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  • Euroburbia: A Personal View

    The image of the European city as a tourist’s paradise of charming inner-city neighborhoods interconnected by high-speed rail networks is not entirely false, but it does not give the full picture of how most Europeans live. Contrary to the mythology embraced by romantics among planners and ‘green’ politicians, urban areas of Europe sprawl just as much as any American or Western city.

    Of course, there are the wealthy and often childless few who live in the renovated urban cores – but at much lower density than at any time in their history. Instead of crowding picturesquely into city, the teeming hordes of the middle class have sought their refuge in the arboreal outskirts. They drive from their single-family homes and townhouse developments to their offices in old city centers, in business parks on the edge of the center and to other villages with massive industrial parks attached to them.

    As a result Germany has long since ceased to be the country that one sees in Grimm’s Fairy Tales or Goethe. Much of it looks like America or Canada. Freeways interconnect exurban villages swelling with housing developments and industrial parks. The German dream is a lot like the American one, only with more rules.

    The most interesting factor is the diversity of these suburbs. They are still predominantly German, but then again so is the country. I live in an exurb of Nuremberg in northern Bavaria. It was the city of Dürer and Hans Sachs as well as the infamous Nazi rallies and post-war trials. It still has castles from the Medieval past, but the need for labor to rebuild destroyed cities – and eventually the resulting prosperity – in the post-war years saw new faces and cultures arrive with immigrants from countries like Turkey.

    Just like in America, many of these newcomers worked until they retired and decided that they wanted to stay. Some of their children are having trouble but not all of them. The children that move out of their neighborhoods to the suburbs integrate better because their parents tend to be more prosperous and thus resent Germany less. The other reason is the fact they are more exposed to the language. Cem Ozdemir was just elected as leader of the Green Party here and he does not speak the pidgin common among a lot of Turkish immigrants. I moved to the suburbs for much the same reason. My wife and I are both non-native speakers but we know that if our children are going to succeed they will need to speak German well and act like Germans. Ideally they will become hyphenated Germans, as in American-Croat-Germans, which is roughly what they would be.

    Of course, some recent newcomers still huddle in their ghettos here, the soulless housing estates built to satisfy Le Corbusier’s destructive urban fantasies. But a lot of them are moving out and up. Their ultimate dream is not a castle or a turn of the century apartment. They want their own house. They want decent schools for their kids, a place to park their cars and easy access to work. That is why they are here and not in their old neighborhoods.

    But diversity is a relatively new benefit of German suburbs. We also moved here for a basic need of space. We had lived in the inner city in a charming apartment but one that simply could not hold kids. It felt cramped just as our offspring popped out.

    There’s also one often-unrecognized advantage to our suburbia: a stronger feeling of neighborhood. Germany is a country of renters. It can be fairly alienating when the residents have little vested interest in where they live. A lot of rental apartments are in buildings that are anything but charming. Here in the suburbs of Germany almost everybody owns their own home. One street is actually named Eigenheimstraße, which translates to Privately-owned-home Street. It is an indication of the pride that Germans have in being able to say that a house belongs to them. They also lovingly tend their yards and fill them with garden gnomes – some harmless, some borderline obscene – and other bric-a-brac that fills countless yards across the urban expanses of America.

    Then there are the schools. The school system here in Germany is fairly uniform with secondary schools more or less standardized. Performance at the elementary school level is vital: children are clearly, quickly and brutally sorted here. At the age of ten, the teachers decide if a child is going to go to college, vocational school or rot in the festering hell of the Hauptschule. The latter is nothing more than a storage facility for tomorrow’s losers.

    We moved to make sure that our neighborhood was mainly German. We wanted to make sure that our children were comfortable with the language and they needed friends who spoke German to feel that way. Most immigrant children fail for the simple reason that they don’t speak German at home, and in pre-school most of their friends speak their parents’ native language as well. This means that they speak Turkish or Russian well but can barely express themselves in German. This then puts them at a disadvantage when working their way through the school system. They have to take remedial language courses. The suburbs allow them to avoid all that.

    The last reason is a place to park our cars. Germans love cars. They love engineering and are very proud of their car industry. They design cars that are the epitome of luxury and performance. Most Germans do not drive cars like this, yet stubbornly continue to own cars despite the government’s multiple efforts to make it too expensive. We pay hefty gas taxes in an effort to fight the “Green House effect,” but most of us feel that it’s just an excuse for the government to steal our money in order to pay for its bloated welfare system.

    Car-ownership in Europe is almost at American levels and Europeans, despite the much-ballyhooed efforts to introduce bikes in Paris, will continue to drive. As in America, the anti-car and anti-suburban ideologues are loud and active, but as long as people prize security, privacy, space and mobility, it’s likely Europe’s version of the suburban American dream will continue to thrive for years ahead.

    Kirk Rogers resides in Bubenreuth on the outer edges of Nuremberg and teaches languages and Amercan culture at the University of Erlangen-Nuremberg’s Institut für Fremdsprachen und Auslandskunde. He has been living in Germany for about ten years now due to an inexplicable fascination with German culture.

  • “Milk” Puts New Attention on San Francisco’s Castro District

    The Castro District of San Francisco has found itself thrust into the national spotlight by recent events. With the premiere of Gus Van Sant’s “Milk” across the country and the continuing controversy over Proposition 8, the neighborhood so instrumental in the gay rights movement is receiving a new surge of attention – and more importantly respect – for its rich history. Yet the Castro is not a museum district; it is a living, breathing neighborhood that is changing and facing significant challenges in a down economy.

    Clearly the area has not lost its huge symbolic political role. The brouhaha over the passage of Proposition 8 – which barred gay marriage in California – sparked marches and protests. To many it appears that the battle that began with Harvey Milk all those years ago has just entered a new phase that many Castro residents are anxious to continue.

    Situated in the heart of the city, just east of Twin Peaks – a large golden hill which beats back the fog from the neighborhood – the Castro is beloved for its colorful Victorians, vintage European streetcars, and eclectic shops and restaurants. It is the site of Harvey Milk’s famous camera shop. The triumphs (and recent setbacks) of the gay rights movement are on display at the large LGBT Center at Octavia and Market streets and in a new small exhibition, “Passionate Struggle,” that was just opened by the GLBT Historical Society at 18th and Castro streets (in one of its last acts, the space for the exhibition was donated by Washington Mutual for a year).

    The neighborhood has been changing in recent years – shopkeepers report a surge in strollers in the neighborhood. Professional couples and their children who may not be able to land a place in Noe Valley over the hill (aka “Stroller Valley”) have slowly been moving into the “gayborhood” (as it is affectionately called). Tour buses have been stopping at the busy intersection of 18th and Castro streets where tourists have been known to get out and, not always out of respectful curiosity, snap photos of two men holding hands to show their aunt in Peoria.

    Local merchants are hoping that all this recent attention can translate to the bottom line (I challenge someone to find an area of a large American city with more neighborhood and merchant groups than the Castro). Though known for technology, tourism is one of the largest industries in San Francisco and business has been lackluster of late. A huge vacancy where Tower Records used to sit at Market and Noe streets still lies empty after nearly two years. The building used to house a large Finnish baths when the area was populated by so many Norwegians, Swedes and Finns it was known as “Little Scandinavia.” One retailer, All American Boy, recently closed its doors after 32 years, and Suri – one of my favorite restaurants – will close for good on December 6th.

    Although the neighborhood has successfully positioned itself as the historical home of the LGBT community, many wonder if that legacy will be continued by a younger generation of gays who came out in a more tolerant era. They may take for granted what was fought and even died for by Harvey Milk and many others.

    Talk to longtime Castro residents and you hear concern in their voices that the neighborhood has lost its knack for experimentation and zaniness. The nearby Mission and South of Market districts now appear more triumphant in terms of “edginess” – a quality that is so important to San Franciscans’ identity. A friend of mine surprised me when he told me that he much preferred the gay culture in his home city of Atlanta over the Castro. The bars, he explained, were “more happening” than those here.

    Today many younger gays often prefer to venture to the city’s uberhip South of Market district where the bars and clubs are larger. Many complain about the narrow and sometimes dirty sidewalks as well as the lack of a large public space in the neighborhood.

    Of course, the neighborhood does not always feel as modern in its look as the glass towers South of Market. But still the Castro continues to be a busy area with numerous cultural events, including the neighborhood’s greatest resource, the peerlessly beautiful Castro Theatre which showcases so many great festivals throughout the year. With numerous events, parties and festivals year-round, the Castro has retained much of its original flair and taste for experimentation even as gay culture and the economy have changed. “Milk,” and Sean Penn’s amazing performance, do not only testify to this historical iconoclasm but speak of its staying power.

    Andy Sywak is the publisher of the Castro Courier neighborhood newspaper.

  • Is the U.S. Capitalist, Socialist or Something In-between?

    During the Presidential campaign, then-Democratic candidate Barack Obama inartfully described his proposed federal income tax cuts for the middle class as “sharing the wealth.” His more strident right-wing opponents – including Vice Presidential candidate Sarah Palin – almost immediately labeled Obama “a socialist,” adding to a litany of alleged infirmities as a presidential candidate that included lacking executive experience; being a closet Muslim; and “someone who pals around with terrorists.”

    Yet in reality Obama’s middle class tax proposal may have been the least “socialist” concept that has been floated and acted upon by a broad array of elected officials and senior-level appointees since four weeks before and four weeks after the Presidential election. This includes not only the huge federal financial bailout and taking of ownership of major investment and commercial banks – something embraced by the establishments of both political parties and the putative ‘capitalist’ business elites – but a series of other proposals, including the bailout of the Big Three American automakers, that are far more socialistic than a tax cut.

    Of course, effective campaigning, like good television advertising, tends to have at least two fundamental characteristics in common – oversimplification and hyperbole – so one might forgive or ignore the campaigns for taking liberties with such terms. Yet the ready and frequent use of the term “socialist” by a variety of sources does raise serious questions as to whether anyone out there really understands either capitalism or socialism as concepts or political constructs. This might help us know how much we should apply either label to the U.S. given the prevailing economic malady and the series of palliatives being offered up by the current and future Administrations, respectively.

    Socialism, of course, places primary ownership of the means of production in the hands of the state, or in some cases, corporate entities controlled by the state. In its extreme cases, such as in North Korea, this reality is absolute; in many other countries, state control is predominant and preeminent but pockets of private enterprise, usually small-scale and concentrated in agriculture or business services, still exist.

    Capitalism is a much more vague idea but essentially reverses priorities, putting the predominant role in the hands of private interests such as investors and corporations. State power in a capitalist country usually focuses on the creation of standards, public health, safety, and welfare, such things as regulating the currency, protecting the environment, and assuring the health of the populace.

    In contrast to the 19th Century, the US already operates on a much-diluted form of capitalism. Our markets are not free; they are highly regulated (and yet many would today argue they are not highly regulated enough). The exchange rates and values of our currency do not float freely but are heavily manipulated through federal government rate-setting activities. Investment decisions are not driven purely by return expectations or classic risk/reward analyses; rather they are incentivized or discouraged by a byzantine system of rewards and penalties affectionately known as the Internal Revenue Code. In other words, the federal government – under both Democrat and Republican Administrations and supported by both Houses of Congress – intervenes routinely in how markets operate and how capital is deployed. In this sense the federal tax code is fundamentally a mechanism for wealth redistribution, so candidate Obama’s statement about his proposed middle-class tax cut simply represented a shift to one set of priorities, much as the Bush Administration’s tax cuts represented another.

    If you accept the premise above that the U.S. already had one foot out the doorway between a more pure form of capitalism and socialism as it is widely practiced in other Westernized countries, it now appears that the U.S. is being pulled at warp speed through that doorway, as a consequence of the myriad plans (schemes would be a more accurate description, given how little thought appears to be devoted to them before rolling them out at press conference after press conference) for bailing out various classically capitalistic institutions.

    Bailing out a completely broken mortgage finance system that rewarded handsomely (some would say shamelessly) myriad private-sector entities and the mortgage industry represents a shift towards socialism. Providing over $100 billion in taxpayer support for AIG is socialism, not capitalism. Providing $200 billion of taxpayer support to prop up consumer credit, so that Americans can return to a false economy predicated upon unbridled, conspicuous consumption, is socialism not capitalism.

    The fact that these and other extraordinary moves by the federal government are undertaken in the name of saving our capitalistic economy and staving off a severe economic depression does not change the fact that we are experiencing – first under Bush and soon under Obama – a powerful drift towards extended state control of the economy. Free-wheeling and unfettered profit-making and corporate greed on the way up, backstopped by enormous government bailouts on the way down, represents in some ways the worst of both worlds .

    We now add to this series of attempts to solve our economic crisis the so-called “New, New Deal” proposed by President-elect Obama the week before Thanksgiving. Focused on fixing America’s infrastructure improvements, technological innovation, and education – as well as the creation of 2.5 million new jobs in the process – the New, New Deal basically supplants a failed, quasi-capitalistic economy with one that is driven primarily by government spending on government projects, in part for the purpose of creating new government jobs.

    There will be two silver linings if all of these government bail-out strategies and the implementation of Obama’s New, New Deal succeed: The U.S. could emerge from this economic abyss in which we find ourselves; and pass, at last, a comprehensive, universal healthcare reform that will not look nearly as socialistic as it may have appeared only six months ago.

    Yet there are some real dangers as well. A massive government program that extends more and more into every aspect of the economy could bring enormous inefficiencies as political decisions overtake market-based decision-making. It is not beyond the pale, for example, that banks may make loans to customers not based on their fundamental ability to pay but their ability to shift their risks to the government. Land use and other decisions once left to markets and localities could be placed in the hands of federal regulators, where the influence of well-connected developers and special interests (including such laudable causes as environmental protection) could be profound.

    Of course, this is a situation that could also change our national geography in profound ways. Parts of the country well-plugged into the new ruling party – the Northeast, coastal California, and most of all Chicago – could be huge beneficiaries. But the real winner, as I have argued before, may be the Nation’s Capital and its environs, whose power over the private economy would be greater than at any time since the Second World War.

    Of course, it may perhaps be both overly simplistic and somewhat hyperbolic to suggest that Washington, D.C. is morphing into “Pyongyang on the Potomac.” However, unless the federal rescue of our fundamentally capitalistic economy and society is not very carefully orchestrated, we may see greater similarities with another centrally planned economy – the one run from Paris. In that case, similarities between Paris and Washington, D.C. may extend well beyond the boulevarded street network and classical scale bestowed upon us by Pierre L’Enfant; we could also end up with something more akin to France’s centrally controlled dirigiste system than anyone could have expected.

    Peter Smirniotopoulos, Vice President – Development of UniDev, LLC, is based in the company’s headquarters in Bethesda, Maryland, and works throughout the U.S. He is on the faculty of the Masters in Science in Real Estate program at Johns Hopkins University. The views expressed herein are solely his own.

  • Auto Bailout: Help Mississippi, Not Michigan

    We should be getting used to the depressing spectacle of once-great corporations begging for assistance from Washington. Yet perhaps nothing is more painful than to see General Motors and other big U.S.-based car companies – once exemplars of both American economic supremacy and middle-class aspirations – fall to such an appalling state.

    Yet if GM represents all that is bad about the American economy, particularly manufacturing, it does not represent the breadth of our industrial landscape. Indeed, even as the dull-witted leviathan sinks, many nimble companies have shown remarkable resiliency.

    These include a series of small and mid-sized firms – in fields as diverse as garments and agricultural machinery, steel and energy equipment – that have managed to thrive in recent years. It also includes a growing contingent of foreign-owned firms, notably in the automobile industry, that have found that “Made in America” is not necessarily uncompetitive, unprofitable or impossible.

    Indeed, until the globalization of the financial crisis, American manufacturing exports were reaching record levels. Overall, U.S. industry has become among the most productive in the world – output has doubled over the past 25 years, and productivity has grown at a rate twice that of the rest of the economy. Far from dead, our manufacturing sector is the world’s largest, with 5% of the world’s population producing five times their share in industrial goods.

    So what is the problem then? If it is not the effort and ingenuity of American workers or our infrastructure, Detroit’s problems must lie somewhere else, largely with almost insanely bad management.

    We have to remember that the Big Three have been losing market share through even the best of times. Their litany of excuses is as tiresome as their product lines. Back in the 1970s it was “cheap” Japanese labor, something that can no longer be cited as an excuse. European car makers, if anything, have even higher wage costs.

    Then there is high gas prices – a good excuse, it appears, back in the 1970s, as well as more recently. But the Detroit auto industry has now had three decades to come up with fuel efficient products that are also fun to drive and reliable. While they have slumbered, the Japanese, Koreans and now the Europeans – with products like the new Volkswagen Jetta – have made enormous strides.

    Now it is the credit crunch, the car makers say. OK. Will increased credit mean that people will suddenly scoop up the same products they have been deserting in droves for decades? Keep in mind that the desertion could get even worse if the congressional greens – led by new Energy and Commerce Committee Chairman Rep. Henry Waxman – impose stiffer taxes on gas, which will hurt the guzzlers that have generated most of Big Three profits.

    So why the push to bail out the Big Three? It’s basically about regional politics. The deindustrializing states of California and New York may not care much, but the big car companies’ operations are overwhelmingly concentrated in the politically volatile Great Lakes region, an area that proved decisive in President-elect Obama’s victory. Another big reason may be that up to 240,000 jobs in Illinois, the nation’s new political epicenter, are tied to the big automakers.

    Sadly, dependence on the Big Three has had long-term tragic results for this entire region. Between 2000 and 2007 – before the onset of the financial crisis – the nation’s largest percentage losses of manufacturing jobs were concentrated in Big Three bastions like Detroit, Warren-Farmington Hills, Saginaw, Flint and Cleveland. In the five years before the onset of the financial crisis, Michigan alone had lost one-third of its auto manufacturing jobs. Now that figure is up to half.

    Worse still has been the psychological dependency that has grown from this troubled relationship. By their very nature, declining businesses – particularly unionized ones – tend to protect their older members and encrusted bureaucracies more than they look to the future. This also creates a political environment where the incentive is not to spur innovation, but to protect the already established.

    Michigan, for example, has met the challenge of its Big Three habit with a combination of farce and failure. Under the clueless leadership of its governor, Jennifer Granholm, the state first hoped its “cool cities” program would keep young, educated workers close to home. After that failed to work, the governor then pushed the highest tax boost in state history, a reliable job-killer.

    So let us be clear. It did not take a world financial crisis to sink Michigan; it was getting there very well on its own. Nearly one in three residents, according to a July 2006 Detroit News poll, believe that Michigan is “a dying state.” Two in five of the state’s residents under 35 said they were seriously considering leaving the state.

    Fortunately, the Big Three do not represent the entire picture of American manufacturing. Even within the Great Lakes region, Wisconsin, which ranks second in per capita employment in manufacturing, has held onto most of its industrial employment due to its large, highly diversified base of smaller-scale specialized manufacturers.

    If Congress and President Obama want to figure out how to restart our industrial economy, they need to travel not to Detroit but to an alternative universe that includes the South and Appalachia, where most of the new foreign-owned auto manufacturers have clustered. States like Alabama, with the second-largest per capita concentration of auto-related jobs, as well as South Carolina, Tennessee, Kentucky, Georgia and Mississippi, have been growing these high-wage jobs for a new generation. In the process, they have brought unprecedented opportunity to some of the nation’s historically poorest regions.

    Nor are these states looking to remain mere assembly centers. For example, they have launched bold new research initiatives, such as the recently formed International Automotive Research Center at Clemson University, which offers the nation’s only Ph.D. in automotive engineering, to make their region a major center of technological innovation for the industry. And the fact that the region will likely be producing the majority of the most low-mileage and low-emission cars certainly cannot hurt their future prospects.

    However, it is also critical to see beyond merely autos. If you look at the period between 2000 and 2007, as we did at the Praxis Strategy Group, much of the fastest growth in manufacturing was taking place in areas tied to energy production like Midland and Longview, Texas, and Morgantown, W.Va., all of which enjoyed 15% or more increases in manufacturing jobs. Already states like Arkansas, Alabama, Iowa and Mississippi boast more per capita industrial jobs than either Michigan or Ohio.

    Another strong performer has been the Great Plains. Places like Dubuque, Iowa, and Fargo and Grand Forks, N.D., experienced substantial growth in industrial jobs during the past decade. The base here, as in Wisconsin, is highly diverse and includes agricultural and construction equipment, electronics as well as a burgeoning sector in the renewable fuels sector, such as LM Glasfibre, a Danish firm with a large operation in Grand Forks. Washington state has been another bright spot, powered by Boeing and other manufacturers attracted to its low-cost, low-emission hydropower.

    If the country is serious about enhancing U.S. industrial might – as it should be – it might want to ask executives and entrepreneurs in these areas, as well as foreign investors, what they need to keep growing and expanding exports. There is clearly a demonstrated global market for Boeing airplanes and Caterpillar construction and agricultural machinery, as well as a host of high-tech and fashion-related products now being churned out in factories scattered across the country.

    The people running these firms should be those at the congressional hearings, not the pathetic losers from companies like General Motors. They might even have some helpful ideas, like streamlining regulations, investing in critical infrastructure and research facilities, expanding support for training a new generation of skilled blue collar workers and using incentives to encourage firms to improve their energy efficiency. These are the steps we can expect our competitors in Europe, Asia and the developing world to take as well.

    Rather than looking for ways to bail out the most egregious serial failures, let us find ways to provide incentives for those successful at creating new jobs and saving existing ones.

    This article originally appeared at Forbes.com.

    Joel Kotkin is executive editor of NewGeography.com and is a presidential fellow in urban futures at Chapman University. He is author of The City: A Global History and is finishing a book on the American future.

  • L.A.’s Big-Bucks Plan for Upper Floors on Broadway Overlooks Facts at Ground Level

    City officials and private business owners recently gathered to celebrate the extended holiday hours of the Metropolitan Transportation Authority (MTA) Metro Red Line train service between Hollywood and Downtown. Private businesses put up $50,000 or so to pay for the Red Line to run an extra two hours — until 3 a.m. — on weekends through December 27. The local business community also came up with private funds for free service on city-operated DASH buses that will offer connections to late-night Red Line riders and others.

    There’s room to question the timing of those moves amid an economic slide. Yet there’s just as much reason to see good sense and courage behind efforts to kick-start economic activity in the face of the frozen confidence of consumers. The effort falls within the realm of a privately financed gamble, too, so that’s fair enough.

    It’s another thing altogether for our city officials to take such chances on an economic stimulus program, as they apparently intend to do with a plan to make $150 million a year available for loans to property owners along the Downtown stretch of Broadway.

    The plan, as stated by 14th District Los Angeles City Councilmember Jose Huizar, is to provide incentives for property owners to renovate some of the long-empty upper floors of buildings along the thoroughfare, where many of the structures have few tenants besides ground-floor retailers.

    Huizar has noted that the empty spaces provide no jobs and little tax revenue, and that he hopes to reverse that by lending money to property owners from a pool of federal funds. The funds would finance renovations in hopes of drawing commercial tenants and jobs to the upper floors on Broadway.

    It remains unclear why any of the property owners who didn’t see incentives to renovate their properties during Downtown’s recent boom years would find reasons to do so now. It’s also unclear what sort of tenants would fill the empty spaces. It could be several years before we see anything resembling a hot economy in these parts.

    Again, there is always room for bold ideas that are counter-intuitive. Fortune magazine launched in 1930 — just four months after the stock market crash that signaled the Great Depression — and the publication has done just fine all these years. There’s also room to figure that renovations take awhile, and such work along Broadway might be ready just as the economy picks up.

    This economic mess of ours is big and immediate, though, causing extreme difficulties for folks everywhere. There’s some irony here, because you can get a picture of the pain by walking along Broadway. Don’t bother looking at those empty spaces on the upper floor. Take a gander at the ground floors, where many of the retail shops that buzzed with customers just a short while ago have closed, and those that remain face uncertain prospects.

    It’s enough to make you wonder whether $150 million might be better spent on something other than loans to property owners on the hopes that renovations will someday bring jobs from somewhere to the upper floors along Broadway.

    Meanwhile, there’s never been a better chance of getting a change on the rules that come with federal funds. That should be enough for Huizar and other city officials to re-think their plans. They should consider that Broadway — while it’s not everybody’s cup of tea — has been one of the busiest commercial streets in the city for years. It’s a place where merchants sell, workers earn, and shoppers spend.

    Maybe the action is mostly bargain retail on the ground floor, but Broadway is a working street — and we need all of those we can get right now.

    So why not focus ways to help retailers hang on, and draw more to fill the new gaps at street level? How about renovations for storefronts, with merchants allowed a voice in the process? Or more cops for the area to help improve the atmosphere for shoppers? Or aggressive promotions of the retail scene? All of that might even entice a few more mid- and upper-scale merchants to set up shop on Broadway, sparking some organic changes in the marketplace.

    Pick a program, but keep in mind that this is no time to overlook — quite literally — Broadway’s long-standing role as a street-level heartbeat of our city.

    Jerry Sullivan is the Editor & Publisher of the Los Angeles Garment & Citizen, a weekly community newspaper that covers Downtown Los Angeles and surrounding districts (www.garmentandcitizen.com)

  • Morley Winograd and Michael D. Hais

  • Can Millennials Turn around the Housing Bust?

    Many of the nation’s youth (and a few of their elders) are expecting a magical turnaround of America’s economic fortunes as soon as their candidate for President, Barack Obama, is sworn in on January 20th 2009. But the Millennial Generation, born between 1982 and 2003, may be more the source of the country’s economic salvation as any initiative the new President might propose.

    Millennials are the largest generation in American history, more than 91 million strong. They are coming of age just in time to join the workforce, enter the housing market, stabilize home prices, and buy the nation’s expanding inventory of durable goods to furnish their new homes. Despite being burdened with student loan debt and graduating just when the job market is shrinking, this group of optimistic, civic-minded young Americans is ready to demonstrate that it is not only capable of electing a President, but also helping to resolve the country’s housing crisis.

    The “helicopter parents” of Millennials constantly hovered over their children as they grew up in order to protect them from anything that might harm their self-esteem. As a result, many older Americans, especially the 27 to 43 year old members of Generation X, think the Millennials’ “can do” attitude will crumble once they are confronted by the “realities of the real world.”

    But this ignores the cyclical nature of generational change. The GI Generation – the Millennial civic generation’s great-grandparents who came of age in the 1930s and 1940s – were raised in much the same way and acquired many of the same values cherished by Millennials. These members of what have come to be called “the Greatest Generation” were able to draw upon a deep reservoir of confidence and determination to lead America’s recovery from the Depression and later win the struggle against both fascism and communism.

    To give Millennials the same opportunity to rescue America, the new Obama administration should give the emerging generation the same attention in its policy initiatives that it expended getting their votes. Certainly the opportunity is there, particularly in rescuing the now devastated housing market.

    One unintended collateral benefit of the rapid drop in housing prices across the nation is to put many suburban homes within reach of first time home buyers, something that has not occurred for at least a decade. Even in pricey California, for example, the ratio between income and cost of housing has begun to drop dramatically, notes a recent paper by Chapman University graduate students Gil Yabes and Jason Goforth, with the ratio between income and mortgages dropping by one half or more in Orange, Riverside, and San Bernardino Counties, close to pre-bubble levels.

    That’s a big opportunity, one that President-elect Obama’s “Home Ownership Initiative” should seize on. The Millennials could well be the demographic that could buy these more affordable homes and staunch the rise of foreclosures threatening the U.S. economy.

    It’s not that these young people don’t want to own homes. A 2004 study of students enrolled in a four-year university, a community college and an historically black college found that about the same 40-percent plurality in each group preferred to live in a “suburban community, single family home,” upon graduation. The second choice of these Millennials was to live in a “rural area, with large lots and open space.” Only about a quarter wanted to live in an “urban setting with mixed housing styles.” Luckily for them, five years later, their preferred housing stock has just become imminently more affordable.

    Now the Democratic Congress and President Obama should enact a significant tax credit incentive for first time homebuyers, many of whom would be Millennials. By rapidly expanding the universe of potential homebuyers, this program would help stabilize housing prices in the critical lower cost housing market. At the same time it would help stem foreclosures among existing homebuyers, whose loss of home equity has made abandoning mortgages more rational economically than keeping up payments.

    In 1934, during an earlier time of far greater economic pain, the Federal Housing Agency (FHA) was created to provide financing for a new type of mortgage requiring a lower down payment with the loan to be paid off over 25 or 30 years. The federal agency’s financing authority was greatly extended through Title II of the Housing Act of 1949, which provided federally guaranteed mortgage insurance and helped a flood of returning GIs own a home. Now it is time for Fannie Mae and Freddie Mac to be given the authority to finance a new mortgage structure for homebuyers under thirty.

    By lowering down payment requirements for this select group of home buyers to 10% and stretching the terms of mortgages to the number of years these young people are likely to be active in the workforce, forty, monthly payments on starter homes could be brought in line with the Millennials‘ ability to pay. Initially, this combination of tax credits and new types of mortgage financing would slow the decline in home prices that triggered the problems in the country’s financial markets. In the longer run, it will make sure that the benefits of widespread homeownership will expand to a new generation of Americans.

    One young Millennial to whom we talked recently was concerned that the hours her retail employer wanted her to work were being cut as holiday shopping continued to sour. She expressed concern that there was still “more than a month before Obama gets sworn in and everything turns around again.”

    Her statement exhibits the kind of economic naiveté that frustrates some older Americans, but does provide an important lesson – political as well as economic – for the incoming administration. The Millennial Generation, whose votes were key in nominating and then resoundingly electing President Obama, want to see things improve rapidly. After all, they lack either the experience or the equity that Baby Boomers have acquired over the years.

    Once in office, President Obama should embrace the impatience of America’s youth as one way to insure that his economic policies are enacted quickly. By making an explicit appeal to America’s largest generation’s desire for homeownership, he would not only take a big step toward ensuring the popularity of his economic program, but its effectiveness as well.

    Morley Winograd and Michael D. Hais are fellows of NDN 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 New York Times 10 favorite books of 2008.

  • The Recession Hits the Plains

    On Monday, Creighton University’s Economic Forecasting Group released the latest installment of the Mid-America Economic Survey. The survey of supply managers in nine plains states has been conducted monthly since 1994 to “produce leading economic indicators of the Mid-America economy.” The survey provides a snapshot of economic activity in the states of Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.

    For November, the economic picture was less than positive. The survey’s primary index hit a second straight all-time low in November, recording a score of 37.8. Any score below 50 “indicates a contracting economy over the next six to eight months.” Only one state surveyed, North Dakota, showed a growing economy, with an index reading of 55.7, down from both September and October.

    Employment prospects in the area were also negative, with the region showing “job losses for the tenth time in the past 11 months.” This led to a “very weak” November employment index figure of 39.0, down from 49.7 in October, another record low. Creighton economics professor Ernie Goss, a member of the forecast group, expects “regional job losses to mount in the months ahead with rapidly rising unemployment rates for most states.” According to Goss, the area is “now in a recession and I expect it to rival the recession of 1981-82 in terms of joblessness and job losses.”

    Echoing such findings today, the Federal Reserve released the latest edition of the Summary of Commentary on Current Economic Conditions, more commonly referred to as the Beige Book. According to the report, “overall economic activity weakened across all Federal Reserve Districts,” with declines in retail sales, manufacturing activity, and housing prices being reported in nearly all districts. On the plains, the Minneapolis and Kansas City Fed districts both reported weaker overall economic activity.

    Hopes for a quick rebound are subdued. According to the Kansas City Fed, their “business contacts expressed little optimism about economic activity going forward.” The Mid-America survey reports that economic optimism “captured by the confidence index, slipped to another record low of 22.4” in November. While pockets of strength such as North Dakota remain, communities across the plains now face the prospect of a significant economic downturn.

  • Robert Bruegmann

  • The Housing Bubble and the Boomer Generation

    Much of the commentary on the current economic crisis has focused on symptoms. Sub-prime mortgages, credit default swaps and the loosening of financial regulations are not the root cause of the financial crisis. They are symptoms of what has recently become a surprisingly widespread belief that individuals, families and even entire nations could live indefinitely beyond their means.

    The crisis has reminded everyone that, in the end, market fundamentals like supply and demand still matter and that ignoring traditional virtues like thrift and long-term planning can lead to grief. But what does this have to do with boomers?

    Ultimately, this economic crisis shines some light on some of the most important yet unresolved and paradoxical aspects of American culture as it developed in the wake of the economic, social and political upheavals of the late 1960s and early 1970s.

    Children coming of age in the 1950s and 1960s were born into families that, on average, enjoyed the greatest material prosperity and the best housing the world had ever known. The security offered by an enormously expanded and comfortable middle class allowed these children to crusade on behalf of various causes. Those who called themselves “progressive” pushed to expand individual civil rights, sometimes at the expense of what others perceived as community rights or duties, but at the same time they were often deeply suspicious of capitalism and markets and for this reason pushed to restrict the rights of private property owners in order to expand on their own notions of community rights.

    The result was, on the one hand, a massive effort to empower racial and ethnic minorities, women, gay people and many others. This aspect of the revolutions of the 1960s era has always been highly controversial, with conservatives fighting the “reforms” every step of the way. On the other hand, starting about 1970, there was an explosion in regulations on the use of land including tighter zoning and building codes, regulations governing environmental matters, historic preservation and land conservation, growth and building caps and growth management schemes. It became harder to build at the urban edge because of the environmental rules and efforts to limit “sprawl.” It also became harder to build at the center because of substantial down-zoning and other regulations to “preserve neighborhood character,” particularly in affluent neighborhoods. This aspect of the 1960s progressive agenda has led to grumbling about NIMBYism but has otherwise generated surprisingly little negative commentary.

    Nevertheless, this movement has created one of the most paradoxical legacies of the 1960s as programs justified in the language and logic of “rights,” have turned into bulwarks for the status quo and a mechanism to transfer wealth from younger families of modest income to more affluent older families.

    In the 1950s and 1960s developers in America built a huge amount of housing, primarily on cheap land at the suburban edge of almost every city in the country. This housing was remarkably inexpensive and, together with liberal financing terms, allowed millions of Americans to enter into the ranks of home ownership and the middle class. It provided the underpinnings for the enormous wealth of the boomer generation.

    Starting in the 1970s, though, particularly in some of the most desirable markets in the country, the same people who most benefited from the developments of the early postwar years turned against those development practices. They advocated regulations for many things that most people, then as now, would agree were desirable – conserving scenic areas and wetlands, protecting coastlines and animal habitats and preserving open space, historic buildings and neighborhood character.

    Yet the net effect of all of these regulations was to limit severely the supply of land for urban uses. Even more important, existing homeowners, what I have elsewhere called the “Incumbents’ Club,” created a political system that allowed them to dictate how much growth and what kind of growth would be permitted in their cities.

    This shift of decision-making about development from private developers and individual property owners to public planning bodies, almost always controlled by homeowners, was hailed by many observers as a triumph of democratic process. The community rather than the developers, so this line of thinking went, would henceforth dictate the growth of the community. The problem with this equation was that it failed to consider who was speaking for the community and whose voices were not heard or to calculate the costs and benefits of these policies.

    For existing homeowners in affluent communities like Boulder Colorado, or Nantucket Island or San Francisco, this regulatory rush turned existing land ownership into pure gold. By limiting the supply of land for development and driving up the costs of development where the land was available, it pushed up the perceived value of all houses, including their own.

    Take the case of the Bay Area, where land prices were on par with urban areas elsewhere in the country up until 1970. Then, as the area pioneered in land use regulations of every kind, house prices started a steep climb. Where the rule of thumb had long been that the average American family in any given urban market would expect to pay about three times its annual salary for an average house, by the early years of the 21st century it had reached the point where that average house in the Bay Area would be the equivalent of ten, eleven or even twelve years of the average family’s income. At the same time, however, in lightly regulated urban areas, even extremely dynamic ones like those of Atlanta, Houston or Phoenix, house prices registered no comparable rise against incomes.

    Nor was this all. There was at the same time an increasing movement around the country to push the cost of what had been considered public goods, like new roads, street lights, sidewalks and sewers, even parks and schools, onto the developers who then passed these costs on to the eventual buyers. As a result, existing owners who enjoyed infrastructure paid for by previous generations no longer had to pay for the infrastructure of their children’s and grandchildren’s generation.

    Finally, this elaborate edifice of protection of the interests of existing landowners was capped by a series of tax revolts starting in the 1970s, particularly Proposition 13 in California. This made it possible for members of the incumbent’s club to enjoy the benefits of rapidly escalating house prices without paying a corresponding share of the property taxes that financed most municipal services.

    These land use regulations and real estate tax policies have made possible, at least in certain highly regulated markets, one of the greatest transfers of wealth in American history. The primary beneficiaries have been existing landowners including a very large percentage of affluent boomers. The ones who have paid have been less affluent renters, younger people and all future generations of prospective homeowners.

    The existing homeowner in the Bay Area could watch the value of his house soar from a few hundred thousand dollars up into the millions without lifting a finger. Meanwhile the dramatic rise in land prices, because it has not been accompanied by a corresponding increase in salaries, has devastated the prospects of young couples, many of whom were forced to either leave the area or obliged to take on huge mortgage debt just to afford an entry level house. These same people are now bearing the brunt of the steep decline in housing prices and the wave of foreclosures washing over the country.

    One of the most remarkable things about this enormous transfer of wealth has been how little most people were aware that it was happening or what caused it. A few people – notably Bernard J. Frieden in his book The Environmental Hustle from 1979 – had sounded the alarm. More recently Wendell Cox and Hugh Pavletich at Demographia.com have made a similar case using substantial data from cities in the English speaking world. Although all of these observers have been dismissed as free market enthusiasts, more mainstream commentators – like Edward Glaeser of Harvard and Joseph Gyourko of the University of Pennsylvania – have embraced this theme. Even the noted liberal economist Paul Krugman has joined the chorus, comparing the moderate land prices in the “flatlands,” meaning lightly regulated places like Texas, with the extremely high prices in the “zoned zone” or places like heavily regulated coastal California.

    This leads us to the great challenge we face now keeping families in their homes. The sad truth is that in areas where housing prices have vastly outstripped incomes there may no easy way to do this. In many markets either housing prices will need to fall quite a bit further or income will have to rise substantially, and there is little likelihood – particularly with this weak economy – of the latter happening any time in the near future.

    One good thing that might come out of the current crisis, though, is a recognition that regulations, however well-intentioned, can come at a price, sometimes a high one, for some parts of society. I doubt very much that the boomer generation ever intended to create the current housing bubble or enrich itself at the expense of less affluent families and generations to come. This was the unanticipated consequence of a genuine desire to create a better life for everyone by individuals who, probably inevitably, defined the good life as the kind of life they themselves wanted. In many ways they succeeded all too well. We can only hope this downturn will at least open up a new chapter in the discussion of the bittersweet story of a generation that set out to remake the world.

    Robert Bruegmann is a professor of Art History, Architecture and Urban Planning at the University of Illinois at Chicago. His most recent book, Sprawl: A Compact History, published by the University of Chicago Press in 2005, has generated a great deal of discussion worldwide.