New Geography

Tag: Obama’s America

  • Credit Cards Flash At The White House

    Back in the 1980s, Citibank CEO John S. Reed looked at the bank’s earnings and said, more or less: This is really a credit card company with six other lines of business. That is, the card portfolio was making lots of dough, and carrying the rest. Commercial lending, real estate lending, clearing, foreign exchange, branch banking — all of them were flat or losing money, while the card business was cooking.

    Membership has its privileges indeed. I am reminded of this today because this past week President Obama has been meeting with the CEOs of the big credit card companies and trying to jawbone them into giving up some of the power they enjoy to goose their earnings by opportunistic manipulation of terms of service to their customers. It’s as if Mobil or BP had the power to come back in the dark of night and siphon off some of the gas they sold you in the afternoon.

    I wish the president well. He made it clear during his session with the card executives that he was familiar with their machinations from personal experience. We have come a long way since the first President Bush marveled at a bar code reader. But I have my doubts. Right now, the whole banking portfolio looks a good deal like Citibank did in those days. Commercial lending, mortgages, trading… all underwater.

    Credit cards may or may not be making money—that shoe doesn’t drop all at once—but when you can squeeze your customers the way all that fine print allows, you don’t give up the franchise lightly. Let’s not forget, the credit card business already had its bailout, in the form of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which functions according to the Law of Goodfellas: Drowning in medical bills? “F* you, pay me.” Swamped by alimony and child support? “F* you, pay me.”

    To that, add: Lost your job, house, and health insurance? “F* you!”

    When I arrived at Citibank in 1980, one of the first speeches I wrote was for the opening of Citibank, South Dakota, which was created expressly for the purpose of lodging the credit card business. Citibank had transplanted this business from New York State because New York still had usury laws, which capped retail interest rates at 12%.

    The bank was in big trouble. In the preceding years, Mr. Reed had flooded the nation with credit cards, a bold move in an era when people did their banking locally. A credit card was generally an extension of an existing banking relationship, replete with a credit history and some suasion of banker over customer. Reed’s folly, as it was occasionally called, entailed giving cards to total strangers by mass mailing—unlike retail banks, the U.S. Post Office could branch across state lines—many of whom were of dubious creditworthiness, or dubious character for that matter. With interest rates capped at 12% by New York law, and overnight money, borrowed as needed from other banks, floating north of that—this was when Paul Volcker was Fed chairman—something had to give. As Walter Wriston put it, “When you borrow money at 14% and lend it at 12%, you can’t make it up on volume.” When I was recruited as a Citibank speechwriter, among the perks my boss mentioned was that I could take out a loan at a low employee rate and buy a CD that paid a higher one.

    New York State legislators never imagined that one of the most venerable of banking institutions would relocate the business to a more favorable venue, a practice called jurisdiction shopping. But armed with some combination of the Bank Holding Company Act and other legislation, and something called the Commerce Clause of the U.S. Constitution, they found their way to South Dakota and its accommodating four-term Governor William Janklow. Governor Janklow’s signature legislative accomplishments were the reinstatement of capital punishment, and lifting the State’s usury limits. (He was later convicted of running a stop sign and hitting a motorcyclist, killing him. The family was precluded from collecting damages because Janklow was heading home from a speech at a country fair, and thus on official business. He is now a practicing lawyer.)

    But enough local color. Suffice it to say that the bank got what it wanted, and so did the State. The bank instantly became South Dakota’s largest employer, and, as we pointed out in our speeches, its college graduates found an employer where they could put their degrees to work without leaving home.

    This was so soon after I started working at Citibank that I was denied my first credit card because I hadn’t been at my job long enough. “I’m writing speeches for the chairman of the bank and for your boss, Rick Braddock,” I told the phone rep. “That may be,” she said, “but you haven’t been employed long enough to qualify.” When I told Rick, he laughed and said, “At least they’re doing their jobs. What do you want, plain vanilla or preferred?”

    Freed from the constraints of New York State law, Citibank survived its catastrophic loan losses and pioneered many now-standard innovations, including risk-based pricing, affinity cards, and a portfolio of cards targeted to different categories and classes of users.

    Even then, the promiscuous marketing of cards and the potential resulting horrors were manifest. Like pornographers’ lawyers, we found the germ of redeeming social importance. We were providing consumers with a tool for managing their personal and family finances. We were freeing working people from the necessity of relying on loan sharks from payday to payday. We were dealing with consenting adults.

    The bankers were fully aware, of course, that in spite of talk about sensible use of credit and managing the household budget, they were really selling liquor to the natives. Behind the scenes was a laboratory where young people with degrees in psychology were kicking the consumer behavior of millions around like a soccer ball, finding ways to hype the impulse to buy, buy, buy, and mining data to place “choices” in front of people based on their previous purchases. We take it all for granted now, with Amazon.com and a thousand other websites, but this took place in the years of the mid-1980s, one of which was 1984.

    By the end of last week, the biggest story out of the credit card summit was that Larry Summers fell asleep, a serendipity that is almost a reenactment of regulatory behavior over the past eight years or more (I am aware of the role Summers played under Clinton). The New York Times reported, “One executive told the president that although her assignment had been to try to persuade the president not to support new restrictions, ‘it was pretty clear I won’t succeed.’” The biggest underlying argument is that with the banks’ other businesses so weak, they don’t want to give up the one cash cow.

    My fear is that whatever new restriction is placed on this weasel industry, whether we have to wait for new Federal Reserve regulations in 2010 or they are expedited, the evil minions at the banks will find a way around it. This is the game they have long played. I have seen their tricks in my own accounts, including that first one that Mr. Braddock granted me. Lower the interest rate? They accelerate the repayment schedule, which means the customer has to pay just as much each month, resulting in lower repayment of interest as a share of the payment.

    It reminds me of the way cigarette companies lower the tar content of cigarettes by perforating the paper. The poor addict drags more often and harder, just to maintain the accustomed nicotine levels. Or the time I paid my balance in full—thousands of dollars worth—when my interest rate was low, then used the card in an emergency, only to find that my rate had shot up to Tony Soprano levels. Why? Because when I had paid my bill in full, they hadn’t yet posted $6 in new interest charges, which went unpaid, and therefore I was now being charged at deadbeat levels.

    Or, as Michael Corleone would put it, just when I thought I was out, they pulled me back in.

    Henry Ehrlich has written speeches as a freelancer for both the new, white-knight CEO of Fannie Mae and the former, disgraced CEO of Freddie Mac. He is author of Writing Effective Speeches and The Wiley Book of Business Quotations.

  • Why Today’s Green Era May Fail

    Much of the debate about ways to create a landscape of green homes today has focused on the new tax credits for residential energy efficient windows, solar panels and geothermal options. Passive solar and other design methods which make more sense have yet to qualify for tax credits. If history is any guide, this is an error that may take us down the wrong path.

    Yesterday And Today

    To best understand the direction of today’s green movement, let’s remember the first green era, when the Carter Administration offered a 50% tax credit to solve our energy consumption and pollution problems. The most prolific of the tax financed energy saving devices were unsightly rooftop solar water heaters that marred the suburban landscape. Those solar units cost $5,000 or more installed (1983 dollars). So you, the tax payer, financed $2,500 per home. Unfortunately the heaters had a short life span. Over a decade most wore out and disappeared. The good news was the developed landscape looked better without those things … the bad news was the tax payers likely paid billions for systems that quickly failed.

    Back then, I too was a participant in this green era. I built a 1980’s state-of-the-art home: Passive solar, earth bermed, with a 10kW Bergey Wind Generator, of which the tax payers reimbursed me $13,000.

    With “passive” solar, the sun heats up a dark brick floor in the home, which in turn heats the home on a sunny winter day. In the picture here, you can see the south-facing windows, which allow the sun through to heat the dark tile floors. The bricks were built upon a thick concrete base which stored heat over-night; this is known as the “battery”. No complex systems are needed as the home itself is the collector. It proved to work well.

    The City of Maple Grove, Minnesota, where the home was located, had passed a Wind Generator Ordinance allowing a 100 foot tall wind system to be built on a small city lot with just a permit. Perhaps it was the first city in the country with such a ruling.

    So we constructed a 100’ tall tower with a 10kW Bergey Wind System with its 23 foot diameter blades. A quarter century before today’s Green movement, we had a “Net-Zero” home (it produced more energy than it used).

    The neighbors however, were not enthused, and waged a war against the city, resulting in Maple Grove being the nations first city to repeal a Wind Generator ordinance. Years after the construction, the City made a large offer and bought the generator from me. There was no recovery from the tax laws, so I got to keep the $13,000 credit.

    In 1983 this home cost about $121,000. Twelve years later it was appraised at $186,000. It’s architectural oddity severely limited it’s resale potential. In those years of good home appreciation, had it been a conventionally built, the nearly 4,000 sq.ft. lake front home should have been worth a minimum of $350,000. I had lost nearly $200,000 by going green. In fairness the loss was due to the underground construction and lack of curb appeal, and had nothing to do with its passive solar design, which is why we used passive solar again on our new home.

    Late in 2008, I found myself building Green again, this time as a requirement of a land purchase I made from the City of St. Louis Park, Minnesota. I had to agree to build to MNGreenStar certification, a derivative of LEED modified for severe cold climates.

    This time, in a similar situation to the ‘80s, the housing market downturn coincides with an increase in energy awareness and we have a government controlled by the Democratic Party. We have not found any new Green solutions that simultaneously reduce both initial housing costs and energy consumption. It seems that higher an EnergyStar rating on an item, the more expensive it becomes. The option today still remains to pay more now, for the promise of reduced costs later.

    With most Green ratings there is a list of requirements (with MNGreenstar the “list” is 36 pages long in tiny sized fonts) the builder must contend with to earn “points”. MNGreenstar is modeled after LEED which also contains many “social engineering” requirements.

    I also had my builder, Creek Hill Custom Homes, apply for National Association of Home Builders “Green” certification. My Certification comes with a HERS Rating of 59. I have no idea what that means but I’m told it’s pretty good. It’s on an EnergyStar sticker for the entire house.

    Why Passive Solar instead of Geothermal?

    Since Passive Solar is a very low cost design method and our home has a large unobstructed southern exposure, it simply made sense. This first winter the passive solar was inoperable because we discovered Anderson delivered the wrong glass, reflecting the suns energy out, not letting it in. Regardless, our first gas bill for the January 2009 winter (most days the high was below zero) heating period bill was only $200 at a nice and toasty 72 degrees . We used a conventional 95% Bryant HVAC system with a 3 phase air exchanger, plus a separate gas heater for the garage, a 14,000 BTU Fireplace, and three separate gas cooktops – and 3,600 sq.ft. to heat.

    Considering that the average home sells every 6 years, a home buyer is not likely to recover the initial investment on a $20,000 to $60,000 geothermal system, leaving the cost benefit a future home buyer. There is likely to be a significant long term mortgage on the home, so the interest on a $40,000 geothermal system might eventually add up to over $100,000.

    According to a December 2008 study and report by Oak Ridge Laboratory for the US Energy Department, Geothermal Systems should reduce energy consumption 30% to 35% compared to typical conventional systems (not specifying what “typical” means). On our home savings in January, the coldest month in a decade, would have been only $66. At best we would save $500 annually with Geothermal. If we spent an extra $40,000 for geothermal payback ( even after factoring in the new 30% tax credit) it would take almost half a century ( without factoring interest). I’d be 108 years old by then.

    Had Anderson delivered the correct glass, our heating bill would have been much less than an active complex system (geothermal); there are no moving parts to passive solar.

    Sustainable Green

    We need efficient housing for the mass market home buyer at attainable pricing to make the largest difference. We desperately need many more newer and better technologies and methods than we have today. This will take the same type of research and development effort that the automotive industry maintains to be competitive. Twenty five years ago our government spent enormous amounts of tax payer dollars on grants for programs that no longer exist. We are entering a new era where government will likely make huge funds available for energy related technologies.

    How did the housing industry respond when consumers stopped buying? Why didn’t builders respond by going back to the drawing board to develop innovative and efficient affordable home construction? Where has that good old American innovation gone? We need real solutions that work this time around and we need them to be at prices the average home buyer can afford.

    Those applying for grants should show proof of concept of ideas in working prototypes before any money is released to reimburse their efforts. Even then, green still won’t take off unless this next problem is solved.

    Appraising the Situation… Or Not.

    This may come as a shock, but the home appraisal business does not factor in green at all. Not even those items that actually can clearly demonstrate a quick payback. Certainly a soy derived counter top (with questionable service life) won’t win over the bank, but there are sustainable green solutions. So, what good does winning Silver, Gold or Platinum Green Certification mean if the home is not worth a cent more for financing? To the average consumer what’s most important is valuation for financing. Because the appraisals give no extra value for highly energy efficient homes, lenders see no advantage to green certification. Fix the appraisal and mortgage side of green and there is hope.

    Are we Headed In The Wrong Direction?

    In some ways these difficult to comply with “go for the Gold” certification programs create roadblocks to success by adding unnecessary complexity and costs. The new tax credits for energy efficient windows, solar panels, geothermal, and wind energy ignore passive solar and other design methods which make more sense, yet earn no tax credits. New home construction is much easier than retrofitting an old home to be efficient, yet there are few tax benefits if building new. The middle class is unlikely to finance home improvements even with a 30% tax credit. Most likely only the wealthy can access funds to retrofit a home today, and take advantage of the tax credits. If we continue on the current path, this green era will fail, and in another quarter century the next generation will try again.

    Rick Harrison is President of Rick Harrison Site Design Studio and Author of Prefurbia: Reinventing The Suburbs From Disdainable To Sustainable. His websites are rhsdplanning.com and April 19, 2009

  • Millennials’ First Recession

    Each generation has been affected differently by the deepening global recession. Baby boomers have witnessed their retirement savings evaporate into oblivion. Generation X families who finally saved enough for a down payment on their first house find themselves deep underwater without SCUBA gear. And earnest Millennials fresh out of college are wondering where all those high-paying jobs promised by duplicitous corporate recruiters went.

    No doubt the economic collapse is most palpable for the Boomer generation. Closing in on retirement, many are now holding off on purchasing that winter home in Florida. Moreover, many Boomers have no other choice but to delay retirement (provided they have managed to keep a job) in order to maintain current lifestyles.

    Ironically, this may not be too much of a stretch for the ‘forever young’ generation who has come to define themselves by their occupations. Yet this does pose a problem from those who are actually young and currently entering the workforce.

    Over the past few months I have witnessed many of my 20-something peers lose their jobs – not to mention me as well. This contradicts the popular, yet flawed notion that ‘technologically savvy’ Millennials are rendering older workers obsolete. It is clear now that upper management at corporations across the country have opted for a more conservative approach to hunkering down. This includes letting go of those with less experience (low on the company ladder) and closing the door completely to new hires out of college.

    Justin Pope of the Associated Press has confirmed that college graduates face the worst job market in years. As is indicated in Pope’s article, employers plan to hire 22% fewer graduates this spring – an alarming statistic reported from a survey conducted by the National Association of Colleges and Employers.

    Perhaps one of the more unnerving new realities spawned by the recession is what appears to be the diminishing returns to education. Even those graduating with J.D. or M.B.A. degrees find themselves in panic mode. Traditionally, these prestigious degrees meant relatively high salaries right out of grad school. Yet with law firms laying off in droves and corporations slashing entry-level positions, not only do graduates with fresh Master’s degrees find themselves without any job prospects, many are stuck with exorbitantly high student loan bills.

    So what are Millennials doing to ride out the storm? Those who do have jobs are hanging on for dear life. Some are applying to graduate school with the hopes that the economic climate will be better by the time they graduate. Others, like 26 year-old Michael Kaainoni have opted to move back home.

    After graduating from Columbia University with a Masters in Architecture degree last year, Michael landed a job at a large international architecture firm in Manhattan. Only months later, he found himself caught in a wave of corporate downsizing. Rather than scrape by and continue to pay ridiculous New York City rents, Michael opted to move back to his hometown of Kailua, Hawaii. Now living back in Hawaii, he works for a local architecture office that gets steady commissions from the government.

    Michael’s story is not uncommon for young people these days. The Millennial generation does not share the same horror about moving back home as the rabidly ‘independent’ Boomers or Gen Xers. Rather than seeing a retreat back to the nest as taboo, many Millennials will tell you that this is just smart financial planning.

    In many ways the Millennials may be following not the boomers but the experience of immigrants. For decades strong family networks have allowed immigrants to the U.S. to become ‘upwardly mobile’ despite all sorts of disadvantages from lack of English fluency to discrimination. Now that this secret is out into the mainstream consciousness, the ‘going it alone’ mentality is rapidly disappearing. Familial and community support networks are making a strong comeback out of financial necessity – and probably for the better.

    Writer Tamara Draut focuses on the financial plight facing young people today in the book “Strapped: Why America’s 20- and 30-Somethings Can’t Get Ahead”. In her book, Draut explains why young people in the workforce might seem too eager to get ahead:

    “If today’s young adults can be accused of wanting it all too soon, the ‘it’ isn’t riches, gadgets, or luxury cars. The elusive ‘it’ that today’s twenty-somethings are after is financial independence, and then hopefully, financial security.”

    Derided as the ‘everyone gets a medal’ generation by cultural commentators who believe that young people today have a bloated sense of self-esteem, most Millennials just want to live secure, modest lifestyles. This observation goes against everything that civic boosters and urban real estate speculators have hoped for during the recent boom years.

    With the notion that lifestyle trumps employment, urban planners have been deluded into thinking that by turning cities into expensive playgrounds, they will attract the best and the brightest young workers. This was an idea touted by urban theorist Richard Florida in his highly influential book “The Rise of the Creative Class”. Florida claims that, according to his focus groups, young creative people do not want to live in places that “do not afford a variety of ‘scenes’”.

    The idea that young people can choose their city at will based on lifestyle preference does not make much sense given the current economic circumstances. Job opportunity and affordability, not to mention family ties, are more likely to dictate where young people end up settling now and in the immediate future.

    Furthermore, many of the ‘lifestyle amenities’ – such as cool coffee shops, farmer’s markets, and culturally diverse restaurants – desired by these young creatives can now be found in more affordable environments outside of the traditional urban core.

    By the time this recession is over, Millennials may have passed their ‘city phase’. This spells bad news for places that have banked on spurring a renaissance driven by young people who often like urban settings but can no longer afford the luxury. Neighborhoods like San Francisco’s SoMa or downtown Los Angeles could be the losers. Cities completely missed the boat by allowing greedy real estate developers to build expensive condos for a largely ephemeral surge of Boomer empty nesters while ignoring basic issues like quality of life, safety and affordability.

    Millennials will bounce back. As the youngest generation in the workforce, they will be defined by the experience of the current economic slump and take its lessons with them throughout their lives. Instead of greed and selfishness, which is likely to define the Boomer legacy, Millennials will more likely resemble that of their grandparents’ generation – one where family and frugality is valued over individuality and self-interest.

    Adam Nathaniel Mayer is a native of the San Francisco Bay Area. Raised in the town of Los Gatos, on the edge of Silicon Valley, Adam developed a keen interest in the importance of place within the framework of a highly globalized economy. He currently lives in San Francisco where he works in the architecture profession.

  • Baby Boomers: The Generation That Lost America

    Tom Brokaw named our parents The Greatest Generation. They came of age during The Great Depression and defeated Fascism, Nazism and Communism. They built the Interstate Highway System and landed a man on the moon. They built the great American middle class with safe communities and public schools that were the envy of the world. They deserve the title of The Greatest Generation. One of their few criticisms is that they spoiled us boomers, adhering to the teaching of Dr. Benjamin Spock.

    I am 59 years old and a child of perhaps the most indulged and impatient generation in history. I fear we may also become known as the generation that lost the American Dream. The Baby Boomers have rejected personal responsibility and exhibited a lack of mental discipline that could have enormous implications for the future.

    The United States House of Representatives, now overwhelmingly controlled by the Boomers, signed a $787 billion legislative “stimulus” package comprised of 1,071 pages and a hefty 8 pounds. Not one legislator read the bill before signing it. Months later, the same House members publicly screamed at the corrupt executives of AIG who received bonuses in 2008 – bonuses specifically allowed in the very legislation they passed without reading.

    This abandonment of personal responsibilities by the Lost Generation took on historic significance on January 20, 1993. That’s when the first President Bush, a member of the Greatest Generation, was replaced with President William Jefferson Clinton, the first Baby-Boomer to reach the Presidency. The Clinton presidency was notorious for its personal indulgence – and not just by introducing oral sex to the Oval Office. During Clinton’s watch, 100,000 Islamic terrorists were trained in camps in Afghanistan while terrorist strikes against American interests went unanswered. Clinton failed to respond to the attack on the USS Cole that killed 17 servicemen. Our enemies grew emboldened believing that America did not take their deadly threats seriously. On September 11th 2,996 American civilians died in part because the government did not see its first priority to be protecting them.

    Also under President Clinton, the Federal Government in 1999 relaxed Fannie Mae and Freddie Mac’s requirements of home mortgages. The decades old formula of 20% down and a 30 year fixed mortgage that allowed the Greatest Generation to lift home ownership to more than 60% was replaced with an array of instruments including sub-prime loans, “no-doc” applications where income was not verified, and teaser rates of 1%. Such tinkering led to unqualified purchasers with 100% financing pushing home values up at 20% per year. The bubble burst in 2007 with disastrous consequences. The heads of Fannie Mae and Freddie Mac made tens of millions in annual salary. Despite the calamitous consequences of their stewardship, no one was fired.

    Another Boomer, George W. Bush followed Clinton and continued the Lost Generation’s abdication of personal responsibility. He also failed to comprehend the extremist Islamic threat. Again, no one was fired. On December 12, 2002, George Tenet, fellow Baby-Boomer and Director of the CIA assured President Bush the case that Saddam Hussein had weapons of mass destruction was a “slam dunk”. President Bush authorized the invasion of a sovereign nation based on that intelligence. No weapons of mass destruction were found. America’s soldiers inherited a broken country and hundreds of billions of responsibilities. No one, including George Tenet, lost their job. In fact, on December 14, 2004, President Bush awarded Tenet the Presidential Medal of Freedom.

    On August 29, 2005, Hurricane Katrina slammed into Louisiana and Mississippi as a Category 3 hurricane. The result was catastrophic. The levees were breached and 1,836 Americans lost their lives. Americans watched in horror as police abandoned their positions, and the National Guard struggled to protect the trapped citizens who could not evacuate. Dead bodies lay uncollected in the streets. No one will forget the scene of 60,000 American refugees at the Louisiana Superdome without food, water or medical care for days. On national television, President Bush proclaimed, “Brownie, you’re doing a heck of a job.” Although three days later, FEMA Director, Michael D. Brown was forced to resign, no one else at FEMA was fired.

    In July 2008, gasoline prices hit a national average of more than $4.00 per gallon as demand outstripped supply pushing oil to $147 barrel. The Lost Generation howled in protest at the oil companies who were profiting from the pain of American citizens. This came as no surprise. The environmental movement had stopped production on both nuclear power plants and gasoline refineries. Congress banned oil exploration off America’s coastline. Congress decided that ANWAR, a barren strip of coastal Alaska the size of Logan Airport in Boston, was off-limits to oil exploration. At $147 barrel, the Western economies were shipping more than $1 trillion dollars per year to the Persian Gulf to nations whose interests were simply not aligned with ours. Once again, our elected officials, dominated by boomers, abdicated their responsibility to keep America safe. Their inaction allowed our nation to become even more vulnerable to the oil weapon.

    In 1973, under President Carter, when the OPEC nations first used oil as a political weapon, America imported 30% of its daily oil quota. Yet not a word is mentioned by the Lost Generation expanding American production of oil to reduce this dependency. Yes, they talk of wind and solar energy – which collectively generate less than one percent of our energy – but no one has yet figured out how to power a car with wind or solar energy. After falling to $30 a barrel, oil has slowly crept back up over $50 a barrel – in a deep recession. When the recovery arrives, does anyone believe oil will not return to $100 barrel? Yet the Lost Generation sleeps with no energy policy in place and once again abdicates its responsibilities to a future generation.

    The same is true of Social Security. The Baby-Boomers are retiring now. The system is broken and there are not enough workers to make the transfers to the retirees. Do you hear anyone in Washington raising the red flag of warning? Once again, the Lost Generation has abdicated its responsibilities and kicked the can down the road.

    In the waning months of the Bush Administration, Treasury Secretary Paulson informed Congress that a $700 billion bail-out of the financial sector was needed to avoid a melt-down of our banking system. TARP, the Troubled Asset Relief Program was passed by the Congress in a matter of days. Only $350 billion was committed, banks were forced to accept TARP funds, and little of those funds made their way to acquire troubled assets. GM and Chrysler received $17 billion even though they had no “troubled assets.” Another $8 billion went to Sheik Mohammed in Dubai. He had no troubled assets either, and $1.6 billion was paid out in bank bonuses. AIG received $165 billion of TARP money and paid out $286 million in bonuses. No one in Congress anticipated the AIG bonuses when they signed the legislation that specifically allowed the payments. It does not end there.

    Franklin Raines, chief executive of Fannie Mae received $91.1 million in compensation from 1998 to 2004. In 1998, Fannie Mae stock was $75 per share. Today, Fannie Mae shares are worth 67 cents. Mr. Raines was not fired – he was simply hired as an economic advisor to President Elect Obama. Raines recently settled a civil lawsuit alleging fraud and stock manipulation for $31.4 million.

    Postmaster General John Potter received compensation of $800,000 in 2008 while the United States Post Office lost $2.8 billion. It is possible his $135,000 bonus was based on future performance. The USPS is projected to loss $6 billion in 2009. Postmaster Potter did not lose his job either.

    Our congressional representatives earn $174,000 per year for this fiscal oversight. Their congressional staff earns another $1.3 million per year plus too many perks to mention like free cars, airfare, and postage stamps.

    The very things that we took for granted as children of the Greatest Generation are now challenged. Home values have fallen dramatically. Our retirement accounts have been decimated. Our public schools are not working. Traditional allies no longer stand with America. Not surprisingly, most Americans fear their children will not be better off. The approval numbers for Congress are at an all-time low. Despite the vast number of problems facing our country in 2009, when Congress passed a Continuing Resolution in March 2009, it contained 8,500 earmarks of pork barrel spending confirming that this Congress is going to maintain business as usual.

    Dr. Spock wrote that our parents should not spank us and they should always bolster our self-esteem. That misguided advice led to the today’s climate of political correctness where the ideal of self-esteem outweighs the importance of performance, success or accomplishment.

    Consequently, the Lost Generation measures itself by its good intentions rather than by its accomplishments. Its good intentions led to policies that prohibited oil exploration off the coastlines. The result was $4.00 gasoline. Its good intentions of teaching all children in their native tongue was a good idea but the cost to do so weakened the overall education system in America. Its good intentions of helping poor families buy homes led to the sub-prime mess that has cost American families trillions in lost equity. In the last twelve months, under the dominant control of the Baby-Boom generation, America has witnessed $11 trillion of home and stock equities disappear.

    The Baby-Boomer’s move into retirement comes none too soon. Let the boomers in Congress retire at 65. We’ll even let them retire on the fat retirement plans they voted for themselves. But let’s get rid of them. The next generation can’t do much worse.

    Robert J. Cristiano Ph.D. has more than 25 years experience in real estate development in Southern California. He is a resident of Newport Beach, CA.

  • From Bush’s Cowboy to Obama’s Collusive Capitalism

    Race may be the thing that most obviously distinguishes President Barack Obama from his predecessors, but his biggest impact may be in transforming the nature of class relations — and economic life — in the United States.

    In basic terms, the president is overseeing a profound shift from cowboy to what may be best described as collusive capitalism. This form of capitalism rejects the essential free-market theology embraced by the cowboys, supplanting it with a more managed, highly centralized form of cohabitation between the government apparat and the economic elite.

    Never as pure as its promoters suggested, cowboy capitalism always depended on subsidies to businesses such as corporate farming, suburban development, pharmaceuticals, energy and aerospace. George W. Bush and the Republican majorities of the early 2000s simply drove this essential hypocrisy to a disastrous extreme by increasing deficits and allowing deregulated financial markets to run wild. In the process, they helped drive the world economy off the cliff.

    Not surprisingly, Obama and his backers see their mission to reverse the course. However, the path they are taking may prove no friendlier — and perhaps less so — to the interests of American democracy and the middle class than those of the now-deposed cowboy posse.

    The Obama policy of collusive capitalism is most evident in the financial bailout. He has placed his economic program in the hands of a man — Treasury Secretary Timothy Geithner — who can best be called, as analyst Susanne Trimbath puts it, a “lap dog of Wall Street.” A protégé of former Treasury Secretary and Citicorp board member Robert Rubin, Geithner played a pivotal role in the original Bush bailout of the Wall Street elite.

    Most recently, he proposed selling toxic assets to hedge funds and other financiers, a plan widely denounced by a host of liberal commentators, notably Paul Krugman and Joseph Stiglitz. The Geithner plan, Stiglitz noted this week in a New York Times op-ed, represents “the kind of Rube Goldberg device that Wall Street loves: clever, complex and nontransparent, allowing huge transfers of wealth to the financial markets.”

    The winners in the plan are the top guns of the financial industry, who would welcome further government-sponsored financial consolidation. For them, this would be vastly preferable to the more democratic alternative of selling the remaining assets of the failed large firms to dispersed, healthy, usually smaller, regional institutions.

    Largely missing from even these critiques is precisely why Obama has adopted this collusive approach while mostly avoiding anything smacking of populist anger. Perhaps one has to start with the very obvious fact that the president — despite occasional attacks on the greed of Wall Street — did not run against the financial markets but, rather, with their strong support. As early as the 2008 Democratic primaries, noted New York Times Wall Street maven Andrew Ross Sorkin, Obama had “nailed [down] the hedge fund vote.”

    This group includes the notorious currency speculator George Soros, a major backer of liberal groups in Washington who recently admitted to London’s Daily Mail that he was having “a nice crisis.” Whatever Geithner is doing seems to be working well for Soros and his ilk, although not so beneficently for the people who are losing their jobs and homes.

    I do not mean to suggest the shift to collusive capitalism represents a conspiracy; it simply reflects a changing of the guard among the American elite. The new hegemons include not only financial barons but also powerful interests such as the burgeoning green industry, the high-tech/venture capital complex, urban landowners and, at least in the category of useful idiots, Hollywood and much of the media.

    The new collusive capitalist class differs from the cowboys in its view of government. The collusive capitalists — notably, powerful IT companies and venture capitalists — now look to spur “green” technologies, which are seen as their next meal ticket.

    Others standing to benefit from the rise of collusive capitalism include the university and nonprofit research establishment. Universities have become critical linchpins for the new Democratic Party — providing student shock troops and professorial financial contributions as well as the basic ideological underpinnings and much of the key personnel.

    Are there any dangers for the administration from this approach? In the short run, they certainly have little to fear from the Republicans, whose strident claims about a lurch toward socialism have about as much credibility as their supposed born-again faith in fiscal conservatism.

    A potentially more dangerous threat lies from those parts of the non-gentry left, who fear that collusive capitalism will promote a dangerous further concentration of wealth and power. More immediately, it may also suffer from the limitations of a top-down, green-obsessed strategy that is unlikely to generate enough private-sector jobs, particularly for blue-collar workers.

    This large job creation deficit may take years to become evident but could have a long-term impact on middle-class voters and, perhaps most important, the generally pro-Obama millennial generation workers who are among the prime victims of the current economic malaise. Hopefully, before then, the president will recognize the limitations of collusive capitalism and set out on a broader, more democratic wealth-creating agenda.

    This article originally appeared at Politico.

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

  • Whatever Happened to “The Vision Thing?”

    When I was in elementary school, I remember reading about the remarkable transformations that the future would bring: Flying cars, manned colonies on the moon, humanoid robotic servants. Almost half a century later, none of these promises of the future – and many, many more – have come to pass. Yet, in many respects, these visions from the future served their purpose in allowing us to imagine a world far more wondrous than the one we were in at the time, to aspire to something greater.

    I am reminded of these early childhood memories not because I lament the loss of my flying car (although it would come in handy every now-and-again in fighting the Washington, D.C. rush hour gridlock) but because, with all of the rhetoric about change and hope, the Obama Administration has failed to articulate a strong, singular vision for what the future of America and the world can and should be. While some would argue that now is not the time for grand visions for the future but, rather, for hunkering down and muddling through these desperate economic travails, the fact of the matter is that at least part of the cause of continuing economic decline in this country, and in many other developed nations as well, is a lack of confidence in the future.

    I was somewhat hopeful during his address to the joint session of Congress in early February – shortly after the passage of the economic stimulus bill – that President Obama was indeed starting down the path of articulating a new vision for America. He recalled in that speech great innovations that had been spurred by prior economic and other exigencies. In that speech he stated:

    “The weight of this crisis will not determine the destiny of this nation. The answers to our problems don’t lie beyond our reach. They exist in our laboratories and universities; in our fields and our factories; in the imaginations of our entrepreneurs and the pride of the hardest-working people on Earth. Those qualities that have made America the greatest force of progress and prosperity in human history we still possess in ample measure. What is required now is for this country to pull together, confront boldly the challenges we face, and take responsibility for our future once more.”

    And again, later in his address:

    “History reminds us that at every moment of economic upheaval and transformation, this nation has responded with bold action and big ideas. In the midst of civil war, we laid railroad tracks from one coast to another that spurred commerce and industry. From the turmoil of the Industrial Revolution came a system of public high schools that prepared our citizens for a new age. In the wake of war and depression, the GI Bill sent a generation to college and created the largest middle-class in history. And a twilight struggle for freedom led to a nation of highways, an American on the moon, and an explosion of technology that still shapes our world.”

    Bold action and big ideas: Yet the focus of all of the Administration’s efforts have been on specific “solutions” to the problem set with which our economy is now faced. Some are well-intentioned but arguably poorly executed by Congress while are others rolled out for public consumption with less than full baking time—without any suggestion about what our “brighter future” might look like and how these various solutions might be woven together to help realize a brighter and different future.

    We may indeed be on the cusp of something big: It may be tragic or triumphant depending upon how and how quickly we find our way out of the country’s current predicament.

    After Hurricane Katrina ravaged New Orleans and the Gulf Coast, some urban planners, architects, emergency management experts, and others were bold enough to suggest that maybe the Ninth Ward shouldn’t be rebuilt; perhaps nature never intended us to put so many homes and so many people below sea level, in harm’s way. Regrettably, that conversation was preempted as soon as it was started by the hundreds of displaced residents who, having been treated with what appeared to be utter disregard by their local, state, and federal government in the face of that tragedy as it unfolded, insisted that at least they deserved to be returned to their homes. Politics and pragmatics trumped bold and broad thinking that could have conjured a different outcome.

    There is so is so little new and dynamic mainstream discourse about where and how we live as individuals and in communities. There is no modern proxy for flying cars and colonies on the moon. And funding billions of dollars in support of “shovel-ready projects” will certainly do nothing to advance the cause of innovative thought about how we would like to see our current communities – urban, suburban, and exurban, and rural – evolve over the next twenty-five or fifty years. What could life be like in America in 2034 or 2059? We should not have to rely upon science fiction writers, futurists, and block-buster sci-fi movie producers to craft all of our visions of the future.

    So here’s an idea for our new President. Now that everyone is relatively comfortable with the notion of spending billions (and even trillions) of dollars, let’s spend a very small portion of that on our future, rather than focusing exclusively on our near-term economic salvation. Make $10 billion available to fund five pilot projects with $2 billion each. Think of is as the “X Prize” for Innovations in Livability. Invite communities throughout the country, without restriction as to size or location, without constraints on the marketplace of ideas, to bring together their best and brightest to craft implementable proposals for how they plan to evolve their community into an exemplar for the future: Then fund the five best proposals. Take the funding decisions out of the hands of elected officials and policy makers, and place it unfettered in the hands of a blue-ribbon panel of experts from a broad range of disciplines.

    Let all Americans and the world marvel at what will replace the flying cars of the 60s.

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

  • Why We Need A New Works Progress Administration

    As the financial bailout fiasco worsens, President Obama may want to consider a do-over of his whole approach towards economic stimulus. Instead of lurching haphazardly in search of a “new” New Deal symphony, perhaps he should adapt parts of the original score.

    Nothing makes more sense, for example, than reviving programs like the Works Progress Administration (WPA), started in the 1935, as well as the Civilian Conservation Corps (CCC), begun in 1933. These programs, focused on employing young people whose families were on relief, completed many important projects – many still in use today – while providing practical training to and instilling discipline in an entire generation.

    Unemployment today may not be as extreme as in the 1930s, but for whole segments of the population – notably young workers under 25 – it is on the rise. Already young workers with college educations suffer a 7.7% jobless rate, while employment is nearly twice that among young workers overall. Hardest hit, in fact, are young people without college educations, whose real earnings already have dropped by almost 30% over the past 30 years, according to one study.

    Tapping the energies of this new “millennial” generation – those now entering their teens and early 20s – would make enormous sense both for economic and social reasons.

    Not only do they need work, but also, as their chroniclers, authors Morley Winograd and Mike Hais have demonstrated, many share an interest in community-building in ways reminiscent of the last “civic generation” in the 1930s.

    In contrast, the current stimulus, rather than inspiring a new generation, has focused on bailing out failed corporations, few of which will generate much employment. Many of the “new” jobs will be going to the already entitled: highly paid, big-pension-collecting, unionized government workers and well-educated people working in federal and university laboratories.

    Also getting short shrift has been the kind of construction projects that drive fundamental economic growth and competitive advantage. These include roads, freight rail, electrical transmission lines and water services that boost productivity in agriculture, manufacturing, high-end business services and technology. The Chinese are currently targeting their spending on precisely the steps that would aid these sectors.

    This is where a New Deal revival would help. The WPA and the CCC were all about building useful, tangible things that made the country stronger and more competitive. Overall, these and other New Deal programs amassed an amazing record – finishing over 22,000 roads, 7,488 educational buildings and over 7,000 sewer, water and other projects.

    These efforts put to work over 3 million workers. (Compare that to the mere 250,000 slated to work in the expanded AmeriCorps program.) Their earnings helped support 10 million dependents. The WPA also employed 125,000 engineers, social workers, accountants, superintendents, supervisors and timekeepers scattered in every state and community. Ultimately, notes political economy professor Jason Scott Smith, the New Deal intimately touched the lives of more than 50 million people – out of a total U.S. population, in 1933, of 125 million. Now that’s stimulus!

    Critically, the WPA and CCC also left behind useful things for the next generation. As historian Gary Breichin has pointed out, we unknowingly walk, drive and ride through many structures built by these agencies.

    These projects did not act as “lures” for the elites, cognitive and otherwise – as so many of our current efforts do – but rather served a broader purpose for the public. The University of Washington’s Richard Morrill notes that the WPA bequeathed “an enduring legacy” around Seattle: bridges and retaining walls and drainage systems, parks and playgrounds, roads and trails, sewers, recreational facilities, airports, streetcars, low-income housing, as well as programs for musicians, artists and writers.

    The WPA and CCC left a similar mark even on the most remote parts of rural “red” America. In places such as Wishek, N.D., notes native Delore Zimmerman, few people recognize that it was the New Deal-sponsored WPA that built the still-used local pool and the community center. Nor do farmers, many of them rock-ribbed Republicans, readily acknowledge that the windbreaks and other conservation projects started by the CCC helped preserve the land from devastating erosion.

    A public works agenda today, of course, would include different things, like expansion of broadband Internet access and a greater emphasis on private financing and skills training. Yet a neo-WPA would still focus on upgrading and expanding our basic infrastructure, which, by all estimates, is generally in sad shape.

    If this is such a good idea, why is no one else promoting it? Among Republicans and conservatives, of course, nothing done by Franklin Roosevelt – except, perhaps, winning the Second World War – could ever hold much merit. They certainly can argue, with some justification, that it was the war, and not the New Deal, that finally got us out of the Great Depression.

    But this is narrow thinking. America’s post-war boom owed much to the work of WPA, CCC and other New Deal programs. Our late 20th-century expansion required travel along their roads and bridges; their energy plants and transmission lines powered our industrial growth, extending it to formerly poor regions like the South. Water and conservation projects undertaken in the agricultural heartland precipitated a revolution in productivity that has fed much of the world.

    More troubling may be why Democrats – often professed admirers of FDR and his work – have not been eager to revive these programs. One factor may be the enormous power of unions representing public employees. The power of organized public-sector workers, notes historian Fred Siegel, was a non-issue in the 1930s and 1940s.

    Today, though, these groups are powerful enough to boost the cost of any government initiative – because often they require high salaries, costly work rules and, most important, pension benefits. The last thing these unions would sanction would be the mass employment of young workers on a temporary basis at living, but not union-scale, wages and benefits.

    Secondly, there are political obstacles. This administration often appears, as one Democratic mayor from central California put it, like “moveon.org run by the Chicago machine.” Its first priority seems to be to reward allies in organizations – whether in “grassroots” groups like ACORN or in the academy – who also share their political agenda.

    Take, for example, the federal government’s proposed expenditure of $500 million to $600 million for “climate change research.” These funds are almost certain to end up in the pockets of high-end government workers and university-based zealots; as a scientific enterprise, it is likely to be as valid as asking the College of Cardinals in Rome to determine the existence of God. The ultimate result will be to provide new grist for Al Gore’s – and the administration’s – friends in the “green” investment banking world and Silicon Valley.

    This green agenda itself may also constitute a third cause itself for WPA avoidance. Much of the environmental movement – committed largely to reducing the carbon footprint of 300 million Americans – doesn’t want new bridges, roads, ports or much of anything that uses greenhouse gas-spewing concrete. They’d prefer to scale back agriculture and grow just enough organic produce to keep Alice Waters clucking happily in her kitchen.

    A similar disconnect can be seen in energy policy. A new WPA could help build transmission lines to connect the energy-rich parts of the country to the major metropolitan areas. This would spur both industrial development in places like the Great Plains – rich in everything from fossil fuels to wind power – while keeping energy prices down for U.S. consumers and firms.

    Yet so far, the energy program seems focused almost exclusively on providing rich contracts to Silicon Valley firms that are close to the administration. So don’t expect a massive expansion of new transmission lines or any expansion of new, “clean” hydropower. The administration’s green agenda seems to revolve not predominately around better or even cleaner energy, but less.

    And, sadly, conservation is one place a new WPA would be most effective. One possible function for a modern WPA would be to go to neighborhoods – particularly poor and working class ones – and insulate houses. This would certainly save money over having government workers or contractors do the same work.

    All this suggests a profound disconnect between the new administration and the real world.

    The post-industrial educated class that now dominates Washington appears, if not scornful, profoundly detached from the problems facing productive industry. These officials also seem blissfully unaware that the public – as opposed to the academy and the elite media – cares more about jobs than about being green; by nearly three to one, according to the most recent Pew poll, they are more worried about the economy than climate change.

    In many ways, this disconnect is inevitable. Products of the “information age,” Obama’s academically oriented backers seem to have trouble distinguishing between words and actual things. Virtually no one in the upper reaches of this administration has been tested by running a private company, manufacturing a product or bringing in a crop. This administration of “experts” from academia and government service appears to possess little tactile knowledge of the real world.

    In this way, Obama’s great strengths – he is a brilliant communicator and image-builder – are also proving to be a source of profound weakness. Right now, he is selling a post-racial kumbaya and a vague confection of ‘hope.” Financing for these good intentions is likely to ebb, however, as a result of a stunning redistribution of wealth from taxpayers to an expanded class of tax-takers.

    Indeed, for all his communication skills, the president has failed to create an attainable vision of a stronger, wealthier America with better jobs, more wealth and improved infrastructure. Roosevelt and even Truman provided inspiration, too, but they backed it up with practical changes that promised improvements in the day-to-day lives of most Americans.

    These hard times require tangible solutions to basic economic problems. Rather than worry about the generally clueless Republicans, the administration should focus on building a legacy as real and long-lasting as the one left behind by the WPA and CCC.

    More than a mere matter of building roads and bridges and increasing access to cheap energy, the WPA was about restoring a collective spirit, a shared stake, in constructing the sinews of a more competitive, prosperous country. Unfortunately, amidst the confused priorities of this administration, such bold initiatives remain but distant possibilities.

    This article originally appeared at Forbes.

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

  • Throwing Rocks At History

    My wife and I spent last Saturday afternoon with our three children exploring the famous and exotic art works on display at the LA County Museum of Art. Yet what caught the attention of our twin 10-year-old girls was a grainy oversized poster of two youths on a Berlin street heaving rocks at Russian tanks.

    Why, Lucia and Antonia wanted to know, were they throwing stones? Wouldn’t the tanks fire on them? What happened to the young men in the photo?

    Their questions forced my wife and I into a quick retelling of postwar German history, as we toured the exhibit of “The Art of Two Germanys / Cold War Culture.” Starting with graphic photos of the firebombing of Dresden, our explanations of how Germany came to be divided and how the two nations took such different courses raised many more questions than we could adequately answer.

    The attention span of 10 year-olds being what it is, we eventually moved on to other topics. But later that evening, on a visit to Vroman’s bookstore in Pasadena, the day’s collision with art and politics triggered a difficult conversation with my 12-year-old son.

    Diego is a voracious consumer of fantasy novels, particularly those that feature dragons. It has seemed like a harmless phase; the spellbinding stories and gorgeously rendered natural histories of mythical creatures have enriched both his imagination and vocabulary.

    Having forgotten to bring his own allowance money, Diego turned to me to buy for him A Practical Guide to Dragon Riding. I refused. Thinking of the young men and the tanks, I urged him to look beyond the seductive world of fantasy to the shelves of books on other topics. You’ll be needing a practical guide to the real world, I advised.

    Diego, of course, was looking for a cash advance, not advice. But for me, our filial drama raised the curtain on the global drama coming soon to the theater of our lives. Everyone now knows that our children are going to be adjusting to tough economic times. But few are anticipating the global geopolitical upheaval that the financial crisis will inevitably unleash on their sheltered lives. The Four Horsemen follow in the wake of economic disaster, bringing conquest, war, famine and death.

    I grew up with my parent’s stories of the Depression and World War II. It was impossible to escape the indelible imprint of those global catastrophes. History was not something that happened in books or to other countries – it was a dominant feature in their personal stories.

    Today, only the governments of Iceland and Latvia have collapsed so far, but titanic forces are unmistakably stirring. The sickening roller coaster ride of volatile global markets, the accelerating shrinkage in world trade, and the rising demands of nations to protect their own will inevitably topple political structures with the same shock and severity that is now sweeping through our economic institutions.

    In reality and in metaphor, young people are gathering the stones that will soon be hurled at tanks around the world. To pretend otherwise is to ignore the lessons of history. Parents obviously hope their children will live in a world of stability and prosperity. But our curse is to live in interesting times.

    Neither children nor their parents are prepared for this. Neither my father’s father, nor the father of Anne Frank, nor the fathers of those anonymous Berlin youths could adequately explain to their children what was happening, nor provide them sure-footed guidance in the shadow of forces beyond anyone’s control. Still, parents today have an urgent responsibility to try.

    Character and resilience are the only lasting legacies we can leave our children, and they will need both in the times ahead. As difficult as it will be, we can take heart from the words of Victor Frankl, the renowned thinker and concentration camp survivor. “The world is in a bad state,” he wrote, “but everything will become still worse unless each of us does his best.”

    Rick Cole is the City Manager of Ventura, California, where he has championed smart growth strategies and revitalization of the historic downtown. He previously served as the City Manager of Azusa, and earlier, as mayor of Pasadena. He has been called “one of Southern California’s most visionary planning thinkers” by the LA Times.

  • Anger Could Make Us Stronger

    The notion of a populist outburst raises an archaic vision of soot-covered industrial workers waving placards. Yet populism is far from dead, and represents a force that could shape our political future in unpredictable ways.

    People have reasons to be mad, from declining real incomes to mythic levels of greed and excess among the financial elite. Confidence in political and economic institutions remains at low levels, as does belief in the future.

    The critical issue facing the new administration is finding useful ways to channel this disenchantment. We know popular anger can also be channeled in unproductive ways. It can serve to further a narrow political agenda – for example, Karl Rove’s cynical exploitation of the “culture wars” – or stir up a witch hunt against both real and perceived “threats,” as occurred during the McCarthy era. If this were Russia, there would be show trials and executions. We do not and should not do that – but we can still use populist anger to reshape our nation and make it stronger.

    In this respect, the Obama administration, criticized justifiably as too radical on some issues, has been far too timid. It has squandered much of the stimulus effort on maintaining fundamentally corrupt, even sociopathic, institutions like AIG or Citigroup. By taking direction from establishmentarians like Treasury Secretary Timothy Geithner, one of the original architects of the Bush financial bailouts, the current administration has seemed as complicit in condoning and even rewarding Wall Street’s transgressions as the last one.

    Populist rage creates the political support for taking far bolder steps against Wall Street. A good first step would be to allow the TARP-backed giant banks to come under some sort of federal control, or bankruptcy process, effectively wiping out the holdings of the financial malefactors and decimating any hopes for future bonuses. The public could then sell the remaining assets to the many well-run community and regional banks that invest in local businesses as opposed to the arcane paper favored by the Masters of the Universe.

    Radical financial reforms represent only part of the opportunity. China is using its stimulus to increase its competitiveness globally. So far, the Obama administration’s economic strategy, if it has one, has been selling the public on the chimera that highly subsidized “green jobs” and good intentions will save the economy. It has also rewarded what my old teacher Michael Harrington called “the social-industrial complex,” the massively growing education, health and social-service bureaucracy. President Obama needs to spend less time in photo ops at “green” factories and figure out how to drive the transformation of whole industries, like autos, steel, electronics and aerospace.

    In this sense, of course, the New Deal – particularly the Works Progress Administration and the Civilian Conservation Corps – provides some models. These programs used the unemployed to create new dams, electrical-transmission systems and bridges that boosted the nation’s productive power. Critically, such a program would target blue-collar workers – mostly male and heavily minority – hardest hit in the recession. As conservatives rightly note, the New Deal construction projects did not end the Depression, but they did give people purpose and skills as well as hope, while leaving us with a remarkable legacy of productive structures that inspire us with their affirmation of our national destiny.

    Sadly, the political operatives running the White House today may prefer to use the popular mood primarily to service their key political constituencies and boost their poll ratings. If they do so, they will have squandered a unique opportunity to implement changes that would benefit both the country and the middle class for decades to come. Public outrage is a terrible thing to waste.

    This article originally appeared at Newsweek.

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

  • The New Business Ethos

    My only post-graduate employment lasted 3 months. I worked for a small political consulting firm drafting online strategy for a well-funded land-use initiative. After the success of the measure, the firm’s founder sat me down, told me he loved my work but that the firm was not interested in continuing its web-based consulting. He had to let me go. It was in that same meeting that I decided to start – and pitched to my boss – my own business.

    Without a business degree, experience, funding or family support I started WebRoots Campaigns. It seems insane in retrospect. But at the time, the process was so thrilling, so life-changing, that I would not trade those initial months for all the know-how in the world.

    Being in consulting, I’ve encountered entrepreneurs from a broad array of industries. Some were as expected: those who wanted money and would do anything for it. Less expected however was the number of business owners who worked to a different beat – running their companies for wildly different reasons – all less motivated by the bottom line.

    This group for the most part hailed from the ranks of new, young business owners. Some started their business fresh out of school, not even dipping into the employment pot for a taste of the promised land. Others, like myself, had a taste, spat it out, and went on to create our own soup.

    While the intrigue of entrepreneurship is nothing new, the current economic and cultural climate has fostered a wave of young, untraditional businessmen (and women) never seen before.

    The New Business
    The emerging business class recognizes various motivations for their work and builds their companies to reflect these motivations.

    This new business is in part a reaction to the shortfalls of traditional business epitomized by disregard for the environment, social equality and family. Once widely viewed as intelligent, lean and mobile, the corporation of the past century maneuvered unquestioned through our economic, cultural and political landscapes.

    The new business reaction to this is to view business not as an end unto itself, but as a means toward something greater. Such a model does not insist that profits are bad, or that one requires world-changing ambition to succeed.

    Profits are celebrated if the business creates value beyond the bottom line. A boutique furniture company which employs locals at good wages, buys from ethically sound foresters, and re-invests some capital back into the community is an exemplary model.

    The entrepreneur may have founded the store because of love for his craft, to be near his family, or because he wanted to support his community. In any of these motivations, the pursuit of profit is inherent and accepted, but is balanced against other factors. It is only when the pursuit of capital becomes exclusionary, when it becomes absolute, that business begins to degrade the quality of both our environment and our lives.

    The new model recognizes various practices, motivations and responsibilities throughout the business process. Such factors as the environment, social mobility, cooperation, community and family are not simply strewn aside in a dash for quick profits, but are strategically considered throughout the life of the business.

    An Emptying Promise
    An additional factor in the emergence of the young entrepreneur is the emptying promise of the traditional employment path, both economically and psychologically.

    Forty years ago, relative wages were higher, health insurance more accessible, and mobility more lubricated; it was not uncommon to stay with a company for one’s entire professional life. However, real wages have been stagnant since the 1970s, while average working hours have increased over the same period.

    Young Americans’ wages were already in retreat before the downturn. They appear to be suffering more since they lack seniority, contacts and, in part, because older Americans – their nest eggs now cracked – cannot retire and not make room for newer workers.

    The young American psyche has also become weary of the traditional path. We are accused of laziness, of unwillingness to pay our dues. But when our dues lead only to more hours in a cubicle in an insatiable rat race to increase corporate profits for an illusionary beneficiary…well, the repulsion becomes understandable.

    The emptiness of such a path has been understood by many over the years. Many have chosen to be musicians, artists, or activists. But as this realization spreads – not just to potential entrepreneurs but to consumers who are also increasingly weary of traditional business – the notion of “rebelling” against business through business itself is becoming a real option. A critical mass is being reached, both as a consumer base large enough to support this new business ethos, and as new entrepreneurs seeking to work with the “untraditional” businessmen.

    The New Business as a Response to the Recession
    The current economic crisis is obviously hurting traditional business and entrepreneurship. However, it will have a mixed effect on the emergence of new business.

    On the down side, business loans or other investments are more difficult to obtain, consumer spending has plummeted, and the majority of all industries have stripped to their bare necessities in an attempt to weather the storm.

    On the up side, the new business ethos provides a model that becomes a response to the roaring chaos. Many are losing their jobs after years of hard work for large enterprises. They are not only venturing out on their own out of economic necessity, but because of newfound realizations of the hollow promises of old business.

    In many ways, the new business ethos is better suited for tough times than the old inflated, dog-eat-dog system because it recognizes the value of cooperation and remains more flexible than older models. In the face of a recession, those who are starting new companies are finding supportive communities where expertise, connections and even business is shared.

    Consumers are also increasingly aware of the difficulties that smaller, local business are facing and are adjusting their behavior to help these local business stay afloat throughout the recession.

    The risks are higher than ever, but the recession may provide a wakeup call for many Americans, and a crucial shift in how business is started and run.

    Much praise has been given to new business models centered on community, philanthropy, environmental sustainability and cooperation. But we are only on the crest of the wave. Scan any business district and it becomes clear that old business still very much dominates the scene. MANY old companies are launching expensive PR campaigns to align themselves with the wave, but they still remain fundamentally flawed.

    As consumers become increasingly sophisticated in this respect, opportunities will arise for business to be built on this new model. More likely than not, these businesses will be built not by the businessmen of the past, but by a new generation, with new rules, and hopefully new results.

    Ilie Mitaru is the founder and director of WebRoots Campaigns, based in Portland, OR, the company offers web and New Media strategy solutions to non-profits, political campaigns and market-driven clients.