New Geography

Tag: Silicon Valley

  • Big Tech Finds Itself Lacking Political Allies

    Our nation’s ruling tech oligarchs may be geniuses in making money through software, but they are showing themselves to be not so adept in the less quantifiable world of politics. Once the toast of the political world, the ever more economically dominant tech elite now face growing political opposition, both domestically and around the world.

    For its part, the right has been alienated by the tech establishment’s one-sided embrace of progressive dogma in everything from gender politics and the environment to open borders and post-nationalism. The left is also now decisively turning against tech leaders on a host of issues, from antitrust enforcement to wealth redistribution and concerns about the industry’s misogynist culture, so evident in firms such as Uber.

    This mounting bipartisan opposition is placing the oligarchs into an increasingly uncomfortable political vise. As left-leaning Buzzfeed’s Ben Smith put it recently, there’s “a kind of ‘Murder on the Orient Express’ alliance against big tech: Everyone wants to kill them.”

    Politics after Obama

    It’s hard to recall that Occupy Wall Street demonstrators in 2011 actually celebrated the life of Apple founder Steve Jobs — a brilliant, but ruthless, capitalist, but also one who founded a religion-like technology cult. President Barack Obama also clearly embraced the techie economic model, and used Google and other tech talent in his data-driven campaigns.

    Obama was their kind of progressive — socially liberal but comfortable with hierarchy, particularly of the college-educated kind. Just a few years ago, author Greg Ferenstein suggested that Silicon Valley would forge an entirely new liberal political ideology built around its technocratic agenda. Big tech’s ascendency was further bolstered by a “progressive” Justice Department that allowed the large tech firms to buy out and squeeze competitors with utter impunity.

    Advocating antitrust at a nonprofit organization dominated by tech oligarchs, as one of my former colleagues at the liberal-leaning New America Foundation recently found out, can be dangerous for your employment status. Gradually, the image of spunky, enlightened entrepreneurs has morphed into one of monopolists reigning over what is rapidly becoming the most consolidated of our major industries.

    No one really expects competition to rise against venture capital-created firms like Google, which owns upwards of 80 percent of the global search ad market, or Facebook, which uses its power to undermine upstarts like Snap, and calls for greater government oversight are now found on both sides of the aisle.

    Kowtowing to the left has not turned out to be as clever a move as the tech oligarchs believed.

    The Democrats, as it now appears, have been taken over by Sen. Bernie Sanders, whose redistributionist, pro-regulation agenda does not sit well with the likes of Amazon CEO Jeff Bezos, the world’s third-richest man, who last year used the Washington Post to try to undermine Sanders during his presidential campaign.

    Read the entire piece at The Orange County Register.

    Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book is The Human City: Urbanism for the rest of us. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

    Photo: TechCrunch [CC BY 2.0], via Wikimedia Commons

  • High-Flying California Charts Its Own Path — Is A Cliff Ahead?

    As its economy bounced back from the Great Recession, California emerged as a progressive role model, with New York Times columnist Paul Krugman arguing that the state’s “success” was proof of the superiority of a high tax, high regulation economy. Some have even embraced the notion that California should secede to form its own more perfect union.

    Pumped up by all the love, California’s leaders have taken it upon themselves to act essentially as if they were running their own nation. In reaction to President Trump’s abandonment of the Paris accords, Gov. Jerry Brown trekked to Beijing to show climate solidarity with President Xi, whose country is by far the world’s largest greenhouse gas emitter and still burns coal at record rates, but mouths all the right climate rhetoric.

    At the same time California’s Attorney General is spending millions to protect undocumented workers and there’s legislation being proposed to transform the entire place into a “sanctuary state.” Sacramento also recently banned travel by government workers to Texas and seven other states that fail to follow the California line on gay and transgender rights.

    Past performance and future trajectory

    When progressive journalists, including those in Texas, speak about the California model, they usually refer to the state’s economic performance since 2010, which has been well above the national average. Yet this may have been only an aberrant phenomenon. Since 2010, Texas’ job count has grown by 20.6 percent compared to 18.6 percent for California. If you pull the curtain even further, to 2000, however, the gap is even bigger, with employment growing 32.7 percent in Texas compared to 18 percent in California.

    The main problem is that California’s once remarkably varied and vital economy has become dangerously dependent on the Bay Area tech boom. Since 2010, the Silicon Valley-San Jose economy and San Francisco have been on a tear, growing their employment base by 25 percent. Job growth in the rest of the state has been a more modest 15 percent. “It’s not a California miracle, but really should be called a Silicon Valley miracle,” notes Chapman University forecaster Jim Doti. “The rest of the state really isn’t doing well.”

    Tech starts to slow

    Such dependency poses dangers. The tech economy is very volatile, and now seems overdue for a major correction. People tend to forget the depth of the tech bust at the turn of the century. If you go back to 2000, San Jose’s job growth rate is among the lowest in the state, less than half the state average.

    Now tech is clearly slowing – job growth in the information sector has slowed over the past year from almost 10 percent to under 2 percent. Particularly hard-hit is high-tech startup formation, down almost half in the first quarter from two years ago; the National Venture Capital Association reported that the number of deals in the quarter was the lowest since the third quarter of 2010.

    The growing hegemony of a few very large firms – chiefly Apple, Google and Facebook — has created a very difficult environment for upstarts. As one recent paper demonstrates, these “super platforms” depress competition, squeeze suppliers and reduce opportunities for potential rivals, much as the monopolists of the late 19th century did.

    And as we found in our recent survey of the hot spots for high wage professional business services jobs, last year’s growth rates for this critical middle class sector in Silicon Valley and San Francisco lagged considerably behind those of boomtowns such as Nashville, Dallas, Austin, Orlando, San Antonio, Salt Lake City and Charlotte. Most other California metro areas, including Los Angeles, have languished in the bottom half of the rankings. These trends suggest that the state’s job performance will at least drop to the national average over the next two years and perhaps below, says California Lutheran University forecaster Matthew Fienup.

    Rising inequality

    California is home to a large chunk of the world’s richest people and particularly dominates the list of billionaires under 40. Yet, by one new measure introduced by the Census Bureau last year, the state also suffers the nation’s highest poverty rate; while a 2015 United Way study found that close to one in three Californians were barely able to pay their bills. No surprise then that as of 2015, the state was the most unequal in the nation, according to the Social Science Research Council.

    As of 2011, nearly half of the 16 counties with the highest percentages of people earning over $190,000 annually were located in California but denizens of the state’s interior have done far worse. A 2015 report found California was home to a remarkable 77 of the country’s 297 most “economically challenged,” cities based on levels of poverty and employment. Altogether these cities had a population of more than 12 million in 2010, roughly one third of the state at the time. Six of the ten metropolitan areas in the country with the highest percentage of jobless are located in the central and eastern parts of the state.

    What is disappearing faster than any state, according to a survey last year, is California’s middle class, a pattern also seen in a recent Pew study. One clear sign of middle class decline: California’s homeownership rates now rank among the lowest in the nation and Los Angeles-Orange County, the state’s largest metropolitan area, suffers the lowest level of homeownership of any major region.

    Jerry’s Jihad and its consequences

    State policies tied to Jerry Brown’s climate jihad have widened these divides. Inland Empire economist John Husing asserts that Brown has placed California “at war“ with blue-collar industries like home building, energy, agriculture and manufacturing. These jobs are critical for regions where almost half the workforce has a high school education or less.

    Richard Chapman, President and CEO of the economic development arm of Kern County, an area dependent on these industries, complains that most polices promulgated in Sacramento — from water and energy regulations to the embrace of sanctuary status and a $15 an hour minimum wage — give little consideration given to the needs of the interior. “We don’t have seats at the table,” he laments. “We are a flyover state within a state.”

    The recent legislation to raise the minimum wage to $15 an hour will have more severe ramifications for less affluent areas than San Francisco. As for climate policies, the state no longer even assesses the economic implications. Yet the state’s costly renewable energy mandates make a lot of difference in the less temperate interior when energy prices are 50 percent rise above neighboring states. A recent study found that the average summer electric bill in rich, liberal and temperate Marin County was $250 a month, while in the impoverished, hotter Central Valley communities, where air conditioners are a necessity, the average bill was twice as high. Some one million Californians, many in the state’s hotter interior, were driven into “energy poverty,” a 2012 Manhattan Institute study stated.

    Housing has arguably emerged as the biggest force accentuating inequality. Environmental restrictions that have cramped home production of all kinds, particularly the building of affordable single-family homes on the periphery. The ever increasing restrictions have made the state among the most unaffordable in the nation, driving homeownership rates to the lowest levels since the 1940s. New “zero emissions” housing policies alone are likely to boost the already bloated cost of new construction by tens of thousands of dollars per home.

    Demographic crisis looms

    In much of California, particularly along the south coast, the number of children has dropped sharply. Since 2000, there has been a precipitous 13.6 percent drop in the number of residents under 17 in Los Angeles, while that number has remained flat in the Bay Area. In contrast, there has been 20 percent growth or better in the under 17 population in more affordable metropolitan areas such as Dallas-Fort Worth, Atlanta, Charlotte, Raleigh, Phoenix and San Antonio.

    Housing prices, in part driven by state and regional regulation, are gradually sending the seed corn — younger workers — to more affordable places. Despite claims that people leaving California are old and poor, the two most recent year’s data from the IRS shows larger net losses of people in the 35 to 54 age group. Losses were particularly marked among those making between $100,000 and $200,000 annually.

    Young people particularly are on the way out. California boomers, as we discussed in a recent Chapman University report, have a homeownership rate around the national average but the state has the third lowest home ownership rate in the nation for people 25 to 34, behind just New York and Washington. The drop among this demographic in San Jose and the Los Angeles areas since 1990 are roughly twice the national average and a recent San Jose Mercury News poll found nearly half of all Bay Area millennials planning to move, mostly motivated by housing and costs. The one population on the upswing in the state are seniors, particularly in the coastal countries, who bought their homes when they were much less expensive.

    As long as home prices stay high, and opportunities for high-wage employment highly limited, the state will continue to suffer net domestic migration outflows, as it has for the last 22 of the past 25 years. Given that the state’s birthrate is also at a historic low and immigration from abroad has slowed, there’s a looming shortage of new workers. Between 2013 and 2025 the number of California high school graduates is expected to drop by 5 percent compared to a 19 percent increase in Texas, 10 percent growth in Florida and a 9 percent increase in North Carolina.

    And for what?

    Of course, many environmental activists generally prefer smaller families to cut greenhouse gas emissions; smaller families also serve the needs of developers of high-density housing, who might prefer that younger people remain long-term adolescents.

    Sadly, many of these climate policies, which cause so much damage, won’t have much of an impact on the actual climate unless the rest of the country adopts similar measures. This stems from the state’s already low carbon footprint and the impact of people as well as firms moving elsewhere, where they usually expand their carbon footprint. Nor does densification make sense as a climate antidote, given the rising temperatures associated with “urban heat islands.”

    The tech boom has been used to justify Sacramento’s crushing regulatory and tax regime. It has also made it possible for apologists to ignore some 10,000 businesses that have left or expanded outside the state, many of them employing middle and working class people.

    Ultimately California’s growing class bifurcation will demand solutions. Hedge fund billionaire-turned green patriarch Tom Steyer now insists that, to reverse our worsening inequality, we should double down on environmental and land use regulation but make up for it by boosting subsidies for the struggling poor and middle class. Certainly the welfare state in California — home to over 30 percent of United States’ on public assistance as of 2012 — will have to expand if the state stays on its present course.

    In the coming years the state’s business leaders fear an ever more leftist, and fiscally damaging, regime after the departure of the somewhat frugal Brown. There are increased calls in Sacramento for new subsidized housing, a single payer healthcare system as well as a big boost to the minimum wage already enacted.

    Ultimately California will pay — demographically, economically and socially — from its current surfeit of good intentions. Those who already own houses will not suffer immediately, but the new generation, immigrants and minorities will face an increasingly impossible burden. With its unparalleled natural assets, and economic legacy, California may be able to survive this toxic policy mix better than most places, but even in the Golden State reality has a way of showing its ugly face.

    This piece originally appeared on Forbes.

    Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book is The Human City: Urbanism for the rest of us. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

    Photo by Neon Tommy, via Flickr, using CC License.

  • Meet Marble

    I’ve lived in this neighborhood for so long that I’ve grown used to tech start ups beta testing their schemes on my doorstep. I remember the first time I saw a car drive by with a huge furry pink mustache strapped to the front grill between the headlights. That was the start of Lyft. I have a clear memory from 2008 when a friend rented her apartment out on a new internet platform. That was Airbnb. Back in the late 1990s during the dot com bubble there was a start up that would deliver everything from milk to condoms via bicycle courier.

    Meet Marble. This little pushcart size machine is launching the next generation of tech based business models. It’s using fine grained real time lidar navigation so autonomous machines can learn to negotiate the city “on foot.”

    The initial concept is for robots to deliver Chinese food to your door. My guess is that Marble’s electronic pizza boy is just the first baby step to much larger and more lucrative contracts. The postal service, private package delivery systems, and utility meter readers will ultimately save billions on labor by switching to such machines. See also city parking enforcement. Meter maids will go the way of buggy whips. Humans and their endless need for salaries, medical insurance, pensions, and workers compensation will melt away.

    New jobs will be created around the production, maintenance, and management of these new systems of course. But there’s the tricky business of getting people who are qualified to deliver pastrami sandwiches or check VIN numbers to craft algorithms – especially when a lot of this work can be done remotely from anywhere on the planet. Don’t expect the people who clean and reload these machines to get paid enough to rent a studio apartment anywhere near the Bay Area. Oh, wait. There’s an automated system that will do that too…

    We don’t have a technology problem. We have a societal distribution problem. These trends are going to make an ever larger proportion of the population redundant. Wealth has not and will not “trickle down.” Instead it will continue to concentrate into specific hands in particular geographic locations. Focusing on the technology itself is a mistake. The challenge is to create a culture and a political framework where everyone has the opportunity to enjoy the benefits of these shifts. History tells us that existing institutions don’t self reform. They fail and are replaced by entirely new systems. From where I’m looking that process has already begun and it ain’t gonna be pretty.

    This piece first appeared on Granola Shotgun.

    John Sanphillippo lives in San Francisco and blogs about urbanism, adaptation, and resilience at granolashotgun.com. He’s a member of the Congress for New Urbanism, films videos for faircompanies.com, and is a regular contributor to Strongtowns.org. He earns his living by buying, renovating, and renting undervalued properties in places that have good long term prospects. He is a graduate of Rutgers University.

  • Can California Survive a Tech Bust?

    California’s economic revival has sparked widespread notions, shared by Jerry Brown and observers elsewhere, that its economy — and policy agenda — should be adopted by the rest of the country. And, to be sure, the Golden State has made a strong recovery in the last five years, but this may prove to be far more vulnerable than its boosters imagine.

    The driver of the latest California “comeback,” the Silicon Valley-San Francisco tech boom, is beginning to slow in terms of both job growth and startup activity. The most recent job numbers, notes Chapman University economist Jim Doti, show that employment growth in the information sector has slowed over the past year from almost 10 percent to under 2 percent. Particularly hard-hit is high-tech startup formation, which is down by almost half from just two years ago.

    This slowdown extends also to the professional business services sector, which has become increasingly intertwined with tech. In a recent survey of professional business service growth for Forbes magazine, economist Mike Shires and I found that last year Silicon Valley and San Francisco growth rates were considerably lower than those in boomtowns such as Nashville, Tenn.; Dallas, San Antonio and Austin, Texas; Orlando, Fla.; Salt Lake City and Charlotte, N.C. With the exception of Orange County, the rest of Southern California performed below the national average.

    The historical perspective

    Historically, California’s great strength was the diversity of its economy, stretching from high-tech and aerospace to finance, entertainment, energy, basic manufacturing and homebuilding. Yet, during the most recent boom, the growth of high-wage job growth largely took place in one region — the Bay Area — while other sectors generally stagnated or shrank.

    Silicon Valley and its urban annex, San Francisco, have brilliantly expanded the scope of the digital revolution. Google and Apple have become the world’s most valuable companies, and the Valley, along with Puget Sound in the state of Washington, account for four of the 10 wealthiest people on the planet, and virtually all of the self-made billionaires under 40.

    This success has masked greater problems in the rest of the state. Southern California, home to over half the state’s population, has seen only modest high-wage job growth, both in tech and business services, since 2000.

    Read the entire piece at The Orange County Register.

    Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book is The Human City: Urbanism for the rest of us. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

    Photo by Coolcaesar at the English language Wikipedia [GFDL or CC-BY-SA-3.0], via Wikimedia Commons

  • Why Socialism Is Back

    Even as Venezuela falls deeper into crisis, and the former Soviet bloc nations groan under its legacy, socialism is coming back, and in a big way. Its key supporters are not grizzled pensioners yearning for Marxist security, but a whole new generation, most of whom have little memory of socialist failure.

    Although the trend is a-historic, it’s not happening in a vacuum. The primary driver is the global ascendency of neo-liberal capitalism, which in virtually all countries has accelerated inequality. This is particularly true in the United States and the United Kingdom, where the gaps between rich and poor are greatest among developed, democratic countries. In these nations, socialist politicians such as Sen. Bernie Sanders and British Labor leader Jeremy Corbyn (pictured) are now political rock stars among young people.

    In the 2016 presidential primaries, Sanders outpolled Donald Trump and Hillary Clinton put together among younger voters, and is now the nation’s most popular politician. His supporters are gradually taking over much of the Democratic Party, state by state. Corbyn, widely portrayed in the media as a walking time electoral bomb, secured for his party 61 percent of the vote among those under 40 in the recent parliamentary elections. It is increasingly possible that this once-marginal figure could someday occupy 10 Downing St. If the 75-year-old Sanders were a decade younger, he would also have an excellent chance of ascending to the White House.

    A Different Kind of Leftism

    Although neither Sanders nor Corbyn can be labeled classic Stalinists, they do represent a radical departure for their respective parties. Both adopt what are generally seen as far left positions, with Corbyn even suggesting that people displaced by London’s Grenfell fire occupy expensive, but unoccupied units, in the city’s rich precincts. Sanders has called for national health care, massive tax increases for the top income earners — with rates upward of 90 percent — and a ban on new fossil fuel development on federal lands.

    This marks a major departure from past progressive politics in both countries. Democrats and Labour have done best by adhering to the center, and calibrating reforms with the demands of the capital markets. Even President Obama, although revered by progressives, was hardly a radical on economic issues. He did little to stop the consolidation of tech industries — which were also key supporters — as his Justice Department failed to press the anti-trust button. He also supported the expansion of free trade codified as Democratic Party orthodoxy during Bill Clinton’s presidency and which are favored by corporate and commercial interests. Tony Blair and his successor, Gordon Brown, also consistently embraced neo-liberal ideologies and courted support among London’s financial elite.

    In contrast, Sanders, a Senate “independent” for most of his career, is a committed socialist who took his honeymoon in, of all places, the communist Soviet Union. He has adopted positions on trade and special visas for tech workers that are closer to those of Donald Trump than Clinton’s. Corbyn’s leftism is even more extreme than Sanders’, embracing long discarded notions of nationalization of industries, massive re-distribution of income as well as a distinctly pro-Palestinian, pro-Third World view common among European leftists.

    The ‘Precariat’ — the Modern Proletariat

    The “Bernie Bros” who made Sanders such a sudden and unlikely political force in 2016 were disproportionately young white voters who swelled the ranks of the precariat — part-time, conditional workers. The numbers of such people is destined to grow with the emerging “gig economy” and the digitization of retail, which could cost millions of working-class jobs. Even university lecturers in Britain, notes the Guardian, fear that their jobs will be “Uber-ised,” a phenomena also seen at American universities.

    For most Americans, the once promising “New Economy” has meant a descent, as one MIT economist  recently put it, towards a precarious position usually associated with Third World countries. Even Silicon Valley has gone from one of the most egalitarian locales in the country to a highly unequal place where the working and middle class have, if anything, done worse (in terms of income) than before the tech boom.

    For its part, the precariat has rational reasons to embrace socialism, particularly if capitalism seems unlikely to meet their needs. The notion of getting a steady, well-paid, full-time job has vanished for an increasing number of young people. Most millennials are not doing as well as their parents did at the same age. The idea of buying a house — once a sure sign of upward mobility — has declined in much of the U.S. for the current generation, particularly on the coasts, and even more so in the U.K., where house prices are higher and incomes lower. The Grenfell fire was not just something that happens to the poor; it could be the future for many young people who may never live in anything much better.

    How Capitalism Is Failing

    “Capitalism,” Lenin noted, “begins in the village marketplace.” Yet Americans are increasingly loath to start a business. There are now more businesses failing than being born, very different than the pattern of the 1980s and 1990s. The dream of starting a business has often been the way out for people with modest educations and means. Without the societal steam valve of entrepreneurship, the alternative for many millennials is in blue-collar or service jobs, where wages have been falling over the past decade.

    Even in the tech world, which represents the largest opportunity for younger people, start-ups have become increasingly rare. This reflects the growing consolidation of the technology sector, which reduces opportunity even in new fields. As one recent research paper demonstrates, “super platforms” such as Facebook, Google, Amazon, and Apple depress competition, squeeze suppliers and drive down salaries, much as the monopolists of the late 19th century did.

    These tech behemoths assert that their success is based utterly on merit, but they have also exploited their structural advantages, as the most ruthless of moguls did. Companies like Amazon have been able to attract investors even with scant profits, an advantage not enjoyed by their competitors, as investors await the rewards of a near-monopoly. Apple and other tech companies have also become adept at avoiding taxes in a way almost impossible for a business on Main Street. As occurs in corrupted systems, insiders usually do best, almost no matter how well they perform; Yahoo’s Marissa Mayer earned $239 million over five years — almost a million a week —  despite failing to revive one of the net’s earliest stars.

    Intersectionality: The Problem Facing Neo-Socialism

    On the surface, the analytics look good for a socialist revival, particularly in the wake of the almost certain failings of Trump’s ersatz populism. A large number of young people, in both Britain and America, have a more favorable view of socialism than capitalism. They never witnessed the failures of the past and they are reeling under present conditions. And given that many older people feel their children face a diminished future, building a majority for socialism is not inconceivable.

    Yet the neo-socialists face a challenge because their potential coalition is fraught. On numerous policy issues, modern progressivism’s interests diverge starkly from those of potential adherents. Corbyn’s multiculturalism and desire to allow more refugees into Britain may win praise on campuses and in left-wing media, but how attractive is this prospect to British working-class voters, many of whom supported Brexit to help cut back on immigration.

    Similar dynamics exists in the U.S. For example, in discussing politics at the Utah AFL-CIO (where I recently spoke), the local president, Dale Cox, suggested that many parts of the progressive agenda — he specifically mentioned opposition to fossil fuel and mineral development — directly threaten the livelihoods of union laborers. Similarly, police unions also feel alienated from progressives who embrace the agenda of groups like Black Lives Matter. Far better, Cox suggested, would be for progressives to focus on improving the lives of working people in ways that really matter, such as expanding opportunities for business and home ownership, health care, and tax reform.

    These economic positions could gain a majority, but not if the progressives maintain their   polarizing embrace of the most radical aspects of social identity and environmental policy. This in particular threatens to undermine working-class support, particularly in the interior states. The leftists’ thinly disguised distaste for how most Americans live in small towns and suburbs does not help make their case. Until the left decides to focus on the everyday issues that matter to people outside their bubble, the dream of the socialist revival will remain a fantasy.

    This piece originally appeared on Real Clear Politics.

    Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book is The Human City: Urbanism for the rest of us. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

    Photo by paulnew (https://www.flickr.com/photos/paulnew/28243001503) [CC BY 2.0], via Wikimedia Commons

  • Amazon Eats Up Whole Foods as the New Masters of the Universe Plunder America

    “We must make our choice. We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both.” —Justice Louis Brandeis

    With his $13.7 billion acquisition of Whole Foods, Amazon’s Jeff Bezos has made clear his determination to dominate every facet of mass retailing, likely at the cost of massive layoffs in the $800 billion supermarket sector.

    But this, if anything, understates the ambitions of America’s new ruling class, almost entirely based in San Francisco and Seattle, as it moves to take over industries from entertainment and transportation to energy and space exploration that once thrived and competed outside the reach of the oligarchy.

    Brandeis posed his choice at a time when industrial moguls and allied Wall Street financiers dominated the American economy. Like the oligarchs of the past, today’s new Masters of the Universe are reshaping our society in ways that could, if unchallenged, undermine the foundations of our middle-class republic. This new oligarchy has amassed wealth that would impress the likes of J.P. Morgan. Bezos’ net worth is a remarkable $84.7 billion; the Whole Foods acquisition makes him the world’s second richest man, up from the third richest last year. His $600 million gain in Amazon stock from the purchase is more than the combined winnings of Whole Foods’ 10 top shareholders.

    The Emergence of Oligarchic America

    Founded two decades ago, Amazon revenue has grown eightfold in the last decade. Bezos now wants to “reorganize the world,” as one tech writer put it, “as an Amazon storefront.” He has done this by convincing investors that despite scant profits, the ample rewards of monopoly await. Kroger, or the corner-food store, enjoys no such luxury. With a seemingly endless supply of capital and the prospect of never-ending expansion, the Silicon Valley-Puget Sound oligarchy now accounts for six of the world’s 13 richest people, and virtually all billionaires who are not either very old or merely inheritors.

    Apple, even as it it evades American taxes, enjoys a $250 billion cash reserve that surpass that of the United Kingdom and Canada combined. Their new $5 billion headquarters in Cupertino—like those of firms such as Facebook, Alphabet, and Salesforce.com—reflect the kind of heady excess that earlier generations of moguls might have admired. The peculiar nature of the tech economy rewards even to failures, like Yahoo’s Marissa Mayer, who earned $239 million, almost a million a week, as she drove one of the net’s earliest stars toward oblivion.

    The tech booms of the 1980s and 1990s rode on a wave of entrepreneurialism that provided enormous opportunities for millions of Americans, the current wave is characterized by stagnant productivity, consolidation, and disparities in wealth not seen since the mogul era. As one recent paper demonstrates, the “super platforms” of the so-called Big Five depress competition, squeeze suppliers, and drive down earnings, much as the monopolists of the late 19th century did.

    Indeed for most Americans the once-promising new economy has meant a descent, as one MIT economist recently put it, toward a precarious position usually associated with Third World countries. Even Silicon Valley, the epicenter of the oligarch universe, has gone from one of the most egalitarian places in America to a highly unequal one where the working and middle class have, if anything, done worse, in terms of income, than before the boom.

    The Oligarchs Outsmart the Political Class

    In the past, progressive political thinkers like Brandeis sought to curb over-concentrated wealth and power. In contrast, today’s Democratic establishment rarely addresses such issues. That’s no wonder given that the party is now financed in large part by the tech giants, which have backed in almost lock-step the environmental, social, and cultural agenda that dominates today’s left. In exchange, they have bought political cover for things such as misogyny, lack of ethnic diversity, and of unions and fair labor practices that old-line companies like Walmart, Exxon, or General Motors could never enjoy.

    Hillary Clinton made clear that she would, at best, tinker at the edges of the so-called sharing economy. That after President Obama’s Justice Department did virtually nothing to employ antitrust to block the tech oligarchs’ domination of key markets like search, social media, computer, and smartphone operating systems. Nor did they pressure them to stop avoiding taxes that burden most other businesses.

    Nor can we expect the Republicans, with their instinctive worship of great wealth, to stand up against monopoly and abuse of power. A White House run by Donald Trump, whose true religion seems to be that of the Golden Calf, and his Goldman Sachs economic henchmen are inherently unable to oppose ever greater concentration of money in the hands of a select few. It’s no surprise that so far, in terms of stocks, the tech giants have been among the biggest winners under Trump.

    Controlling the Means of Information

    The Masters’ ascendency has been enhanced by their growing control of the means of communications. Facebook is already the largest source of news for Americans, particularly the young. They, along with Google, seem capable of shaping information flows to suit their particular world view, one increasingly hostile to any dissenting opinions from the right. (One key to understanding post-election concerns about “fake news” is to realize that a staggering 99 percent of growth in digital advertising in 2016 went to Google and Facebook.) At the same time, those two, along with Apple and Amazon, increasingly shape the national culture, essentially turning Hollywood into glitzy contract laborers.

    But no one practices the politics of oligarchy better than Bezos. Under his ownership The Washington Post has been transformed into the Pravda of the gentry left. Last year, for example, they worked overtime to undermine Bernie Sanders’ campaign, whose victory might have led to stronger antitrust enforcement and the confiscation of some of their unprecedented wealth. Once Sanders was dispatched, Bezos, fearing the rise of uncontrollable Trumpian populism, sank his editorial resources into supporting the big money favorite, Hillary Clinton.

    The New Political Agenda

    Populism, left or right, represents the only viable threat to oligarchic ambitions. Bank of America’s Michael Harnett recently warned that if the growth of stock market wealth continues to be concentrated in a handful of tech stocks, that “could ultimately lead to populist calls for redistribution of the increasingly concentrated wealth of Silicon Valley.”

    Deflecting populism is the central imperative of an oligarchy. They feel their dominance as evidence of their superior intellect and foresight, not the result of such things as political influence, or easy access to capital. They embrace, as former TechCrunch reporter Greg Ferenstein put it, the notion of “a two-class society of extremely wealthy workaholics who create technologies that allow the rest of society to enjoy leisurely prosperity. The cost for this prosperity will be inequality of influence.”

    What Google’s Eric Schmidt calls the Valley’s “religion in-of-itself” has little in common with resuscitating grassroots Democratic capitalism, the old dream of libertarians, or empowering the working class, that of old leftists. The founders of the big tech firms may embrace progressive ideas on the environment, free trade, and immigration, but have little use for unions or raising capital gains rates.

    Overall, notes Ferenstein, they eschew nationalism, favoring global governance, want more immigration and embrace the notion of a government nanny state to tell the masses how to live. They also prefer highly unequal conditions of urban density over the more traditionally egalitarian suburbs. Largely childless San Francisco, impossibly expensive and deeply divided by class, is the preferred model of the future.

    The Problem is People

    People, little or otherwise, now constitute the Masters’ biggest problem. Unlike the old moguls like Andrew Carnegie or Henry Ford, the new Masters do not promise greater prosperity, or even decent jobs for the middle or working class. Their vision, increasingly, seems to be a world where most people’s labor is largely superfluous, and will need to be satiated with regular basic income from the state, a position now widely embraced by such luminaries as Mark Zuckerberg and Elon Musk, supplemented by occasional “gig” work.

    They imagine a future where few will ever own homes or control any real assets. Rather than being parts of a geography or even a country, the increasingly socially isolated masses can be part of Zuckerberg’s “global community” while ordering food from Amazon, delivered by a drone from an automated warehouse, employing social media and virtual reality to fill their long periods of idleness.

    As Brandeis warned, this vision—dominated by the interests and influence of the few who possess the bulk of the wealth—is incompatible with the democracy that we have known.

    This piece originally appeared on The Daily Beast.

    Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book is The Human City: Urbanism for the rest of us. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

    Photo by National Museum of American History, via Flickr, using CC License.

  • The Superstar Gap

    The biggest challenge facing many cities in transitioning to the knowledge economy is a shortage of “A” talent, especially true superstars.

    All “talent” isn’t created equal. Crude measures such as the percentage of a region with college degrees, or even graduate degrees, don’t fully capture this. It is disproporationately the top performers, the “A” players and superstars that make things happen.

    Sections of the knowledge economy have long been geared to superstars. Economist Enrico Moretti cites research on biotech hubs, in which he notes that it is not just having a top university nearby that mattered in establishing biotech clusters, but having the true handful of academic superstars researchers. In The New Geography of Jobs, he writes:

    In a fascinating and now classic article and in a series of subsequent studies, they argued that what really explains the location and success of biotech companies is the presence of academic stars – researchers who have published the most articles reporting specific gene sequencing discoveries. Among top universities, some institutions happened to have on their faculties stars in the particular subfield of biology that matters for biotech; others had comparable research but did not have stars in that specific subfield. The former group created a local cluster of biotech firms while the latter did not.

    Richard Florida devotes a significant amount of his latest book The New Urban Crisis discussing the rise of the superstar phenomenon, which he also links to specific superstar cities.

    Superstars are important in tech because of the 10x principle I mentioned in my recent post on the Silicon Valley mindset. The best coders are 10x as productive as the merely very good coder. The top entrepreneurs are probably 100x or or more. The presence of superstars, along with some amount of good fortune, can transform the economy of a city or region.

    Jeff Bezos is a superstar. Mark Zuckerberg is a superstar. Michael Bloomberg is a superstar.

    These superstars are disproporationately located in only a handful of regions.

    To see this effect, just look at Austin vs. Seattle. Austin is a booming, prosperous city with a major tech industry. Yet Seattle is generating significantly greater value. Seattle’s real per capita GDP is $75,960 vs. only $55,323 in Austin. Seattle’s per capita income is $61,021 vs. $51,014 in Austin.

    Austin had some good entrepreneurs like Michael Dell, but not superstars in industries that would create massive platforms like Microsoft and Amazon. Austin has a lot of quantity, but it looks to me like there’s a big quality gap vs. Seattle.

    And it’s not just that superstars create things, they act like a magnet attracting others. As economic development consultant Kevin Hively once told me, “When you’re the best in the world, people beat a path to your door.”

    To see this in action, just look at Carnegie Mellon University in Pittsburgh. CMU has the #1 ranked computer science program in the country. And companies like Google (600 employees), Uber (500 employees), Apple (500 employees), Intel, and Amazon been drawn there and set up shops around it. Ford is investing a billion dollars into autonomous vehicle ventures there. And GM also has a presence.

    It’s interesting to contrast with the University of Illinois’ program. U of I is ranked 5th in computer science. My impression is that from a commercial impact, they used to be bigger time than they are now. The web browser as we know it was invented there, but that was a long time ago. They have a research park designed for companies wanting to take advantage of proxmity of U of I. There are a lot of companies there, but the tech roster isn’t as marquee as Pittsburgh’s and my impression is that the scale is smaller.

    There’s a big differnce between being number one and number five, particularly when something like ownership of the driverless car market is at stake. Maybe that’s why former GE CEO Jack Welch said he only wanted to be in a business if he could be number one or number two.

    Cities and states in the Midwest and elsewhere in the interior like to boast of their assets, which include many great schools, but very few world dominating number ones in important fields. This is a big challenge for them.

    Superstars aren’t the entire world. The presence of superstar businesses also creates problems as well as wealth. But if these places want to not only thrive but perhaps for some of them even just survive in the knowledge economy world, they need to look at their attractiveness to the truly top tier talent (I will address “A” caliber but not superstar talent in a future post). I don’t often see this talked about.

    For example, one thing I don’t see in most discussion of Chicago is its lack of superstar talent. Chicago is very good but not the best in a lot of things. Where they do have arguably world beating talent, such as in their culinary industry, they shine. (I know people in New York who happily admit Chicago has better restaurants).

    If I were that city, I’d be looking to see how to create a world’s best talent pool in additional particular high impact industries. Maybe the state should consider some radical type action, such as relocating U of I’s entire computer science and select engineering programs to Chicago as part of UI Labs, and putting serious muscle behind getting at least some critical subspecialities with high commerical potential to be clear #1’s in the world.

    This is actually a scenario I plan to study in the future. Right now I’m not sure it’s necessary and some of my initial thoughts are impressionistic. So this post is in part a honeypot to try to lure in those who might react to this or even help flesh out the facts (which might augur against it).

    Regardless, this lack of superstar/number one type talent in the interior is a big handicap in the world we live in now. For example, just look back at a 2010 analysis Carl Wohlt did of where the people on Fast Company’s “100 Most Creative People in Business” list lived. Only six in the Midwest and seven in the South vs. 35 in the West and 32 in the Northeast (with 20 international). This isn’t a scientific survey but illustrates the scope of the problem.

    Cities and states need to take a more finer grained view of talent, and understand the criticality of having at least some of the absolute best talent to kicking a region’s knowledge economy into high gear. Too many places have a superstar gap.

    This piece originally appeared on Urbanophile.

    Aaron M. Renn is a senior fellow at the Manhattan Institute, a contributing editor of City Journal, and an economic development columnist for Governing magazine. He focuses on ways to help America’s cities thrive in an ever more complex, competitive, globalized, and diverse twenty-first century. During Renn’s 15-year career in management and technology consulting, he was a partner at Accenture and held several technology strategy roles and directed multimillion-dollar global technology implementations. He has contributed to The Guardian, Forbes.com, and numerous other publications. Renn holds a B.S. from Indiana University, where he coauthored an early social-networking platform in 1991.

    Photo by John Picken (Flickr: Chicago River ferry) [CC BY 2.0], via Wikimedia Commons

  • The Silicon Valley Mindset

    The tech industry is one of the most powerful entities affecting our world. But who are these people? And what do they believe and how do they think about the world? A couple of recent articles provide a window into this.

    Rationalist Demographics

    The first is a set of demographics from the reader survey (unscientific, but with 5500 respondents) of the popular blog Slate Star Codex. SSC is the web site of Scott Alexander, pen name of a Midwest psychiatrist. It’s explicitly associated with the Rationalist movement and especially the Less Wrong community. If you’d like to get a feel for the Rationalist way of life, see the New York Times Magazine profile of them. One site says of them:

    …typical rationalist philosophical positions include reductionism, materialism, moral non-realism, utilitarianism, anti-deathism and transhumanism. Rationalists across all three groups tend to have high opinions of the Sequences and Slate Star Codex and cite both in arguments; rationalist discourse norms were shaped by How To Actually Change Your Mind and 37 Ways Words Can Be Wrong, among others.

    They analyze the world in terms of Bayesianism, game theory, trying to become aware of personal biases, etc. They are trying to improve themselves and the world through a clearer sense of reality as informed by their philosophical worldview above. Their heartland is Silicon Valley, though there’s a group of them NYC too of course.

    Alexander is a psychiatrist, but this community, and the Rationalists generally, is highly tech centric. Alexander himself is a defender of Silicon Valley. His readership is predominantly in computer science and other related tech professions, and overlaps heavily with Silicon Valley.

    His readers are 90% male, 89% white (Asians under-represented vs the Valley), and 81% atheist or agnostic. They skew significantly left in their politics. 55% of them are explicitly politically left, with another 24% libertarian. A higher percentage actually describe themselves as neoreactionary or alt-right (6.3%) than conservative (5.7%).

    The following table shows their responses on various topics:

    Item Left/Globalist Position Right/Populist Positions
    Immigration 55.8% more permissive 20.3% more restrictive
    Feminism 48.1% favorable 28.4% unfavorable
    Donald Trump 82.3% unfavorable 6.6% favorable
    Basic Income 60.1% favor 18.6% oppose
    Global Warming 72.8% requires action 13.7% does not require action
    Weightlifting 64.4% no/rarely 22.5% yes/often

    Silicon Valley Founders Survey

    A second source comes from a recent City Journal article by former Tech Crunch reporter Gregory Ferenstein. He used the Crunchbase database to survey 147 tech founders, including a few billionaires and other influentials, to get a sense of their belief system.

    One of his core findings is that Silicon Valley founders are strong believers in income inequality.

    The most common answer I received in Silicon Valley was this: over the (very) long run, an increasingly greater share of economic wealth will be generated by a smaller slice of very talented or original people. Everyone else will increasingly subsist on some combination of part-time entrepreneurial “gig work” and government aid. The way the Valley elite see it, everyone can try to be an entrepreneur; some small percentage will achieve wild success and create enough wealth that others can live comfortably. Many tech leaders appear optimistic that this type of economy will provide the vast majority of people with unprecedented prosperity and leisure, though no one quite knows when.

    The founders he surveyed (a tiny subset so beware of error margins) 2/3 believed that the top 10% of people would collect 50% or more of all the income in a meritocracy (the system they endorse).

    Y Combinator Paul Graham got in trouble for openly talking about inequality as inevitable. Not because other Valley execs thought he was wrong, but because the optics are bad. It’s similar to Uber CEO Travis Kalanick. His real crime was being so gauche as to put a picture of Ayn Rand as his Twitter avatar. He should have known that he was supposed to spout politically palatable bromides while running his company in a Rand-like mode, which seems to be how many of these firms in fact operate.

    Speaking of which, the politics of Silicon Valley are an odd mix of leftism and hyper-market economics. Overwhelmingly, Silicon Valley donates money to the Democrats and to progressive causes. (They also largely hate Donald Trump with a passion). What’s more, they have a communitarian streak and don’t think of themselves as hard core individualists:

    Indeed, in my survey, founders displayed a strong orientation toward collectivism. Fifty-nine percent believed in a health-care mandate, compared with just 21 percent of self-identified libertarians. They also believed that the government should coerce people into making wise personal decisions, such as whether to eat healthier foods. Sixty-two percent said that individual decisions had an impact on many other people, justifying government intervention.

    But they also support a neoliberal vision of the economy.

    Silicon Valley’s reputation as a haven for small-government activists isn’t entirely off base: the Valley does support some staunchly libertarian ideas, and the tech elite are not typical Democrats. They don’t like regulations or labor unions. For instance, Bill Gates and Mark Zuckerberg have both given hundreds of millions of dollars to charter schools and supported policies that would allow public schools to fire teachers more readily and dodge union membership. Big tech lobbyists are also strong supporters of free trade. According to Maplight, several telecommunications companies have lobbied for the Trans-Pacific Partnership (TPP) trade deal that union groups and many Democrats oppose.

    …

    Theirs is a move to make public schools more like charters—a different focus from a libertarian vision of simply privatizing the education system. The tech elite want to bring the essence of free markets to all things public and private. Using traditional American political categories, this would land them in the Republican camp.

    This is most evident in their techno-utopianism and belief that unbridled creative destruction always brings long run benefits:

    On the capitalistic side, tech founders were extraordinarily optimistic about the nature of change, especially the kind of unpredictable “creative destruction” associated with free markets. Philosophically, most tech founders believe that “change over the long run is inherently positive.” Or, as Hillary Clinton supporter and billionaire Reid Hoffman told me: “I tend to believe that most Silicon Valley people are very much long-term optimists. . . . Could we have a bad 20 years? Absolutely. But if you’re working toward progress, your future will be better than your present.”

    They in part reconcile all these through a belief in high taxation and redistribution, especially in the form of a basic income. This policy idea, nowhere fully implemented, is probably completely unknown to most Americans, yet has strong majority support in Silicon Valley (60% of SSC’s readers).

    The Silicon Valley State of Mind

    Combining these, what we see is that Silicon Valley is made up overwhelmingly of men, who are highly intelligent and with extreme faith in their intelligence and rationality, largely atheist, and largely leftist in their thinking, but who believe in an aristocracy of talent.

    They exhibit extreme faith in the goodness of technical progress and seem to believe that human problems can be resolved almost entirely through the realm of technology and engineering. They believe in policy, but a technocratic vision of it in which their rationalist designs, powered by technology, inform government decisions.

    One might say they are naive, but their track record of success gives them reasons for confidence. Consider Uber. Uber is effectively a technological workaround to dysfunctional politics and regulation. It has revolutionized transportation in many cities were taxis were before almost not available. Where almost all other reform efforts failed, Uber was a spectacular success. Apple, Google, Amazon, Facebook, etc. have all been extremely successful at what they do. And in any case, Silicon Valley’s “fail false” mentality means that they don’t necessarily see their failures – say, Mark Zuckerberg’s $100 million schools fiasco in Newark – as a reflection on their capabilities. Many failures and a handful of grand slams is how their system is designed to function.

    What’s more, it’s not just them who thinks they can fix things. Much of the rest of society seems to believe it too. For example, Alon Levy just put up a post examining the composition of NY Gov. Cuomo’s “MTA Genius Grant” panel, and how it is heavily slanted towards tech people vs. transportation people. Of course, the politicians and transport people have failed with the MTA to date. So they lose credibility by failures as Silicon Valley gains it with successes.

    However, their techno-optimistic view perhaps leads them to underestimate second and third order consequences and overestimate their ability to deal with them. For example, perhaps more than anyone else, Mark Zuckerberg and Jack Dorsey made Donald Trump’s presidency possible. Without his social media impact, and the ability of his troll army to drive news cycles, I very much doubt he would have gotten over the top. That’s a second order effect they never anticipated.

    Also, Trump himself is a classic example of creative destruction. He disrupted the politics business in the same way Netflix disrupted the video rental one. Yet they despise him and don’t think this is a positive change. It seems that they only like disruption when they are the ones controlling it, and don’t really believe in creative destruction per se. Instead it’s just another term of art for their taking over one industry after another.

    They themselves have no problem at all radically reordering society with unproven policies at levels far beyond what almost any political figure would do. Their blasé acceptance of massive job destruction and embrace of a speculative basic income scheme to compensate illustrate that. It’s no surprise to me that Mencius Moldbug, the founder of neoreaction (one of the sub-tribes commonly grouped with the alt-right that believes in absolute monarchy or the state as a publicly traded sovereign corporation), is a Silicon Valley techie and startup founder who reportedly started out in the Rationalist movement.

    They are also comfortable with an almost feudal distribution of wealth, so long as it’s based on an aristocracy of talent rather than heredity. And it’s an aristocracy that believes it should rule as well as profit. When they talk about a communitarian ethos in which the government needs to compel people to act properly, it’s pretty clear who the determinant of that is. It will of course be intelligent “rationalists” like them, who know what is right, have the technology to bring it into being, and whose motivations are beyond question (at least in their own mind).

    It’s a stunningly grandiose vision. Much like the EU, I suspect the public’s tolerance for it will be directly proportional to benefits continuously delivered. To the extent that Silicon Valley is able to deliver benefits to the common good, few will stand in their way. If the benefits slow, or the costs (including second and third order costs) start exceeding the benefits, we’ll see how it turns out for them.

    Aaron M. Renn is a senior fellow at the Manhattan Institute, a contributing editor of City Journal, and an economic development columnist for Governing magazine. He focuses on ways to help America’s cities thrive in an ever more complex, competitive, globalized, and diverse twenty-first century. During Renn’s 15-year career in management and technology consulting, he was a partner at Accenture and held several technology strategy roles and directed multimillion-dollar global technology implementations. He has contributed to The Guardian, Forbes.com, and numerous other publications. Renn holds a B.S. from Indiana University, where he coauthored an early social-networking platform in 1991.

    Photo by Maurizio Pesce via Flickr, using CC License.

  • The California economy’s surface strength hides looming weakness

    If you listen to California’s many boosters, things have never been so good. And, to be sure, since 2011, the state appears to have gained its economic footing, and outperformed many of its rivals.

    Some, such as Los Angeles Magazine and Bloomberg, claim that it is California — not the bumbling Trump regime — that is “making America great again.” California, with 2 percent job growth in 2016, gained jobs more rapidly than most states. The growth rate was about equal to Texas and Colorado, but behind such growth centers as Florida, Nevada, Oregon, Washington, Utah and the District of Columbia.

    Bay Area: Still the tower of power

    Over the past few years, the Bay Area has grown faster in terms of jobs than anywhere in the nation. But this year, according to the annual survey of the nation’s 70 largest job markets that I do with Pepperdine University public policy professor Michael Shires for Forbes, there is a discernible slowing in the region. For the first time this decade, San Francisco lost its No. 1 slot to Dallas, which, like most other fastest-growing metros, boasts lower costs and taxes, and has created more middle-class jobs than its California rivals.

    The San Francisco area, which includes suburban San Mateo, remains vibrant. More troubling may be the weakening of the adjacent San Jose/Silicon Valley economy, which dropped six places to eighth — respectable, but not the kind of superstar performance we have seen over the past several years.

    This partly reflects an inevitable slowdown in information job growth. As the startup economy has stalled, and the big players have consolidated their dominance, sector growth has dropped from near double digits to well under half that. Perhaps more telling has been a shift in domestic migration, which was positive in San Francisco earlier in the decade, but has now turned sharply negative. These are clear signs of a boom that is cooling off.

    Read the entire piece at The Orange County Register.

    Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book is The Human City: Urbanism for the rest of us. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

    Photo by Todd Jones (Flickr) [CC BY 2.0], via Wikimedia Commons

  • California: The Republic of Climate

    To some progressives, California’s huge endorsement for the losing side for president reflects our state’s moral superiority. Some even embrace the notion that California should secede so that we don’t have to associate with the “deplorables” who tilted less enlightened places to President-elect Donald Trump. One can imagine our political leaders even inviting President Barack Obama, who reportedly now plans to move to our state, to serve as the California Republic’s first chief executive.

    As a standalone country, California could accelerate its ongoing emergence as what could be called “the Republic of Climate.” This would be true in two ways. Dominated by climate concerns, California’s political leaders will produce policies that discourage blue-collar growth and keep energy and housing prices high. This is ideal for the state’s wealthier, mostly white, coastal ruling classes. Yet, at the same time, the California gentry can enjoy what, for the most part, remains a temperate climate. Due to our open borders policies, they can also enjoy an inexhaustible supply of cheap service workers.

    Of course, most Californians, particularly in the interior, will not do so well. They will continue to experience a climate of declining social mobility due to rising costs, and businesses, particularly those employing blue-collar and middle-income workers, will continue to flee to more hospitable, if less idyllic, climes.

    California in the Trump era

    Barring a rush to independence, Californians now must adapt to a new regime in Washington that does not owe anything to the state, much less its policy agenda. Under the new regime, our high tax rates and ever-intensifying regulatory regime will become even more distinct from national norms.

    President Obama saw California’s regulatory program, particularly its obsession with climate change, as a role model leading the rest of the nation — and even the world. Trump’s victory turns this amicable situation on its head. California now must compete with other states, which can only salivate at the growing gap in costs.

    At the same time, foreign competitors, such as the Chinese, courted by Gov. Jerry Brown and others to follow its climate agenda, will be more than happy to take energy-dependent business off our hands. They will make gestures to impress what Vladimir Lenin labeled “useful idiots” in our ruling circles, but will continue to add coal-fired plants to power their job-sapping export industries.

    Read the entire piece at The Orange County Register.

    Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, was published in April by Agate. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

    Photo: By User “Neon Tommy” (https://www.flickr.com/photos/neontommy/8117052872) [CC BY-SA 2.0], via Wikimedia Commons