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  • The Hong Kong Model for National Identity Cards

    “May I see some identification, please?” asked a retail clerk in my home town Seattle taking my check. I said certainly and handed the sales woman my Hong Kong identity card. She looked at it blankly for a moment then said, “Can I see some other kind of identification?”

    Sometimes when I’m feeling cranky or mischievous, I hand over my Hong Kong ID card when I need to produce some kind of identification. Why not? It is a perfectly valid document. It has my photograph on it. I know of no law that specifies that my state driver’s license has become a national ID card. At least not yet.

    The United States is groping towards a national ID card system, compelled both by worries about security in an age of terrorism and the need to control immigration. In doing so it could learn some lessons from Hong Kong.

    In the U. S. the driver’s license, issued by individual states, has become a de facto identity card. It is used more for cashing checks and opening bank accounts to getting on aircraft even for domestic flights.

    Call me too literal-minded, but a driver’s license is for driving. Identity verification is something else. Why should citizenship be confused with a demonstrated ability navigate through heavy traffic without causing an accident?

    I was reminded of the need for such a card by the controversy over Arizona’s new anti-immigrant law. That state has, if nothing else, put the cart before the horse. Before the police can check on somebody’s “papers” one needs to settle on what “papers” a person should be required to carry.

    The U.S. clearly has a need for some kind of identification card to cash checks, to board airplanes, even to enter a federal building to pick up tax forms. But Americans instinctively balk at the idea of having to carry around a national identity card. Since strictly speaking nobody actually has to have a driver’s license, we kid ourselves into thinking it is still voluntary.

    Before returning to the U.S., I lived for sixteen years in Hong Kong, where everybody over a certain age must obtain an ID card and carry it with him or her at all times. I never considered this a serious infringement on my freedom, although there certainly was a hassle having to obtain one (and to replace one when lost.)

    The Hong Kong police can and do stop people at random and ask them to produce their ID cards. It is not uncommon on the streets to see a couple policemen huddled around a young Chinese man inspecting his ID. That this involves profiling is undeniable. In my sixteen years there, I never once was asked by a policeman to produce my card. It was assumed that being a Westerner I had entered on a valid work permit.

    Of course, I had to produce my ID, or at least provide the number on it, numerous times during the ordinary course of living, from opening a bank account to applying for a job to voting.

    It would be far better to follow Hong Kong’s example and create a national card, probably issued through the Department of Homeland Security. It would lift a burden from state motor vehicle authorities that they were never intended or are equipped to shoulder.

    The advantage that the ID card has over a driver’s license, social security card or any of the other make-shift sources of identification now in use is that they can be coded to show at a glance a person’s status: citizen, permanent resident, foreign student, guest worker.

    In Hong Kong, ID cards are issued to everyone, whether or not they are born there, have become permanent residents or are on short-term work contracts such as the tens of thousands of domestic helpers from Indonesia and the Philippines. In the same way, a national identity card is also a requisite if America is to have any kind of orderly guest-worker program.

    A standardized, secure national ID card issued by the federal government is essential for controlling immigration into the U.S. In short: it’s the way it’s done. Anybody who thinks a national ID card is un-American might have a valid point. But then he should stop complaining about “securing our borders.”

    Todd Crowell worked as a Senior Writer for Asiaweek in Hong Kong before returning to the U.S.

  • Racing China: The Australia Housing Bubble

    “The writing is on the wall for the Australian dream,” according to Professor Joe Flood at the Flinders University Institute for Housing, Urban and Regional Research. That was before recent predictions that Australia’s overheated housing market may be headed for even higher prices. Real estate experts have recently predicted a doubling of house prices in all five of the largest metropolitan areas over the next decade.

    Sydney, the largest metropolitan area, according to Australian Property Monitors (APM), can be expected by 2019 to experience a median house price increase to $1.124 million in 2019. This would double the 2009 figure of $569,000 (Note). Sydney is already the second most unaffordable metropolitan area in the English speaking world , according to our Demographia International Housing Affordability Survey, with a Median Multiple (median house price divided by median household income) of 9.1, trailing only Vancouver. Sydney’s higher priced housing has been blamed for stunting economic growth and job creation and appears to be a major factor in the continuing migration out of the state of New South Wales. One of Australia’s leading demographers, Bernard Salt, has projected that Sydney could fall to second largest in the nation, behind Melbourne in less than 20 years.

    Melbourne median house prices are also expected to rise above $1.1 million according to projections by property expert Michael Yardney. This would represent more than twice the $480,000 price in 2009.

    Brisbane, which has generally been less unaffordable than Sydney, would have a median house price equal to that of Sydney by 2019. This is more than double the 2009 price of $430,000.

    Perth would experience the greatest house price inflation, also rising to above $1 million, compared to the 2009 figure of $460,000.

    Adelaide would also see house prices rise to more than $1.2 million, according to APM. In 2009, the median house price in Adelaide was $370,000.

    Australia’s Race with China: Recent data indicates that prices are rising furiously toward the doubling the experts have projected. The Australian Bureau of Statistics (ABS) House Price Index indicates that prices have risen 20% over the past year. This is more than 1.5 times the 12% annual rate posted in China’s house price bubble that has its government and so many of the world’s leading economists so concerned.

    As of the 1st quarter, the greatest annual price inflation was in Melbourne, at 28%, a rate that would place it 3rd out of 70 metropolitan areas if it were in China. Prices in Sydney were up 21% from a year ago, which would also rank it 3rd out of 70 in China. At this rate, Sydney could become less affordable than Vancouver within six months and could even surpass high-priced Hong Kong. Brisbane, Adelaide and Perth all experienced price increases between 10% and 15%, and would all place in the top 20 out of 70 Chinese metropolitan areas.

    ABS indicated that the house prices increased more than in any other annual period in the 8 year history of its House Price Index. According to the Wall Street Journal’s Marketwatch, Economist Glenn Maguire of SocGen Asia Pacific in Hong Kong said “These are bubble like numbers … It’s the type of return that basically encourages speculation.” Marketwatch also predicted, on the basis of the house price trend, that the Reserve Bank of Australia (RBA) would raise interest rates, which it did a day later.

    Working for the Mortgage: Meanwhile, because variable rate mortgage loans predominate in Australia, the interest rate increase places an immediate burden on thousands of Australian households. The Housing Industry Association indicates that interest rate increases over the past six months will result in a first-home buyer mortgage payment increase of more than $300 per month.

    This is not good news for the large numbers of households already in mortgage stress, defined by the government when 35% or more of the budget goes to housing expenses. Just six months ago, a median income household purchasing the median income house in Sydney or Melbourne would have had mortgage payments that consumed 50% to 57% of their gross income. Now, the figure would be 60% to 67%. Needless to say, the median priced house is well beyond the means of the median income household. By contrast, if Melbourne and Sydney had the same housing affordability as faster growing Atlanta and Dallas-Fort Worth, the median income household would pay at least $25,000 less in annual mortgage payments for the median priced house.

    Rigging the Market: The housing affordability crisis is the direct result of excessive land use regulations that have artificially limited the supply of land, driving up house prices and fostering speculation. Before these regulations (called “urban consolidation” or “smart growth”) were adopted, housing was as affordable in Australia as in Atlanta or Dallas-Fort Worth. Median Multiples across the nation were 3.0 or below. Now the Median Multiple is between 6.7 and 9.1 in the five largest metropolitan areas. Analysts often suggest that Australia’s population growth rate is driving up prices. While Australia is growing, it grew faster over the 20 years following World War II, and still accommodated a quickly increasing home ownership share. Further, much faster population growth in Dallas-Fort Worth and Atlanta has not driven prices up. Since 2000, these two American metropolitan areas added 40% more population than the five largest Australian metropolitan regions, despite having a smaller combined population.

    This also impacts the other side of the housing equation, the ability of consumers to afford mortgages. The Urban Task Force says that Sydney’s especially onerous regulations have driven up the price of consumer goods while dampening income and employment growth. Australian Property Monitors economist Matthew Bell says that the answer to the housing affordability problem is to increase the supply of housing, a view shared by the Reserve Bank of Australia. The political reality, however, suggests that “The shortages are going to get much, much worse in Sydney” as Jason Anderson, a senior economist with BIS Shrapnel told Agence France-Presse.

    Professor Flood noted that “The country that promised limitless land, cheap housing and near universal home ownership to all comers now has the most expensive housing in the world amid very tight housing and land markets and little prospect of restoring the balance.” Flood’s research indicates a dramatic decrease in home ownership among younger households over the past 20 years.

    Alternate Futures

    Not everyone thinks that house prices can continue their stratospheric rise. US investment expert Edward Chancellor believes that the housing market is overdue for a price collapse, noting that house prices are well above historic measures. Chancellor won the George Polk award for his 2007 article Ponzi Nation, which warned of the housing collapse in the United States and the international damage that could follow. Of course, a housing collapse in Australia would have much less impact on international markets than the one that rocked the much larger US economy, but could do great damage at home.

    The good news is that house prices could be brought under control if there was a change in policy. The state government of Victoria (Melbourne is the capital) is about to significantly expand its “urban growth boundary, allowing more house construction and lower new house prices. Policies such as these could provide a preferable soft landing for the housing market. But this would require state and local governments finally to turn their backs on 20 years of devastating social engineering.

    Note: The Australian dollar is currently worth about US$0.90. The latest (2008) data indicates that Australia had a gross domestic product of $37,400 per capita (purchasing power parity), which compares to $46,500 in the United States, according to the OECD.

    Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris. He was born in Los Angeles and was appointed to three terms on the Los Angeles County Transportation Commission by Mayor Tom Bradley. He is the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life.”

    Photograph: Detached housing conforming to plan in suburban Perth

  • Twenty-first Century Electorate’s Heart is in the Suburbs

    Even as the nation conducts its critically important decennial census, a demographic picture of the rapidly changing population of the United States is emerging. It underlines how suburban living has become the dominant experience for all key groups in America’s 21st Century Electorate.

    While suburban living was once seen as the almost exclusive preserve of the white upper-middle class, a majority of all major American racial and ethnic groups now live in suburbia, according to the newest report on the state of metropolitan America from the Brookings Institute. Slightly more than half of African-Americans now live in large metropolitan suburbs, as do 59% of Hispanics, almost 62% of Asian-Americans, and 78% of whites. As a result the country is closer than ever to achieving a goal that many thought would never be achieved: city/suburban racial/ethnic integration. This is particularly so in the faster growing metropolitan areas of the South and West.

    The trend is likely to continue for the foreseeable future. A majority of Millennials live in the suburbs and 43% of them, a portion higher than for any other generation, describe suburbs as their “ideal place to live.”

    The nation’s one hundred largest metropolitan areas have grown twice as fast as the rest of the country in the last decade. That growth was heavily concentrated in lower density suburbs, which grew at three times the rate of cities or inner ring suburbs. At the same time, one third of the nation’s overall population growth was due to immigration. As a result about one-quarter of all children in the United States have at least one immigrant parent. In 2008, non whites became a majority of Americans less than eighteen years old, a demographic milestone that underlines just how fast and how dramatically the country is changing. Any political party that wants to build a lasting electoral majority must align its policy prescriptions with these new demographic realities to attract the votes of a younger, more ethnically diverse population, most of which now lives in the suburbs.

    Economic opportunity continues to be the major driver in determining where people want to live and work. Five of the six fastest growing metropolitan areas in the last decade were also among the top six in job growth according to data from the Census and the Bureau of Labor Statistics analyzed by the Praxis Strategy Group. The same five metropolitan areas – Phoenix, Riverside (CA), Dallas, Houston and Washington, D.C – also ranked high in the diversity of their population, differing only in the degree of educational attainment their residents have achieved.

    With America experiencing the first decade since the 1930s in which inflation adjusted median income declined and job creation slowed to levels not seen in decades, this movement to where the jobs are located is likely to intensify, as current migration to economically buoyant Texas cities and Washington, DC suggests. This crucial factor is often overlooked by urban planners who argue that cultural amenities and sport complexes are the key to attracting new residents. In fact, metropolitan areas that focus on job creation for Millennials (young Americans born 1982-2003) and minorities have the best chance of gaining population in the next decade.

    Clearly providing higher quality public education experiences is a key part of any such economic strategy. The arrival of stealth fighter parents at local school district meetings across the country only reflects the passion among young families about the quality of education their children receive. They are unwilling to allow Boomer ideological debates to delay the changes needed to properly prepare their children for a higher educational experience that increases the odds of economic success. The traditional separation between municipal partisan politics and nominally non-partisan schools is increasingly outdated when so much of a city’s economic success depends on the quality of the education its residents receive.

    Safe neighborhoods of single family dwellings with a surrounding patch of land continue to attract families of every background to the nation’s suburbs. Metropolitan areas that provide such an environment to all of their residents are the furthest along in achieving a more integrated society. Los Angeles, for instance, which is often decried by non-residents as simply an aggregation of suburbs with no central core, has a suburban population whose demographic profile almost exactly matches the city’s population. The fact that most of its housing reflects the tract developments of the 50s and 60s, as well as the city’s low crime rates – down to levels not seen in five decades – are two key reasons for this polyglot profile.

    Rather than fighting this desire on the part of America’s 21st Century Electorate to live comfortably in the suburbs, politicians of all stripes should find ways to embrace it and advocate policies that reflect our new economic realities. For instance, rather than insisting on higher density housing and light rail systems as the only answer to the nation’s appetite for foreign oil, the federal government should adopt tax incentives that encourage telecommuting and continue policies to foster more energy efficient automobiles. If all Americans worked from home, as many Millennials prefer to do, just two days a week, it would cut that portion of our nation’s gas consumption by more than a third. The FCC’s recently announced broadband policy will help put in place the infrastructure required to make such a lifestyle possible and even more productive.

    Three out of four commuting trips involve a single individual driving their car to work and this isn’t likely to change in the foreseeable future. But putting as much emphasis on making our nation’s highways “smart” as in creating a smart electrical grid would make it possible for the existing highway system to shorten commuting time and reduce the quantity of fuel used in such trips. Recent developments in mobile technology makes this a practical, near term solution if state and local governments are prepared to invest in upgrading an infrastructure that is already designed and deployed to connect people’s homes to their workplace.

    Aligning the message at the heart of a party’s programs with the values and behaviors of America’s 21st Century Electorate is the best road towards achieving political victory –for either party – or years to come.

    Morley Winograd and Michael D. Hais are fellows of the New Democrat Network and the New Policy Institute and co-authors of Millennial Makeover: MySpace, YouTube, and the Future of American Politics (Rutgers University Press: 2008), named one of the 10 favorite books by the New York Times in 2008.

    Photo by delbz

  • Currency Crisis: Fool’s Gold, The Euro, The Pound and The Dollar

    Lost in the obituaries of the Euro — the European currency — is the extent to which the continent remains a fractured reservoir of national monies. To be sure, the Euro circulates in the larger economies of Western Europe, notably France, Germany, Italy, Spain, and the Netherlands. But as a traveling European, I also have in my wallet Polish złoty, Czech crowns, Serbian dinars, Swiss francs, and British pounds, testaments to the nationalist sentiment that every country should have it own money. (Which is similar to the notion that every country should have its own airline, no matter how much it costs.)

    Countries, like Poland, which are in the European Union, have their currency pegged to the Euro, but because of local budget deficits, they stick with their old notes. Countries like Britain and Switzerland cling to their currencies out of distrust for the common currency. In theory, what they lose in terms of trading convenience, they gain in the coin of economic independence.

    By holding on to the pound, Britain partially sidestepped the recent financial crisis in Europe; London was only on the hook as a member of the common market, not in the currency union.

    At the same time, Britain, as the only issuer of pounds, was left to deal with its own banking crisis without the mutual assistance of Germany and France, one reason why the United Kingdom has such high borrowing obligations.

    Which is better, national money that floats on international markets — the pound is a good example — or a transnational currency like the Euro?

    The rap now against the Euro is that the European Union lacks the authority to impose fiscal discipline in member states. Countries within the Union, it is feared, can borrow to their budget deficit’s content, given that any country in the monetary union enjoys an implicit guarantee from the rest of the pact. For example, Greece could fund its deficit with debt that was issued at rates that equated Greek risk with that of Germany.

    Now that this mug’s game is up, the stronger members of the European Union will only let the weaker names borrow in exchange for surrendering a degree of fiscal and budgetary independence. Will that be enough to save the Euro?

    In answering, it is useful to recall what money is: a zero-coupon bond, issued by an organization, company, or government. Currency may represent value, but underneath the crisp paper it is a sovereign loan. The dollar bill is best understood as the world’s smallest government bond.

    Before there was fiat money, the currency that circulated was either coins or bank drafts, passed around to settle transactions in local markets. The stronger currencies were those of silver or gold, or negotiable instruments issued by a solid creditor, such as a Florentine bank or a London merchant.

    In the early days of the American republic, circulating specie included Peruvian coins (valued for their silver) and Spanish dubloons, sometimes mined in Mexico.

    Now, instead of a private script, money is a national instrument, based on the full faith and credit of sovereign governments, which, as everyone knows, are run by profligate spenders. (If you owned a bank, would you put Nancy Pelosi on the credit committee?)

    Anyone holding U.S. dollars is betting that the Congress will not bankrupt the country with medical, retirement, and national security schemes. In Europe, the Euro gamble is that the large governments, and by extension the European Union, will honor their obligations, many of which were drawn to fund retirement plans that kick in at age sixty-two or to subsidize corporate elephants like the Airbus.

    To be sure, the Euro will survive its current crisis, because neither France, Italy, nor Germany — the big engines of the continental economy — want to rerun the political consequences of a fractured Europe. But just because the Euro will remain in circulation does not mean that it will trade at an exchange rate of €1 = $1.50.

    Keep in mind that Europe is gleeful at the decline of the Euro against the U.S. dollar, which, measured in Europe, has been at an artificially low exchange rate for the last few years. The weak dollar and the strong Euro meant that U.S. industry and exporters had a competitive advantage against European companies. Now that advantage is less pronounced.

    For fun, have a look at the Big Mac Index of The Economist, which prices the global hamburger in world currencies. For the Euro zone, a Big Mac costs $4.62 versus $3.58 for the same happy meal in the United States. China’s triple-decker only costs $1.83, a statistic that is a good measure of the extent to which China keeps its currency, the yuan, artificially low.

    Exchange rates are the new tariffs. In the bad old days of Senator Smoot and Congressman Hawley — co-authors of the 1930 tariff bill that so prolonged the Depression — countries sought competitive trade advantages by slapping on tariffs and import quotas to protect national industries.

    Even today, tariffs protect local farmers and manufacturers from low-priced international competition, but they are considered “unfair,” the trade equivalent of gunboat diplomacy.

    Instead of enacting tariffs, governments now play the game of currency manipulation, and, to use a 1930s expression, “beggar their neighbors” by driving down the value of their money’s exchange rates in international markets. Central banks generally accomplish this by failing to defend, i.e., purchase their currency in world markets.

    Two of the very best currency manipulators are the U.S. and China, one reason for their economic success. The U.S. let the dollar fall after the 2008 crisis, which gave American exporters an advantage over European competitors. The price of European products in the U.S. went up about 25 percent.

    For years China has fueled its economic miracle by pegging the yuan at low exchange rates to the dollar, to make sure that, no matter what the industry, it would be selling the equivalent of Big Macs that cost $1.83.

    In the Euro collapse over the potential Greek default, many see an end to the European common currency. But that will happen only if German taxpayers get tired of bailing out pensioners throwing darts in Dublin or the café klatch on Mykonos.

    In the meantime, by letting its currency fall by twenty percent against the dollar, Europe has shown that it understands the power politics of international exchange rates and that it is willing to take on the Americans and the Chinese at the shell game of cheaper money.

    What’s the risk? The problem in the manipulation racket is that investors can have a hard time judging when a currency is being depreciated for a reason — to stimulate jobs, say — or when it’s broke. The wheelbarrow money of Weimar was bust while the Euro is just overvalued. In most cases, the vital sign of a currency’s health is its rate of inflation, and for the Euro right now it’s negligible.

    For all that diplomatists busy themselves over questions like Israeli settlements and Iranian sanctions, the issue of exchange-rate parity is rarely discussed in world councils.

    The story of unfettered money rarely has a happy ending. Breton Woods, which pegged many currencies to the dollar, and the greenback to gold, was signed in 1944 and broke down in 1971, when Richard Nixon unilaterally took the U.S. off the gold standard.

    Since then, world money has traded like over-the-counter options, even when it’s backed by less collateral than most subprime packages. My own view is that currencies should be pegged to baskets of global commodities, including gold and silver. But governments, like Greece today, or even the U.S., hate the idea of external limits on their ability to raise and spend money.

    Italy was among those countries that thought the 1971 U.S. withdrawal from the gold standard set a dangerous precedent for economic stability. But its warnings went unheeded, and prompted an undeleted response from President Nixon, who on the White House tapes was heard to say, “I don’t give a shit about the lira,” words that might express how many investors will come to think about paper money.

    Latent print developed on US Currency ($1 bill) using fluorescent magnetic power. http://www.flickr.com/photos/jackofspades/1376867166/

    Matthew Stevenson is the author of Remembering the Twentieth Century Limited and editor of Rules of the Game: The Best Sports Writing from Harper’s Magazine. He lives in Switzerland.

  • Kirsten Moore

  • 2009: A Year of US Entrepreneurial Activity

    The Kauffman Index of Entrepreneurial Activity produced good news for the year 2009: Americans have created businesses at its fastest rate in 14 years. This past year, 558,000 businesses were created each month, marking a 4% increase from 2008. Though this comes in the midst of economic recession, president and CEO of the Kauffman foundation Carl Schramm seems to think the unsavory results of massive layoffs have fostered these higher rates of entrepreneurship, serving as “a motivational boost” for the newly unemployed to become their own boss. He sees the recent rates in business startups as a favorable sign for economic recovery.

    Using the monthly Current Population Survey from the US Census Bureau and US Bureau of Labor Statistics, the Kauffman index has tracked the demographic makeup of business creators, as well as their location. Though African Americans lag behind other groups in terms of the number of entrepreneurs, they saw the largest increase from 2008 to 2009 from an index of .22 to an index of .27. Both the 35-44 and 55-64-year-old groups have increased to an index of .40 percent, also the greatest of their demographic category.

    The index followed predictable trends in terms of location of entrepreneurial activity, showing that the largest rate increases occurred in the south and west in states like Oklahoma, Montana, Texas, and Arizona while Mississippi, Nebraska, and Pennsylvania floundered. However, business creation rates in the Midwest and South outdid those of the west, which actually declined from 0.42 to 0.38 percent from 2008 to 2009.

    You can find interactive data on entrepreneurial activity for the period spanning 1996-2009 on the Kauffman Foundation’s website at www.kauffman.org/kiea.

    Kirsten Moore is an undergraduate at Chapman University majoring in US history and screenwriting.

  • Zoning and Sprawl

    Matt Yglesias has been making the case recently that zoning and land use laws encourage suburban sprawl, and if we did away with them we’d have a greater number of dense, walkable neighborhoods. Cato’s Randall O’Toole took exception, so Matt condensed his argument into PowerPoint form:

    • Throughout America there are many regulations that restrict the density of the built environment.
    • Were it not for these restrictions, people would build more densely.
    • Were the built environment more densely built, the metro areas would be less sprawling.

    There’s a lot I could say about this, but that’s a mistake in a blog post. So I’ll stick to one main point: these regulations aren’t something that’s been imposed by “government.” They exist because people really, really, really want them.

    I need to be clear here: I’m neither praising nor condemning this, just describing how things are. To get an idea of how strongly people feel about this, you really need to come live in a suburb for a while. But failing that, consider the balance of power here. Corporations would like to be able to build wherever and whatever they want. Wealthy land developers would like to be able to build wherever and whatever they want. And local governments hate single-family neighborhoods because they’re a net tax loss: they cost more in services than they return in property tax remittances. And yet, even with corporations, wealthy developers, and local governments all on one side, suburban zoning is ubiquitous. This is a triumvirate that, under normal circumstances, could get practically anything they wanted, but in this case it’s not even a close fight. Suburban residents have them completely overwhelmed. That’s how strong the desire is for suburban sprawl. Read more

  • The Broken Ladder: The Threat to Upward Mobility in the Global City

    Since the beginnings of civilization, cities have been the crucibles of progress both for societies and individuals. A great city, wrote Rene Descartes in the 17th Century, represented “an inventory of the possible”, a place where people could create their own futures and lift up their families.

    In the 21st Century – the first in which the majority of people will live in cities – this unique link between urbanism and upward mobility will become ever more critical. Cities have become much larger. In 1900 London was the world’s largest urban center with seven million people. Today there are three dozen cities with larger populations.

    No longer do a handful of western cities represent the only, or even the most critical, front in the battle for social progress. Mexico City and Mumbai, two cities we have studied, have three times London’s 1900 population. Indeed, of the world’s twenty most populous regions, the preponderance are located in third world or developing countries. The urban drama will play out on a truly global stage, with the most decisive developments taking place in the growing mega-cities of the developing world.

    It is first and foremost in these great cities of the human future that upward mobility must be most accelerated. Urban agglomerations such as Beijing, Shanghai, New Delhi, Sao Paulo, Mumbai, and Mexico City daily stand witness to one of the most rapid expansions of prosperity in history, as well as to wrenching examples of deep seated misery.

    Urbanity in the advanced industrial world is an increasingly interdependent system. The established centers of the global urban culture – New York, Los Angeles, London, Paris, Tokyo, Berlin – provide the critical markets, capital, and technological assistance that drive economic growth in the developing countries, whose growth in turn provides new opportunities for the citizens of the advanced cities.

    These established centers are often seen as occupying the Leninist “commanding heights” of the global economy. Is the kind of centralization we see in these cities, and in other mega-cities around the world, truly inevitable? And is their growth universally desirable? The answers to these questions are vital, notably because it is particularly in these locations that upward mobility now appears to be increasingly stalled. The stasis is reflected in both income trends and popular opinion in the leading centers of advanced world, including the United States, Japan and the United Kingdom.

    Optimists like historian Peter Hall believe that “neither western civilization, nor the western city, shows any sign of decay”. A recent World Bank report insists that large urban concentrations – the more dense the better – are the harbingers of opportunity and wealth creation. “To spread out economic growth”, it argues, is to discourage it. And it is certainly true that as countries modernize, they also urbanize, often quite rapidly. As a result, cities in the developing world – which also receive a great deal of international investment and aid – tend to be growing far more quickly than peripheral regions.

    Yet, in the longer term, the impacts of dense urbanization may not be universally useful at promoting either poverty alleviation or upward mobility. In advanced countries, this is already evident in large urban areas. Indeed, even the strongly pro-urbanist World Bank report acknowledges that as societies reach certain affluence levels, they begin to deconcentrate, with the middle classes in particular moving to the periphery.

    This process reflects a shift in economic and social realities over the past few decades. After nearly a half century of sustained social progress in most advanced countries, income growth for the middle class, even among the best-educated, has slowed considerably, and by some measurements has even turned negative. As we will see, the effects have been particularly tough on the urban middle and working classes in cities as diverse as Toronto, Los Angeles, Tokyo and London.

    Such concerns have been heightened by the current deep recession, which has caused wages to fall in both developing and developed countries. Yet concern over upward mobility was developing even in the relative “boom” times of the recent past, particularly in the advanced western countries, but also in the developing ones. Since 1973, for example, the rate of growth of the “typical family’s income” in the United States has slowed dramatically, and for males has actually gone backwards when adjusted for inflation. This diminishment has been particularly marked in major urban centers such as New York, Chicago, San Francisco and Los Angeles.

    Similar developments can be seen in a host of European cities, including London and Berlin, and even in Tokyo, which long has been seen as distinctly middle class. In all these cities, the middle class appears to be diminishing, while the population living in poverty has increased.

    The reasons for this trend include the impact of technology, aging demographics, globalization, and greater government indebtedness. A critical factor may also be opposition to the very idea of economic growth, something first seen in the 1970s and now increasingly persuasive, at least within large portions of academia, the media, and even parts of the financial community. This attitude is vividly and forcefully expressed, for example, within sectors of the ecology movement.

    Polls of popular opinion in the United States and the United Kingdom find ecological concerns well down the list, behind such issues as the economy, immigration, crime, unemployment and even the state of morality. Yet the agenda to address anthropogenic global warming promotes policies that seem likely to depress economic growth, particularly in cities, through further declines of productive industry, unaffordable housing prices and high levels of taxation.

    As recently seen at the global climate change conference in Copenhagen, few governments in the developing world are anxious to adopt any policy that weakens their ability to spark income and job growth in the near future. The pressing concerns of these cities remain focused on basic issues: sanitation, alleviation of poverty, industrial growth, infrastructure development and employment.

    Policies that prolong poverty and depress mobility seem likely to delay the necessary social consensus needed to enact long-term environmental improvements. When concern for the sustenance of families grows, focus on environmental issues tends to decline, as is already clear in recent surveys in the advanced countries. The much overworked term “sustainability” needs to include both economic and social components, as opposed to strictly ecological ones.

    Within the developing world, as the focus remains on basic economic issues, middle class residents of noted megacities appear to be more optimistic about personal advancement than their counterparts in the advanced countries. This may reflect the fact that countries such as India, China and Brazil have experienced rapid economic growth over the past decade, and expect more of the same in the decades ahead.

    Yet this does not suggest that the rising cities of the Second and Third World are growing in ways that do not deepen inequality. With rapid economic growth, these locations have seen considerable expansion of gaps between rich and poor, particularly with the decline of socialist institutions. Similarly, in some developing cities – Mumbai, Bogota and Sao Paulo, for example – there may be a widening gap between economic success and population density, as growth shifts to places with better infrastructure, less congestion, and less crime.

    In order to look in depth at differing attitudes among urban dwellers, we have focused our research on three megacities that represent different stages of economic development. We start with London, arguably the world’s most important global city, and explore the prospects for upward mobility there.

    Then we look at Mexico City, a city that represents the broad “Second World” of urban centers that have enjoyed some rapid growth but now face increased competition from China and other ascendant locations. Mexico City represents some of the realities that emerging urban centers in the Third World will face as they achieve higher levels of economic development.

    Third, we focus on Mumbai, India’s premier commercial city and financial center. Mumbai reflects the dichotomy of a rapidly growing city in the developing world: increasing wealth and rising expectations among its expanding middle class, with the continued creation of huge populations of destitute slum-dwellers.
    Yet for all the differences between these three great cities, we also find some commonalities. First, their future vitality depends largely on the future of their middle classes. Second, the critical issue for all these places remains how to sustain economic growth to meet the needs and aspirations of their citizens.

    Finally, they share the challenges of the current great economic revolution – what has been called the “post-industrial” era by Daniel Bell or the “third wave” by Alvin Toffler – on the nature of class. The increasing primacy of technology and education, once seen as liberating, could make widespread class mobility far more difficult than in the past.

    As occurred in the early stages of the industrial revolution, the current economic transformation threatens massive displacement of existing classes. Just as the machine age undermined the status of weavers, artisans and small farmers, the current technological epoch could well have similar impacts on not only industrial workers, particularly in the West, but on the supposedly ascendant educated middle class as well.

    This leads us to suggest a primary focus by all great cities on basic economic issues. Current concerns among the dominant cognitive classes in the media, the academic world, and the policy elites, particularly in the First World, have tended to center on aesthetics and “green” issues, as well as on who can draw ‘the best and the brightest”, rather than on how to employ the vast middle or working classes.

    We will explore some of the common challenges that will face all mega-cities as they evolve. Increasingly, they may find that their scale, long seen as an advantage, also produces inherent problems. In a globally interconnected urban environment, they must successfully compete not only with each other, but with smaller scale, and often more efficiently organized, urban areas throughout both the advanced and developing world.

  • Rail Transit Expansion Reconsidered

    More than two years ago we suggested in these pages that the era of multi-billion dollar system-building investments in urban rail transit is coming to an end. We wrote: “The 30-year effort to retrofit American cities with rail infrastructure, begun back in the Nixon Administration, appears to be just about over. The New Starts program is running out of cities that can afford or justify cost-effective rail transit investment. To be sure, federal capital assistance to transit will continue, but its function will shift to incrementally expanding existing rail networks and commuter rail services rather than embarking on construction of brand new rail systems.” (“Urban Rail Transit and Freight Railroads: A Study in Contrast,” February 18 2008).

    Now comes a startling new revelation from a senior U.S. DOT official that even rail extensions may be at risk. Speaking at a National Summit on the Future of Transit before an audience of leading transit General Managers on May 18, Federal Transit Administrator Peter Rogoff questioned the wisdom of expanding rail networks when money is badly needed to maintain and modernize existing facilities:

    “At times like these, it’s more important than ever to have the courage to ask a hard question: if you can’t afford to operate the system you have, why does it make sense for us to partner in your expansion? If you can’t afford your current footprint, does expanding that underfunded footprint really advance the President’s goal for cutting oil use and greenhouse gases… Or are we at risk of just helping communities dig a deeper hole for our children and our grandchildren?”

    In Rogoff’s judgment, the first priority for the transit industry is to follow the precept “fix it first.” “Put down the glossy brochures, roll up our sleeves, and target our resources on repairing the system we have,” he told the assembled transit officials. Transit systems that don’t maintain their assets in a state of good repair risk losing riders, he warned. The Administrator cited the preliminary results of an FTA study of the financial needs of 690 public transit systems across America that show a $78 billion backlog of deferred maintenance. Fully 29 percent of all transit assets are “in poor or marginal condition.” The challenge facing transit managers is to resist the siren call of new construction and devote money to the “unglamorous but absolutely vital work of repairing and improving our current systems.”

    At first blush Rogoff’s position would appear to go counter to the Administration’s announced policy of favoring public transit. Hasn’t Transportation Secretary Ray LaHood repeatedly championed public transit as an alternative to highway expansion? Hasn’t the Administration’s proposed Fiscal Year 2011 budget include major commitments to funding new rail lines in Denver, Honolulu, Minneapolis and San Francisco? Hasn’t the Federal Transit Administration dropped the former emphasis on cost-effectiveness as an evaluation factor in rail project selection in favor of a broader range of factors? All true.

    But fiscal realities can do wonders to bring federal officials down to earth. The Transit Account of the Highway Trust Fund is barely solvent. The U.S. DOT budget will grow by only one percent in 2011. With commendable consistency and fairness, the Administration seems to have decided to apply the same investment standard to transit as it has preached and laid down for highways: Forget about massive capacity expansion; focus on getting the most out of the assets already in place by maintaining them in a state of good repair. To critics of the DOT’s new posture – and there will be some – a good answer could be: It’s just a different way of looking at what it means to be pro-transit.

  • The Limits Of The Green Machine

    Environmentalism is strangely detached from the public’s economic goals.

    The awful oil spill in the Gulf–as well as the recent coal mine disaster in West Virginia–has added spring to the step of America’s hugely influential environmental lobby. After years of hand-wringing over global warming (aka climate change), the greens now have an issue that will play to legitimate public concerns for weeks and months ahead.

    This is as it should be. Strong support for environmental regulation–starting particularly under our original “green president,” Richard Nixon–has been based on the protection of public health and safety, as well as the preservation of America’s wild spaces. In this respect, environmentalists enjoy widespread support from the public and even more so from the emerging millennial generation.

    Conservatives who fail to address this concern will pay a price, even more so in the future. The Bush administration’s apparent clubbiness with conventional energy interests has undermined the GOP’s once-proud legacy on environmental causes. The oil spill could prove a great campaign issue for Democrats assigning blame for the disaster on lax Republican regulators and their oil company chums.

    But there’s also a danger for Democrats who tilt uncritically toward “green” policies. Instead of following the environmentalists’ party line, they should adopt a balanced approach adding both economic and social needs to their concept of “sustainability.”

    Sadly, many in the administration seem anxious to extend environmental regulation into virtually every aspect of life. Legitimate concerns over pollution and open space preservation, for example, have now been conflated with a renewed drive to strangle suburbia in favor of forced densification.

    The administration’s “livability” agenda, as suggested by Transportation Secretary Ray LaHood, for example, proposes policies that favor dense urban development over the dispersed living preferred by most Americans. This, notes analyst Ken Orski, represents an unprecedented federal intrusion over traditional local zoning and local decisions.

    This centralizing tendency supports a wide array of interests, notably big city mayors and urban land speculators, and also is eagerly promoted by many architects, the media and planning professors. Not surprisingly, less intrusive ways to reduce energy use, such as telecommuting or the dispersion of worksites closer to people’s homes, have elicited very little administration support.

    Herein lies the Achilles heel of environmentalism–its profound disconnect from public preferences and aspirations. By embracing such a radical social engineering agenda, the greens may end up undermining their own long-term effectiveness.

    The first sign of this pushback, notes analyst Walter Russell Mead, can be seen in growing skepticism about climate change policies both here and in Europe. At a time of severe economic challenges, greens and their political allies need to consider how specific environmental costs threaten an already beleaguered middle and working class.

    Voters, for example, may support strong penalties and stricter controls of energy giants such as British Petroleum or Massey Energy, but roughly six in 10, according to a post-spill NBC/Wall Street Journal poll, continue to back the idea of expanded offshore oil drilling. Voters may embrace new environmental improvements but they also want to keep their jobs.

    This conflict will be on display in the coming struggle over the “cap and trade” proposals in the Senate. Strongest opposition comes from those states and regions most adversely impacted by strict limits on carbon, clustered in the south and Midwest.

    Mitch Daniels, governor of coal-dependent Indiana, even has denounced such proposals as Washington “imperialism.” But Daniels’ opposition also is shared by many Democrats from fossil-fuel-rich states such as North Dakota, West Virginia and Louisiana. Cap and trade even manages to offend many on the left, who see it as yet another opportunity for Wall Street to profit from complex federal regulation.

    On the state level, more draconian mandates on shifting to renewable fuels, such as those in place in California, could also cause future power shortages, as the state auditor warned recently. Such concerns are routinely brushed aside by environmentalist and their prodigious PR machines who prattle on about our coming economic salvation through the creation of “green jobs.”

    In reality, given their dependence on massive subsidies from both taxpayers and rate-payer, it’s unlikely that renewables, as opposed to relatively clean alternatives such as plentiful natural gas, will produce a net positive impact on the economy for years or even decades. Certainly highly aggressive subsidies for wind and solar have not proved any kind of elixir in countries like Spain, where such policies have been long in place but now are being scaled back due to their drain on both the economy and the public budget.

    To some extent, the hype over “green jobs” sometimes appears as something of a PR smokescreen. Prominent greens have long been opposed to the very idea of economic growth and wealth creation, particularly in advanced industrial countries. For decades John Holdren, President Obama’s science advisor, has favored what he calls “de-development” of Western countries in order to preserve natural resources and reduce pollution.

    This approach appears to be gaining support even as the pain of economic dislocation has devastated the advanced countries of the West. Boston University sociologist Juliet Schor, writing in the influential left-leaning The Nation, even attacks “progressive economists”- such as those calling for a second New Deal- for focusing on “climate destabilizing growth” as a way to create new jobs and raise middle class incomes.

    In the Huffington Post one-time investment banker Ann Lee, now an economics professor at NYU, has called for “a new economic ideology” that focuses on “human dignity, creative and degrees of freedom” instead of following traditional measurements of material well-being. This “new” economy, she argues, would provide greater returns to favored groups like artists and, of course, teachers, who she considers severely underpaid.

    This kind of low-carbon academic “esteem” economy appeals to people who already enjoy considerable material wealth and can count on the support of the state. It is not so promising on the West’s aspirational middle and working classes, particularly those employed in the private sector, whose individual strivings would now be compensated by a deadly combination of high taxes and slow growth.

    Until the issues of growth are tackled honestly, the green movement will continue to depend on tragic events such as the Gulf oil spill to maintain its public support. But in the long run, environmentalism will not remain politically “sustainable” if it fails to balance a green future with the economic aspirations of current and future generations.

    This article originally appeared in Forbes.com.

    Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in Febuary, 2010.

    Photo by just.Luc