New Geography

Tag: middle class

  • Suppressing the News: The Real Cost of the Wall Street Bailout

    No one really knows what a politician will do once elected. George “No New Taxes” Bush (George I to us commoners) was neither the first nor will he be the last politician to lie to the public in order to get elected.  It takes increasing amounts of money to get elected. Total spending by Presidential candidates in 1988 was $210.7 million; in 2000 it was $343.1 million and in 2008, presidential candidates spent $1.3 billion. Even without adjusting for inflation, it’s pretty obvious that it takes A LOT MORE MONEY now. For those readers who are from the Show Me state, $210.7 million in 1988 is equivalent to roughly one-third of the buying power used by Presidential Candidates in 2008.

    When Texas Governor and presidential hopeful Rick Perry told Iowan voters in early November, “I happen to think Wall Street and Washington, D.C., have been in bed together way too long,” it made headlines for Reuters and ABC . But that’s not news; that’s advertising. News, according to Sir Harold Evans, is what somebody somewhere wants to suppress. News Flash: The average member of Congress who voted in favor of the 2008 Bank Bailout received 51 percent more campaign money from Wall Street than those who voted no – Republicans and Democrats alike. That’s according to research by Center for Responsive Politics and was reported as news by the OpenSecrets.org blog on September 29, 2008.

    In other news fit to be suppressed, the Federal Reserve "provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world." This was revealed in an audit of the Federal Reserve released in July 2011 by the Government Accountability Office. All the goods and services produced in the United States in the last twelve months are worth about $14 trillion – Ben Bernanke and Timothy Geithner spent more than that to bailout Wall Street in twelve months! This is news, news that Bloomberg and Fox Business Network had to file lawsuits to get access to and that Bernanke and Geithner want to suppress.

    The answer to the differences in the value of the bailouts – it was “only $1.2 trillion” according to Bernanke – can be found in the GAO’s audits.  The latest audit of the TARP, released November 10, 2011 makes it clear: “In valuing TARP …, [Office of Financial Stability] management considered and selected assumptions and data that it believed provided a reasonable basis for the estimated subsidy costs …. However, these assumptions and estimates are inherently subject to substantial uncertainty arising from the likelihood of future changes in general economic, regulatory, and market conditions.” [emphasis added]. TARP is under Treasury – which is run by Geithner – and is headed up by Timothy Massad, formerly of Cravath, Swaine & Moore LLP in New York …[still following this?]…, who represents Goldman Sachs, Morgan Stanley, etc. as underwriters for (among other things) European public debt. Cravath, Swaine & Moore advised Citigroup on their repayment of TARP funds and Merrill Lynch in their orchestrated takeover by Bank of America.

    The dispute about the cost of the bailout is not the stuff of conspiracy theories. This is basic finance and economics,  not accounting. In accounting, debits and credits balance at the end of the day; in finance, you get to assume rates of return, costs of capital, etc., etc. – a lot of stuff that has much room for judgment. It is in the area of judgment that Bernanke and Geithner are able to make their numbers look smaller than those added up by Bloomberg and Fox. The GAO, on the other hand, should have no dog in this fight and therefore should (we live and hope) give us the right stuff to work with. GAO says (in a nice way) that Geithner has been fiddling with the numbers.

    The GAO had been recommending to Congress that they get audit authority over the Federal Reserve System at least since 1973. They finally got that authority in the Wall Street Reform Act of 2010 – about the only piece of that legislation that has so far resulted in anything of substance. The Center for Responsive politics also did an analysis of the campaign contributions for Senators who opposed the financial regulatory reform bill in 2010. Those opposing the reforms got 65 percent more money from Wall Street banks than those voting for the bill.

    For politicians, it doesn’t matter who votes for them. They will figure out what they need to say to get the money to get the votes to get elected. What they need most – and what makes them Wall Streetwalkers – is the money. The big donors don’t care who they give to, as long as the one they give to gets elected. According to Federal Election Commission data, Warren Buffett gives money almost exclusively to Democrats; Donald Trump likes to spread it around between the parties, as do Goldman Sachs employees. But that’s only the money that can be traced back to a source, unlike the opaque donations given to PACs and SuperPACs.

    The revolving door between Wall Street and Washington swings both ways. When John Corzine departed Goldman Sachs he left Hank Paulson in charge in 1999. Investment Dealers’ Digest reported that Corzine left Goldman “against a backdrop of fixed-income trading losses.” Corzine won a Senate seat in 2000 (D-NJ).  He was then elected Governor of New Jersey in November 2005, where he put forth Bradley Abelow for state Treasurer. Abelow worked with Corzine at Goldman and was a former Board member at the Depository Trust and Clearing Corporation, the world’s largest self-regulatory financial institution. Together, Corzine and Abelow later went on to run MF Global into bankruptcy. Both have been invited back to Washington, the first time a former Congressman has been called to testify before a Congressional Committee. Wherever they get started, Washington and Wall Street tend to end up in bed together.

    It’s this kind of knowledge that makes me question why I should vote at all. Congressmen from both parties are generally for sale. Even with self-described liberals in Congress, right-wing conservatives could get approval for everything they want – free-for-all-banking and the US military engaged in active combat.  It’s the taxpayers – the mothers, fathers and families of service men – who suffer. Sure, Barack Obama took more money from Wall Street than John McCain – but it was only $2 million more, hardly enough to run one ad campaign in a big state.

    Then I pause and remember what my mentor, Rose Kaufman, from the League of Women Voters of Santa Monica told me: if you don’t vote, you open the door for someone to take away your right to vote.  The benefit of living in a democracy with freedom of the press is that you can find out all those things that Washington and Wall Street “want to suppress.” Whether or not we have good choices among the presidential candidates, we have choices.  It’s better than nothing.

    Susanne Trimbath, Ph.D. is CEO and Chief Economist of STP Advisory Services. Her training in finance and economics began with editing briefing documents for the Economic Research Department of the Federal Reserve Bank of San Francisco. She worked in operations at depository trust and clearing corporations in San Francisco and New York, including Depository Trust Company, a subsidiary of DTCC; formerly, she was a Senior Research Economist studying capital markets at the Milken Institute. Her PhD in economics is from New York University. In addition to teaching economics and finance at New York University and University of Southern California (Marshall School of Business), Trimbath is co-author of Beyond Junk Bonds: Expanding High Yield Markets. She participated in an Infrastructure Index Project Workshop Series throughout 2010.

    Follow Susanne on Twitter @SusanneTrimbath

    Photo by Kay Chernush for the U.S. State Department

  • The Robotics Census

    Immigration is a concern for countries around the world, not just the U.S. It’s that annoying tendency of humans to gravitate toward an area where they can survive as opposed to staying where they are barely surviving or worse.  Once there, of course, these workers are seen often as taking jobs, altering local cultures and in general upsetting lots of apple carts.  

    Here in the US, most fear concerns Spanish speakers but how about a whole other classification of immigrant workers whose impact may be the most insidious I of all: those that speak machine code, the basic language of computers.

    We’re talking about what we call robots, machines that can think and can do tasks for humans. In many instances, they can replace or reduce the human workers needed to do a job. Hence, they must be considered workers themselves.

    Unfortunately, they aren’t even counted in our national census, a clear instance of anti-machine racism. How are we to evaluate our true workforce? It’s left to the statistical department of the International Federation of Robotics (IFR) to keep track of them, where they are born and where they eventually work.

    The numbers IFR deals with are not cumulative numbers. The actual number of robots working at any one time is a function of their lifespan which is about that of a dog:  about 12-15 years, usually. But since we’ve only had robots since the late sixties, that doesn’t mean much. Improvements that increase lifespan are always being made.

    These new workers come in various categories including personal service robots, professional service robots and industrial robots. Like their human counterparts, robot workers come with varying levels of skill and intelligence.

    A personal service robot can do anything from vacuum cleaning to lawn-mowing to window cleaning. Recognize those jobs? They used to be done by low-skilled workers and kids looking to make a buck around their neighborhood. Not anymore. This constitutes the fastest growing segment of robotics, with about 15 million more of these are due to be released into the wild by 2014.

    The professional service robot can handle medical applications, search and rescue, bomb disposal, and in increasing numbers, military jobs like aerial surveillance: drones. The fastest growing jobs of this segment are milking robots – the days of stools and pails are over – and defense applications.  

    And therein lies the paradox of the robot worker. You can’t really complain about fewer jobs for window washers while praising the selfless robots willing to die for us.

    How then are we to think about those now ubiquitous automated checkout stands in your local CVS which management wants to make you use to check out your own purchases — as if it’s fun? While ignoring that each of those stations used to be a human’s job. Almost makes you want to resolve to patronize only human checkers, that is, if you can find one!

    Some of the smartest of the new immigrant workers are the industrial robots. Industrial robots generally have appendages and they work overwhelmingly in the automobile and the electronics industry. Most of them have found work of late in the Republic of Korea, China and the ASEAN countries.  The IFR tells us there are more than 1,300,000 in service.

    Don’t let that apparently low number fool you. You have to understand that one industrial robot can be a factory. All it takes to turn that one robot into an army is new software. They are quick learners. One day it’s a welder, the next it’s an electrician. They are designed to work 24 hours straight, with no lunch and no breaks, doing the same operation over and over with the utmost precision.

    Mind-numbing consistency, that’s the ticket. Robots don’t make things better than people do. They simply make things the same, forever. Work turned out on Friday is the same as that turned out on Monday. Moreover, they have other advantages. A robot-populated factory filmed for a documentary in Japan needed to import lighting. The actual factory needed none. Such factories may also dispense with HVAC systems, potted plants and lavatories.  You can hear the heavy breathing among the bean-counters!

    If the hairs on the back of your neck haven’t perked up by now, we can add a chilling coda. Who do you think is turning out all these robots? That’s right, robots! Under the watchful eyes of their control humans as of now, but later, who knows?

    To measure the impact of these immigrants on local populations, the IFR uses a metric called Robot Density. Simply it is the number of multipurpose industrial robots per 10,000 persons employed in manufacturing industry whether automotive, electronic or generally. The IFR found the worldwide average industrial robot density of the 45 countries it surveys is about 50 robots. The bottom 21 countries have less than a 20-robot density.

    However, in 2010, the most automated countries were Japan, Republic of Korea, and Germany with densities of 306, 287 and 253 respectively. The fact that all these countries have low human birthrates makes you think a bit.

    If you take just the auto industry in Japan and Germany the densities rise to 1,436 and 1,130. Number three in the auto industry by the way is Italy with 1,229.

    What about the good ol’ USA? In 2010, 1,112 industrial robots worked in the auto industry for every 10,000 human workers. We also tend to have more babies.

    You see what’s happening here? At 1000, the number of robots equals one-tenth of the (human) workforce.

    Our future arch enemy in the auto industry, China, increased their density from a paltry 2006 level of 37 to a paltry 105 in 2010, though with their population numbers and still relatively low wages they could probably put autos together Henry Ford style and still make money.  

    The undeniable fact is robots are taking over the auto industry in the same way the Swiss captured the watchmaking industry just four hundred years ago. Remember? The other big robot user, the electronics industry, can boast similar numbers and similar robotic domination.

    Are robots to blame for the recent recession and its attendant job losses? Well, you can rest easy knowing that robots suffered during the last few years, too. Job placements, in fact, were down 47% to the lowest level reported since 1994.

    But by 2010, the auto and electronics industries had begun their recovery and robot placements recovered by 50%. In monetary terms this uptick was worth $5.7 billion to robot manufacturers. Substantial, but still not up to 2008 levels. Worldwide worth of the robot worker market, notes IFR, now totals some $18 Billion annually.

    Noted science fiction writer Isaac Asimov once composed a set of laws to restrain the behavior of robots and to make them more acceptable to society. The original set has been refined and added to over the years by others and by Asimov, himself. They are:

    1. A robot may not injure a human being or, through inaction, allow a human being to come to harm.
    2. A robot must obey the orders given to it by human beings, except where such orders would conflict with the First Law.
    3. A robot must protect its own existence as long as such protection does not conflict with the First or Second Laws.

    And, there is a fourth known as the “zeroth” law, to precede the others:

    0.  A robot may not harm humanity, or, by inaction, allow humanity to come to harm.

    Robots currently are not smart enough to read, understand or follow these laws. In the case of milking robots that isn’t a problem, but with drones, it might be. Humans have to control them. When things are going well, these multi-talented helpers are more than welcomed and appreciated. After all, nobody really wants handmade automobiles. If they’re all different, how would you get parts for them? And electronics built by Chinese ladies with soldering irons is not a business model that inspires confidence.

    The fact is, for good and/or evil robots are now firmly entrenched in our industrial culture. And more are on the way. In the next four years, robot immigration , according to IFR, will increase by about 6% per year on average: about 6% in the Americas, about 7% in Asia/Australia, and about 4% in Europe.

    Whether they are harming humanity depends on your perspective. They are taking jobs in some places and they are creating jobs in others. Perhaps the most we can hope for is a tempering of the automation frenzy while we humans prepare for the onslaught. We’re going to need more education and training to live with and control our new compatriots. For the near future, it may be wise to keep track of the new census, the combined census, because that’s the way it’s going to be from now on. Us and them.

    So far, in some countries,  one in ten industrial workers has their more capable, robotic counterpart.    Every technological advance has consequences, winners and losers; and it’s disingenuous to pretend they don’t.

    Robert Carr, as far as we know, is human and writes occasionally on technology. He is based in Los Angeles.

    Photo by BigStockPhoto.com.

  • Iowa: Not Just the Elderly Waiting to Die

    Stephen Bloom, a journalism professor at the University of Iowa, created quite a stir in Iowa this week with a piece in The Atlantic describing his unique observations on rural Iowa as evidence that it doesn’t deserve its decidedly powerful hand in the vote for the president. After the article appeared last Friday both his colleagues and the massive student body of the state he so harshly criticizes are returning the favor.

    Mr. Bloom’s writing is not offensive because it contains no truths, but because has over-generalized our collective character as unfalteringly Christian, complacent, ignorant, and uncultured.  He continually describes a sense of delusion that is rampant in the Iowa populace. And, of course, since we’re from Iowa we must have met a meth head before, right?

    When I was a four year old, my parents picked up everything they had and transplanted their lives from Phoenix all the way to Northwest Iowa. I was young, but I can still remember the farm that we originally settled in– it was the kind of farm you see in a painting: a one-level home, a big red barn, two silos for storage, a small thicket grove with a number of deer, and even a fenced-in area for hogs. I was living the rural Iowa dream.

    Eventually, when I was around seven, our next settlement of choice was a (very) small town only a couple of miles from the farmhouse. The city’s population had around 200 people, the vast majority of them at least 50 years old, and a main street littered with old buildings and storefronts of yesterday that had been abandoned over the years since their mid-century inceptions. People didn’t move to this town; instead those living in it would die from old age, or, in my case, move away in hopes of seeing something bigger.

    I’m well aware of the stereotypes of Iowans: we’re wannabe hicks, we’re uncultured, we hunt, we tend to our rolling hills of corn and beans, we all drive Ford trucks because they “ride better” than anything else. I’ve grown up with people that fulfill these stereotypes here and there and I am no stranger to small town life, but not every soul that I have met in this state fits the profile as Professor Bloom posits. Far from it.

    Expectedly, Bloom’s portrayal of Iowans hasn’t exactly had a warm reception. On Tuesday, the Daily Iowan’s front page had perhaps the most outrageous quote that Bloom’s article included, labeling rural Iowans as nothing more than “the elderly waiting to die, those too timid (or lacking in educated [sic]) to peer around the bend for better opportunities, an assortment of waste-toids and meth addicts with pale skin and rotted teeth, or those who quixotically believe, like Little Orphan Annie, that ‘The sun’ll come out tomorrow.’”

    Yesterday, Sally Mason, the president of the University of Iowa, sent out a campus-wide letter reminding the students that she “disagrees strongly with and was offended by Professor Bloom’s portrayal of Iowa and Iowans”. She reminds us of the generosity that Iowans famously possess and of our “pragmatic and balanced” lifestyles. She also goes on to speak about Dubuque’s recent revitalization, the kinds of companies Iowa has attracted (namely Rockwell Collins in Cedar Rapids and Google in Council Bluffs), and the fact that Iowa City, at times called the “Athens of the Midwest”, is designated as the only “City of Literature” in the United States. It seems like Bloom forgot to take any of this into account.

    He even goes so far as to berate and categorize Iowa’s Mississippi River cities as “some of the skuzziest cities” that he’s ever visited. Cities such as Burlington, Keokuk, Muscatine, and Davenport all seem to be more degraded, violent, and worse-off than some of the cities he’s used to having seen growing up in New Jersey, a place with cities that are labeled time and time again for their overall “skuzziness.” Has he ever driven to Newark?

    It seems that Bloom’s laughable interpretation of his years in Iowa have a few rings of truth that I’ve definitely witnessed, but to completely overgeneralize a people into one category assuming it’s only an “Iowa thing” is inappropriate and crude. Is he correct about anything at all? The numbers show that he is off base about the state as a whole.

    The Mississippi River cities’ so-called blight is similar to many other hard hit industrial cities in the Midwest, perhaps on a similar scale to areas in Michigan (which was the only state in the past Census to actually lose population) where Bloom has holed up most recently as a visiting professor for the University of Michigan. Even so, Iowa has the 11th lowest household poverty rate in the nation. So much for widespread blight.

    The state’s brain drain is always a topic of discussion. There has been a very noticeable population shift of rural to urban in the past half-century which was especially fueled by the farming crisis in the 80s, but this trend holds out empirically for all Midwestern states. The problem is that a look at the numbers doesn’t confirm major outmigration. Iowa saw a net gain from other states according to IRS tax return data from 2008-2010. In fact, the net gain from the top 12 source states ­­– states like Illinois, California, and Michigan – in the last three years is 40% higher than the net loss to the top destinations. If Iowans are “fleeing” anywhere, it’s to places like Texas, the largest gainer, and second placed South Dakota which the professor would no doubt like even less.

    Iowa does have high concentrations of people over age 70, but that group makes up about 10% of the total population, not enough to skew the other age groups much from the national average. Iowa has an average number of children, and it lags the most in 35-44 year olds: about 10%. This older group skews the state’s educational attainment numbers as well. Iowa’s young workforce is well educated, ranking 11th of all states in residents with at least an associate’s degree. Bloom’s claim that the state is uneducated is simply not true.

    The median age of those living in rural areas is 41.2 while urbanites are relatively young at 35.8. To further add to these negative trends, rural areas have a job growth rate of -6% in the past three years, these numbers mainly fueled by the recession. But overall state jobs are is down 2.8% since January 2008, better than 35 other states. Clearly Iowans are not lazy and giving up.

    Four Iowa cities were even included on CNN Money’s Best Cities to Live in 2011. (This includes the Mississippi River city of Bettendorf.) The state and its cities are also a great place to do business, according to Forbes. In 2010, Des Moines was ranked first, with Cedar Rapids at 13th beating out even a few Texan heavyweights, including Houston, Dallas, and Fort Worth that have been lauded for having a plethora of jobs. The 2011 list puts Des Moines in second place and Cedar Rapids in 11th. It seems Iowa isn’t as economically distraught as Bloom leads us to believe.

    Bloom comes off as nothing more than an ignorant, smug “city-slicker” (a word that Iowans apparently use to describe Obama) who sees the state through an apparently very blurry window. He claims to have seen all 99 counties of Iowa, but how can he possibly paint a portrait of the state that is so absurdly misguided after living here for so long?  If this is what they teach in journalism school, perhaps our skepticism of the media may be better placed than even we suspect.

    Jacob Langenfeld is a senior undergraduate at the University of Iowa studying economics and geography.

    Mark Schill contributed demographic analysis to this piece.

    Des Moines photo courtesty of BigStockPhoto.com.

     

  • Let’s Level the Inter-generational Playing Field

    With President Obama’s speech in Osawatomie, Kansas decrying the growing economic inequality and lack of upward mobility in America, the issue has finally arrived at the center of this year’s campaign debates. While most discussions of this growing inequality focus on the gap between America’s poorest and richest citizens, a recent report by the Pew Foundation highlights how the same economic trends over the last two and a half decades have also widened the wealth gap between the oldest and youngest Americans to the highest levels in history.

    In a time of great political unrest and economic anxiety, this inter-generational wealth gap has the potential to throw gasoline on an already white hot fire. Only by understanding the sources of this increasing disparity can the country develop policies that will help to close the gap and create a fairer, less economically stratified society.

    Drawing on data provided by the U.S. Census Bureau’s Survey of Income and Program Participation (SIPP), Pew documents the tectonic shifts that have occurred in households’ net worth based upon age between 1985 and 2009. During this time, the average net worth of households headed by those under 35 fell from $11,521 to just $3,662, a drop of 68%.  During the same period, the net wealth of households, as measured by adding up the value of all assets owned minus liabilities such as mortgages or credit card debt associated with those assets, headed by those over 65 increased by 42%, from $120,457 to $170,494 (all figures are expressed in 2010 dollars).

    Of course younger households have always been less wealthy than older ones, since the heads of those households haven’t had a lifetime to acquire wealth. In 1984, this effect of age on household wealth meant that senior citizen households had, on average, ten times the wealth of those headed by people younger than 35. However, the enormous generational shift in household wealth that occurred in the intervening twenty-five years meant that, by 2009, the net worth of senior citizen households was 47 times greater than younger households. The resulting disparities in economic well-being are reflected in each generation’s perception of its own economic situation.  

    Those Americans over 65 in 2009 are members of what generational historians call the Silent Generation. Only 25% of Silents expressed any dissatisfaction with their personal financial situation that year, a percentage that did not increase in the next two years of the Great Recession.

    By contrast, 36% of people under 35 in 2009 – mostly members of the Millennial Generation – expressed dissatisfaction with their individual finances in 2009, a number that rose to 39% in 2011. But the biggest jump in dissatisfaction with personal finances between 2009 and 2011 occurred among the next older cohort, who are considered to be members of Generation X. In 2009, only 30% of Xers felt dissatisfied, a number that shot up to 42% in 2011.  Finally, 32% of the Baby Boom generation, born from 1946 to 1964 and approaching their retirement years in 2009, were dissatisfied with their personal financial situation, a number that rose only to 39% by 2011.

    One of the reasons behind this disparity of financial and economic concern among generations lies with the different impact the nation’s housing market has had on each generation between 1985 and 2009.  The great housing price collapse that began in 2008 had little impact on Millennials, only 18% of whom currently own their own home. By comparison, 57% of Gen Xers own their own home. Three-fourths of them bought after 2000 when housing prices began to soar. As a result, about one in five members of Gen X now say their home mortgage is under water, with the balance owed greater than the value of the house. By comparison, only 13% of Boomers and a miniscule 4% of Silents, most of whom bought homes well before the crash, report having under water mortgages. In fact, if it weren’t for the overall rise in housing prices since 1984 that Silents were able to take advantage of, that generation’s net worth would have fallen by a third in the twenty-five years since, instead of rising by 42%. Clearly, to improve Gen X’s attitudes toward the economy and reduce the inter-generational wealth gap, something must be done to fix the nation’s housing market.

    For older generations – Boomers facing retirement and Silents already enjoying their new life – housing is not an especially large concern. Retirement savings based on stock market valuations and/or interest rates and the certainty of pension payments are clearly a much bigger issue with these generations. Almost two-thirds of Boomers believe they may have to defer their retirement beyond 65 because of the decline in their savings and net worth, with about one in four now expecting to work until at least 70. While the stock market has almost fully recovered from the 2008 crash, for those counting on a more interest-oriented set of retirement payouts from bonds or CDs, years of rock bottom interest rates, designed by the Federal Reserve to stimulate the housing market and help the economy recover, have made these investments problematic at best. In some ways, economic policies that are designed to help Gen X with their housing challenges offer older generations scant comfort, and in certain instances actually exacerbate their concerns over their personal finances.

    Millennials diminished sense of economic opportunity remains focused almost entirely on the job market. About two-thirds of Millennials are employed but only slightly half of those are working full-time. Almost two-thirds of Millennials without a job are looking for work. Unemployment among 16-24 year olds rose to 19.1% by the fourth quarter of 2009, a full eight points higher than in 2007 before the crash. For all other generations, unemployment has gone up on average by only 5 points during the same time period. It seems too obvious to be worth stating, but the best way to increase Millennials’ wealth is to create an economy where they can all find jobs.

    Anxiety that the nation’s economy is only working for the wealthiest drives much of  the overall feeling of fear, uncertainty and doubt that pervades the nation’s political debate.  But an examination of household wealth suggests the remedy to this disease varies by generation.

    Senior citizens turned out in record numbers in the 2010 election to decry the policies of the Obama administration, but it would appear from both the economic and attitudinal data that most of them are more interested in fighting to hang on to what they have or in resisting other societal changes than in expressing any dissatisfaction with their own personal financial situation. Boomers complain about what has happened to their plans for retirement, but it is hard to see how fixing entitlements by raising the retirement age, or cutting the overly generous pensions of public employees will do anything to impact their own retirement prospects directly. To really close the generational wealth gap, policies should be adopted which raise the economic well being of America’s two youngest generations, rather than focusing on those who are already relatively better off. 

    To bring up the least wealthy of the nation’s households to levels closer to those more fortunate would require taking much more aggressive steps than Washington has so far been willing to consider.  This might require expanding the scope and size of government, something older generations especially are steadfastly resisting. This inter-generational debate over the nation’s “civic ethos,” driven by the differing economic circumstances of each generation, will be and ought to be the fundamental issue of the campaign – precisely where President Obama’s speech in Osawatomie, Kansas placed it.

    Morley Winograd and Michael D. Hais are co-authors of the newly published Millennial Momentum: How a New Generation is Remaking America and Millennial Makeover: MySpace, YouTube, and the Future of American Politics and fellows of NDN and the New Policy Institute.

  • Wanted: Blue-Collar Workers

    To many, America’s industrial heartland may look like a place mired in the economic past—a place that, outcompeted by manufacturing countries around the world, has too little work to offer its residents. But things look very different to Karen Wright, the CEO of Ariel Corporation in Mount Vernon, Ohio. Wright’s biggest problem isn’t a lack of work; it’s a lack of skilled workers. “We have a very skilled workforce, but they are getting older,” says Wright, who employs 1,200 people at three Ohio factories. “I don’t know where we are going to find replacements.”

    That may sound odd, given that the region has suffered from unemployment for a generation and is just emerging from the worst recession in decades. Yet across the heartland, even in high-unemployment areas, one hears the same concern: a shortage of skilled workers capable of running increasingly sophisticated, globally competitive factories. That shortage is surely a problem for manufacturers like Wright. But it also represents an opportunity, should Americans be wise enough to embrace it, to reduce the nation’s stubbornly high unemployment rate.

    Driving the skilled-labor shortage is a remarkable resurgence in American manufacturing. Since 2009, the number of job openings in manufacturing has been rising, with average annual earnings of $73,000, well above the average earnings in education, health services, and many other fields, according to Bureau of Labor Statistics data. Production has been on the upswing for over 20 months, thanks to productivity improvements, the growth of export markets (especially China and Brazil), and the lower dollar, which makes American goods cheaper for foreign customers. Also, as wages have risen in developing countries, notably China, the production of goods for export to the United States has become less profitable, creating an opening for American firms. The American Chamber of Commerce in Beijing expects China’s “low-wage advantage” to be all but gone within five years.

    It’s also true that American industry hasn’t faded as much as you might think. Though industrial employment has certainly plummeted over the long term, economist Mark Perry notes that the U.S. share of the world’s manufacturing output, as measured in dollars, has remained fairly stable over the last 20 years, at about one-fifth. Indeed, U.S. factories produce twice what they did back in the 1970s, though productivity improvements mean that they do it with fewer employees. Recent export growth has particularly helped companies producing capital equipment, such as John Deere and Caterpillar, and many industrial firms are even hiring more people for their plants, especially in the Midwest, the Southeast, and Texas.

    One area in which industry is positively roaring: firms that service the thriving oil and natural-gas industries, from Montana and the Dakotas to Pennsylvania. In Ohio alone, there are already 65,000 wells, with more on the way, says Rhonda Reda, executive director of the Ohio Oil and Gas Energy Education Foundation—while a new finding, the Utica shale formation in eastern Ohio, could hold more than $20 billion worth of natural gas. As a result, Karen Wright’s business—selling compressors for natural-gas wells—has been soaring, leading her to add more than 300 positions over the past two years. “There’s a huge amount of drilling throughout the Midwest,” Wright says. “This is a game changer.”

    Wright isn’t alone. Firms throughout the Midwest are moving aggressively to meet the demand for natural-gas-related products. Take the $650 million expansion of the V&M Star steel mill in Youngstown, Ohio, which builds pipes for transporting gas. The expansion will add 350 permanent jobs to the factory after it’s completed next year.

    As the natural-gas boom continues, it could have another effect beneficial to industry: keeping energy prices low, which will give American manufacturers a leg up on their global rivals. Companies in the business-friendly midwestern and Plains states will profit the most, while New York and California—though each has ample fossil-fuel resources—will probably be too concerned with potential environmental problems to cash in.

    The industrial resurgence comes with a price: a soaring demand for skilled workers. Even as overall manufacturing employment has dropped, employment in high-skill manufacturing professions has soared 37 percent since the early 1980s, according to a New York Federal Reserve study. These jobs can pay handsomely. An experienced machinist at Ariel Corporation earns over $75,000, a very good wage in an area where you can buy a nice single-family house for less than $150,000.

    A big reason for the demand is changes on the factory floor. At Ariel, Wright points out, the operator of a modern CNC (computer numerical control) machine, which programs repetitive tasks such as drilling, is running equipment that can cost over $5 million. A new hire in this position must have knowledge of programming, metallurgy, cutting-tool technology, geometry, drafting, and engineering. Today’s factory worker is less Joe Six-Pack and more Renaissance man.

    So perhaps it isn’t surprising that American employers are hard-pressed to find the skilled workers they need. Delore Zimmerman, the CEO of Praxis Strategy Group (for which I consult), observes that this shortage extends to virtually any industrial operation. In his hometown of Wishek, North Dakota, whose population is just 800, one company making farm machinery has 17 openings that it can’t fill. Skilled-labor shortages grip the whole of this energy-rich state. Demand for skilled workers in the North Dakota oilfields—from petroleum engineers to roustabouts—exceeds supply by nearly 30 percent. The shortage of machinists is 10 percent. “The HELP WANTED signs in North Dakota are as common as FOR SALE signs in much of the rest of the country,” Zimmerman reports.

    “There are very few unskilled jobs any more,” says Wright. “You can’t make it any more just pushing a button. These jobs require thinking and ability to act autonomously. But such people are not very thick on the ground.” Among the affected industries will be the auto companies, which lost some 230,000 jobs in the recession. David Cole, chairman of the Center for Automotive Research, predicts that as the industry tries to hire more than 100,000 workers by 2013, it will start running out of people with the proper skills as early as next year. “The ability to make things in America is at risk,” says Jeannine Kunz, director of professional development for the Society of Manufacturing Engineers in Dearborn, Michigan. If the skilled-labor shortage persists, she fears, “hundreds of thousands of jobs will go unfilled by 2021.”

    The shortage of industrial skills points to a wide gap between the American education system and the demands of the world economy. For decades, Americans have been told that the future lies in high-end services, such as law, and “creative” professions, such as software-writing and systems design. This has led many pundits to think that the only real way to improve opportunities for the country’s middle class is to increase its access to higher education.

    That attitude is a relic of the post–World War II era, a time when a college education almost guaranteed you a good job. These days, the returns on higher education, particularly on higher education gained outside the elite schools, are declining, as they have been for about a decade. Earnings for holders of four-year degrees have actually dropped over the past decade, according to the left-of-center Economic Policy Institute, which also predicts that the pattern will persist for the foreseeable future. In 2008, more than one-third of college graduates worked at occupations such as waiting tables and manning cash registers, traditionally held by non–college graduates. Mid-career salaries for social work, graphic design, and art history majors are less than $60,000 annually.

    The reason for the low rewards is that many of the skills learned in college are now in oversupply. A recent study by the economic forecasting firm EMSI found that fewer computer programmers have jobs now than in 2008. Through 2016, EMSI estimates, the number of new graduates in the information field will be three times the number of job openings.

    There’s a similar excess of many postgraduate skills. Take law, which flourished in a society that had easy access to credit. Now, with the economy tepid, law schools are churning out many more graduates than the market wants. Roughly 30 percent of those passing the bar exam aren’t even working in the profession, according to a survey by the National Association for Law Placement. Another EMSI study indicates that last year, in New York State alone, the difference between the number of students graduating from law school and the number of jobs waiting for them was a whopping 7,000.

    The oversupply of college-educated workers is especially striking when you contrast it with the growing shortage of skilled manufacturing workers. A 2005 study by Deloitte Consulting found that 80 percent of manufacturers expected a shortage of skilled production workers, more than twice the percentage that expected a lack of scientists and engineers and five times the percentage that expected a lack of managerial and administration workers. “We don’t just need people—we need people who can meet our standards,” worries Patrick Gibson, a senior manufacturing executive at Boeing’s plant in Heath, Ohio.

    Some of Gibson’s fellow manufacturers blame the shortage of skilled workers on the decline of vocational education, which has been taking place for two decades now. Such training is unpopular for several reasons. For one thing, many working-class and minority children were once steered into vocational programs even if they had aptitude for other things, an unfair practice that many people haven’t forgotten. Today’s young people, moreover, tend to regard craft work—plumbing, masonry, and carpentry, for instance—as unfashionable and dead-end, no doubt because they’ve been instructed to aspire to college. “People go to college not because they want to but because their parents tell them that’s the thing to do,” says Jeff Kirk, manager of human relations at Kaiser Aluminum’s plant in Heath, Ohio. “Kids need to become aware of the reality that much of what they learn in school is not really needed in the workplace. They don’t realize a pipe fitter makes three times as much as a social worker.”

    Fortunately, there are signs that some schools are getting that message and passing it along to their students. Funded by industry sources, the Houston Independent School District’s Academy for Petroleum Exploration and Production Technology trains working-class, mostly minority high school students in the skills they’ll need to perform high-wage industrial jobs. Tennessee—like Texas, a growth-oriented state—has developed 27 publicly funded “technical centers” that teach skills in just months and carry a far lower price tag than a conventional college does.

    Two-year colleges will be crucial to the effort to train skilled workers. One of these schools, Central Ohio Technical College, has recently expanded by 70 welding students and 50 aspiring machinists per year. Many of the college’s certificate programs are designed and partly funded by companies, which figure that they’re making a wise investment. “You have a lot of people sitting in the city doing nothing. They did not succeed in college. But this way, they can find a way up,” says Kelly Wallace, who runs the college’s Career and Technology Education Center.

    Such shorter educational alternatives will become ever more important as industrial workers retire. The average skilled worker in the industries supplying the gas boom is in his mid-fifties. “At our plant, you have lots of people with 20 to 30 years’ experience,” says Kirk, who has three high-skill openings that he can’t fill. “But there’s no apprenticeship program—no way to fill the future growth. We are simply running out of people.”

    New programs may not produce enough graduates to fill all these openings. But Karen Wright, at least, suspects that more young people will start looking for careers that offer them the prospect of a decent living and less debt. This may not be the postindustrial future envisioned by Ivy League economists and Information Age enthusiasts. But it could spell better times for a country in sore need of jobs.

    This piece first appeared at The City Journal.

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

    Photograph from BigStockPhoto.com

  • Illinois: State Of Embarrassment

    Most critics of Barack Obama’s desultory performance the past three years trace it to his supposedly leftist ideology, lack of experience and even his personality quirks. But it would perhaps be more useful to look at the geography — of Chicago and the state of Illinois — that nurtured his career and shaped his approach to politics. Like with George W. Bush and Texas, this is a case where you can’t separate the man from the place.

    The Chicago imprint on Obama is unmistakable. His closest advisors are almost all products of the Windy City’s machine politic: ConsigliereValerie Jarrett; his first chief of staff, now Chicago Mayor, Rahm Emanuel; and his current chief of staff, longtime Chicago hackster William Daley, scion of the Windy City’s longtime ruling family.

    All these figures arose from a Chicago where corruption is so commonplace that it elicits winks, nods and even a kind of admiration. Since 1973, for example, 27 Chicago Aldermen have been convicted by U.S. Attorney of the Northern District of Illinois.

    That culture of corruption affects the rest of the state as well. Both Gov. George Ryan (who served from 1999 to 2003 and  and his successor Ron Blagojevich have been convicted a major crimes. So have four of the state’s last eight governors. Blagojevich’s felonies are part and parcel of a political climate that also includes the also newly convicted  Antonin “Tony” Rezko, a real estate speculator and early key Obama backer, sentenced late last month to a ten-year prison sentence.

    Crony capitalism constitutes the essential element of what the legendary columnist John Kass of the Chicago Tribune has labeled both the “Chicago way” and the “Illinois Combine”, not primarily an ideology-driven movement. The political system, he notes, “knows no party, only appetites.”

    Just look at the special favors granted to vested interests while the state has imposed a 65% boost in income taxes for middle class citizens. Companies like Boeing and United, which have head offices in Chicago, get tax breaks and incentives, while everyone else pays the full fare. This game is still afoot.  Even as the state deficit persists, other big players such as the CME group, which operates the Chicago Mercantile Exchange, the Chicago Board of Options and Sears are threatening to leave unless their taxes are also lowered.

    Thus it’s not surprising then that cronyism has become a hallmark of the Obama administration. Wall Street grandees, a key source of Obama campaign funders in 2008 and again now, have been treated to bailouts as well as monetary policies that have assured massive profits to the “too big to fail” crowed while devastating consumers and smaller banks.

    The evolving scandal over “green jobs” — with huge loans handed out to faithful campaign contributors — epitomizes the special dealing that has become an art form in the system of Chicago and Illinois politics.  Beneficiaries include longtime Obama backers such as Goldman Sachs, Morgan Stanley and Google. Another scandal is building up around the telecom company LightSquared. This company, financed largely by key Obama donors, appears to have gained a leg up for a huge Pentagon contract due to White House pressure.

    If the Chicago system had proven an economic success, perhaps we could excuse Obama for bringing it to the rest of us. Most of us would put up with a bit of corruption and special dealing if the results were strong economic and employment growth.

    But the bare demographic and economic facts for both Chicago and Illinois reveal a stunning legacy of failure. Over the past decade, Illinois suffered the third highest loss of STEM (science, technology, engineering and math-related) jobs in the nation, barely beating out Delaware and Michigan. The rest of the job picture is also dismal: Over the past ten years, Illinois suffered the third largest loss of jobs of any state, losing over six percent of its employment.

    The state’s demographic picture also is dismal. In the last decade, Illinois lost population not only to sunbelt states such as Texas and Florida but actually managed to have negative migration even with places like California and New York, net losers to virtually everywhere else. In fact, Illinois had a positive net migration with only one major state, Michigan.

    Chicago and its Daley dictatorship has been much celebrated in the media – particularly after Obama’s election in everything from the liberal New Yorker to Fast Company, which named Chicago “city of the year” in 2008. The following year, the Windy City was deemed the best city for men by Askmen.com, for offering what it claimed was “the perfect balance between cosmopolitan and comfortable, combining all of the culture, entertainment and sophistication of an internationally renowned destination with an affordable lifestyle and down-to-earth work hard/play hard character.”

    Well, you can make that case, unless you happen to be searching for a job. Over the past decade, “the Chicago way” has proven more adept at getting good coverage than creating employment for its residents. In NewGeography’s last cities rankings greater Chicago ranked 41st out of the 51 largest metropolitan areas. Between 2001 and 2011 it actually lost jobs. Since 2007 the region has lost more jobs than Detroit, and more than twice as many as New York. It has lost about as many jobs – 250,000 – as up and comer Houston has gained.  In NewGeography’s recent survey of high-tech growth, the Chicago region stood at a dismal 47th among the nation’s 51 largest metropolitan areas.

    Overall, Chicago Loop Alliance reports that private sector employment in the Loop, the core of the Chicago downtown area, fell from 338,000 to 275,000 between 2000 and 2010. Chicago’s core has fallen further behind, in capturing high end employment than its traditional rival, New York.

    This weak hand is also evident in the region’s strongly negative migration. According to the last Census, Chicago lost more than 200,000 people during the last decade. People are leaving the Chicago area not only for Sun Belt havens but to rising Midwest competitors like Indianapolis and Minneapolis, which offer better business climates, lower housing prices and cleaner governments, says local urban analyst Aaron Renn. Even perennial losers like Los Angeles and New York are net gainers with Chicago.

    Given this economic and demographic track record, it’s no big surprise that the City of Chicago and the State of Illinois face enormous fiscal pressures. The city is facing a deficit of about $650 million and the state’s unfunded future liabilities are upwards of $160 billion. The  new taxes are on tap for state residents, according to Illinois Public Policy Institute, will cost the average Illinoisan a whole week’s earnings.

    One might hope this disastrous record might make President Obama consider taking a different path to governing our country.  Yet sadly it appears that acknowledgement of failure is not part of the “Chicago way” — a denial that may cost us dearly in the years ahead.

    This piece first appeared at Forbes.com.

    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.

    Official White House Photo by Pete Souza.

  • Wall Street Plays Occupy White House

    Wall Street is disdained in the court of public opinion — detested by the tea party on the right and the Occupy movement on the left. The public blames financial plutocrats for America’s economic plight more than either President Barack Obama or former President George W. Bush. Less than a quarter of all Americans, according to Gallup, have confidence in the banks, which vie for the lowest spot with Big Business and Congress.

    But these angry voters are unlikely to get satisfaction in next year’s presidential election. In fact, things are looking up for the financial elite — which donated more to Washington politicians than almost any other sector of the economy over the past two decades. Wall Street can look forward to a bank-friendly administration if Obama is reelected — and perhaps even better conditions if either of the two leading GOP contenders, Newt Gingrich and Mitt Romney, wins the White House.

    Despite his occasional remarks that decry “fat cat”’ bankers, Obama has effectively serviced the financial bigwigs. Bank prosecutions have declined markedly under Obama — to levels not seen for more than 25 years. Obama has even tried to derail aggressive bank prosecutions pursued by state attorneys general, most of them liberal Democrats.

    This is remarkable since a considerable number of people on Wall Street should likely be in the dock — or in jail — for systematically ruining the national, and even global, economy. Instead, financial powers have enjoyed several big bonus years and have been on a spending binge at overpriced New York restaurants and tony boutiques. Struggling homeowners of middle America may be happy to know that the Manhattan luxury apartment market is running low on inventory.

    Even while trying to exploit the Occupy Wall Street movement for political purposes, Obama still leads in financial sector donations, according to the Center for Responsive Politics. He has secured more cash from the financial elite, at this point, than all the GOP candidates combined. He has even raised twice as much as they have from Bain Capital, the venture firm co-founded by Romney. Why not give up on the white working class when you can sew up the Harvard and Wharton business school constituency?

    Nor can we expect this pro-Wall Street tilt to shift in a second term. Obama’s virtual toadying to Wall Street is long-standing. He was the finance industry’s favorite against Hillary Clinton and then-GOP nominee Sen. John McCain (R-Ariz.). He may call them “fat cat” bankers, but Obama has been a kitten when dealing with financiers.

    The president might not have much interest in conventional energy, manufacturing and industry — economic sectors that really create wealth and high-paying blue-collar jobs — but he has performed wonders to make sure the financial elite does well.

    With his enablers, Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke, Obama has pursued low interest rates and easy money, policies favorable to large financial institutions. They get essentially free cash, which they then lend to the government and others at substantially higher rates. Now, to save the European banks, we hand out more money — not so much to save the old continent or our industries but our banks’ exposure to them.

    Yet even Obama’s record of largely obsequious behavior is not enough for some Wall Street powers. Many financiers are now signing on with Romney. No doubt, the former investment banker seems a safe choice. He is, if you will, to the manor born and is expected to view things as the ultra-rich prefer. To him, the Occupy Wall Street movement has been largely looking for “scapegoats.”

    Romney is a strong defender of the Troubled Asset Relief Program and the financial bailouts. He has even talked about lowering capital gains — though for only the smaller investor. Wall Street would likely be safe with Romney in the White House.

    Gingrich is, as usual, harder to categorize — having said and done so many often contradictory things over the past few decades. Typically, after decrying the TARP bailout as “socialism,” Gingrich supported the bailout legislation. He also received compensation of more than $1.6 million in consulting fees from Freddie Mac, one of the big Washington institutions at the core of the financial crisis.

    As a congressman, Gingrich consistently supported another key source of the meltdown — the wholesale deregulation of the financial industry. He has continued to play to Wall Street’s tune, opposing more stringent regulations. Gingrich symbolizes, as much as anyone, the interplay of the financial elite, Washington lobbying and politics.

    More radical Republican challengers — those perhaps more likely to break the Wall Street consensus — seem to have self-destructed. The shifting tea party favorites — Rep. Michele Bachmann (R-Minn.) and Texas Gov. Rick Perry — have been undermined by their own demonstrated ignorance and a fatal attraction to the far-right social conservative agenda.

    On the left, no one is likely to run against Obama. Politicians are perhaps unwilling to challenge the first African-American president — though many Democrats have grave misgivings about his gentry-friendly economic policy.

    Next November, populists on both the left and the right are unlikely to get satisfaction from whoever wins the White House. In contrast, one faction or another of Wall Street is likely to win big.

    The more traditionalist financial wing favors the GOP policies of greater deregulation, which allow for ever increasing risk-taking and agglomeration of assets. The “progressive faction” — which includes many Silicon Valley venture capitalists — tends toward Obama, who has favored its members with more than $14 billion in subsidies for green ventures and supports their status as arbiters of the future economy.

    Yet those who seek a radical shift in economic policy, whether on the right or left, should not give up. Eighty-one percent of Americans are dissatisfied with the status quo, according to Gallup. Their trust in large economic and political institutions stands at the lowest ebb in a generation.

    This anger could fuel a prairie fire that would force the restoration of competition to capitalism and reduce the power of the bipartisan patrician caste.

    What is needed is some sort of tacit agreement among Americans — independents, tea partiers or Occupy Wall Street — for a break with the Wall Street-first policies of the political leaders of both parties. One crucial component could be a reform of the tax system — with flatter rates and capital gains equalized with income taxes, a policy that now overwhelmingly benefits the top 0.1 percent.

    This does not necessarily mean more regulations — which the financial industry can easily game, in any case. We must instead make bankers more accountable for their failures. Let them feel the pain, and not allow them to prevail with the help of bailouts or to slip into their golden parachutes.

    The whole concept of “too big to fail” — which puts smaller community-oriented banks at a severe disadvantage — should be eliminated. We also need to curb all the cozy special deals concocted for banks, energy companies, green ventures and other well-connected businesses.

    Sadly, such reformist impulses won’t get any more support from a President Romney or Gingrich than from Obama. A break with the bipartisan Wall Street consensus will have to be forced on the unwilling financial plutocrats by a public fed up with the financial hegemon’s overweening power and destructive influence.

    This piece first appeared at Politico.com.

    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 BigStockPhoto.com.

  • It’s Not the 1980s in Britain Anymore

    Britain’s public sector workers came out on a one day strike last week over government plans to raid their pension funds. Government ministers did the rounds of television studios denouncing the strikers as mindless militants. Both sides are echoing the class struggles of the Thatcher-era, but the truth is that it’s not the 1980s.

    My children were off school, and like many children, glad of it. Schools are among the more solid parts of the public sector action today, and in London were struck out, though in the country the teachers’ unions have not achieved the 90 per cent shut down they were aiming for. Unlike the last great wave of union opposition to Conservative spending cuts, back in the 1980s, the teachers’ unions were supported by the National Association of Head Teachers.

    At the college where I teach, the lecturers in my department were solidly behind the strike, and boldly leafleted and informed students of their decisions in lectures and circulars. Administrative staff, by contrast, crossed the picket lines.

    Overall the strike is well-supported, but not quite the quantum leap of opposition to the Conservative-Liberal coalition that seemed to be in the air. Those joining the marches were 30,000 in London, and a few thousand in the other major cities, which is many more people than the deracinated petit bourgeois mobilised by the #Occupy camps, but does not compare to the bigger union mobilisations of the 1980s.

    Union activists have tried to paint the coalition (which they call the ‘Con-Dem’ government) as Margaret Thatcher’s Conservative government of the 1980s reborn.  As they see it, some ‘anti-Thatcher’ spirit would give the rank and file more fire in their bellies.

    Prime Minister Cameron and his ministers have been trying to spark up a Thatcherite spirit, too. It is their only blueprint for handling the challenge of the public sector union revolt. They have been going around the studios denouncing mindless trade union militants in the same way that Thatcher’s ministers Cecil Parkinson and Norman Fowler did back then. But they have not done it very convincingly. Most of all they have failed to get the public to blame the state sector for the budget deficit, as Mrs Thatcher by and large did. The public is just not in the mood to turn on any group of workers with that much anger. It is people in power that are distrusted, newspaper editors and politicians. The specific plan to cut pensions and raise the pension age is not accepted, but widely seen as the chancellor robbing from people’s rightfully earned savings. Chancellor Osborne has failed to persuade many people that they need to take his harsh medicine.

    It is perhaps typical of the strident Mrs Thatcher that her ghost is haunting the country even though she is still with us, if a little frail. It is a generational thing – anyone over forty either hated or loved Thatcher and by and large it is the ones who hated her who went on to be opinion formers, whether in TV studios, newspapers or teaching in colleges and schools. The under thirties take their idea of the Thatcher era from those teachers, or from the novels of Jonathan Coe, or most recently from the Meryl Streep film. There is a touch of nostalgia for an age that was a bit more black and white, where the choices were starker.

    Today’s class struggle is by no means as clear. As much as the unions talk up the coalition as a return to Thatcherism there is nothing like the determination to lead an offensive against trade union power in Cameron’s cabinet, which, remember, is a coalition with some sceptical Liberal Democratic partners. What is more, the party he leads got elected on the express promise that it had left the ‘nasty party’ image of the Thatcherite 1980s behind. This was the nice Tory party.

    Cameron’s one distinctive policy, the Big Society, if it were to work, would surely be carried along by the kind of people who are on strike today – who struck me as people with a social conscience, and an interest in their communities. It cannot be comfortable for him that this is the very constituency that he most offends.

    Mrs Thatcher was not so bothered about the Social Workers and Community Activists, generally painting them as a big nuisance. What she was good at was rallying the establishment – the newspaper editors, City financiers, industry managers, senior police chiefs and judges were a formidable establishment ready to face down any rebellious mood among the scruff trade unionists or rioting youth. Mr Cameron, though, does not have any such united establishment on his side. They have all been attacking each other for some time now. Right now, Lord Leveson is enquiring into the scurrilous phone tapping done by Rupert Murdoch’s News International. It is a ghoulish picture of the newspaper magnate that emerges, and not the kind of thing that is likely to persuade him to get behind the Cameron government in the way he was behind Mrs Thatcher’s.

    The left, too, is in a weaker state than it looks. There is a kind of trajectory to events, from the student demonstrations of a year ago, through the summer riots and this autumn’s version of #Occupy Wall Street – a tent city in the gardens of St Paul’s cathedral. The rhythm of these protests – and protest is legitimated emotionally by the events in the Middle East, however different those protests are – give the impression of a rising crescendo. But that is deceptive. The anti-capitalist mood is not deeply rooted. Last week they had an opportunity to make their organisation a bit stronger. But without a concerted assault from the government, the opposition is also a little tentative.

    Overall the country is much more exercised by the throwaway line from TV presenter Jeremy Clarkson, that the strikers ought to be shot – for which he has been roundly condemned – than it has been by the strikes.

    On the night Cameron went around the television studios saying that the strikes proved to be a bit of a damp squib. It is a smart spin to put on things. It conveys that he is not rattled, and that it is all a bit of a fuss about nothing. But it is not true enough for him to get away with it. The unions did not land a big punch, but they had a respectable day. Worse still for Cameron is that it sounds like his own strategy is a bit of a damp squib so far.

    James Heartfield’s latest book The Aborigines’ Protection Society: Humanitarian Imperialism in Australia, New Zealand, Fiji, Canada, South Africa, and the Congo, 1836-1909 is published by Columbia University Press, and Hurst Books in the UK.

    Photo by Flickr user Ben Sutherland

  • Will You Still House Me When I’m 64?

    In the song by the Beatles, the worry was about being fed and needed at 64. Things have changed. If the Beatles wrote those lyrics today, the worry instead might be about housing.

    Australia’s aging population is an inevitability. As our replacement rate falls (we’re having fewer children per family) and life expectancy extends, the proportion of over 65s will double in 40 years. In raw numbers, there were 2.5 million over 65s in 2002, and this will rise by 6.2 million in 2042. That’s an extra 4 million in this demographic. Have we given enough thought to where they’re going to live, and what styles of housing they might prefer?

    There have been a number of developers who have understood the looming significance of Australia’s aging population, and who have sought to supply the ‘retirement living’ market with product that suits. At one end have been the glitzy apartment style residences in inner city locations, while at the other have been the aged care ‘homes’ provided for those in need of access to nursing care or medical assistance, or at least the reassurance of it being present.

    Running parallel with the provision of retirement living or seniors living projects has been an assumption that, once ready to abandon the family home of many years, seniors will be happy to move across town and relocate to the facilities that are available. Perhaps this is hangover from the days when retirement or aged care living was provided on Stalinist lines: our oldies were forcibly shuffled off to some retirement centre well away from the rest of the community they grew up in. A sort of gulag for grumpies?

    But what if seniors simply want a change of housing style within their community? What if they don’t want to move across town to the only available accommodation because they would prefer to continue to live in the neighbourhood and community they have spent a large part of their lives living in? They may want to continue to shop with ‘their’ local butcher, visit their local supermarket, newsagent, bank branch (if it still exists) and generally remain connected to the people and places that they’re familiar with – including (quite possibly) members of their family, children and grandchildren.

    Meeting that need in the future is going to be close to impossible unless planning schemes (old fashioned zoning laws) adopt a more flexible approach. Flexibility will be needed because most of the existing suburbs of our major population centres are largely built out and will require retrofits and redevelopment of existing stock to accommodate senior’s housing preferences. Generally, the only tracts of undeveloped land capable of meeting seniors housing needs tend to be on the outskirts and while there’s nothing wrong with fringe development, it seems unfair to expect seniors to relocate across town to regions they’re unfamiliar with and to alienate themselves from their community simply because supply side mechanisms (controlled by planning schemes) don’t permit choice.

    Further, the built out status of our ‘established’ suburbs – as they now stand – is something that much planning law seems to want to preserve for time immemorial. It’s a little bit like imagining that someone has declared the existing housing mix and styles a fixture of permanency: let’s put a giant glass dome over it all and call the city a museum – because we don’t (it seems) want anything to change.

    But if we are to allow Australia’s seniors to ‘age in place’ and to ensure our markets provide choice, it’s going to mean some things will need to change, given the likely levels of future demand. The fastest growth of aging populations will be around our ‘middle ring’ suburbs and given the overwhelming preference to ‘age in place’, it is these suburbs that are going to have to change if those needs are to be met.

    What will that change look like? The psychology of seniors in years to come – even today – is going to be different to those of previous generations. They’ll likely be more active rather than sedentary. The family home that’s served them to this point may now be simply too big for their needs, or contain too many stairs (the artificial hip or knee doesn’t like too many stairs). Their future housing needs will vary widely – some will be happy with apartments in high to medium density developments (elevators to their level of living means no stairs) while others (generally the majority) will prefer smaller, detached or semi-detached, single level dwellings. Many may want a small yard or garden (or at least a large balcony or terrace if in a unit), and perhaps want to keep a small pet dog or cat. They may want a spare bedroom for visitors or for babysitting grandchildren. They will probably prefer to be close to shops and near to public transport. And the majority will want to find something of that nature generally within the same community they’ve been living in. It is unlikely they’ll be searching for the ‘retirement home’ style of assisted care living until they’re well into their later years when their choices will be more limited.

    Their problem will be that developers will struggle under current planning schemes to get approval for semi-detached housing designed with seniors in mind, if it means amalgamating some detached residential dwellings near local shops, because that land use is highly protected. They will struggle to gain approval to convert a large single site into medium or high rise in areas near local shops or transport, because the community will likely object – particularly if it’s in a neighbourhood where low density prevails (typical of most of suburban Brisbane). Advocates of Transit Oriented Development (TOD) style development might now be shouting at this article that ‘TODs are the answer.’ That might be so, if only one single TOD had been delivered during the past 15 years we’ve been talking about them.

    Plus, the majority of proposed ‘TOD’ style development areas largely surround inner city transport nodes. Not much use if you’re in Aspley and want to stay there. And of course there’s the reality that multi level apartments are much more costly to develop and construct than the cottage building industry’s approach to single level, small detached housing.

    The changes needed need not be dramatic, and subtle changes to land use surrounding existing retail or service centres in middle ring suburbs ought to be able to be achieved with minimal planning fuss. It is still possible to imagine something being done with minimal planning fuss, but very difficult to point to any actual examples. Still, hope springs eternal.

    The changes could allow (for example) for some amalgamations of larger lot, detached post war homes into higher density cottage-style dwellings on a group title, still single level and with low construction costs. A 2000 square metre amalgamation could in theory provide 10 such cottages, with private garden space and minimal likelihood of community objection. The key would be to keep regulatory costs down, so punitive development levies would be out of order. After all, the infrastructure already exists and seniors tend to be much less demanding on utilities or services than young households. (Have a think about how little garbage they generate, or how little water they use as an illustration. It would surely be unfair to tax seniors in this type of housing for infrastructure upgrades under the circumstances?).

    The traditional ‘retirement home’ or ‘aged care’ model of seniors housing is still going to be needed, especially as people require more frequent or acute care in their later years, and become less and less independent. But there will be a good 10 to 15 year period for people for whom the family home no longer suits, and who aren’t yet ready for ‘God’s waiting room.’ How we accommodate this coming bubble of seniors who want to age in place and continue to live independently, and how planning schemes will allow markets to provide choice and diversity, is something that perhaps should be a policy focus now.

    Ross Elliott has more than 20 years experience in property and public policy. His past roles have included stints in urban economics, national and state roles with the Property Council, and in destination marketing. He has written extensively on a range of public policy issues centering around urban issues, and continues to maintain his recreational interest in public policy through ongoing contributions such as this or via his monthly blog The Pulse.

    Photo by BigStockPhoto.com

  • Social Market Housing for the USA: Dream or Nightmare?

    Imagine a future America where the home ownership rate climbs from the current 65%1 to 87%2.  Libertarians as well as many social democrats would be cheering.  Imagine that this rate was achieved by the state itself acting as the builder of 88%3 of the housing.  Imagine also that the state imposes rules on home purchases to favor first time buyers and young families. “Progressives”, increasingly tilted towards the unmarried and childless, would bristile.  Imagine racial diversity rules that restrict who you can sell your home to. Time for libertarians to shudder.   

    Most Americans would probably say such a concept is “Utopian” but serious policy makers should reflect that the word “Utopia” literally means “nowhere”. But Social Market Housing is alive and well in Singapore. 

    For Americans living in the hottest real estate markets, the USA is very far from the ideal of a Property Owning Democracy.  At the time of the 2010 census three of New York City’s five boroughs had home ownership rates under 30% and in the Bronx it was under 20%4.   Though many US politicians support the concept of home ownership it has been declining since 1980 when it reached a peak of 68%5. 

    How have the Singaporeans achieved such high ownership rates despite having the richest economy in South East Asia?  Many factors come into play.  Singapore has an aggressive building program achieved through a public body – the Housing Development Board (HDB).   HDB apartments can only be sold to Singapore citizens and those with permanent resident status, so their prices cannot be inflated by foreign speculators. 

    The HDB also has eminent domain powers to claim land if it needs to.  Singapore’s version of social security is not inter-generational (unlike the USA where the current generation of workers pays for the last generation of retirees) but rather an elaborate system of forced saving by both workers and their employers.  Part of the compulsory savings can be used for a deposit on an HDB flat. Finally there is an elaborate system of price discounts on new HDB flats which is not only designed to favor first time buyers, but also young families and newlyweds. 

    There is even a category of ‘Executive Homes’ to retain managers in Singapore.  These may be larger apartments or semi-detached homes with gardens. 
    There is no problem with runaway maintenance fees.  HDB owners do not pay associations dues.  Their elevators are maintained through local real estate taxes so monthly costs are very predictable.  In the year 2010 the average Singaporean household paid $145 USD a month in property tax6
    .  This is less than the $216 average USD American Condo owners paid in condo fees at the time of the 2000 census.

    Some Americans might argue that this can only work because Asians are conformist and are culturally more receptive to rule-based systems.  I do find that South East Asians are reluctant to draw attention to themselves in public.  When I talk in a Starbucks with my normal New York speaking voice I sometimes look up and find myself orating to a group of open-mouthed onlookers (“I’m so sorry it’s the Tourette’s Syndrome – my shrink keeps forgetting to up my dosage.”)

    Many US politicians recoil against the state as a real estate developer largely because tenanted housing projects have been such a magnet for social problems.  The St. Louis public housing scheme, Pruitt-Igoe, was eventually dynamited (see photo right7).  The author of “The Death and Life of Great American Cities”, Jane Jacobs, famously complained that the public housing projects took some mixed income neighborhoods which could have been viable and sealed their doom by concentrating too many low income and unemployed people in the same buildings. 

    Singapore’s HDB does act as a direct landlord for a very small number of people who meet a strict income ceiling (about $1160 USD a month8), however the low income tenants are spread thinly among owner occupiers. Income ghettoization is limited. My realtor tells me that one of the blocks in my own HDB estate is for tenants rather than owners but from the outside I cannot tell which building it is.  Another form of deliberate social mixing takes the form of racial quotas intended to prevent the formation of ethnic enclaves.  If the percentage of people in a given racial group has already met the national quota you can be blocked from selling or renting to a person in that category. Access to the more attractive and less attractive neighborhoods is thus shared out more equally.  This looks like a policy American cities should consider given that the 14th amendment, busing and affirmative action have yet to produce full integration. 

    One aspect of America’s public housing projects that particularly angered Jane Jacobs was the wholesale removal of small retailers.   In theory “The Projects” could have included small commercial spaces at the ground floor but generally public rental buildings in most of the US are considered to be danger zones where retailers fear to tread. 

    Typically the ground floor of HDB buildings is a void space where retailers can create businesses. Often they are left empty but sometimes the policy works well.  Near Singapore’s Clementi MRT train station many dozens of “mom and pop” stores are now sheltering under the HDB apartments; late night street life is vibrant.  When I ask Singaporeans to name a neighborhood that would be dangerous to go at night, nobody can think of one.  The country’s homicide rate would pose an absolute disaster for TV script writers.  You could not have a CSI series or Law and Order because Singapore would not be able to supply the requirement of one murder per week.  The homicide rate is currently about one tenth of the USA’s9.

    If she were alive today Jacobs might also criticize the HDB apartment blocks for excessive architectural uniformity.  She loved communities to have buildings with different age profiles.  But most of Singapore’s buildings are so new the option of preserving the old simply does not exist. Greater architectural variety is an attractive goal.  One Singaporean architect commented that they will really have the styles right with you can build an HDB block next to a private condominium and you cannot tell which is which (a sort of urban planning version of the Turing Test).  Local architects are point to a new HDB building, the Pinnacle at Duxton, as an example of a new look more comparable with private designs (pictured right).

    But would greater variety cause costs to escalate?  Observing new HDB construction it is possible to discern a very advanced form of modular building; entire concrete rooms are hoisted into the air at the end of a crane.  Certainly a wider range of designs could be achieved using the same building blocks.  Kids can make a huge variety of things with Lego.  The same cuboids could also make homes with gardens which are America’s preferred form of housing— a gift of an expansiveness impossible to achieve, except in dreams or by immigration, in Singapore.

    Is Social Market Housing a good model for the USA? Certainly there would be many objections but the ideal of home ownership is too often an American Dream that disappears into a distant future. Are we doing enough to create a Commonwealth with “Liberty and Justice for All?” When they say the Pledge of Allegiance we force or children to use the words “Indivisible” and “One Nation”.  Are we enough to make those words a reality?

    Philip Truscott is a Senior Lecturer at Singapore University of Technology and Design
    Notes:

    Lead photo of HDB flats courtesy of BigStockPhoto.com. Other photo image files from  http://commons.wikimedia.org

    ———————————

     1 US Census Bureau, (2011), “Housing Characteristics: 2010”, Washington DC: Bureau of the Census. Accessed on 19/11/2011 from http://www.census.gov/prod/cen2010/briefs/c2010br-07.pdf

    2 SINGSTAT, (2011), “Statistics Singapore: Key Annual Indicators”, Singapore: Department of Statistics. Accessed on 19/11/2011 from <http://www.singstat.gov.sg/stats/keyind.html#hhld>.

    3 SINGSTAT, (2008), “Key Indicators of Residential Households”, Singapore: Department of Statistics, Accessed on 19/11/2011 from <http://www.singstat.gov.sg/stats/themes/people/hhldindicators.pdf>.

    4 US Census Bureau, (2011), “Housing Characteristics: 2010”, Washington DC: Bureau of the Census. Accessed on 19/11/2011 from <http://www.census.gov/prod/cen2010/briefs/c2010br-07.pdf>

    5 This is based on a cross-tabulation of the variables “ownership” and “year” from the IPUMS online data analysis system at this URL http://sda.usa.ipums.org/cgi-bin/sdaweb/hsda?harcsda+1850-2009

    6 Singapore Gross Property Tax Revenue from SINGSTAT, “Public Finance” at http://www.singstat.gov.sg/pubn/reference/yos11/statsT-publicfinance.pdf  The number of resident households has been taken from the Census of Population 2010 at <http://www.singstat.gov.sg/pubn/popn/c2010sr2/t20-25.pdf>

    7 Photo public domain: http://commons.wikimedia.org/wiki/File:Pruitt-Igoe-collapses.jpg

    8 HDB, (2011), “Homes for All”, Singapore: Housing Development Board.  Accessed on 19/11/2011 from < http://www.hdb.gov.sg/fi10/fi10221p.nsf/Attachment/AR0405/$file/home5_frameset.html>.

    9 UNODC, (2011), “Homicide level for 2010, or latest available year”, Vienna: UN Office on Drugs and Crime, accessed on 17/11/2011 from < www.unodc.org/documents/data-and-analysis/statistics/Homicide/Homicide_level.xlsx >.