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  • The Purpose of Finger-Pointing on Financial Crisis

    The presidential campaign is over and the global financial crisis remains. President-elect Barack Obama offers hope for a fresh start even as he prepares to face a backlog of enormous problems. I believe that our nation is up to any and all challenges, able to achieve a new unity and purpose in these trying times.

    Yes We Can, indeed.

    You’ll hear some others say that these challenging times leave no room for finger-pointing over the origins of the financial mess we face.

    I beg to differ, based on the firm belief that our nation will be served well by understanding how this mess came about. This is part of the challenge, and it will require some sorting through the rubble and—yes—some finger-pointing.

    A lot of time could be spent on the Wall Street big shots who played significant roles in the whole affair.

    There’s certainly room for a hard look at the culture of monetary hedonism that grew in Corporate America over the past several decades.

    There are bigger culprits out there, though. I’m talking about the elected officials who the voters of this nation have trusted to keep an eye on those Wall Street big shots. That’s a basic part of the job for Washington politicians—voters don’t expect
    Wall Street big shots to behave themselves.

    You’ve probably noticed that politicians generally don’t do very well when it comes to facing their own shortcomings on the job.

    You’ve also probably noticed a phrase that’s been on the lips of politicians who want to dodge any blame for what ails our financial system. It began making the rounds during the presidential campaign, as so many elected officials performed the circus act of scurrying for cover even as they lusted after airtime on cable TV shows. Here is the basic message, although you’ll hear plenty of slight variations:

    “The problem is that we have a 20th-century regulatory system for a 21st-century financial market.”

    Keep in mind that many of the Washington politicians who have uttered this sentiment have the authority to keep an eye on our financial regulatory system. They have been—and most of them remain—in positions to raise questions and seek changes to the system at any time.

    Remember also that our financial regulatory system has never been chiseled in stone. It can and has been changed over the years. The truth is that the system itself cannot be outdated—it can be adjusted as needed by our elected officials. They have always had the standing to consider new developments in the marketplace—exotic investment instruments and lax mortgage-lending standards, to name a couple—and seek changes to regulations on such practices.

    The only thing outdated in recent years has been the elected officials who have had oversight of our financial regulatory system.

    The world changed, and the financial industry changed, too. The politicians who were supposed to ride herd on the financial industry didn’t change.

    Go ahead and give some of the politicians in Washington a back-handed benefit of the doubt on the motives behind their lack of oversight—it’s become clear that most of them had little understanding of the forces tearing the financial system to shreds. That still leaves room to suspect that some of them didn’t know because they didn’t want to know—because they were taking in all the campaign donations they needed right up to the point of the meltdown.

    Readers can decide how all of that shakes out.
    Whatever you decide, though, don’t let any politicians off the hook by accepting the notion that events simply overtook an outdated regulatory system, and there was nothing to be done until the whole thing broke down. This is the worst sort of bunk—the kind that will embolden ignorance and influence peddling in our political class if left unchallenged.

    There is good reason to be hopeful about the incoming Obama Administration, and cause to believe that the U.S. can beat this bad spell.

    There’s also good reason for all of us to complete the full exercise of getting a grip on what has occurred.

    That will require some finger-pointing.

    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)

  • European Housing Woes

    While the decline in housing prices in America has been making news for some time now, less attention has been paid on this side of the Atlantic to the downturn in European housing. The housing market in Europe, much like that of the United States, “soared during the first half of this decade, rising far beyond the levels that you’d expect, based on traditional economic factors.”

    The fallout from the bubble is beginning to look the same, if not worse. According to Newsweek, over the first six months of 2008, housing prices in several European nations, including the United Kingdom, Spain, Sweden, and Norway, have fallen “at a faster rate than is occurring in the United States.” According to one analyst interviewed by Newsweek, the European downturn is still in an “early stage”.

    Eastern Europe is also seeing major fallout from deflation of the real estate bubble. According to Reuters, nations such as Bulgaria, Romania, and the Baltic republics of Latvia, Estonia, and Lithuania, have seen property prices plummet as easy access to credit has dried up. A Bulgarian property agent interviewed by Reuters reported that “No-one is buying. Everything has frozen”. The credit crunch has led to fears of “a wave of bank and currency crises,” which might necessitate IMF bailouts of several Eastern European nations. In the past two weeks Hungary and Ukraine have been bailed out, with the IMF providing loans “totaling $32 billion, in exchange for belt-tightening.”

    A recent report on European housing by Stratfor argues that the housing bubble faced by Europe was larger than that seen in the United States, and in correcting could lead to a “long-term deflationary spiral”. The report points out that in addition to facing overheated housing markets, Europe, over the long-term, faces a “poor demographic situation,” with a birth rate well below replacement level. According to Stratfor, this situation “will dampen the demand for housing in the long term and possibly create a deflationary spiral in the housing market”.

    Not all analysts are so gloomy, with some arguing that “the practice of giving mortgages to less credit-worthy buyers,” never reached the same levels in Europe, and that while prices did boom, there is not a “vast glut of never-lived-in houses sitting vacant on the market,” which should help to mitigate the situation. Regardless of the severity, it appears clear that Europe is set to face a continued period of real estate value contraction.

  • Financial Bailout Shortchanges Taxpayers and Does Little to Fix the Economy

    Last month, Congress gave the treasury secretary $700 billion, which he said he urgently needed to buy toxic securities from the balance sheets of some of our largest financial institutions that were in financial trouble.

    The secretary said that the economy was in danger, and the bailout funds were necessary to prevent a collapse.

    I agree the economy is in trouble. And I am anxious to support emergency measures that will give our economy a lift.

    But I voted against the $700 billion dollar fund for the secretary because I insisted that any bailout had to include measures that would stop the reckless behavior that caused this financial wreckage.

    Unfortunately, the bailout fund was approved without the tough, new regulations necessary to prevent the actions that steered our economy into the ditch.

    In recent weeks, the treasury secretary changed his mind. He decided not to buy toxic securities. Instead, he used the first big chunk of bailout money to buy $125 billion of capital in the nine largest banks. It would free up some lending in the credit markets, he claimed.

    But, strangely, he gave the big banks the money “with no strings attached.” He didn’t require them to use it to expand lending. He didn’t stop the payment of big bonuses to their executives. And in a final insult to common sense, his department is encouraging the big banks to consider more mergers.

    Weeks later, we learn that the big Wall Street banks plan to pay over $20 billion in executive bonuses to their employees.

    What’s wrong with this picture? The American taxpayers, who are struggling through this economic crisis, are told they have to fork over a pile of money to bailout some big banks, while the big banks are busy calculating their year-end bonus payments — maybe to the same geniuses who built this financial house of cards and were last seen driving the getaway car from the scene of the wreckage.

    I think it’s nuts!

    Should anyone in Washington be surprised that the American people are steamed?

    During the past few decades and especially in recent years, the big financial firms were having a field day trading in complicated derivatives, creating a sub-prime loan scandal and engaging in risky, reckless business practices. All the while, many of the government regulatory agencies were doing their imitation of a potted plant.

    Finally, the speculation bubble burst, some big financial firms failed, and it is causing major damage throughout our economy.

    By contrast, on Main Streets across America, community banks and small businesses were still doing business the old-fashioned way.

    A couple of weeks ago, I was sitting across the table from a North Dakota community banker. I asked him if, in light of the financial crisis, his small-town bank had any money to lend if a business from his town wanted to expand.

    “Oh, sure,” he said. “We didn’t get involved in all of those fancy, risky business practices that the big banks were involved in. We take in deposits, and we make good loans.”

    Good for him. It is the way business is supposed to work.

    We do need to take urgent steps to put our economy back on track, but it needs to be smart, effective action that will work. So far, that hasn’t been the case.

    When Congress is back in session in mid-November, I am going to push the following changes to the misguided policies of recent weeks:

    • Prohibit the payment of big bonuses in the firms that are getting the federal bailout money.

    • Attach conditions to any bailout money to make sure the funds are used for the purpose intended and to prohibit the reckless business practices that created this crisis.

    • Restrict further mergers by big banks. It was many of the big banks that caused this crisis, while the smaller community banks largely steered clear of the reckless behavior in high finance.

    • Immediately create a Federal Investigative Task Force to investigate and establish accountability for this financial crisis. Criminal behavior should be investigated and prosecuted.

    Dorgan, a Democrat, represents North Dakota in the U.S. Senate.

  • Orlando: The Limits of Form

    By Richard Reep

    To date, luminaries of the New Urbanist movement such as Andres Duany and Peter Calthorpe have done little to change Orlando. The central Florida city remains balkanized, market-driven, and vaguely cosmopolitan in nature. Orlando’s vitality does not depend on the physical form of the city, but rather the spiritual involvement of its citizens, the safety and security that they gain from their urban choice as well as the unique mix of jobs created by the employment of Orlando. These three intangible factors drive the form, and a healthy city planning process will not ignore this in favor of a rigid dress code.

    New Urbanists, of course, can point to pockets of clustered development that echo their philosophy. Baldwin Park, Horizon West, and Avalon Park are three large examples. Mills Park, Sodo, and other smaller projects abound, for which the New Urbanist movement takes credit. All of these projects have in common a core that mixes residential, office, and retail in a form denser than the surrounding community does. All of these projects take great pains to store vehicles, once you have arrived to the core, in a way that masks them from view. In addition, all of these projects feature traditional architectural styles that express early 20th century America.

    Yet these efforts have failed to produce affordable housing for those who truly want to live within walking distance of their workplace. This is in part because New Urbanists seem to have trouble with the idea of creating an economic base first. By contrast, older, organically grown clusters are thriving nicely, in areas such as Thornton Park. At one time, Lake Eola (a small, oval lake) separated Downtown Orlando from this older neighborhood walking distance of downtown. The area was shabby, violent, and chaotic. But efforts to drive downtown toward Thornton Park – painstakingly led by visionaries who believed in the neighborhood – has created an organically grown, variable density cluster that adds tremendous value to the city.

    New Urbanists, however, are not approving of Thornton Park, perhaps because it was not their idea. They point to a violation of their form-based codes, which maintain seven stories the maximum height for a good structure. They point to the on-street parking – another abomination to their theology. In addition, they point to the older, single-family residential development that exists in and around the other development, citing its violations of their theoretical density hierarchy (six gradients of density, from urban to rural, which must occur in a specific order, and which are collectively labeled “the transect.”). Lastly, they are mute when it comes to the older, 11- and 12-story senior living towers associated with downtown churches, which happen to be 100% full with a waiting list. Somehow, this affordable housing does not fit into the Smart Code.

    Parramore is another shabby, violent, chaotic neighborhood exists adjacent to Downtown Orlando, with similar potential to Thornton Park. Like cosmetic surgeons rushing to claim credit for a half-facelift, the New Urbanist professionals, when questioned about this area of Orlando, freeze with a faint smile, and mention that no private interests have approached them about Parramore. Until this happens, they maintain implementing the imagined order of a proper city, as set forth in the “Smart Code” by the Congress of the New Urbanism, is impossible. The code regulates form rather than use, and is generally referred to as a form-based code for this reason.

    It is time to call off the form wars, and put effort into the basics what makes a city great: encouragement of a city’s spiritual life, solid bases for employment, and assurance of safety and security. We have to become more pragmatic in these times of economic turmoil; embrace of a strict planning theology, and the mass dumping of land-use regulation that have shaped cities for the past 50 or more years, could inhibit more organically driven growth that may be far more economically viable.

    Orlando’s enduring, 10-year involvement with New Urbanism has reaped mixed results. While some organically developed areas like Thornton Park add interesting and thoughtful form to the city, many of the New Urbanist projects (which are larger in scale the farther out from the urban core) add bland, living-over-retail or office-over-retail streetfronts. These developments cherry-pick from New Urbanism what developers and city planners can agree upon: traditional architecture, vertical stacking of uses, and selective relaxation of land use codes.

    Although the New Urbanist projects have contributed to Orlando’s messy vitality, it has also worsened traffic since one has to drive from cluster development to cluster development. And it also contributes to Orlando’s tax base, because New Urbanism, as implemented in Orlando, comes at a cost premium over suburban development. This guarantees developers only propose projects where they can make the most money. It also reflects the most glaring problem New Urbanism in its current form: it leaves behind the rest of us.

    In reality although form-based codes claim to improve the city’s form, they also create a host of non-form social, traffic, income disparity, and employment problems for the city to solve. To improve social involvement, attract and retain meaningful employment, and deliver a safe and secure envelope is very hard work. Citizens should care what their city looks like. However, for the city to focus overly on form, placing aesthetics above the older, more proven values is not the way to create successful places that work primarily for people, not architects.

    Richard Reep is an Architect and artist living in Winter Park, Florida. His practice has centered around hospitality-driven mixed use, and has contributed in various capacities to urban mixed-use projects, both nationally and internationally, for the last 25 years.

  • Washington Wins…Everyone Else (except maybe Chicago) Loses

    What could prove to be the worst economic decline since 1929 may also have the unintended consequence of creating a booming real estate market for the Washington, D.C. metropolitan area over the next few years. Ironically this has been brought on not, as one might expect, by Democrats – traditionally the party of Washington – but by the often fervently anti-DC Republicans.

    This process was set in motion by the Bush Administration’s $700 billion financial bailout. This has caused a potential geographic shift in power from Wall Street to Pennsylvania Avenue. By concentrating decision-making power and institutional ownership in the Nation’s Capital, the Administration has essentially drained power away from financial institutions historically headquartered in New York City. The local real estate market impacts of this shift in the locus of private-sector financial power will only be accelerated by the impact in that real estate market by the changing of the guard in Washington following the November 4th election.

    To start with, the $700 billion federal bail-out of Wall Street being spearheaded by the Treasury Secretary is certain to involve a spate of new Treasury Department hirings, bringing in the employees needed to manage this herculean task. And, while that in and of itself does not a real estate boom make, there is a remarkable confluence of other factors to be considered as well.

    For example, the November 4th election results are projected to generate 40,000 real estate transactions in the metro Washington marketplace over the next nine weeks, as those currently in power leave the Nation’s Capital and those elected to power move in. That is 40,000 transactions that otherwise would not be occurring in the prevailing economic climate. Any time you introduce a large number of buyers into the marketplace competing for product that might not be entirely fungible in terms of geography (in-town versus out of town; D.C. vs. suburban Maryland vs. Northern Virginia) or housing typologies (pied-a-tier versus exurban McMansion, for example), you drive prices up. Add to the equation that not everyone voted out of power actually ever leaves the D.C. area – this is after all the center of the universe for many law firms and lobbyists, as well as both major political parties – and there is the potential for increased demand for and a constrained supply of houses.

    Add to this residential real estate boom a coincident commercial development boom. Consider that the federal government will become a major owner of some of the country’s most important financial institutions with, at the very least, monitoring and oversight responsibilities (if not also investment policy input). Under this scenario it is easy to imagine a whole new industry being born almost overnight in the District of Columbia, with private interests seeking debt and equity financing not by meeting with Wall Street investment bankers but by meeting with their investment bankers’ new regulator at 1500 Pennsylvania Avenue in Washington, D.C. (the headquarters for the U.S. Treasury Department).

    This is not nearly as far-fetched a notion as it may first appear. Forty years ago most Washington, D.C. law firms and lobbyists were focused primarily on what today are viewed as pretty stodgy federal agencies: The Interstate Commerce Commission; the Federal Trade Commission; the Food and Drug Administration; the Interstate Highway Commission. Lobbying became more sophisticated, impacting to a much greater degree federal policies related to taxation, banking, and capital markets, as well as emerging policy areas like healthcare, energy, and the environment, causing the private-sector workforce feeding off of the federal presence in Washington, D.C. to grow exponentially.

    The District of Columbia has the third-largest downtown in the U.S., ranking only behind New York and Chicago. More than 10 million square feet of commercial office space was added to the District between 1996 and 2005, with another 10 million having been brought on-line or underway since then. Additionally, geographic areas that in the 1960s were entirely rural farmland – such as Tysons Corner, VA, and Gaithersburg, Maryland – have grown so fast that they are today unrecognizable. For example, Tysons Corner has over 46 million square feet of office and retail space, and a daytime population of over 100,000. The Washington metropolitan area is the eight largest market in the country – and comprises the fifth largest market when combined with the Baltimore metro area – with a 2007 population of over 5.3 million people, yet almost nothing is manufactured here. It makes one wonder exactly how many people are required to properly rearrange the deck chairs on the Titanic.

    Finally, add to the foregoing scenarios the very real prospect for a major expansion of our federal government under the incoming Obama Administration and an energized and slightly larger Democratic majority in the House and Senate. There is the distinct possibility (if not, in reality, the promise) of a New Deal Era federal program to re-build the nation’s infrastructure both to meet long overlooked needs but, more-importantly, to also create a vast number of new public sector-financed jobs . The stage is set for what could be the greatest Washington, D.C. real estate boom since the New Deal (the residential population exceeding 500,000 for the first time in the 1930s) or the Second World War (in 1950 Washington, D.C. reached its peak population of over 800,000 residents, although today that number is just under 600,000). The last boom transformed a sleepy southern town into a major northern metropolis; the next could turn greater Washington into first-rank conurbation on the scale of New York, Los Angeles, and Chicago.

    Under less ominous circumstances this might all be considered the natural order of things. And from a purely personal perspective, I guess it wouldn’t be so bad to see my home appreciation return to the double-digit annual escalations to which Washingtonians have become accustomed.

    But then there are questions of whether this is good for the country. Most metropolitan areas are suffering (some, like Miami, Las Vegas, and Phoenix are hemorrhaging) while only perhaps Chicago – the geographic power base of President-Elect Obama – seems well-positioned to gather in the spoils of the new political order. Meanwhile DHL’s recently announced layoffs in Wilmington, Ohio, may impact an estimated one-third of the employable residents in that community. By way of this stark contrast, there’s something truly unseemly in the notion that the very place fundamentally responsible for many of our current economic woes should benefit from being both the cause and the cure of the economic maladies plaguing the country.

    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.

  • The Change We Need – Part II: Will We Sustain The Current Economy, Or Create A Sustainable Economy?

    Yesterday, Rick Cole discussed the theoretical basis for the most effective kinds of economic change. Today, he provides specific suggestions. – The Editors

    No brief outline can do justice to weaving together the potentially convergent strands that compose the key elements of the remaking of the American economy. None of the policy prescriptions here are original, but it is important to see them as complimentary parts of a larger whole:

    •GREEN BUSINESS: This means shifting from thinking of “green jobs” as being generated by alternative energy to an understanding that, in the decade ahead, every single job in the American economy will be “green”, as we ruthlessly pursue less wasteful, more sustainable and more productive business practices. This is primarily the domain of the private sector, but Federal policies that deal with taxes, regulations, research, purchasing and grant-making must all be tweaked to actively promote green practices, rather than inadvertently hinder them.

    •SMART GROWTH: The suburban, auto-dominated landscape of the past fifty years is not only unsustainable on a world-scale, it won’t work for a post peak oil, post carbon America. Alternate fuels are not enough, nor will public transit work in sprawled suburbs. Chicago is the headquarters for the Congress for the New Urbanism, a largely apolitical movement of architects, planners, developers and activists promoting a revival of traditional town and city building that emphasizes mixed-use, transit-oriented design at every scale of development from neighborhood to metropolis. While catching on in cities and states across the country, the movement remains largely marginalized in Washington. One exception is Congressman Earl Blumenauer, an early Obama backer from Portland, Oregon. Former Milwaukee Mayor John Norquist has also laid out a program for reversing the Federal government’s half century of counter-productive policies.

    •REGIONALISM: Obama’s speech to the US Conference of Mayors embraced this powerful focus on metro regions as the engines of global growth. Bruce Katz of the Brookings Institution has been one of its leading theoreticians, and former HUD Secretary Henry Cisneros one of its most eloquent champions. Denver, Seattle, Salt Lake City, Sacramento, Portland, Chattanooga and St. Louis have emerged as models for metro/suburban collaboration to promote infrastructure investment, economic development and land use planning. Europe has pioneered this kind of regional collaboration to stay competitive in the global economy. There is also a powerful social equity dimension to this movement, which ensures that inner cities will not be left of out the regional efforts to improve education, reinvest in older communities, and focus on the creation of high-wage, high-value jobs.

    •TRANSPORTATION: In 1991, Senator Pat Moynihan spearheaded the least-heralded major domestic policy shift of that decade, the landmark ISTEA omnibus transportation bill. Unfortunately, the Clinton Administration failed to follow up on it, and left highway expansion as the continuing Federal policy direction, instead of investing in matching the investment by all other advanced economies in both high-speed rail and public transit. This has been compounded by the Bush Administration’s embrace of libertarian market mechanisms for funding future transportation investment. This failure has fueled sprawl and its appetite for oil consumption and greenhouse gas emissions. The new administration will need to start where ISTEA left off to rebuild our goods- and people-moving capacity 0n an environmentally and economically sustainable model.

    •HUMAN CAPITAL: Obama’s education program needs to be place-based in a way that directly ties into the drive to restore American competitiveness. Mayors around the country have followed the lead of Chicago’s Richard Daly in seeing the revival of K-12 schools as fundamental to restoring America’s great cities as engines of new wealth creation, and not just gentrified havens for young professionals amongst crime-ridden slums. One of Obama’s successes as an organizer was to establish a job training program in the projects. But without a national commitment to human capital, we won’t reduce the underclass, assimilate immigrants, and provide the workforce that can outperform the hard-working offshore workforce clamoring for what were once American jobs.

    •INNOVATION: Obama’s popularity in Silicon Valley mirrors his embrace of venture capital investment in American jobs. The Japanese failed to shake off their decade-long slump because they remained tied to “pork barrel” public works stimulation of their economy. Harnessing private investment and entrepreneurship to rebuild America’s cities, older suburbs and essential infrastructure is essential not only to economic success, but to political success as well. We must find a way to redeploy the huge brainpower and speculative investment that has gone into financing consumer debt and exotic credit mechanisms into rebuilding America’s cities and productive economy.

    •NEW ORLEANS: Of all of George Bush’s public relations stunts and policy failures, none is crueler than his broken promise to rebuild that city. Nothing would be a more powerful counter-point to those wasted years than to use the New Orleans region as a model for a rebuilt, muscular economy that puts people back to work in high-wage, high-value jobs. Of course, the default choice is tourism, gambling, and decay. But great cities are not primarily sinkholes for consumption. They’re centers of enterprise, trade and the generation of wealth.

    This is simply a superficial survey of the shape of a fundamental reshaping of the American landscape and economy that could emerge from the wrenching changes ahead. “Change we can believe in” will need to look beyond Washington and its sound bite pre-occupations and stale wedge issues. It will need to harness local movements, as well as Mayors, Council members, Governors, and State Legislators to experiment with and implement a new model throughout our federalist system. Obama carries the unique advantage of having been a community organizer and a state legislator. He can be the model and the inspiration for a broad-based movement for change that is not solely reliant on Washington politics or policy.

    The first 100 and the first 1000 days of the new administration will be a time of harsh testing, for Washington, and for the country. We are too big and complex a nation for any administration to chart a single course for our gargantuan economy and our diverse geography.

    But a clear course that favors investment in capacity over spending on consumption, and a commitment to sustainability over business as usual could have a profound impact on the shape of American metropolitan regions and the communities they contain. That is “the change we need”.

    Read: The Change We Need: Will We Sustain The Current Economy, Or Create A Sustainable Economy? Part I

    Rick Cole is the City Manager in Ventura, California, where he has championed smart growth strategies and revitalization of the historic downtown. He previously spent six years as the City Manager of Azusa, where he was credited by the San Gabriel Valley Tribune with helping make it “the most improved city in the San Gabriel Valley.” He earlier served as mayor of Pasadena and has been called “one of Southern California’s most visionary planning thinkers by the LA Times.” He was honored by Governing Magazine as one of their “2006 Public Officials of the Year.”

  • Toronto: The Action is Where You Make It

    You get mean-spirited when you feel left out of joy. Somebody else’s joy raises envy when you haven’t had any yourself. Cities are like that, jealously eyeing other cities as if there were more fun and delight and oh, “buzz,” to be had elsewhere.

    In fact it’s an illusion that the party is going on somewhere else. The action is where you make it, and in a city you have lots of help doing it. In fact that’s what justifies city life – the signature of any great city. Self-rejoicing. It’s something more than plain pride, or confidence or superiority, or a call for “buzz,” excitement, or (yech) prosperity.

    Joy is what Toronto hasn’t done too well. But now the New Canadians are it the city along with their spontaneity, a zeal, a natural gusto for life; that is, until they get hooked on the regulation and protocol that define the city’s ethic.

    What makes the new Canadians naturally more joyful? Perhaps it’s because they initially come from less “fortunate” places. Deprivation, (for all its unseemliness in a climate of entitlement) has a way of instructing people in reliance upon family and community. People need each other in dire straits. In their calm affluence, Torontonians seem to not need each other.

    There’s something about having to rub closely against another human being that gets on our nerves and I don’t think that all the talk of “densification” in affluent Toronto will quite manufacture that alchemy of inter-civic dependence. And that’s the challenge for all cities in an atmosphere of globalization. Globalization likes order, efficacy and the robotization of human capital, leading to culture of protocol and calculation – even when it comes to enjoying oneself.

    To be fair, there’s been a steady erosion of the puritan ethic that says “don’t do this” “don’t do that”. But now the caveats and prohibitions come from a more hygenic mentality. There are prohibitions against parking, loitering, lingering, lingering in parks after 11pm., trespassing. We have bylaws for everything; a bureaucratic industry of injunctions and disallowance. Add to that a contemporary feel for the wisdom of surveillance, neighborhood watch and reporting of suspicious behavior, and you have a self-consciousness that is being perfected in Toronto.

    Toronto comes to its love for order from a colonial tradition of shopkeepers, whose ethic was that of good business. Add to that the “family compact”, loyalism, and a legacy of stingy theologies (notions that God totes a ledger instead of a horn of plenty) and this typology becomes a model for Ontario. It’s evident in the dedication of bureaurocrats and civil servants, who seek a sanitized city in place of a creative or playful one. This culture of prudence and circumspection threatens to oppress the lively spirit generated and smuggled here by the new Canadians.

    Proceduralism preempts happenstance encounter. Connectedness is preferred to intimacy. Negotiated space is the means by which we enter the public realm. The city in general is being redefined as a place where you can enjoy yourself without necessarily enjoying others.

    You can slap on all the new urbanism you want, all the new designs, the access paths to waterfronts, the well thought out landscaping but the zeitgeist of civic withdrawal persists. In urban centres, revitalized or not, you will find no one on the streets after 8 pm at night.

    In Toronto, this zeitgeist is abetted by parking police and increased infatuation with bylaws, a lack of leniency and flexibility in regulation – the licensing difficulties for small businesses that force them to use consultancies that conform better to the civic animal.

    Yes there are the usual arts festivals, showcase museums, testaments to corporate architecture, commercial temples, touristic theme-parks, and the downtown is hugely revitalized with condos, bars and art galleries. But like revitalized downtowns throughout North America, ours is, predictably, a playground for the rich and their pampered offspring, while the service workers can’t afford to live there. Let alone the artists who first raised the property values by their ethos of adventure. Bring the artists in, let the neighborhood get trendy, and then make it unaffordable to anyone but the gentrified. At the end of the day, there is nothing casual about what the gentrified city permits.

    In the end, the natural expression of exuberance is left crippled. Spontaneity is the casualty of the global city – scared as it is by security issues, the notion that the next guy is in it for himself, the loss of a general ethic that encourage the citizen to civic sacrifice. In short, in trying to become or remain ‘world class’ we are in danger of being regulated out of life.

    In some ways, Toronto’s fetish for regulation may be the very thing that attracts the global lifestyle pilgrim. It might be why trendy people choose to live in Toronto …because Toronto the good (or the Toronto of protocol) is antidote to the tyranny of origins and the fracas of more bankrupt places.

    In the future, however, this stifling of spirit and resort to regulated celebration could backfire. What will define the successful city of the future will be not adherence to cultural fashion but the nature of its faith, its civic generosity and it’s preservation of civil encounter. Civil encounter is under siege. The public realm is being evacuated of its indigenous spirits, and with it, the delight the manufacture of joy.

    The time must soon come when the “city” as notion will no longer be limited to the “metropole.” The revitalization of downtowns is inevitable but the real urban frontier may lie in those hinterlands snubbed by those cosmopolitan condo dwellers and spuriously dismissed as “suburbs”. This is where the bulk of urban populations – the middle and working classes now reside. The expedience, economy and unimaginativeness with which those areas are being designed is appalling. Toronto’s outer rings cannot be brought to health medication of new urbanism, with no thought to why people don’t use public spaces even when they are adequately designed, even when they pose no threat to personal safety.

    What we need is not so much better design or more control but the cultivation of “urban citizenship”. Urban citizenship is not understood as the key to poorly done infrastructure and municipal alienation; it can not be quantified, or designed into existence. You can not manufacture the notion of loyalty to a neighborhood, municipality or city. Without loyalty, people become mere “services” to each other, networks and not neighborhoods; information replaces knowledge about people. The government ends up knowing more about you than your neighbor does.

    Toronto has arrived as a successful North American city by the standards of a livable city but is it a place where you still have an appetite for life? It is good to consider that though most places seek to be livable cities, they often arrive there without the manufacture of joy.

    Let me tail this piece off with a quote from Walt Whitman: “The greatest city in the world is that place that has the greatest men and women. Though it be a few shacks, it is still the greatest city in the world”. In the wake of a deep recession, that is a perspective urbanists must adopt. Our mutual reliance and ability to create our joy in places we make our own constitutes the infrastructure upon which creating a great city must be based.

    Pier Giorgio Di Cicco is Principal of Municipal Mind, Poet Laureate of The City of Toronto, and Curator of The Toronto Museum Project. He was a team member and co-author of the Imagine Toronto report of the City of Toronto and Province of Ontario. He was official moderator for the 2005 International Metropolis Conference and the Toronto host for the World Association of Major Metropolises. His latest book is Municipal Mind: Manifestos for the Creative City.

  • The Change We Need: Will We Sustain The Current Economy, Or Create A Sustainable Economy? Part I

    The Change We Need will run in two parts. In Part I, Rick Cole lays out the kinds of changes we need, and why. Part II outlines his specific policy prescriptions.- The Editors

    Will this historic election alter the American physical landscape as well as the electoral one? Much will depend on whether the Obama Administration will focus on trying to revive the economy or move to reshape it.

    Bold leadership sounds great in the abstract, but embarking on profound changes in the economy is both politically risky and economically daunting. Government, especially the one the new president will inherit, is severely limited in its competence and capacity to reshape the American share of the global economy.

    The easier option is to minimize the “change we need,” and aim for a “kinder, gentler, greener and more regulated” version of the Enron economy bequeathed by President Bush. We may be facing the most profound economic crisis since Franklin Roosevelt took office, but so far, instead of investing in a more sustainable economy, the Democrats seem to be focused on a “stimulus” response to boost spending.

    This is essentially the path followed over the past two decades without success by Japan’s ruling Liberal Democrats. In reaction to the Japanese real estate and financial meltdown in 1989, the party essentially opted to “bail-out” the status quo. The cost has been nearly twenty years of economic anemia and political gridlock.

    As Japan found, a broken economy can’t be successfully “stimulated.” A patchwork of single-issue nostrums (alternative energy, public works spending, health care reform) will not put Americans back to work and America back on track.

    Why not? Why isn’t it possible to revive the Clinton formula for a soaring stock market, nearly full employment and low interest rates? The answer, of course, is that neither the global economic crisis nor America’s vulnerability are sudden or surprising. The problems are deep-seated and structural, and both Clinton and Bush steered around them by postponing difficult, but necessary sacrifices.

    The Republicans, of course, are most immediately and egregiously culpable. Their foreign wars, their reckless deficit spending, their unconscionable tax cuts, their laissez faire dismantling of so much of the middle class safety net, their disastrous energy policies, and their injection of cheap money into a housing/consumer spending bubble are all proximate causes of the stunning decline of American economic prowess. But the long-term, Democratic failure to chart a different course leaves the next president unprepared to offer a comprehensive alternative that makes sense in the global economy in which we now find ourselves.

    The inescapable mathematics of our situation is that America runs on $2 billion a day of money borrowed from abroad. That long-running profligacy has made us into the world’s largest debtor nation by far. For the first time in our history, we are in a position where we cannot reflate our way back to prosperity.

    The retooling of America we face will require a president with an approach as bold and flexible as the New Deal, and a re-investment in real places , instead of the exotic and deracinated instruments that Warren Buffett has derided as “financial weapons of mass destruction.”

    The magnitude of the unfolding crisis offers glaring dangers and remarkable opportunities for embarking on a long-term rebuilding of our economy on a far more solid and sustainable foundation.

    One quickly forgotten episode in the campaign gives particular “hope” that Obama may ultimately choose the more difficult, but more promising, path. At a crucial juncture during his primary battle with Hillary Clinton, he bucked both her and John McCain and their blatant pander of a “gas tax holiday” to offset skyrocketing prices at the pump.

    “This is what passes for leadership in Washington,” he responded right before the important Indiana primary. “Phony ideas, calculated to win elections instead of actually solving problems.”

    He went on to acknowledge, “I wish I could stand up here and tell you that we could fix our energy problems with a holiday. I wish I could tell you that we can take a time-out from trade and bring back the jobs that have gone overseas. I wish I could promise that on day one of my presidency, I could pass every plan and proposal I’ve outlined in this campaign. But my guess is that you’ve heard those promises before. You hear them every year, in every election.”

    Such courageous “straight talk” must also acknowledge that we can’t work our way out of unprecedented levels of consumer and public debt by borrowing money. That way lies Argentina. President Obama is going to have to deliver big time on the somewhat hazy promise of rebuilding our economy with green jobs, but at a scale and scope that few have dared even suggest so far. He is going to have to do that in the face of almost irresistible political clamor to go the other direction: to somehow keep the casino economy going by cutting taxes, propping up banks, stimulating consumer spending, and keeping the American people on the job doing things that make our problems worse, from building freeways to financing more suburban subdivisions so we can continue to export a trillion dollars a year to oil exporting nations.

    Building a sustainable economy is such a huge, complicated, politically challenging endeavor, that it will take every bit of Obama’s personal charisma, and leadership abilities, and the backing of an unprecedented movement of support.

    Fortunately, however, there is a vast untapped source of innovative and promising ideas and practitioners working off the radar screen of the national political class in Washington and its small-minded media annex. They have laid out a framework for restoring American competitiveness that is based on investment rather than consumption – on sustainability rather than short-term fixes.

    Read: The Change We Need – Part II: Will We Sustain The Current Economy, Or Create A Sustainable Economy?

    Rick Cole is the City Manager in Ventura, California, where he has championed smart growth strategies and revitalization of the historic downtown. He previously spent six years as the City Manager of Azusa, where he was credited by the San Gabriel Valley Tribune with helping make it “the most improved city in the San Gabriel Valley.” He earlier served as mayor of Pasadena and has been called “one of Southern California’s most visionary planning thinkers by the LA Times.” He was honored by Governing Magazine as one of their “2006 Public Officials of the Year.”

  • Surprise! For Fiscally Responsible, Housing Remains Good as Gold

    Back in 2002, I compared housing to gold. The surge in home buying in the 2000s looked like the 1970s rush to buy gold. Like the current times, the 1970s were a time of great economic uncertainty, followed by the rapid inflation of prices in the 1980s. Regardless of the actual return on investment, many people bought gold as a hedge against financial and economic turmoil. When Americans bought houses in the 2000s, they believed homes would provide some of that same protection, in addition to being a place to live.

    Today it is fashionable to believe that this shift to housing was a tremendous mistake. Yet our research suggests that, if done responsibly, investments in real estate have continued – even amidst the severe bubble in certain locales – to serve as a decent hedge against hard times. Real estate may have taken a dive, but, over time, the market has remained even further under water. The reality is that the percentage of regular (conventional and prime) mortgages past due and 90 days past due were higher in 1984 to 1989 (average 0.59%) than they were in 2007 (0.49%). The fact that foreclosures in regular mortgages spiked upward in 2007 and 2008 may have more to do with the Failure of Financial Innovation than with the behavior of homeowners. (Notice that the past due rate is historically much higher than foreclosure rate and they are now merging; and that regular mortgage interest rates remain at historically low levels.)

    Let’s look at the record. Since the turn of the 21st century, the net worth of Americans grew six times faster than disposable income. Initially this was more the result of the increase in the value of financial assets than real estate. However, while financial assets dipped in value in 2002, real estate did not, hence the perception that houses could be a better “investment” than stocks and bonds. Real estate values continued to grow at a rate more than twice as fast as income. Last year the value of financial assets dropped 2.9%, but real estate assets dropped by only 1.4%.

    The relationship between real estate shares and stock values has changed direction and become more volatile. From 1945 through 1980, the DJIA moved with household investment in real estate and then in the opposite direction through about 2002. In 2003, 2004 and 2005, DJIA and household real estate moved in the same direction. Now, it seems to be shifting again, ironically again in favor of real estate.

    The stock market was never the “safe” investment. You could have invested in about 400 shares of General Motors stock at $83 a share in 2000; it closed at $3 today (with an analyst’s target price of $0). Or you could have made a down payment on a $315,000 condo in Santa Monica; and sold it this year for $680,000. When capital and productivity are again allowed to surge, we can expect the housing market to rebound first and more strongly than the stock market. Right now even amidst the perilous economic news, we believe the turn back to real estate is just beginning, although the effects probably won’t be fully felt till 2010. We see evidence of potential buyers sitting on the sidelines. There was already a surge in homes sales this summer as some buyers must have judged prices to have adjusted sufficiently in some regions.

    So then the question is: did the New Gold strategy work? Has homeownership shielded Americans from economic uncertainty? We think the answer is – surprisingly – “yes”. As financial markets have become increasingly volatile, regular Americans were able to access the value of their homes. The aggregate value of mortgages increased from 44.4 percent of household real estate values in 2002 to 53.8 percent at the end of the first quarter of 2008. Note that this is not merely a result of falling real estate values. Aggregate real estate holdings increased in every year except for the last one.

    When real estate values slowed down, mortgage values slowed down even more. And, obviously, it isn’t because the bank reduced the value of the mortgage! It can only be because homeowners continued paying on existing balances.

    Before the “subprime crisis”, household real estate values grew at an increasing rate – from 9.9% in 2003 to 11.8% in 2004. But the growth of mortgages slowed from 14.1% in 2003 to 13.9% in 2004 and to 13.1% in 2005 when the growth of household real estate remained constant. What was happening here? I think millions of responsible American households were paying into equity. And when things got tough in 2007, some of them dipped into that equity. Not to remodel the kitchen or to buy a boat; but to expand their small business or start their kids in college. These homeowners are “the rest of us who have been prudent and responsible” as Roger Randall called them in a Letter to the Editor of USA Today (November 11, 2008). Mr. Randall asks the question: “Where can the prudent sign up for rewards?” The answer is: Anyone who protected their credit score over the last 8 years can still get a “no-doc” mortgage and bank credit for their small business. When a mortgage broker I know lamented that he couldn’t write a mortgage for anyone with a credit score under 600, I asked: “If someone has a credit score of 585, should they be buying a house?” Of course, the answer is “no.”

    Sure, you can deride this activity as Americans “treating their homes like piggy banks.” But the reality is that millions of Americans planned it this way. With a fiscally responsible approach to homeownership and financing, they have been and will continue to be able to insulate themselves from the worst of economic times. Good as Gold!

    Susanne Trimbath, Ph.D. is CEO and Chief Economist of STP Advisory Services. Dr. Trimbath’s credits include appearances on national television and radio programs. Dr. Trimbath is a Technical Advisor to the California Economic Strategy Panel and Associate Professor of Finance and Business Economics at USC’s Marshall School of Business. Dr. Trimbath was formerly Senior Research Economist at the Milken Institute and Senior Advisor on the Russian capital markets project for KPMG.

  • Annual change in value of real estate and mortgages