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  • Root Causes of the Financial Crisis: A Primer

    It is not yet clear whether we stand at the start of a long fiscal crisis or one that will pass relatively quickly, like most other post-World War II recessions. The full extent will only become obvious in the years to come. But if we want to avoid future deep financial meltdowns of this or even greater magnitude, we must address the root causes.

    In my estimation two critical and related factors created the current crisis. First, profligate lending which allowed many people to buy overpriced properties that they could not, in reality, afford. Second, the existence of excessive land use regulation which helped drive prices up in many of the most impacted markets.

    Profligate lending all by itself would not likely have produced the financial crisis. It took a toxic connection with excessive land-use regulation. In some metropolitan markets, land use restrictions, such as urban growth boundaries, building moratoria and large areas made off-limits to development propelled house prices to unprecedented levels, leading to severely higher mortgage exposures. On the other hand, where land regulation was not so severe, in the traditionally regulated markets, such as in Texas, Georgia and much of the US Midwest and South there were only modest increases in relative house prices. If the increase in mortgage exposures around the country had been on the order of those sustained in traditionally regulated markets, the financial losses would have been far less. Here is a primer on the process:

    1. The International Financial Crisis Started with Losses in the US Housing Market: There is general agreement that the US housing bubble was the proximate cause for the most severe financial crisis (in the US) since the Great Depression. This crisis has spread to other parts of the world, if for no other reason than the huge size of the American economy.
    2. Root Cause #1 (Macro-Economic): Profligate Lending Led to Losses: Profligate lending, a macro-economic factor, occurred throughout all markets in the United States. The greater availability of mortgage funding predictably led to greater demand for housing, as people who could not have previously qualified for credit received loans (“subprime” borrowers) and others qualified for loans far larger than they could have secured in the past (“prime” borrowers). When over-stretched, subprime and prime borrowers were unable to make their mortgage payments, the delinquency and foreclosure rates could not be absorbed by the lenders (and those which held or bought the “toxic” paper). This undermined the mortgage market, leading to the failures of firms like Bear Stearns and Lehman Brothers and the virtual failures of Fannie Mae and Freddie Mac. In this era of interconnected markets, this unprecedented reversal reverberated around the world.
    3. Root Cause #2 (Micro-Economic): Excessive Land Use Regulation Exacerbated Losses: Profligate lending increased the demand for housing. This demand, however, produced far different results in different metropolitan areas, depending in large part upon the micro-economic factor of land use regulation. In some metropolitan markets, land use restrictions propelled prices and led to severely higher mortgage exposures. On the other hand, where land regulation was not so severe, in the traditionally regulated markets, there were only modest increases in relative house prices. If the increase in mortgage exposures around the country had been on the order of those sustained in traditionally regulated markets, the financial losses would have been far less. This “two-Americas” nature of the housing bubble was noted by Nobel Laureate Paul Krugman more than three years ago. Krugman noted that the US housing bubble was concentrated in areas with stronger land use regulation. Indeed, the housing bubble is by no means pervasive. Krugman and others have identified the single identifiable difference. The bubble – the largest relative housing price increases – occurred in metropolitan markets that have strong restrictions on land use (called “smart growth,” “urban consolidation,” or “compact city” policy). Metropolitan markets that have the more liberal and traditional land use regulation experienced little relative increase in housing prices. Unlike the more strongly regulated markets, the traditionally regulated markets permitted a normal supply response to the higher market demand created by the profligate lending. This disparate price performance is evidence of a well established principle of economics in operation – that shortages and rationing lead to higher prices.

      Among the 50 metropolitan areas with more than 1,000,000 population, 25 have significant land use restrictions and 25 are more liberally regulated. The markets with liberal land use regulation were generally able to absorb from the excess of profligate lending at historic price norms (Median Multiple, or median house price divided by median household income, of 3.0 or less), while those with restrictive land use regulation were not.

      Moreover, the demand was greater in the more liberal markets, not the restrictive markets. Since 2000, population growth has been at least four times as high in the traditional metropolitan markets as in the more regulated markets. The ultimate examples are liberally regulated Atlanta, Dallas-Fort Worth and Houston, the fastest growing metropolitan areas in the developed world with more than 5,000,000 population, where prices have remained within historic norms. Indeed, the more restrictive markets have seen a huge outflow of residents to the markets with traditional land use regulation (see: http://www.demographia.com/db-haffmigra.pdf).

    4. Toxic Mortgages are Concentrated Where there is Excessive Land Use Regulation: The overwhelming share of the excess increase in US house prices and mortgage exposures relative to incomes has occurred in the restrictive land use markets. Our analysis of Federal Reserve and US Bureau of the Census data shows that these over-regulated markets accounted for upwards of 80% of “overhang” of an estimated $5.3 billion in overinflated mortgages.
    5. Without Smart Growth, World Financial Losses Would Have Been Far Less: If supply markets had not been constrained by excessive land use regulation, the financial crisis would have been far less severe. Instead of a more than $5 Trillion housing bubble, a more likely scenario would have been at most a $0.5 Trillion housing bubble. Mortgage losses would have been at least that much less, something now defunct investors and the market probably could have handled.

      While the current financial crisis would not have occurred without the profligate lending that became pervasive in the United States, land use rationing policies of smart growth clearly intensified the problem and turned what may have been a relatively minor downturn into a global financial meltdown.

    Never Again: All of the analyst talk about whether we are “slipping into a recession” misses the point. For those whose retirement accounts have been wiped out, or stock in financial companies has been made worthless, those who have lost their jobs and homes, this might as well be another Great Depression. These people now have little prospect of restoring their former standard of living. Then there is the much larger number of people whose lives are more indirectly impacted – the many households and people toward the lower end of the economic ladder who have far less hope of achieving upward mobility.

    All of this leads to the bottom line. It is crucial that smart growth’s toxic land rationing policies be dismantled as quickly as possible. Otherwise, there could be further smart growth economic crises ahead, or, perhaps even worse, a further freezing of economic opportunity for future generations.

    Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris and the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life”

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  • A Fistful of (Out of State) Dollars

    A new study from Maplight.org, a “nonpartisan, nonprofit research group illuminating the connection between money and politics,” reports that “U.S. House members raised $700 million in campaign funds,” during the 2005-2007 time period, with 79%, or $551 million of that amount coming from outside the district of the House member running for office.

    According to Maplight, around 21% of campaign contributions to U.S. House members originated in Washington, D.C., with Virginia, California, New York, and Texas rounding out the top five source locations for contributions. The reports states that the majority of campaign funds not only came from out of district, but out of state sources as well:

    About two-thirds of House members, 274 out of 421 (65%), raised half or more of their funds from out-of-state. Ninety-two House members (22%) raised 70% or more of their funds from out-of-state. Eight House members raised 90% or more of their funds from out-of-state. The average percentage of funds each Representative raised from out-of-state is 56.7%, and the median percentage is 56.1%.

    It should be noted that the Maplight report only looks at donations of over $200, the point above which the donor must be identified to the Federal Elections Committee. Much has been made of the move, particularly by the Obama campaign, towards utilizing a base of small donations, under this $200 dollar threshold. Estimates place somewhere between one quarter and one half of Sen. Obama’s $600 million of campaign contributions in this class.

    This potential move towards smaller donations does not appear to have had as much of an impact on Congressional races. According to the Campaign Finance Institute, registered candidates for the U.S. House raised $447 million in the first four months of 2008, with “less than 10% of this total [arriving] in amounts of $200 or less.” This, states the CFI, marks little or no change from prior years.

  • Industry, inequality and the middle classes

    The financial collapse dominates the news, but its unregulated rise is not unrelated to the relative decline of manufacturing over the last quarter century, and the outsourcing of much of industrial production. One consequence of this de-industrialization and financialization of everything has been an astounding increase in inequality, a massive concentration of wealth at the very top and the squeezing of the middle classes.

    Places that remained strong in manufacturing tend to have had and still have lower inequality than places more dependent on services, lowly to professional, and experienced a smaller change in inequality. This case has been argued by many, perhaps most eloquently by Zimmermann and Beal (2002) in Manufacturing Works, and by Scott (2003) The High Price of Free Trade.

    Zimmermann argues the importance of industrial production for national and local prosperity. In Part 2, “Changing geography and what it means”, he treats the relocation of industry, and then follows with “Counties gaining momentum:, Counties losing momentum, and Big City Blues (Philadelphia and beyond)”. He notes the huge northeastern losses in industry coincided with increased inequality, e.g., New York, St. Louis, Philadelphia, and Rochester and in large numbers of smaller metropolitan counties. In contrast decreased inequality in many places in the South, Mountain states and plains (e,g, ND, SD, WY, UT, NE) with rapid industrial growth.

    Local economies dominated by manufacturing generally have had less inequality than ones dominated by services. Although this is particularly true in mostly northern states with a long history of labor unrest and successful unionization, even the more recent largely nonunionized industrialization in the South has reduced income inequality, although statewide levels remain a high, a hangover from their long pre-industrial and even feudal histories.

    What distinguishes lower levels of inequality? In my work using Census data these areas generally experience female labor force participation, higher shares of manufacturing and a larger population with only a high school education (i.e., not overloaded with us professionals!), but lower shares of government and of services. Manufacturing is just one of many factors, but it is a powerful one.

    It is instructive to look at some example areas of higher and of lower inequality in 2000 relative to the composition of their labor forces. The most unequal large areas/counties are New York (Manhattan) and Washington DC – by far, both with high levels of professional services and government, and low levels of industry. Also very unequal are many retirement and environmental service areas, with almost no manufacturing, such as St. Petersburg, Naples, Vero Beach and many other growing Florida cities, Jackson, Wyoming, and several ski dominated areas in Colorado and Utah.

    In stark contrast, inequality is quite low in such strong manufacturing communities as Kansas City, Worcester, Appleton-Green Bay, Fond du Lac (and several other Wisconsin cities), Duluth, Grand Rapids, Davenport-Rock Island, Manchester, NH, Lancaster, PA and Tacoma, WA.

    In sum, economic characteristic variation is real: egalitarian regions exhibit higher labor force participation, especially of women, and high levels of manufacturing – this is probably the most meaningful economic variable to account for lower inequality – and conversely higher inequality is associated with service and government job dependency. High shares of both managerial-professional occupations and service jobs, with lower shares of craft and manufacturing jobs are typically characteristic of elite metropolitan areas and helps account for their higher inequality.

    Change in inequality 1970-2000
    Since the 1970s most major metropolitan areas became less industrial and far more dominated by professional, finance, and other services, and by trade, and concomitantly, have become far more unequal. Prominent examples are Los Angeles, Chicago, Detroit Minneapolis, Dallas, Houston, St. Louis, Atlanta, Rochester, Pittsburgh, Cincinnati, Cleveland, Indianapolis, Birmingham, Baltimore and Boston – a roster of historic giants of industry.

    There are probably only limited opportunities for these areas – particularly in California and the Northeast – to reindustrialize. Yet there may be more opportunities in dozens of smaller metropolitan areas, in all parts of the country, but especially in the historic Midwestern and Northeastern “urban-industrial” heartland, that have suffered varying degrees of deindustrialization. These places enjoy low costs and often retain concentrations of skilled labor. Places like Florence and Gadsden, AL; Pueblo CO; Peoria and Rock Island, IL; Evansville and Muncie, IN; Dubuque, IA; Shreveport, LA; Saginaw, Midland, Benton Harbor, Flint and Muskegon, MI; Binghamton, NY; Toledo, Akron, Dayton, and Canton OH; Tulsa, OK; and Charleston and Wheeling, WV all could benefit from a new emphasis on productive enterprise. But the question remains: does Congress or the next President possess the will to make this happen?

    Richard Morrill is Professor Emeritus of Geography and Environmental Studies, University of Washington. His research interests include: political geography (voting behavior, redistricting, local governance), population/demography/settlement/migration, urban geography and planning, urban transportation (i.e., old fashioned generalist)

  • American Elections Inspire Interest in Ghana

    There’s another presidential election just around the corner here in Ghana. Current President John Kufuor is stepping down after eight years in office that has seen the gold- and cocoa-exporting West African country expand its economy and solidify its democratic credentials. Another economic stride forward is expected when Ghana begins to pump oil in 2010 or 2011.

    Many people I’ve talked to expect the ruling New Patriotic Party (NPP) to keep a hold on the presidency here in Ghana. The street signs and billboards of NPP Presidential Candidate Nana Akufo Addo appear to significantly outnumber those of National Democratic Congress (NDC) opposition candidate Professor Atta Mills. But the election in Ghana is not the only presidential race that people here are thinking of and talking about in the city and villages.

    Accra, Aburi and Akropong are about as far away from the election day swing states in America as you can get. But America’s election is more than just another news story on the BBC. Crawling and darting through the hectic traffic of the capital city of Accra one catches an occasional glimpse of an Obama bumper sticker. Traveling with my Ghanaian hosts and meeting with people at restaurants and bars talk about the American election quickly turns to questions about the prospects of Barack Obama.

    It becomes readily apparent who is the favored choice between Obama and McCain. People react favorably and with big smiles when I tell them that Obama is leading in the polls. They ask me a second, maybe a third time if I think he will really win. At times some will repeat his name following the conversation – as some kind of hopeful confirmation.

    The interest in the US election goes beyond the Obama candidacy; this is one place where America’s status has not plummeted . Relations between the two countries are at an all-time high, with President Kufuor meeting with President Bush at least five times in the last three years. A visit by President Bush to the capital city of Accra in February of 2008 created widespread excitement, pride and goodwill as the two presidents talked about development issues, the fight against HIV/AIDS, the Africa Union, regional security, and Millennium Development Goals, humanitarian issues.

    The prospects of more international trade and investment for Ghana are certainly part of this equation. A 2007 Pew Global poll shows that, all things considered, people in 47 countries consistently endorse international trade. Favorable views are especially common in sub-Saharan Africa. In all 10 African countries included in the survey, over 80 percent said trade was having a positive impact. My conversations with businessmen and traditional leaders confirm that more trade and development cooperation with the United States is eagerly anticipated.

    Lastly, but certainly as important, the interest in the American election is a consequence of the many personal and family ties that bind Ghanaians to the United States. In conversations over the course of several days I’ve met people who have lived in the Bronx, are proud Kansas Jayhawks, or have spent time in Seattle, Atlanta and Washington DC and the suburbs of northern Virginia. Others have told me of sisters, brothers, sons and daughters who now living throughout the United States.

    No matter the eventual outcome of the election – in the US or Ghana – it is clear that the relationship between the two democracies will and should continue to flourish. Ghana, as much of Africa, faces many development challenges and there will continue to be many opportunities for the US to work together with Ghanaian businesses and leaders in continuing to take small steps and big strides forward.

    Delore Zimmerman is Publisher of NewGeography.com and President of Praxis Strategy Group, a company that works to improve the futures of communities and regions.

  • Knowledge Worker Migration: Going Where the Brains Are

    At a time when national unemployment is rising, Nebraska is working overtime to attract labor. At the inaugural Sarpy County Economic Summit, Governor David Heinemann (R) talked about the need to “market the state to 16- to 20-year-olds.” Nebraska, apparently, has more jobs requiring college degrees than it has college graduates. (Interested college students can call the Director of the Nebraska Department of Economic Development, Richard Baier, at 402-471-3746.)
    Special incentives are in place for any employer who will bring in jobs that will drive up the average local salary. The idea is to keep young college graduates here by bringing in better jobs.

    Nebraska is not alone in this regard. In the middle of all the economic turmoil, the Federal Reserve districts in Cleveland, Chicago and Kansas City reported high demand and resulting upward pressure on wages for skilled labor. The industries most in need of additional skilled workers are energy, health care, and manufacturing. Yes, manufacturing. Skilled financial services workers were easier to come by in Dallas as a result of mergers in the industry. The same was true for financial workers in Chicago. The only minimum-wage jobs going wanting are in the leisure and hospitality industry in the Kansas City district.

    I did an analysis comparing States (plus Puerto Rico and D.C.) by the high percentage of workers with graduate degrees in 2007 and the change in that figure from 2005. For example, Nevada ranked 45th among the States for workforce with graduate degrees in 2007; yet they ranked number 1 for increasing that percentage since 2005 (from 6.6% to 7.5%). The Knowledge Score is simply the difference in the two ranks. Nevada has the highest score at 44. The States with the lower scores are falling behind: although they rank high this year other states are moving up faster in gaining educated knowledge workers. Delaware has a score of -37: they rank 15th for an educated workforce but next to last (better only than New Mexico) for going from 11.1% of the workforce with graduate degrees in 2005 to 10.4% in 2007.

    The Minneapolis district “reported continued strength in professional business services.” Our analysis scores them 2, meaning they are currently attracting a more educated workforce. In contrast, San Francisco and Philadelphia reported that “demand for professional business services was down.” I score California at -30 and Philadelphia at -14, meaning that they are losing their educated workforce. It’s likely that knowledge workers are leaving because of the lack of opportunity and, in California especially, high housing costs.

    Although Illinois ranked 12th among the states for percentage of the workforce with graduate degrees, their increase from two years ago was about the national average, giving them a Knowledge Score of -21. The demand for skilled labor in manufacturing, healthcare, and some professional services remained strong in the Chicago Federal Reserve district, which will put upward pressure on wages. These higher wages will serve to attract more knowledge workers to the State. The Chicago district, which includes northern Illinois, southern Wisconsin, southern Minnesota, Michigan, and northern Indiana, reported shortages of skilled workers. Among the States included in the Chicago district, only Wisconsin and Indiana have positive Knowledge Scores.

    The relationship between education and income is well-known. The median-income in the U.S. was $33,452 for 2007, about what is earned by the worker with some college or an associate’s degree. Workers with only a high school diploma make about 20% less than that. A bachelor’s degree translates into a 40% increase in income; a worker with a graduate degree earns 83% more than the median-income. And this curve gets steeper every year: from 2006 to 2007 the slope increased 3%.

    So where are the knowledge workers going to and coming from? Nevada, Hawaii and DC lead the way in attracting them while New Mexico, Delaware and Louisiana are the biggest losers. Actually, only 10 States are losing knowledge workers as a percent of the workforce, including North Dakota, West Virginia, New Hampshire, Alaska, Arizona, California and Mississippi. In addition to educating the workforce, the U.S. also benefits from international migration. In the face of some of these shortages for skilled-labor, US immigration routinely increases the allowance for workers in industries like technology and others requiring advanced education. However, there has been little change in the overall percentage of the US workforce with advanced degrees: 10% in 2005, 9.9% in 2006 and 10.1% in 2007. Among the many other states increasing the share of their workforce with advanced degrees, Montana, North Carolina, Maine, Vermont and Maryland led the way with increase of more than 0.5%.

    You are probably surprised to find Nevada at the top of the Knowledge Scores. From September 2007 to September 2008, Nevada decreased the overall number of jobs by 7,600. In fact, the loss of 14,300 construction jobs was offset by a gain of 7,600 jobs in health services, transportation, utilities, education, and other services. The shift is toward jobs requiring skilled workers, those with higher levels of education, the Knowledge Workers.

    Down the road, it appears that the balance of knowledge workers are shifting to states that, for years, lagged behind perennial leaders like Massachussetts, California and New York. Now the balance is shifting and as the economy moves from speculation to productive jobs – such as those related to manufacturing, logistics, food and energy – we will also see an increase in new opportunities in these states for knowledge workers who are increasingly critical to these fields as well.

    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.

  • US States Change in Percent of workforce with Graduate Degrees, 2005-2007

  • Percent of population over age 25 with an Advanced Degree, 2007

  • Appalachia and Energy

    When I think of the energy crisis, I cannot help but think of the poignant story of Martin Toler. A victim of the Sago Mine disaster, he was found sitting alongside his 12 fellow miners in darkness. Deep in the heart of the earth he wrote a note to his family as air and time was running out: “Tell all that I’ll see them on the other side,” read the note found lying beside his body. “It wasn’t bad. I just went to sleep. I love you.”

    Toler’s incredible courage to care for family first in the face of certain death reflects some of the Appalachian culture. Yet the region has struggled from the beginning of its settlement. It has almost always been poor. The world of small towns in Appalachia stands light years from the “flat” world of Friedman or the green certainties of elite urbanites.

    Not surprisingly, we find it hard to simply dismiss coal and other fossil fuels with such aplomb. Inez, Kentucky, the birthplace of LBJ’s War on Poverty in 1964, has struggled over the years with the boom and bust of the coal business. And, despite the news media insistence that it isn’t doing well, its unemployment rate is well below that of other more “successful” communities.

    We look at the revival of coal as a potential source of economic sustenance for our communities. This does not mean we have to abandon the environment or the strict safety standards that might have saved Martin Toler. But neither do people there want to abandon their towns and the ability to make a good living for their families.

    Marvin Toler and his fellow miners lived through the boom and bust of the energy cycles. They lived through bitter debates over mine safety, unscrupulous and/or absentee owners, black lung, mine disasters brought on by lax standards, slurry spills and mountaintop removal. Yet mining has also provided a good living for people and a way to keep the towns we love alive.

    Our hope is that energy could revive our communities. Perhaps we can rewrite the story of coal through standards that make mining safer and technology that can make it cleaner. Our greatest hope is that, with American ingenuity and Appalachian persistence, we can think up new and alternative sources of energy right in the heart of the Appalachian Mountains.

    Marvin Toler didn’t have to go far to convince me of the strong stock and strength of him and his forebears. As the American dream undergoes renovation, I need go no further than Toler’s last words, scribbled in darkness but full of hope, strength, resilience and love – all qualities that remain true even in our bewildering world. His words transcend the YouTube culture and go to the heart of the matter. Perhaps that mountain fortitude of his is the perfect quality for starting a new energy revolution.

    Appalachia will always be about the rugged sorts who settled there. Those who worked the mines and tilled the soil did not ask for much. They worked hard and didn’t count the cost or avoid taking risks. Coal could be part of that future, but the spirit of this place could also extend to other tasks that need smart, tough and risk-taking folks. We don’t need to become more dependent on the coal mines, but we think they can be part of creating a new wave of opportunity for our communities – if we can find the will.

    Sylvia L. Lovely is the Executive Director/CEO of the Kentucky League of Cities and president of the NewCities Institute. She currently serves as chair of the Morehead State University Board of Regents.

  • The Opportunity City weathers all storms

    In the dark early-morning hours of September 13th, Hurricane Ike scored a direct hit on the Houston region with 110mph winds, a 13ft storm surge, and a gigantic eye 80 miles across. While Texas gets its fair share of Gulf hurricanes, this was the first direct hit on Houston since Alicia in 1983, 25 years ago.

    Before the strike, nearly a million people along the coastal areas were ordered to evacuate (out of six million in the metro). The evacuation went far smoother than the infamous Rita evacuation three years earlier, which gridlocked roads, left thousands of vehicles stranded without fuel, and ultimately directly or indirectly killed about 100 people. This time, only coastal areas at risk from storm surge were evacuated, while the vast bulk of the urban area more than 50 miles inland was encouraged to “shelter in place.” It made all the difference. Those who stayed were able to evaluate and react to any damage overnight, then choose to stay or leave as they awaited power to return, comfortably knowing the state of their home. Those who left before the storm were, of course, restless to know their home’s condition, but faced challenges returning due to a regional gas shortage as well as the outage of most traffic signals.

    Coastal areas around Galveston, Bolivar, and Clear Lake suffered substantial surge damage, flooding buildings and tossing boats up on land, but the primary problems in Houston revolved around down trees and the power outages they caused. Nearly 2 million homes were without power in the storm’s aftermath, and most stayed without power for one to two weeks, even with thousands of repair crews coming in from all over the country. It’s hard to really understand how fundamental electricity is to modern living until you go a while without air conditioning, cooking, hot water, refrigeration, lights, TV, or the internet (followed by horrendous rush hours without traffic signals the following week as people returned to work).

    Houston was greatly blessed to get our first cool front of autumn just two days after the storm – several weeks earlier than usual – bringing relief to millions without air conditioning across the region. The trauma of that experience has sparked a regional debate on the merits of burying our power lines, which increases reliability and has better aesthetics, but can cost an order of magnitude more while being harder to diagnose for repair and susceptible to flooding, a common problem in tropical Houston.

    The mayor’s repeated theme both before and after the storm was “Neighbors helping neighbors,” and Houston rose to the challenge. Immediately after the storm passed, people checked on each other and assisted with debris cleanup, piling it in neat mounds in front of each house (estimates are the city is hauling off enough tree debris to fill four Astrodomes – the mayor is even holding a contest for creative uses for the debris). Many people fired up BBQ grills and cooked meat from thawing freezers, feeding all comers. People lacking lights and TV instead chatted in their yards with their neighbors and looked up at a star-filled sky made brilliant by the lack of city lights. Many mentioned that camaraderie as one of the silver linings from the storm. Despite looting fears, crime actually dropped dramatically after the storm (helped by a temporary night curfew). Even the venerable New York Times ran a story on Houston’s strong spirit after the storm. Here’s just one example of a touching story I heard about one of the many local churches that stepped up to help:

    …one church’s senior pastor who received a phone call from someone he didn’t know living back east. The caller said they could not find their elderly parents and were desperate to find out if they were ok. So this pastor got in his car late that night, with a load of food, water and ice and drove across town to find the parents. He drove up to the house and knocked on the door. They were fine, but without electricity or phone, so he called their kids on his cell phone and said, “Here, someone wants to talk to you.” After the call the parents said they didn’t need anything but across the street there was someone who really looked like he did. So the pastor gave all of his food, water and ice to the neighbor. The next day he came back with more food and water only to find that the neighbor had distributed what he received the night before to his neighbors. The church volunteers returned each day until the electricity came back.

    Area leaders also stepped up, with The Economist saying, “Credit should go to city officials like Mr. White (city mayor) and Mr. Emmett (county leader), who exuded competence and calm.” Harris County Commissioner Ed Emmett received widespread plaudits for pulling an all-nighter to untangle complex recovery logistics directing hundreds of supply trucks. Mayor White admitted to using “harsh language inappropriate for Sunday school” to cut through bureaucracy and get emergency supplies moving, raising his already-high local approval ratings.

    City and county leaders can also be credited with some good “lessons learned” from previous disasters. In addition to better evacuations since Rita, aggressive drainage infrastructure investments since Tropical Storm Allison’s massive floods in 2001 resulted in greatly reduced street flooding across the city even with 10 to 20 inches of rain over two mornings. During Alicia in 1983, blown gravel from downtown skyscraper roofs blew out thousands of windows. Since then, gravel roofs have been banned, and less than half of one-percent of downtown’s windows blew out during Ike.

    Today, in the city (not the coast), the main remaining signs of Ike are shredded commercial signs and plywood replacements for some office tower windows. Damage estimates are about $8.5 billion for the four million people of Harris County, substantially more than either Alicia or Allison, but manageable vs. the $125 billion value of residential structures in the county. The total for Texas may exceed $50 billion. Surprisingly, energy infrastructure held up very well, with minimal damage to refineries and offshore oil rigs. The combined downtime from Gustav and Ike created fuel shortages in the southeastern U.S. fed by pipelines from Houston, but they were alleviated relatively quickly as capacity came back on line.

    As Houston recovers from Ike, it continues to face three additional “storms,” with the housing and credit crunch as well as oil prices dropping from $140 to less than $70 per barrel. Despite these strong storms – in many ways stronger than Ike – Houston continues to hold up well. Conservative oil companies still require new projects to break even at prices substantially below $70, so they are still growing and hiring. Houston’s port, space, and health care industries (the Texas Medical Center is the world’s largest medical complex) are also somewhat insulated from the nation’s economic woes. In part because Houston lacks the restrictive controls on home building found in many cities, the city never really had a housing bubble. Overall homes continue to appreciate modestly as opposed to sharp drops in much of the rest of the country.

    Of course, we are still part of the Union and the world economy, so we’re slowing down too. But Houston and Texas continue to outpace the national economy; Texas is unlikely to join the lengthening line asking for a federal bailout. Every day I see a steady stream of out-of-state license plates as people overcome any fear of hurricanes (are they really any worse than earthquakes in the West or blizzards in the North?) and continue to migrate to our resilient Opportunity City.

    Tory Gattis is a Social Systems Architect, consultant and entrepreneur with a genuine love of his hometown Houston and its people. He covers a wide range of Houston topics at Houston Strategies – including transportation, transit, quality-of-life, city identity, and development and land-use regulations – and have published numerous Houston Chronicle op-eds on these topics.