New Geography

Tag: Los Angeles

  • More Condescension Surrounds Los Angeles Stadium Plan

    The head of the group pushing the Los Angeles plan for an NFL stadium, Anschutz Entertainment Group, doesn’t understand why anyone would be suspicious of the finances behind his plans for a downtown football stadium. From the LAT:

    “Almost every other community in the world would be throwing parades,” Leiweke said.

    Really? A power-hungry developer backed by a reclusive Denver billionaire comes along with a plan to tear down part of the city-owned-and-operated convention center and jam in a stadium without providing any specifics on how the deal would be structured – other than his promise that it won’t cost taxpayers a dime – and he’s wondering why so many people are skeptical?

    “When the proposal gets there, everyone’s going to take a deep breath and realize: There is zero risk to the taxpayer,” Leiweke said. “This is people trying to scare people. And it’s a shame.”

    More disinterested voices continue to point out that pro sports teams do little, if anything, to boost local economies – and that the job creation figures being bandied about for the downtown stadium are crazy high. From the LAT:

    Villaraigosa said the stadium complex would create more than 22,000 jobs, an assertion that drew a laugh from Brad Humphreys, an economics professor at the University of Alberta, Canada, who has studied such facilities for years. “That’s way outside the usual garbage that I read,” he said. “The best estimate … would be zero jobs created.” Construction jobs, he explained, would be the most visible, but they would be short-term.

    Humphreys and colleagues studied every city in North America that had built sports facilities in the last 40 years, “and we were unable to find any evidence that the local economy ever did any better,” he said. What such developments tend to do is move existing money, and presumably jobs, around — as, say, entertainment dollars that would have been spent in Westwood are spent instead downtown.

    This piece originally appeared at Mark’s LA Biz Observed blog.

  • Orange County Vantage Point: One Eye on Egypt as Little Saigon Rebrands Tet

    Scenes from Egypt, Tunisia and other places in the Middle East provide a stark reminder of the chaos that can consume entire nations. The scene on Bolsa Avenue in Little Saigon last week offered evidence that chaos can be overcome.

    Don’t get me wrong—chaos had a place along Bolsa as streams of drivers sought rare parking spaces, crowds gathered around impromptu fireworks displays on the streets, and shoppers elbowed their way among dozens of flower merchants who set up shop in parking lots.

    The buzz came in advance of Tet, the Vietnamese New Year celebration. Flowers are a big part of the tradition, and peddlers offered their best orchids and other selections.
    Restaurants and ad hoc vendors of various goods also aimed for some business, with everything from silk fabrics to baked goods on sale.

    The jumble of commerce, tradition and celebration that made parking so hard in Little Saigon was a relatively nice sort of problem for all involved. It was certainly nicer than the American experience in the Vietnam War, which ended in utter chaos.

    Many historians say the end started with the Tet Offensive in 1968. Vietcong forces picked the New Year holiday to unleash a campaign of attacks that sowed chaos throughout South Vietnam.

    The Tet Offensive failed to score any military victories by standard measures. Yet it succeeded in fostering a perception of chaos that struck a significant blow against the South Vietnamese government, which stumbled along with U.S. aid for another seven years.

    The chaos that started with the Tet Offensive and ended with crammed refugee boats fleeing Vietnam also led to the creation of Little Saigon. It’s a sprawling district that takes in parts of five cities in Orange County, just south of Los Angeles.

    Little Saigon is now home to the largest concentration of ethnic Vietnamese outside of Vietnam itself. It’s where refugees staked a claim to something more than—better than—the chaos they faced as their native country crumbled.

    What better place to rebrand Tet by reclaiming the celebratory sense of a new year and laying to rest darker images tied to yesteryear’s misfortunes? There are no doubt many who continue think of the Vietnam War when they hear the word Tet.

    Little Saigon’s recent hustle and bustle built around flower peddlers indicates another view, though. It shows that many others have remembered that the holiday existed before war and survived combat. They do not ignore history by considering Tet’s traditional meaning. They allow room for a larger view and an eye on the future.

    Jim Schlusemeyer, owner of Tuyet’s Orchid, is a good example. He sells his flowers to retailers and the general public, working the weekly swap meet at the Orange County Fairgrounds in Costa Mesa.

    Schlusemeyer was born in Vietnam and came here as a refugee, eventually taking the last name of his stepfather. He’s a competitive businessman who needs unique product, so he breeds his own orchids. Land in Orange County is either too expensive to make commercial flower growing worthwhile or too far inland to provide the cooler atmosphere that orchids require. So he breeds small lots of hybrids here and leases space at growing operations in Northern California for commercial production.

    Schlusemeyer enjoyed the big crowd in Little Saigon in the days leading up to Tet. His business has taken hits along with most others the past few years. The holiday and its call for flowers is a nice spike.

    Schlusemeyer says Tet sales get helped along each year by growing numbers of whites and Latinos who come to Little Saigon. Word has gotten around that the Tet holiday brings out the best orchids. There still aren’t a lot of shoppers from outside the local Vietnamese community, but the numbers are rising and appreciated.

    Not bad for a holiday that bears a name once firmly associated with one of the most frustrating and fractious periods in American history.

    Rather impressive for a community of refugees who only recently carved a new life for themselves as Americans.

    Any doubts about the rebranding of Tet were answered by a small booth set up amid the flower peddlers on Bolsa. It was sponsored by Sam’s Club—a division of retail giant Wal-Mart Stores Inc. A salesperson pitched the crowd on home improvements looking to sell everything from patio covers to vinyl fencing.

    You’d be hard-pressed to come up with a better example of putting the hyphen in Vietnamese-American. Keep those hyphens handy considering events in the Middle East. There’s a neighborhood known as Little Arabia just a few miles away from Little Saigon.

    Jerry Sullivan is a contributing editor to New Geography and managing editor of the Orange County Business Journal.

  • Regional Exchange Rates: The Cost of Living in US Metropolitan Areas

    International travelers and expatriates have long known that currency exchange rates are not reliable indicators of purchasing power. For example, a traveler to France or Germany will notice that the dollar equivalent in Euros cannot buy as much as at home. Conversely, the traveler to China will note that the dollar equivalent in Yuan will buy more.

    Economists have attempted to solve this problem by developing "purchasing power parities," which are used to estimate currency conversion rates that equalize values based upon prices (Note 1). This helps establish the real value of money in a particular place.

    When people move from one region of the United States to another they can encounter a similar phenomenon. For example, a dollar is not worth as much in San Jose as it is in St. Louis. Research by the US Department of Commerce Bureau of Economic Analysis (BEA), for example, found that in 2006 a dollar purchased roughly 35 cents less in San Jose than in St. Louis. BEA researchers estimated "regional price parities" for states and the District of Columbia and for all of the nation’s metropolitan areas (Note 2). Regional price parities can be thought of as the equivalent of regional (state or metropolitan area) exchange rates. This research was covered in previous newgeography.com articles by Eamon Moynihan and this author.

    This article uses Department of Labor, Bureau of Labor Statistics metropolitan area consumer price indexes to estimate the 2009 cost of living and per capita personal income adjusted for the cost of living.

    Cost of Living: At the regional level (See Census Region Map, Figure 1), there are substantial differences in the cost of living (Figure 2). The lowest cost of living is in the Midwest, at 4.8 percent below the nation. The South has the second lowest cost of living at 3.9 percent above the national level. The West is the most expensive area, 13.5 percent above the national cost-of-living, while the Northeast’s cost-of-living stands 11.3 percent above the national rate.

    The cost of living in the South may seem higher than expected. But if the higher cost metropolitan areas of Washington, Baltimore and Miami are excluded, the cost of living in the South falls to 1.5 percent below the national rate. If the California metropolitan areas are excluded from the West, the cost of living still remains 4.0 percent above the national rate.

    Per Capita Income: The highest unadjusted per capita incomes are in the Northeast, followed by the West, the South and the Midwest. Yet when metropolitan area exchange rates are taken into consideration, the order changes significantly. The Northeast remains the most affluent, and the Midwest moves from last place to second place. The South is in third place, the same as its income rating, while the West falls from second place to fourth place (Figure 3).

    Cost of Living: Variations in the cost of living, which is reflected by the metropolitan area exchange rates, remains similar in 2009 to the 2006 rankings.

    The Top Ten: The lowest costs of living were in (Table 1):

    1. St. Louis, where $0.891 purchased $1.00 in value at the national average.
    2. Kansas City, where $0.903 purchased $1.00 in value at the national average.
    3. Cleveland, where $0.921 purchased $1.00 in value at the national average.
    4. Pittsburgh, where $0.941 purchased $1.00 in value at the national average.
    5. Cincinnati, where $0.944 purchased $1.00 in value at the national average.

    Rounding out the most affordable 10 are two metropolitan areas in the South (Atlanta and Dallas-Fort Worth), two in the Midwest (Detroit and Milwaukee) and one in the West (Denver). No Northeastern metropolitan area was ranked in the top 10.

    Table 1
    Estimated Cost of Living: 2009
    Metropolitan Areas over 1,000,000 with Local CPIs
    Rank Metropolitan Area
    Metropolitan Exchange Rate: to Purchase $1.00 at National Average
    Compared to Lowest Cost of Living
    1
    		 St. Louis, MO-IL
    $0.891
    0%
    2
    		 Kansas City, MO-KS
    $0.903
    1%
    3
    		 Cleveland, OH
    $0.921
    3%
    4
    		 Pittsburgh. PA
    $0.941
    6%
    5
    		 Cincinnati, OH-KY-IN
    $0.944
    6%
    6
    		 Atlanta. GA
    $0.958
    8%
    7
    		 Detroit. MI
    $0.959
    8%
    8
    		 Milwaukee. WI
    $0.959
    8%
    9
    		 Dallas-Fort Worth, TX
    $0.976
    10%
    10
    		 Denver, CO
    $0.996
    12%
    11
    		 Minneapolis-St. Paul, MN-WI
    $1.000
    12%
    12
    		 Houston, TX
    $1.000
    12%
    13
    		 Tampa-St. Petersburg, FL
    $1.006
    13%
    14
    		 Phoenix, AZ
    $1.011
    14%
    15
    		 Portland, OR-WA
    $1.034
    16%
    16
    		 Chicago, IL-IN-WI
    $1.041
    17%
    17
    		 Philadelphia, PA-NJ-DE-MD
    $1.054
    18%
    18
    		 Baltimore, MD
    $1.068
    20%
    19
    		 Riverside-San Bernardino, CA
    $1.078
    21%
    20
    		 Miami-West Palm Beach, FL
    $1.085
    22%
    21
    		 Seattle, WA
    $1.120
    26%
    22
    		 San Diego, CA
    $1.151
    29%
    23
    		 Boston, MA
    $1.175
    32%
    24
    		 Washington, DC-VA-MD-WV
    $1.181
    33%
    25
    		 Los Angeles, CA
    $1.222
    37%
    26
    		 San Francisco-Oakland, CA
    $1.258
    41%
    27
    		 New York, NY-NJ-PA
    $1.281
    44%
    28
    		 San Jose, CA
    $1.343
    51%
    Estimated from BEA 2006 data, adjusted by local Consumer Price Index for 2006-2009

     

    The Bottom Ten: The most expensive metropolitan areas were:

    28. San Jose, where $1.343 purchased $1.00 in value at the national average.
    27. New York, where $1.281 purchased $1.00 in value at the national average.
    26. San Francisco, where $1.268 purchased $1.00 in value at the national average.
    25. Los Angeles, where $1.222 purchased $1.00 in value at the national average.
    24. Washington, where $1.181 purchased $1.00 in value at the national average.

    The bottom ten also included three metropolitan areas in the West (Riverside-San Bernardino, San Diego and Seattle), one in the Northeast (Boston) and one in the South (Miami). There were no Midwestern metropolitan areas in the bottom 10.

    Per Capita Income: Per capita income in 2009 was then adjusted for the cost of living.

    Top Ten:Washington has the highest per capita income, adjusted for the cost of living, at $47,800. San Francisco placed second at $47,500. Denver ranked third at $46,200, while the cost-of-living adjusted income in Minneapolis-St. Paul was $45,800 and $45,700 in Boston. The top 10 also included two Midwestern metropolitan areas (St. Louis and Kansas City), two from the Northeast (Baltimore and Pittsburgh) and one from the West (Seattle).

    Bottom Ten: The least affluent metropolitan area was Riverside-San Bernardino, with a per capita income of $27,800. Phoenix was second least affluent at $33,900 while Los Angeles was third least affluent at $35,000. The fourth least affluent metropolitan area was Tampa-St. Petersburg at $36,600 and the fifth least affluent metropolitan area was Portland at $37,400. The bottom 10 also included two metropolitan areas from the South (Atlanta and Miami), two from the Midwest (Cincinnati and Detroit) and one from the West (San Diego).

    The cost of living adjusted income data includes surprises. New York, commonly considered a particularly affluent metropolitan area, ranked 17th in cost-of-living adjusted income, and below such seemingly unlikely metropolitan areas as Pittsburgh, Kansas City, Cleveland, St. Louis and Milwaukee. These metropolitan areas also ranked above San Jose, which ranked first in unadjusted income in 2000, but now ranks 16th in cost of living adjusted income (Table 2).

    Table 2
    Personal Income Per Capita Adjusted for  the Cost of Liviing
    Metropolitan Areas over 1,000,000 with Local CPIs
    Rank (Cost of Living Adjusted)
    Rank (Unadjusted Income)
    		 Metropolitan Area
    Per Capita Income 2009: Adjusted for Cost of Living
    Per Capita Income 2009: Unadjusted
    1
    2
    		 Washington, DC-VA-MD-WV
    $47,780
    $56,442
    2
    1
    		 San Francisco-Oakland, CA
    $47,462
    $59,696
    3
    8
    		 Denver, CO
    $46,172
    $45,982
    4
    9
    		 Minneapolis-St. Paul, MN-WI
    $45,772
    $45,750
    5
    4
    		 Boston, MA
    $45,707
    $53,713
    6
    18
    		 St. Louis, MO-IL
    $45,288
    $40,342
    7
    7
    		 Baltimore, MD
    $44,908
    $47,962
    8
    15
    		 Pittsburgh. PA
    $44,848
    $42,216
    9
    19
    		 Kansas City, MO-KS
    $43,862
    $39,619
    10
    6
    		 Seattle, WA
    $43,730
    $48,976
    11
    13
    		 Houston, TX
    $43,581
    $43,568
    12
    16
    		 Milwaukee. WI
    $43,477
    $41,696
    13
    11
    		 Philadelphia, PA-NJ-DE-MD
    $43,247
    $45,565
    14
    21
    		 Cleveland, OH
    $42,734
    $39,348
    15
    12
    		 Chicago, IL-IN-WI
    $41,990
    $43,727
    16
    3
    		 San Jose, CA
    $41,255
    $55,404
    17
    5
    		 New York, NY-NJ-PA
    $40,893
    $52,375
    18
    20
    		 Dallas-Fort Worth, TX
    $40,494
    $39,514
    19
    23
    		 Cincinnati, OH-KY-IN
    $40,437
    $38,168
    20
    10
    		 San Diego, CA
    $39,647
    $45,630
    21
    24
    		 Detroit. MI
    $39,147
    $37,541
    22
    17
    		 Miami-West Palm Beach, FL
    $38,124
    $41,352
    23
    26
    		 Atlanta. GA
    $38,081
    $36,482
    24
    22
    		 Portland, OR-WA
    $37,446
    $38,728
    25
    25
    		 Tampa-St. Petersburg, FL
    $36,561
    $36,780
    26
    14
    		 Los Angeles, CA
    $35,045
    $42,818
    27
    27
    		 Phoenix, AZ
    $33,897
    $34,282
    28
    28
    		 Riverside-San Bernardino, CA
    $27,767
    $29,930
    Estimated from BEA 2009 income data and 2006 regional price parity data, adjusted by local Consumer Price Index for 2006-2009

     

    Some expensive metropolitan areas such as Washington, San Francisco and Boston ranked at or near the top, but their cost-of-living adjusted incomes were considerably less than the unadjusted incomes. On average, it took $1.20 to purchase $1.00 of value at national rates in these three metropolitan areas. Washington’s unadjusted per capita income was 40 percent ($16,100) higher than that of St. Louis, however when the cost of living is factored in, Washington’s advantage drops to 6 percent ($2,500).

    Caveats: The analysis above does not consider cost-of-living differentials within metropolitan areas. For example, data from the ACCRA cost of living index indicates generally higher prices in the cores of the largest metropolitan areas, such as New York (especially Manhattan), Chicago and San Francisco. Further, these data make no adjustment for relative levels of taxation. A cost of living analysis using disposable income would produce different results, dropping higher taxed metropolitan areas to lower rankings and raising lower taxed metropolitan areas higher.

    Cost of Living Differences: Will They Continue? The spread in cost-of-living between metropolitan areas have been driven wider over the last decade by the relative escalation of house prices in some metropolitan areas in the West, Florida and the Northeast. Whether these shifts in cost of living will be reflected in migration patterns will be one of the things to look for in the new Census.

    ———

    Note 1: Purchasing power parity data is published by the World Bank, the International Monetary Fund (IMF) and the Organization for Economic Cooperation and Development (OECD).

    Note 2: The BEA research applied regional price parity factors only to employee compensation and excluded other income. It is possible that, had the analysis been expanded to these other forms of income, the differences in cost of living would have been greater.

    Photo: Rosslyn, VA business district, Washington (by author)

    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”

  • Chicago: The Cost of Clout

    The Chicago Tribune has been running a series on the challenges facing the next mayor. One entry was about the Chicago economy. It described the sad reality of how Chicago’s economy is in the tank, and has been underperforming the nation for the last few years. I’ll highlight the part about challenges building an innovation and tech economy in Chicago:

    The region also has lagged in innovation, firm creation and growth in productivity and gross metropolitan product over the past decade, according to economic development consultant Robert Weissbourd, president of RW Ventures LLC. Daley’s two long-held dreams of Chicago emerging as a high-tech center and a global business center remain just out of reach… “We haven’t made the real global jump yet, and we have not made the tech jump either, but we are finally poised,” said Paul O’Connor, who for many years ran World Business Chicago, the city’s economic development affiliate. “We are still a major contender, but, yeah, we can blow it.” Or, as [Chicago Fed Economist William] Testa put it, “Given the poor performance of this decade, we need to rethink the challenges for Chicago.”
    …

    “If I could wave a magic wand, I would get government to start thinking differently about … what are the levers that we need to push, away from the traditional (tax increment finance district) thinking and away from the traditional thinking of, ‘Let’s just get a big company to move here,’ and toward thinking about how to foster innovation and creativity,” Christie Hefner, former chairman and chief executive of Playboy Enterprises Inc., said at a recent economic forum.

    It has been extremely rare to see people with establishment positions ever say a discouraging word about the city. Most honest observers would have to rate Daley highly has a leader, but certainly not perfect. Yet any criticism at all of him (directly or implicitly by that of the city he runs) has been studiously avoided by most. They are terrified of being excommunicated or broken on the wheel if they deviate from the script. To have corporate executives asking tough questions is unusual, and hopefully an example of a forthcoming “Great Thaw” we need to have here in the wake of Daley’s retirement.

    Chicago’s inability to build an innovation/tech economy is pretty remarkable if you think about it. Here’s third largest city in the country, one with enormous human capital, tremendous wealth, incredible academic institutions, and above all an ability to execute that far outclasses virtually any city I know. How is it then that Chicago has been unable to execute on this?

    Believe it or not, a lot of it goes back to that bane of Chicago politics: Clout. People in Chicago tend to write off clout and political corruption in Chicago with a shrug, as a unique or even amusing local affectation, or just part of the character of purely political life of the city, but one that doesn’t fundamentally change its status as the “City That Works.” But nothing could be further from the truth. Chicago’s culture of clout is a key, perhaps the key, factor holding the city back economically.

    Chicago’s Ambition: Clout

    In Paul Graham’s essay Cities and Ambition, he writes about the subtle messages cities send about what you should try to achieve, and how that shapes their fortunes:

    “Great cities attract ambitious people. You can sense it when you walk around one. In a hundred subtle ways, the city sends you a message: you could do more; you should try harder. The surprising thing is how different these messages can be. New York tells you, above all: you should make more money. There are other messages too, of course. You should be hipper. You should be better looking. But the clearest message is that you should be richer.

    What I like about Boston (or rather Cambridge) is that the message there is: you should be smarter. You really should get around to reading all those books you’ve been meaning to. When you ask what message a city sends, you sometimes get surprising answers. As much as they respect brains in Silicon Valley, the message the Valley sends is: you should be more powerful.
    …
    How much does it matter what message a city sends? Empirically, the answer seems to be: a lot. You might think that if you had enough strength of mind to do great things, you’d be able to transcend your environment. Where you live should make at most a couple percent difference. But if you look at the historical evidence, it seems to matter more than that.

    Chicago’s ambition, the message it sends is: “You should have more clout.” Does that matter? You bet it does.

    What Is Clout?

    Clout is a term of art in Chicago that normally refers to the ability to use connections to obtain jobs, contracts, subsidies or other favors from government. But more broadly, we can think of clout as the ability to influence organizational action within the context of a particular power structure.

    But if that’s the definition, isn’t saying you should have clout the same thing as saying you should have power like Graham said of Silicon Valley? No. Having power, like that held by Mark Zuckerberg or Larry Page and Sergey Brin, is about being autocephalous. It’s about have an independent base of authority or ability to act others are forced to respect. Clout, by contrast is all about petty privileges. Clout can be given, but it can also be taken away. That’s what makes it so corrupting. Tellingly, no one ever talks about Mayor Daley as having clout. That’s because he has real power instead. Having power is like being a king or a duke or a baron. Clout is all about being a courtier.

    To see this in action, just contrast Jesse Jackson with Al Sharpton. Both are prominent national civil rights leaders and black ministers. But Jackson rarely goes hard after anyone in Chicago, at least not anymore. Jackson has clout. One son is a congressman. Another somehow managed to acquire ownership of a lucrative beer distributorship. Jackson bought into the system in Chicago.

    By contrast, Sharpton wants to be a power player in New York, to be someone to whom even a would-be mayor has to come visit and, as they say, kiss the ring. He’s not interested in being bought off. Sure, he’ll make alliances. But he’ll never give up his independent base of power that makes him someone to be reckoned with. That’s the difference between power and clout.

    The Chicago Nexus

    John Kass likes to talk about clout in terms of the “the Combine,” or the bi-partisan system in Illinois in which the Democrats and Republicans have often proven less rivals than partners in crime, sometimes literally. But I prefer to think of “the Nexus” – a unitary social structure that pretty much everyone who’s anyone in Chicago is part of, one that goes far beyond the world of politics.

    Ramsin Canon had a good illustration of the Nexus in a piece he wrote over at Gapers Block:

    With big city economies cratering all around him, the Mayor was able to raise in the neighborhood of $70 million dollars to fund the Olympic Bid. At the same time he was able to get everybody that mattered–everybody–on board behind the push for the Olympics. Nobody, from the largest, most conservative institutions to the most active progressive advocacy group, was willing to step out against him on that issue.
    …
    The list of big donors to the Chicago 2016 bid committee is a comprehensive list of powerful Chicago institutions. I mean, it’s exhaustive. Economy be damned, when the Mayor called, they listened. Why? What did those conversations sound like? And do we believe that the Mayor is so powerful–or that their relationship with him is so close–that they must obey him? Or–more likely–is it a mutual back-scratching club with an incentive to protect the status quo? Chicago’s political infrastructure isn’t about the Democratic Party or “the Machine” or special interest groups or labor unions. Those are elements of varying importance. It’s real power lives in the networks that tie that list together.

    …
    Replace the man on the Fifth Floor–Bureaucracy Man, the superhero who keeps our alleys clear–and will these networks evaporate? Will they just disappear? How long would it take them to reorganize around the new personalities that moved in there?

    All cities have elite networks, but I have never seen a city that has a unitary power nexus to the extent Chicago does. I believe the Nexus resulted from the culture of clout combined with the fact that, with the exception of the interregnum between Daley pere and fils, power has been centralized on the 5th floor of city hall for decades. The Nexus may have come into being around the mayor, but now it has become a feature of civic life, one that practically longs for what Greg Hinz has labeled a “Big Daddy” style leader to sustain the system.

    Clout’s Effect on the Culture of Chicago

    The emergence of the Nexus is one of the key cultural impacts of clout in Chicago. If clout is only effective within a given power structure, then clearly the clouted want to see their power structure expand. The ultimate dream of the clout seeker is a centralized unitary state like Louis XIV’s France. In Chicago, we’ve come amazingly close to achieving it. It’s not that there’s no conflict, but it is all of the palace intrigue variety, not true conflicts between rival power centers. Without centralized political power and a tradition of clout, the Nexus would never have come into being.

    There are many other cultural impacts as well. As Douglas and Wildavsky note in Risk and Culture, “An individual who passes his life exclusively in one or another such social environment internalizes its values and bears its marks on his personality.”

    People are bought into and defend the system. They mapped these social environments along the axes of “grid” and “group” – the degree of hierarchy in the system and the degree of group cohesion. The Chicago Nexus is a high-grid, high-group structure, or collective hierarchy, with centralized decision making and a high cost of defection. Even groups that in other cities tend to be more oppositional to government will say something like, “Decisions get made in the mayor’s office here, so we have to play that game” and buy into the system. I’ve lost track of the number of times I’ve heard, “That’s just how it works here.” Of course, this means the basis of their own ability to make things happen then becomes influence – clout – within the Nexus. Thus they defend the system, because if it went away, so would their ability to make things happen because they’ve cultivated no alternative vectors for action. Also, the Council Wars period of the 1980’s still looms large in many leaders’ minds. Chicago remains heavily segregated and racially balkanized, as the recent quest for a single black mayoral candidate illustrates. There’s a lot of worry about what might happen if the current system breaks down.

    Conservatism and favoring of the establishment. Following on from that, the system fosters a sort of generalized conservatism, one dominated by a desire for institutional stability. It takes a heavy hitter to get the mayor’s attention or even access to the mayor, which reinforces establishment control, an inherently conservative model. This conservatism is even visible the realm of public design, as I’ve noted in discussion the retro-nostalgia design of the city’s streetlights and other streetscape elements. The evidence of clout-fed conservatism is literally graven in into the very streets of the city.

    Parochialism. Though fancying itself a cosmopolitan burg, I don’t see that Chicago is that much less parochial than most other Midwest cities. You see this in a thousand little ways. For example, in the way beloved long time personalities dominate the local airwaves. As the New York Times noted about turmoil at long time ratings leader WGN-AM, “Chicago tends to be unforgiving to newcomers. And with WGN pulling in the second- most radio revenue in the market behind WBBM, its moves are fraught with risk. ‘It was always difficult to bring someone in from out of town,’ said Bob Sirott, a longtime Chicago broadcaster.” (Longevity seems particularly prized here generally, as unless you are fortunately enough to be born to the right family or in the right parish, it takes time to accumulate clout). Or in the focus on local and hyper-local news in the local internet journalism community.

    Fear. As a high-group social structure, people are terrified of being kicked out of the club. Hence the unwillingness to cross the party line on almost any issue. As Tocqueville put it: “That which most vividly stirs the human heart is not the quiet possession of something precious, but rather the imperfectly satisfied desire to have it and the continual fear of losing it again.” People are even afraid of collateral damage if others near them cross the line. As Mike Doyle said, “In systems like Chicago’s, people don’t just refrain from rocking the boat, they do their best to keep anyone else from rocking it either.”

    Total Rejection of the Other. Anyone who exists outside the structure is a potential threat. Hence they are either co-opted or marginalized. The best illustration of this is the very title of that wonderful book on Chicago politics, We Don’t Want Nobody Nobody Sent. Or as Steve Rhodes said to me:

    One of the bartenders at the Beachwood says it took her awhile to figure this city out. In other cities you apply for a job with a resume, talk about your experience, etc. Here they just want to know who you know, who sent you – even at the bartender level….I’m not naive enough to believe this doesn’t happen elsewhere, but nowhere near as it does here, where it’s in the DNA. …Here, merit counts for next to nothing…In New York, everyone wants to know: “What do you do?” In Chicago, everyone wants to know: “Who do you know?”

    Why Clout Is Toxic to the Innovation Economy

    When you think about these cultural impacts of clout on Chicago, it becomes obvious why the city has failed to build an innovation economy. Innovation is fundamentally about new ideas, new ways of doing things, new players in the game, those from the outside, about merit, about dynamism. Clout is about what happened yesterday, the fruits of long years of efforts, and the same old – sometimes really old – players, about insiders, about connections, about stasis. As Jane Jacobs noted, “Economic development, no matter when or where it occurs, is profoundly subversive of the status quo.” Innovation driven economic development is fundamentally about disrupting the status quo. Clout is all about preserving it. Innovation welcomes the outsider, the clout-fueled Nexus abhors the Other. Innovation and clout are enemies.

    Think about the innovation hubs in America. They are all places that welcome the new. Not that it’s easy to make it in them. In fact, these place are often brutally competitive. And of course they have elite networks where the scions of the rich and powerful have a leg up and such. But the new is an important part of what makes them tick. In Silicon Valley, they are always looking for the tomorrow’s HP, Apple, Cisco, Google, Facebook, or Twitter, not just celebrating the past. They know that success today is ephemeral and, as Andy Grove put it, “only the paranoid survive.” DC loves its establishment, but the very nature of the place assures there will always be new players in the game. President Obama comes out of nowhere to gain the White House. But two years later it is the upstart Tea Party’s turn. Possibly because of their entertainment industry clusters, NYC and LA are always on the lookout for the fresh face and the next big thing.

    But Chicago? What do you think is going to happen when an ambitious 20-something with a great idea for a new business but no clout shows up in Chicago trying to make it happen and knocks on the door?

    I may not be 20 anymore, but at the risk of making this post sound like merely a bit of personal pique, I’ll share a true personal story to illustrate one example of how this plays out in real life in Chicago. In 2009 I received an award from the Chicagoland Chamber of Commerce for innovative thinking on public transit, winning first prize in a global competition they ran to solicit ideas for boosting public transit ridership in Chicago.

    I was thinking at the time that I might want to do something more entrepreneurial. I knew that the Chamber ran a sister organization called the Chicagoland Entrepreneurship Center chartered with boosting startups in Chicago. In the wake of my award I decided to check them out and see how they might be able to help me.

    There was just one problem: they wouldn’t return my phone calls. I made many attempts to get in touch with them by phone and email, and couldn’t even get them to give me a “No Thanks” or pawn me off on a peon. Now I’m a guy who a) had significant business experience, who b) built up one of America’s top urbanist sites from scratch, an inherently entrepreneurial act, and a successful one, if you think about it, and c) just got an award for innovation from the Chamber itself. Yet they wouldn’t even give me the time of day.

    What’s more, the Chamber mothership never showed any interest in engaging with me post-competition either. It was clearly just a PR exercise for them. Now don’t get me wrong, I’m delighted to report it was a very successful one. I got my picture on the front page of the Chicago Tribune above the fold. It exceeded my wildest expectations. I think the folks at the Chamber are nice people and I was extremely pleased with how it went. But clearly from their perspective, that’s where it ended. Actually uncovering innovators or something was not part of the agenda.

    From standpoint of the the Chicago system, this experience actually makes perfect sense, as I don’t have clout, nor can I bestow it on anyone. So why burn cycles on me?

    If you think about my profile and the treatment I got, can you imagine what a 23 year old armed with nothing but a crazy idea would get? A lot of ink has been dedicated to talking about how far Chicago and Illinois have come since they days when Mark Andreesen was actively harassed while trying to commercialize his web browser, then run out of town on a rail. But there is no doubt in my mind that if the next the next Andreesen showed up today, he’d get the exact same treatment. (I’m not familiar enough with Andrew Mason’s history to know how he was treated pre-Groupon, and pre-his association with the likes of big money Eric Lefkofsky. It would make an interesting case study to look at the history there – though he is a possible exception. I don’t know. In any case, his major local profile came after Groupon was already a huge success).

    This is what clout in Chicago hath wrought. The culture of the establishment Chicago is simply incompatible with an innovation economy. It’s not just about money or resources. It’s about respect. It’s about what this town respects, and more importantly what it doesn’t. It’s about what Chicago whispers to you about what you should aspire to achieve, what success means in this city, and the subtle – and not so subtle – messages about how you get ahead here.

    Until you’ve already made your millions or somehow wormed your way into connections or up through the hierarchy, establishment Chicago has no use for you in its economic plans, no matter what talent, ideas, or ambitions you might harbor. (Ironically, the biggest exception is Daley himself, who was famous for seeking out and rapidly promoting young talent like Ron Huberman and Richard Rodriguez. That’s another example of how he is head and shoulders above your average leader).

    By contrast, the local entrepreneurial tech community gets it, is energized, knows where the city is and where it needs to be, and is working hard to make progress with a sense of legitimate optimism backed up by recent good news. Grass roots and “by tech for tech” institutions ranging from Technori, to the Chicago Lean Startup Circle, to the folks at Groupon – which is a huge, inspirational success story, with people who get it and are committed to trying to build up Chicago’s tech scene – are hugely supportive of anyone trying to make a go at it no matter what stage they are in, and providing legitimately useful info and help along the way. Every single person in this group I’ve talked to has been more that willing to do anything to try to help me out, sometimes even more than I’d hoped or asked for – 100% of them. (Yes, this does mean I am starting an internet business myself – watch this space).

    I’ve long said Chicago isn’t going to be the next Silicon Valley and should seek only to get its “fair share” of tech. Having said that, as the third largest city in America, a fair share is still pretty big. If Chicago’s going to make it, this collaborative effort by the local tech community is what is going to get it there – not the Nexus.

    The Way Forward

    Pretty much every report out of officialdom – from Gov. Quinn’s Illinois Economic Recovery Commission Report to CMAP’s Go To 2040 Plan – suggests the public and quasi-public sectors need to do more to boost innovation. But what’s really needed is cultural change in the establishment. Until that happens, I’d suggest that what’s really needed is to take a page from the Getting Real playbook and for them to do less.

    Think about it. If Joe Investor shoots you down, you know the odds were probably long in the first place. While you might not come away feeling good about him, you probably don’t feel any worse about Chicago. But if you approach an official or quasi-official organization chartered with promoting “innovation”, “entrepreneurship”, “clusters”, “technology” or whatever in Chicago and they shoot you down, it’s not just them but your city you feel has rejected you. It’s one thing to generate a negative interaction with a private entity, but with an official entities that hurts the very thing they’re trying to promote. If an official or quasi-official organization can’t say Yes, or at least make sure that well over 50% of the people it says No to feel good about the experience, it should be shut down, because it’s doing more harm than good.

    What’s more, these organizations and leaders glom on to these hot phrases du jour and, as someone put it, “suck the oxygen out of the room.” They hog the microphone and the real stories and the real discussion that need to happen out there don’t get told in the press because big names are the default easy answer for reporters. Just look at the number of big titled civic folks and such quoted in the Tribune piece, for example. Startup blog Technori has already told me more in two months about things that matter in tech than the Tribune and the Sun-Times combined did all last year. As Mike Madison said of Pittsburgh:

    Tech-based economic development is not something that can be conjured in  meetings of mayors and CEOs.   That’s top-down, old-school, clear-the-skies, ACCD thinking.  In fact, I would guess that the more that the Downtown Duquesne Club crew gets in the middle of this process, the more the real entrepreneurs and innovators and risk-capital investors get turned off.

    Or as Paul O’Connor put it in that Tribune piece I led off with:

    “What we have now, to some extent, is a stodgy Midwest establishment, and underneath them are the kids who moved here, some of them in their 30s now,” he said. “They get it; they know how to do it. … We either give them permission and invite them to the table, which the next mayor should do and which Mayor Daley has begun to do a little bit lately, or we let them do it themselves.”

    Blowing Up the Culture of Clout

    Clout is so persistent in Chicago not just because of the people who personally benefit from it, but because there’s little perception of the ways the culture of clout affects Chicago outside the political realm. Indeed, to the extent people regard the Chicago Way at all, it’s often positively, because it enabled the city to “get things done.” It’s the same thing that causes Thomas Friedman to have his schoolgirl crush on China.

    But unfortunately for Chicago (and likely China too down the road) it doesn’t just matter if you can get things done, it matters what it is you do. And it also matters how you do it and who is involved. Until people understand the linkage between clout and other parts of the city like its economic under-performance, and care enough to change it, the non-political members of the Chicago Nexus are not going to feel the need to change the way things are done here. It’s not that these folks are corrupt by any means. Far from it. I believe they are completely sincere in their desire to better the city. But they don’t perceive the issue at the level that will collectively move them to action, or else feel the status quo is better for their institutional interests.

    Changing the culture is mission critical to Chicago realizing its ambitions as a global city and a center of the innovation economy, and a lot of other things too. The notion that you can have a centralized, top-down, clout driven Nexus infusing your civic culture but that somehow you’ll have an innovation driven economic culture – that’s just impossible. The attempt to fix and transform Chicago’s economy with a bunch of behind the scenes maneuvering and initiatives by a few heavy hitters has failed. We need to try a different way. That doesn’t mean Chicago has to become paralyzed with dysfunction of in-fighting or civic anarchy. But there need to be multiple power centers and a receptivity to everything innovation is all about. And it will be a bit messier. I think that’s a good thing. There’s no doubt Chicago is a great city with incredible assets and capabilities. There’s no reason it can’t join the ranks of the innovation elite – if it’s willing to start jettisoning the culture of clout the so hobbles its ambitions and embracing a more dynamic future for the city. What will it be, Chicago?

    Aaron M. Renn is an independent writer on urban affairs based in the Midwest. His writings appear at The Urbanophile, where this piece originally appeared.

    Photo by Bryce Edwards

  • Why Affordable Housing Matters

    Economists, planners and the media often focus on the extremes of real estate — the high-end properties or the foreclosed deserts, particularly in the suburban fringe. Yet to a large extent, they ignore what is arguably the most critical issue: affordability.

    This problem is the focus of an important new study by Demographia. The study, which focuses largely on English-speaking countries, looks at the price of housing relative to household income. It essentially benchmarks the number of years of a region’s household income required to purchase a median-priced house.

    Overall, the results are rather dismal in terms of affordability, particularly in what Wharton’s Joe Gyourko dubs “superstar cities.” These places — such as London, New York, Sydney, Toronto and Los Angeles — generally tend to be more expensive than second-tier regions commonly found in the American South and heartland.

    Even with their usually higher incomes, these regions, for the most part, still have a ratio of five years median income to median house price; this is far higher than the historical ratio of three. In some areas the ratios are even more stratospheric. Sydney and Melbourne, for example, have ratios over nine; London, New York, San Jose and Los Angeles approach six or more.

    Urbanists often assume that these high prices — unprecedented in a tepid economy — reflect the greater attractiveness of these regions. This is somewhat true, particularly for parts of London and New York, which can survive high ratios because their markets are less national and middle-income and more tied to the global upper classes.

    In places like Mayfair or New York’s Upper East Side, the buying “public” extends beyond the local market to high-income markets in places like the United Arab Emirates, Moscow, Shanghai, Singapore or Tokyo. Many owners are not full-time residents and consider a home in such places as just another expression of their wealth and privilege.

    Yet such markets are exceptional. In most regions, the vast preponderance of homebuyers are either natives or long-term migrants. Their less glamorous tastes — notably access to affordable single-family dwellings — drives migration  from one region to another. Over the past decade, and even since the crash, this has meant a general trend of migration from high-end, unaffordable markets to less expensive regions. In the U.S., for example, people have been flocking to the South, particularly the large metropolitan areas of Texas.

    One factor driving this migration, the Demographia study reveals, is differing levels of regulation of land use between regions. In many markets advocacy for “smart growth,” with tight restrictions on development on the urban fringe, has tended to drive up prices even in places like Australia, despite the relatively plentiful supply of land near its major cities.

    More recently, “smart growth” has been bolstered by claims, not always well founded, that high-density development is better for the environment, particularly in terms of limiting greenhouse gases. Fighting climate change (aka global warming) has given planning advocates, politicians and their developer allies a new rationale for “cramming” people into more dense housing, even though most surveys show an overwhelming preference for less dense, single-family houses in most major markets across the English-speaking world.

    Limits on the kind of residential living most people prefer inevitably raises prices. As the Demographia study shows, the highest rise in prices relative to incomes generally has taken place in wherever strong growth controls have been imposed by local authorities.

    Perhaps the poster child for “smart growth” has been the U.K. Long before the climate change debate, both of England’s major parties embraced the notion of strict constraints on suburban development — not only in London, but across the country. As a result, even places with weak economies are not as affordable as they should be. Liverpool, Newcastle and the Midlands have affordability rates higher than Toronto, Boston, Miami and Portland — and not much lower than those of New York or Los Angeles.

    But the most remarkable impact of “smart growth” policies has been in Australia, which once had among the most affordable housing prices in the English-speaking world. Houses in Sydney and Melbourne, for example, are now less affordable than in London or San Francisco.  Even secondary markets like Adelaide and Perth are more expensive than Toronto, New York, Los Angeles or Chicago. Most recently these policies have even caught the attention of the OECD, which linked overly regulated housing markets not only to the Great Recession, but to a continued slow economic recovery.

    Compared with the U.K. and Australia, the U.S. housing market is more hopeful, with a host of regions — notably Houston, Dallas, Austin, San Antonio, Phoenix and Kansas City — with affordability rates around three and under. Low prices by themselves, of course, are no guarantor of success; in economically challenged places like Detroit and Cleveland, out-migration and high unemployment have driven prices down.

    But in many, if not most, cases affordability has promoted economic and demographic growth.  Generally speaking, affordable markets tend to draw migrants from overpriced ones, for example to Houston or Austin from Los Angeles or New York.

    Nor is this necessarily a case of “smart” people heading to dense, expensive cities while the less cognitively gifted head to the low-cost regions — as news outlets like The Atlantic have claimed. In fact, the American Community Survey reveals that between 2007 and 2009 college graduates generally gravitated toward lower-cost, less dense markets — such as Austin, Houston and Nashville — than to the highly constrained, denser ones. Overall  growth in affordable markets — with a ratio of three or four — among college graduates was roughly 5%; in the more expensive places , it was barely 3%.

    How could this be, if everyone with an above-a-room-temperature IQ supposedly favors hip, cool, dense cities? Perhaps it’s because of factors often too small or mundane for urban pundits to acknowledge. Most people, particularly as they enter their 30s, aspire to a middle-class lifestyle — and being able to afford a house constitutes a large part of that.

    So what does this tell us about future growth? Clearly affordability matters. Areas that combine strong income and job growth, along with affordable housing, are poised to do best. This will be particularly true once the economy recovers and a new generation of millennial buyers, entering their 30s in huge numbers over the next decade, start their search for a place where they can settle down and start raising families.

    This piece originally appeared in Forbes.

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

    Photo by Je Kemp

  • Personal Income in the 2000s: Top and Bottom Ten Metropolitan Areas

    The first decade of the new millennium was particularly hard on the US economy. First, there was the recession that followed the attacks of 9/11. That was followed by the housing bust and the resulting Great Financial Crisis, which was the most severe economic decline since the Great Depression.

    Per capita personal incomes in America’s major metropolitan areas vary widely. Moreover, the changes in per capita incomes from 2000 to 2009 have also varied. The differences are particularly obvious when average incomes are adjusted for metropolitan area Consumer Price Indexes. The US Bureau of Labor statistics produces a Consumer Price Index for nearly 30 metropolitan areas. Among these, 28 metropolitan areas are covered by these local Consumer Price Indexes.

    While overall national inflation was approximately 25 percent between 2000 and 2009, the metropolitan area inflation indexes ranged from 16 percent in Phoenix to more than 32 percent in San Diego. Five additional metropolitan areas had 2000 to 2009 inflation of more than 30 percent, including Los Angeles, Riverside-San Bernardino, Miami, Tampa-St. Petersburg and San Diego. Four metropolitan areas experienced inflation of less than 20 percent, including Atlanta, Detroit and Cleveland and Phoenix.

    Overall, the 28 metropolitan areas covered by metropolitan inflation indexes averaged a per capita income decrease of 0.1 percent, after adjustment for inflation. Increases were achieved in 18 metropolitan areas, while decreases occurred in 10. The overall average declines occurred because the steepest loss (19 percent in San Jose), was far outside the plus 10 percent to minus 8 percent range of the other 27 metropolitan areas (Table).

    Metropolitan Area: Per Capita Income
    Metropolitan Areas Covered by Metropolitan Consumer Price Indexes
    Inflation Adjusted
    Rank Metropolitan Area
    2000 in 2009$
    2009
    Change
    1 Baltimore
    $    43,729
    $    47,962
    9.7%
    2 Pittsburgh
    $    39,024
    $    42,216
    8.2%
    3 Washington
    $    53,753
    $    56,442
    5.0%
    4 Philadelphia
    $    43,572
    $    45,565
    4.6%
    5 St. Louis
    $    38,636
    $    40,342
    4.4%
    6 Milwaukee
    $    40,028
    $    41,696
    4.2%
    7 Los Angeles
    $    41,382
    $    42,818
    3.5%
    8 Houston
    $    42,232
    $    43,568
    3.2%
    9 Cleveland
    $    38,396
    $    39,348
    2.5%
    10 Chicago
    $    42,761
    $    43,727
    2.3%
    11 Phoenix
    $    33,594
    $    34,282
    2.0%
    12 San Diego
    $    44,812
    $    45,630
    1.8%
    13 Kansas City
    $    39,020
    $    39,619
    1.5%
    14 New York
    $    51,638
    $    52,375
    1.4%
    15 Cincinnati
    $    37,852
    $    38,168
    0.8%
    16 Seattle
    $    48,651
    $    48,976
    0.7%
    17 Boston
    $    53,396
    $    53,713
    0.6%
    18 Minneapolis-St. Paul
    $    45,690
    $    45,750
    0.1%
    19 Denver
    $    46,205
    $    45,982
    -0.5%
    20 Miami-West Pallm Beach
    $    41,937
    $    41,352
    -1.4%
    21 Riverside-San Bernardino
    $    30,600
    $    29,930
    -2.2%
    22 Portland
    $    39,703
    $    38,728
    -2.5%
    23 Tampa-St. Petersburg
    $    38,048
    $    36,780
    -3.3%
    24 San Francico
    $    61,831
    $    59,696
    -3.5%
    25 Dallas-Fort Worth
    $    41,575
    $    39,514
    -5.0%
    26 Detroit
    $    40,412
    $    37,541
    -7.1%
    27 Atlanta
    $    39,775
    $    36,482
    -8.3%
    28 San Jose
    $    68,185
    $    55,404
    -18.7%
    Unweighted Average
    $    43,801
    $    43,700
    -0.2%

    The Top Ten: The strongest per capita personal income growth between 2000 and 2009 was in Baltimore, which had an inflation adjusted increase of 9.7 percent. This strong performance is not surprising due to Baltimore’s proximity to Washington and the federal government’s high paying jobs. It also receives spillover lucrative employment from federal contracts to health, defense and security companies. In fact, Baltimore did better than Washington. Washington, which extends from the District of Columbia and into Maryland, Virginia and West Virginia. Not that DC did badly; it boasted the third highest income growth, and 5.0 percent.

    However, perhaps the biggest surprise is the metropolitan area that slipped into the number two position between Baltimore and Washington. The Pittsburgh metropolitan area, which may have faced the most severe economic challenges of any major metropolitan area over the past 40 years, achieved per capita personal income growth of 8.2 percent. The Pittsburgh gain is all the more significant in view of the local financing difficulties which placed the city of Pittsburgh in the near equivalent of bankruptcy under Pennsylvania’s Act 47. However, as is the case in on number of metropolitan areas, the central city has become much less dominant and no longer seals the fate of the larger metropolitan area. Today, the city of Pittsburgh accounts for only 15 percent of the metropolitan area population.

    Philadelphia, the other long troubled region across the state, constitutes another surprise. Philadelphia placed fourth in per capita income growth at 4.6 percent only slightly behind Washington. The Philadelphia metropolitan area borders on that of Baltimore, stretching from Pennsylvania into New Jersey, Delaware and Maryland. Together with Washington and Baltimore, Philadelphia anchors the northern end of a corridor of comparative prosperity.

    Four of the next six positions are occupied by Midwest metropolitan areas. This may be unexpected because of the significant job losses sustained in this area since 2000. St. Louis, which stretches from Missouri into Illinois, ranked fifth in per capita income growth, at 4.4 percent. Milwaukee ranked sixth in its per capita income growth at 4.2 percent. Cleveland ranked ninth with per capita income growth of 2.5 percent, while Chicago placed 10th, with a gain of 2.3 percent in per capita personal income.

    Los Angeles was the only metropolitan area in the West to place in the top 10 in per capita income growth. Los Angeles ranked seventh growth of 3.5 percent. Houston replaced eighth with personal income growth of 3.2 percent.

    Overall, the East and Midwest captured six of the top ten income positions, while the South and West occupied four of the top ten positions.

    The Bottom 10: If the top 10 contained surprises, the bottom 10 could be even more surprising. Last place (28th) was occupied by San Jose, which experienced a stunning 18.7 percent decline in per capita inflation adjusted income between 2000 and 2009. This income loss is more than double that of the second-worst performing metropolitan area and more than triples that of all but two other metropolitan areas.

    The second worst position (27th) also contained a surprise, in Atlanta, which has enjoyed decades of unbridled growth. Yet, Atlanta experienced a per capita income loss of 8.3 percent. There was no surprise in the third to the last ranking (26th) of Detroit, with its automobile industry employment losses and the physical deterioration of its central city, which may be unprecedented in modern peace-time. Per capita incomes declined 7.1 percent in Detroit.

    Dallas-Fort Worth, which has also experienced strong growth in the past, posted a surprising fourth worst, with a per capita income decline of 5.0 percent. San Francisco, which has now replaced San Jose as the metropolitan area with the highest per capita income, ranked fifth worst and experienced a decline of 3.5 percent.

    All of the remaining bottom 10 positions were occupied by metropolitan areas that have developed a reputation for strong growth. Tampa St. Petersburg ranked 6th worst, with a per capita income loss of 3.3 percent. Portland (Oregon) ranked 7th worst with a personal income loss of 2.5 percent. Riverside San Bernardino, with the lowest per capita income ranking out of the 28 metropolitan areas, ranked 8th worst with a per capita income drop of 2.2 percent.

    The Miami (to West Palm Beach) metropolitan area ranked 9th in personal income growth with a loss of 1.4 percent from 2000 to 2009, while Denver topped out the bottom 10, ranking, with a per capita income loss of 0.5 percent

    Overall, the South and the West captured nine of the bottom ten positions, while only one Midwestern metropolitan area, Detroit, broke into the bottom ten.

    Of course, the 2000s certainly were an unusual time. But it does suggest that the dogma about the geography of regional prosperity needs to be challenged and perhaps thoroughly revised.

    Photo: Pittsburgh: Second Fastest Growing Income per Capita 2000-2009 (photo by author)

    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”

  • Irvine, by Design

    Different is not necessarily better or worse. I took notice of this upon moving from the Echo Park district of Los Angeles to Irvine. Some acquaintances and casual observers viewed it as a shift from ground zero of hipster chic to the center of conformity. Neither comes close to capturing the truth about either place.

    Irvine is very different from Echo Park—not necessarily better or worse. That’s my point of view as a resident who appreciates aspects of both places.

    Here’s a viewpoint from a broader perspective: I can see why a lot of observers and even some residents of Irvine see the city as a paean to conformity. The cityscape obviously conforms to any number of standards, some of which seem to be downright capricious. Must earth tones dominate the palette of the entire city? Must opportunities for legal U-turns be so rare?

    There’s no denying that anyone who’s unfamiliar gets little help from landmarks as they find their way around Irvine. A lot of the streets have a similar look and feel. Many are bigger and busier than they seem at first glance. Cars are the boss, and it can take a while to get one’s bearings amid the slight distinctions of streetscape and zippy pace of traffic.

    It’s taking me awhile, but a few things are coming into focus. I find it helps to think of the city as a canvas and to get to know its brush strokes.

    There is a street grid, with major thoroughfares generally oriented on north to south and east to west. It helps to think of them as freeways. The housing subdivisions are like small towns. The shopping centers are downtown commercial districts.

    Get that in mind and it helps put the city in perspective. Once you put Irvine in perspective you begin to realize its design.

    Yes, the city is designed to a T—so much so that the “conformity” tag gets affixed by critics in gentrified neighborhoods filled with hipsters, including many who don’t realize that they themselves have gotten comfortable with uniformity.

    Listen closely to those same critics and you’ll realize they actually crave the sort of design that defines Irvine. Go to a community meeting in a gentrified neighborhood and you’ll likely hear all sorts of calls for strict design standards on everything from signs for mom-and-pop stores to street lights and dog parks.

    The difference between the design-obsessed enclaves of inner cities and Irvine owes to Donald Bren.

    His Irvine Company shares its name with the city. He grew it out of acreage that had been the historic Irvine Ranch. Bren’s vast landholdings have given him an unusual scope of control over how Irvine has taken shape.

    Bren is apparently obsessed with design. It’s also apparent, however, that his obsession works toward a clear purpose. He seeks a profit in the marketplace.

    The same hipsters who knock Irvine for conformity should appreciate the profit motive. Many of them look back fondly on pages of history that tell the stories of captains of industry who built company headquarters, stores and even factories as monuments and legacies.

    Ask a hipster about the Chrysler Building in New York or the Wrigley Building in Chicago. Get ready for a stream-of-conscious review of the elegance of those structures. You’ll hear about the glory days of magnates who were not beholden to quarterly profit reports and could freely direct their wealth to aesthetic pleasures for public view without questions from shareholders.

    You won’t hear Bren mentioned, but he should be.

    I know this much from my brief time in Irvine: The place is a big canvas, and much of it has been filled by Bren. The conformity that critics see actually is design. It just happens to be on such a grand scale that it requires a broader perspective than can be gained with drive through and a look around. You have to live with it awhile—or perhaps take it in from several thousand feet in the air.

    Nobody has to like Bren’s design. Fair is fair, though, and it should be understood that nothing of the scale and scope of what Bren has created can be fairly called conformity.

    Sullivan is managing editor of the Orange County Business Journal (ocbj.com), where this column originally appeared.

    Photo by maziar hooshmand

  • The Next Urban Challenge — And Opportunity

    In the next two years, America’s large cities will face the greatest existential crisis in a generation. Municipal bonds are in the tank, having just suffered the worst quarterly performance in more than 16 years, a sign of flagging interest in urban debt.

    Things may get worse. The website Business Insider calculates that as many as 16 major cities — including New York, Los Angeles, Chicago and San Francisco — could face bankruptcy in the next year without major revenue increases or drastic budget cuts. JPMorgan Chase’s Jamie Dimon notes that there have already been six municipal bankruptcies and predicts that we “will see more.”

    Big cities face particularly steep challenges. Many, notes the Manhattan Institute’s Steve Malanga, have extraordinarily generous compensation systems for their public employees. New York City, for example, owes nearly $65 billion in municipal debt, as well as a remarkable $122 billion for unfunded pension obligations.  President Barack Obama’s hometown of Chicago has it even worse: Its total public pension liability adds up to roughly $42,000 per household.

    This all should give some pause to the relentless hoopla about the country’s supposed “urban renaissance.” The roots of the current economic crisis lie deep in urban economies, where employment growth that has lagged even in good times.  During the last economic expansion, urban job growth was roughly one-sixth that of suburbs and one-third that of smaller communities.

    Population flows are also less favorable than commonly perceived.  Even since the onset of the Great Recession, the vast majority of urban regions have seen population continue to grow more robustly in the suburbs than in the urban core. Similarly, the largest increases in the much-coveted educated population continue to be in smaller, less dense urban areas such as Raleigh-Durham, Austin and Nashville and away from the largest, densest regions such as New York or Los Angeles.

    True, many cities now boast more residential complexes, often built from abandoned office and industrial space, but there are few new office towers outside the public sector. Stadiums, convention centers, luxury hotels and other ephemera may gain public notoriety, but they have done little to boost the private sector economic base  as can be seen in the lack of growth in places like downtown Cleveland, Detroit and Baltimore. In contrast, job growth has flourished  in low-density regions in suburban rings, particularly in fast-growing metropolitan regions of the South , particularly in Texas and Intermountain West locales such as Salt Lake City.

    Initially, the Great Recession was widely held to have reversed this pattern. As private sector growth retrenched, companies pulled out of newer offices in suburbia, sometimes consolidating in downtown office. The Bush-Obama stimulus also bailed out the two sectors — finance and government — that drive employment in most inner cities. Meanwhile, suburbs, with their collections of small companies that have little political heft and depend more on home construction, suffered greater drops in occupancies.

    This urban tilt was, until recently, reinforced by political trends. After the 2008 election urban interests had secured a degree of political power unprecedented in recent history. The White House was occupied by a confirmed urbanite who found suburbs “boring” and had little connection with small town residents. The president stocked his EPA, Housing, Transportation and Education bureaucracies with pro-urban advocates who shared his vision to re-densify a country that has been steadily dispersing for half a century.

    At the start of the Obama presidency virtually every critical committee post in the House was controlled by urban Democrats led by Speaker Nancy Pelosi — such old lions as Henry Waxman, Barney Frank and Charles Rangel. In concert with an urban-focused White House, they constructed a stimulus tilted toward key urban interests: public employees, large universities, mass transit and high-speed rail systems.

    Now the cities’ political ascendency has come to an end. Suburban and small town voters, who represented a large majority of the electorate, shifted heavily the November toward the GOP. Unlike the city-focused old Congress, the new GOP dominated House’s primary loyalty is to the metropolitan periphery as well as smaller cities and towns.

    This shift will affect big cities across the country. Urban land speculators counting on a national  high-speed rail speed  and expanded rail transit networks to boost central cores now face a Congress more concerned with roads than ultra-expensive new trains. You can also forget the hundreds of millions ascribed for “smart growth” plans, which, in essence, seek to direct development and housing towards high-density urban areas.

    Even more serious for cities will be the fiscal fallout from the new order in Washington. Pushed by the Tea Party base, the GOP-led Congress will unlikely provide bailouts to fiscally challenged states and cities. This will hit those big cities — New York, Los Angeles, San Francisco and Chicago, –  located in heavily indebted states — New York, California and, arguably the worst of the pack, Illinois — the hardest.

    There is widespread concern, bordering on panic, about how potential cutbacks in state spending could further savage already strapped city budgets. In California, for example, Governor Jerry Brown’s proposed scaling back of state redevelopment funds was described in the Los Angeles Downtown News as a “budget bomb” for the city’s widely hyped but already tottering downtown renaissance.

    Yet these challenges also present an opportunity for cities. As one prominent urban booster, Brookings’ Chris Leinberger, has pointed out in a recent radio interview (KPCC-FM-NPR), many of the nation’s cities no longer require the assistance deemed necessary back in the ’60s and ’70s. As they have developed somewhat stronger downtown cores, lowered crime rates and reduced “white flight,” the stronger urban cores are better positioned now, though perhaps less so than the boosters believe,  to succeed on a market-oriented basis.

    Even setbacks, like the largely failed condo boom, can turn into an advantage. No longer commanding high prices from the never-quite-materialized hordes of affluent “empty nesters,” the new units could provide a stock of lower-cost housing for the younger, educated and childless demographic attracted to urban core. Although most millennials consider suburbs their ultimate destination, a sizable number, roughly one in five, rank an urban center as their “ideal” location.

    Cities need to break their reliance on outside help from a country that is, for the most part, not dense or urban. Future urban progress cannot rely on Washington’s largesse or diktats. Instead cities need to focus on how to create a greater competitive advantage in the demographic and employment marketplace. Rather than obsessing over government-driven employment, they have to create conditions that will lead to job creation in the private sector, particularly from the oft-neglected and usually politically impotent small business sector.  These include such things as relaxing some regulations, including taxes on home-based businesses, incubator centers and more consistent standards on building construction.

    City governments will need to shift their priorities away from ephemera and concentrate on such basics as improving schools, promoting entrepreneurial growth and nurturing sustainable middle class neighborhoods. The current shift in political power away from cities may be painful at first, but it could prove the elixir that will turn the urban renaissance fantasy into something closer to reality.

    This piece originally appeared in Forbes.

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

    Photo by asterix611

  • California’s Third Brown Era

    Jerry Brown’s no-frills inauguration today as California governor will make headlines, but the meager celebration also marks the restoration of one of the country’s most illustrious political families. Save the Kennedys of Massachusetts no clan has dominated the political life of a major state in modern times than the Browns of California. A member of this old California Irish clan has been in statewide office for most of the past half century; by the end of Jerry Brown’s new term, his third, the family will have inhabited the California chief executive office for a remarkable two full decades since 1958.

    Brown, at 72 the oldest governor in state history, may well determine the final legacy of this remarkable family. His biggest challenge will be to reverse the state’s long-term secular decline — a stark contrast to the heady days of the first Brown era, presided over by paterfamilias Edmund “Pat” Brown.

    Pat Brown was a committed progressive who actually believed in both social and economic progress. He did not focus on re-distributing wealth or expanding bureaucratic controls; his priority was to use government to help generate greater opportunities for Californians.

    Under Pat roughly 20% of the state budget was devoted to capital outlays. He expanded wealth creating infrastructure such as freeways and the State Water Project, which created vast expanses of new, highly fertile farmland. He also increased the state’s parklands so that middle-class Californians could enjoy the state’s unmatched natural beauty.

    Pat, as historian Kevin Starr notes, also transformed California into “a mecca for education.” Inexpensive and quality training — from the elite university to the extensive network of community colleges — fostered high-tech industries across the state. Under Pat Brown, California’s share of the nation’s employment rose from some 8% to 10% as its GDP swelled by a similar percent.

    Pat, not surprisingly, remains an iconic figure for many older Californians. What ended his career was not so much his embrace of big government — although its growing scope and cost concerned many voters  – but backlash against the 1964 “free speech” riots at Berkeley and the far deadlier civil unrest in Watts the following year.  Running as the candidate of law and order, as well as fiscal conservatism, Ronald Reagan in 1966 defeated Brown’s bid for a third term.

    Yet so great was the reservoir of affection for the Pat Brown that in 1974 the voters elected his 36-year-old son as Reagan’s successor. As the late Joe Cerrell, a key operative for both Browns, put it: “If he had run as Edmund G. Green, he wouldn’t have bet on his running in the top 14.”

    Jerry Brown turned out to be of a very different political hue than his father. Sometimes he sounded more anti-government even than Reagan. He disdained his father’s traditional focus on   infrastructure spending and instead preached about amore environmentally friendly “era of limits.”  Brown cut the percentage of spending on such capital improvements from roughly 10% of state spending under Reagan to barely 5%, where it remains mired today.

    Arguably Brown’s biggest mistake was signing legislation in 1978 that allowed collective bargaining for public employee unions. This opened the door for a power grab that eventually drove the state toward semi-permanent penury. Brown’s early embrace of environmentalism also set a pattern of state green engineering that, although clearly avant garde , also tipped the state’s competitive edge.

    Brown, however, also showed a pragmatic side.   Although initially opposed to Howard Jarvis’ 1978 Proposition 13 limits on property taxes, he later embraced it  so enthusiastically that the casual voter might have mistaken him for its author. In his second term Brown also evolved into an avid cheerleader for the state’s burgeoning high-tech industry.

    He also had good fortune to govern California at a time when surging Japanese investment, the high tech boom and, perhaps most important of all, the military buildup accelerated by the 1979 Soviet invasion of Afghanistan generated a remarkable economic boom. Between 1976 and 1980 aerospace and electronics-related employment jumped by a third. California’s share of the nation’s GDP, population and jobs rose steadily, while job growth surpassed the national average.

    The third Brown era, sadly, starts with far less favorable prospects. The state’s share of the nation’s economy and employment has been shrinking for at least a decade. Per capita income has fallen in comparison with the national average by nearly 20%. Once the nation’s high tech wunderkind, California’s share of new high-tech jobs has fallen to a fraction of the national average, while other states, notably Texas, Virginia, Utah and Washington have surged ahead.

    Things have been toughest on the state’s working class. Despite an ever-expanding welfare state, California’s 36 million people suffer a rate of poverty at least one-third higher than the national average when adjusted for cost of living.  Unemployment now is higher than any major state outside Michigan.

    Meanwhile, even as state social spending has surged, reminders of the heroic period — from the state system of higher education to the power, water and freeway systems — have fallen into disrepair. The state’s finances are in even worse shape. Under the feckless Arnold Schwarzenegger, state debt jumped from $34 billion to $88 billion. California now spends twice as much on servicing its interest (more than $6 billion annually) than on the University of California.

    Brown himself recently conceded that the state budget deficit may widen to $28 billion over the next 18 months while the state’s Legislative Analyst’s Office predicts that $20 billion deficits are likely to persist at least through 2016. Not surprisingly, once golden California suffers consistently near the worst debt rating of any state. And things are not likely to turn around quickly: State and local tax revenues in the third quarter of last year rose a paltry 0.6% compared with a 5.2 % gain nationwide.

    Brown’s proven taste for austerity could make him far more effective at addressing the state fiscal crisis than the clueless Terminator. His biggest problem on fiscal matters, one close advisor confided, may lie with his own Democrats in the legislature, many of whom are little more than satraps of the public employee interests.

    Brown’s support for the state’s increasingly draconian green polices may prove more problematic.  As Attorney General, Brown played the bully in enforcing radical green measures that seek to limit developments — industrial and residential — suspected of creating greenhouses gases. Brown suggested during the campaign that such policies would help create an estimated 500,000 green jobs, but few outside the environmental lobby take this seriously. Brownsupporter Tom Hayden points out that these jobs can only be created by higher energy prices and considerable tax increases — not exactly the elixir for an already weak economy.

    More troubling still, Brown, the Democratic leadership and their media supporters continue to deny that “progressive” policies have created  ”a hostile business climate.” Until they wake up to the reality of the state’s dire economic situation, little in the way of serious reform can be expected.

    To succeed, Brown must move beyond delusions and rediscover the pro-business pragmatism that characterized his second gubernatorial term. If not, we can expect the final obliteration of Pat Brown’s great  legacy of pro-growth progressivism, in no small part due to the misjudgments of his son and heir.

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

    Photo by Thomas Hawk

  • Overselling Transit

    A recent op-ed in the Los Angeles Times eloquently illustrated the limits of mass transit in modern societies. This is not to imply that that transit does not have its place, nor that it does not provide a most useful service where it can. The problem has been the overselling of a mode that has very serious limitations. This has led to misallocations of financial resources that could be more efficiently used for the roadway expansions that would relieve traffic congestion and reduce both air pollution and greenhouse gas emissions while encouraging greater job creation and economic growth.

    The op-ed in question was by Karen Leonard, a professor at the University of California, Irvine and Sarah Hays, a Los Angeles architect. The article noted the neighborhood opposition to the “Expo” Line (Exposition Boulevard line) and efforts by the authors to gain support for the line. The neighborhood in question is Cheviot Hills, a tony neighborhood with a median house price of $850,000 in the city of Los Angeles and located between Beverly Hills and Culver City.

    What is significant about the op-ed, however, is not so much the neighborhood as the concluding line and the author credits.

    “So we continue to walk our neighborhoods talking with our neighbors, hoping that this time the quiet majority will finally prevail and we will all gain the choice of leaving our cars at home.

    Karen Leonard is an anthropology professor at UC Irvine. Sarah Hays is a Los Angeles architect. They are co-chairs of Light Rail for Cheviot Hills (lightrailforcheviot.org).“

    UC Irvine? It is doubtful that the Expo line will make it possible for anyone in the foreseeable future who lives in Cheviot Hills to “leave their car at home.” The University of California, Irvine is located in the middle of Orange County, approximately 50 miles from Cheviot Hills.

    It is useful to consider what leaving the car at home in Cheviot Hills would mean for a mythical professor at the University of California, Irvine once the Expo line is fully operational.

    On Monday*, the professor needs to be in class at 8:00 am, which requires arrival on campus by 7:45 a.m. On the assumption that the mythical professor lives in the middle of Cheviot Hills, the trip would involve leaving the house at 3:45 a.m. and walking 20 minutes to the transit stop. The favored Expo light rail line would likely not be available that early, so the first leg of the trip would be on a bus. (If the Expo line is operating early enough for the trip, the professor could leave home approximately 25 minutes later).

    Three transfers later, the mythical professor arrives at the campus, at 7:20 a.m., in plenty of time to have coffee and get to the classroom before 8:00. While the professor requires four hours from leaving his or her car at home to the necessary arrival time at campus, a neighbor could have driven nearly all the way to Las Vegas for breakfast.

    If it is assumed that the mythical professor is able to get out of a staff meeting at 3:00 pm, the return trip would take more than 3 hours, part of it on the Expo line.

    Tuesday would be little better, assuming a 10:00 a.m. class start and that the professor gets away by 5:15 p.m. The trip to Irvine would have the advantage of starting on the Expo line, but would still take more than 3 hours, door to door. The return trip, including bus rides, a Green Line ride, a Harbor Freeway Busway ride and an Expo light rail ride would be about 4 hours and 30 minutes, with little wait in Irvine for service.

    These transit commutes would hardly be comfortable or productive, though they would include all conventional forms of transit available in Los Angeles (there are no trolley buses, inclined planes or ferries in Los Angeles). The total door-to-door time would be up to 7.5 hours for a work day of 7 hours. Needless to say, it is unlikely that with this schedule, any professor would ever leave his or her car at home.

    Finally, there is a myth people cannot leave their cars at home and walk or take transit to work. In fact, there are probably no work locations in urban America where people cannot choose to live close enough to work to walk or take transit. But choosing to leave the car at home is not as important as other choices, even for advocates for transit improvements. Otherwise they would live close enough to leave their cars at home. Of course, most people value other things more than leaving the car at home, such as a nice neighborhood, a nice car, a low crime rate and a host of other considerations. Otherwise no professor would live in Cheviot Hills and work at UC Irvine. Indeed, they would probably live in the faculty housing made available by UC Irvine.

    All of this illustrates what transit cannot do; provide automobile competitive service for most of the trips that are taken in the modern American (and even European) urban area.

    It is also worth recognizing that transit has been substantially improved in Los Angeles over the past 20 years (whether it has grown cost effectively is dealt with in another article). Spending aside, these improvements have made it possible to make any one-way trip in the Los Angeles urban area in less than four hours, at least during the middle of the day. This is to the credit of the Metrolink commuter rail system, the subway, rapid busways and the more rapid of the light rail lines. But this is hardly tempting to Angelenos whose median commute time by car is 24 minutes. As elsewhere in the nation (and as in Western Europe, Canada and Australia), transit can sometimes compete with the automobile to core (principally downtown) locations. The suburban to suburban trips, however, largely are simply beyond transit’s capability.

    Of course, some drivers commute much longer, as in the case of the mythical professor at UC Irvine, whose trip would be between one and one and one-half hours each way. In Los Angeles, 8 percent of people in cars have commutes that are more than one hour. And virtually all of them find this commute, however maddening, is far shorter and more comfortable than a similar trip taken by transit.

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    *Correction: The Monday trip from Cheviot Hills to UC-Irvine has been corrected to reflect a subsequently identified better itinerary. The article has been revised to assume this trip.

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    Photograph: Interstate 5 (on the way to Irvine) in Orange County

    Wendell Cox trained on the Exposition corridor between the University of Southern California (USC) and Culver City (near Cheviot Hills) as a member of the USC cross country team. He was appointed to three terms on the Los Angeles County Transportation Commission (one of two agencies merged later to form the MTA) and participated in decisions to authorize the Green Line light rail line, the Harbor Freeway Busway, the Red Line Subway and Interstate 105, all used by the mythical professor commuting to UC Irvine.