Policy

The New Deal at 75: An Inspiration, Not a Blueprint

Joel Kotkin — Mon, 11 Aug 2008 01:57:40 -0400

Whatever your political perspective, Americans need to admire the New Deal for, if nothing else, its ambitious agenda. In a way unparalleled in the 20th Century, the New Deal left us a legacy of achievement – one that we can still see in big cities like San Francisco and small towns like Wishek, North Dakota.

The great genius of the New Deal lay not in ideology but in its pragmatism and practicality. People were out of work so it created jobs. The country’s infrastructure, particularly in the rural areas, was primitive, so it took on the task of modernization.

In some ways, this paralleled what was also being done under the Communists in the Soviet Union as well as under Fascists in Italy and under the National Socialists in Germany. This has led some conservatives, such as “Liberal Fascism” author Jonah Goldberg, to conflate the New Deal legacy with fascism. But this assertion is belied by the fact that we still live under a democratic and liberal political structure, one that by the 1980s had turned to oppose much of that legacy.

Yet I believe that even Ronald Reagan – himself once an avid New Dealer – would admit that the New Deal did much to expand America’s middle class. It did so not by promoting redistribution and welfarism or by moral cajoling – characteristics Mike Lind identifies with the more elite Progressives – but by practical actions that gave people the tools with which to build their own individual prosperity.

Economically speaking, it is also true that the New Deal failed to recreate prosperity (at least until the onset of the Second World War). But it cannot be denied that it literally brought light to large parts of the country – particularly the Southeast and the rural Great Plains – into the 20th Century. Among the New Deal’s great accomplishments, as Andy Sywak discusses, are its public works.A partial list of these accomplishments include:

• 22,428 road projects
• 7488 educational buildings
• Over 7000 sewer, water and other public buildings
• Employed over 3,000,000 workers earning who helped support 10,000,000 dependents
• Employed 125,000 engineers, social workers, accountants, superintendents, foremen and timekeepers scattered in every state and community

Ultimately, notes scholar Jason Scott Smith, the New Deal touched intimately the lives of more than fifty million out of a total U.S. population in 1933 of 125 million. Yet its legacy went well beyond the Roosevelt years, extending from Roosevelt and Truman all the way to Eisenhower, Kennedy, Johnson and, even to some extent, Richard Nixon.

As Sherle Schwenninger points out, The New Deal created the basis for the great, and widely shared, national prosperity of the post-war period. Through infrastructure spending, housing programs, the GI Bill and government-funded scientific research, the New Deal directly and indirectly helped make the United States the premier power on the world scene and by far its strongest economy.

America remains the preeminent country in the world, but there is a great, widely held belief that this status is slipping as other countries – China, Russia, Brazil, India – enact what amounts to their own New Deals. Our once vibrant middle class is under siege, our infrastructure is aging and even “progressives” seem more interested in promoting avant garde cultural values than in economic growth, upward mobility or maintaining technological excellence. Even in the field of conservation, a core value of the New Deal and progressive traditions, the focus is increasing less about preserving resources and open space for people, and more about how to preserve and insulate nature from the ill-effects of human carbon-based life forms.

Yet if we can be inspired by the New Deal, we can not simply repeat it. For one thing, our crisis today is less palpable and immediate, making it all but impossible to mobilize resources in the same way. At the same time, the public sector, small at the onset of New Deal, has already swollen to gargantuan size. The power of organized public employees, largely a non-factor in the 1930s and 1940s, threatens any government initiative by siphoning off too many local and federal resources due to their often extravagant demands in everything from salaries and work rules to pensions.

This can be seen in the morphing of the New Deal legacy in large cities including the greatest of all, New York. Under Mayor Fiorella La Guardia, a maverick Republican of the Theodore Roosevelt stripe, the city built new parks, playgrounds, swimming pools, roads, and sanitation systems with an almost messianic fervor. At one time, New York City was receiving one-seventh of all funds dispersed by the Works Progress Administration (WPA).

Yet La Guardia’s expanded city government, notes Cooper Union historian Fred Siegel, still operated under an efficiency-oriented progressive administration. La Guardia and his parks commissioner, Robert Moses fired political appointees and dismissed incumbents, leading some public employees to identify him with the Italian dictator Mussolini. Rejecting narrow ideology, La Guardia famously claimed: “There is no Republican or Democratic way to clean streets.”

La Guardia’s successors, in New York and elsewhere, did not stick to this moral and administrative rigor. The share government workers in New York’s workforce expanded from 10 percent in 1950 to over 17 percent in 1970s but with increasingly little accountability. If a new New Deal means a large expansion of the unionized public workforce, in New York or elsewhere, it will be largely doomed.

So as we admire the achievements of the New Deal, we also need to keep in mind the shortcomings that grew out of its success. That we need a new powerful commitment to infrastructure and economic growth is undoubted, but in pursuing this we need to make sure it does not serve primarily the public employee lobbies and the well-organized rent-seeking private interests.

New solutions, such as tapping abundant capital resources from both here and abroad, need to be tried out. And given the overconcentration of power already in Washington, and the spread of technical expertise to states and regions, a greater emphasis on locally based initiatives may work better this time around.

Yet in the end, American still requires some form of broad initiative to overcome its current doldrums. This requires the same kind of bold, innovative and pragmatic spirit characteristic of the New Deal that three quarters of a century later remains its most useful legacy.

Joel Kotkin is the Executive Editor of www.newgeography.com.

Other New Geography New Deal articles:

The New Deal & the Legacy of Public Works
New Deal Investments Created Enduring, Livable Communities
Progressives, New Dealers, and the Politics of Landscape
Public Investment, Decentralization and Other Economic Lessons from the New Deal
Emerald City Emergence: Seattle and the New Deal
Excavating The Buried Civilization of Roosevelt’s New Deall

Other New Deal sites:

New Deal Network (sponsored by the Franklin and Eleanor Roosevelt Institute)
New Deal Cultural Programs
California’s Living New Deal Project

Why Gentrification?

Aaron M. Renn — Tue, 14 May 2013 01:38:09 -0400

The mostly commonly chosen means, or at least attempted means, of revitalizing central cities that have fallen on hard times is gentrification. Gentrification is the process of replacing the poor population of a neighborhood with the affluent and reorienting the district along upscale lines. This has seen enormous success in large swaths of New York and Chicago, but even traditionally struggling cities like Cleveland have seen pockets of this type of development downtown.

What makes gentrification so attractive as a redevelopment strategy? There are many reasons.

The first and most easily understandable is that is works, at least in a given geographic area. There’s a proven track record and model for redeveloping cities on an upscale basis. It may do very little for the rest of the city, but it does work for those who live, work, and, perhaps most importantly, invest in them.

But perhaps the best question is: are there any other success models? It’s hard to point to many other successful models for redeveloping urban cores. The only alternative, and one that cities generally pursue in parallel, is attracting immigrants who seek out and revitalize out of fashion districts, often in outlying precincts of the city or the inner ring suburbs. Where there are successful working class districts in cities today, most of them are older neighborhoods that have hung on, not new ones birthed out of decline.

In a modern America where income equality and class divisions are a huge problem, it’s definitely mission critical for America to restart the middle class jobs engine and renew our metro regions as engines of upward mobility. But that’s easy to say and hard to do, at least from an inner city perspective.

The manufacturing jobs that previously supported a middle and comfortable working class lifestyle are gone and likely are not coming back. Public sector employment, traditionally another way to a middle class life in the city, is under extreme pressure due to fiscal mismanagement. Key services like the public schools remain intractably broken in most places. Segregation remains entrenched. What is the basis on which a middle or working class life will be re-established in the city? It isn’t clear. Untold billions pumped into various Great Society type programs accomplished little that was sustainable. Indeed, many programs like urban renewal, yesterday’s urban planning conventional wisdom, turned out to be disasters for cities. Community organizing may have launched the career of President Obama, but it’s not clear how it has helped Chicago’s marginalized communities. Given the paucity of models other than gentrification, it’s easy to see the attraction.

Other reasons also drive cities toward gentrification. Clearly with a fiscal crisis, attracting more high income taxpayers (even where local taxes are predominantly on property) is clearly attractive. And the existing affluent residents need to have some assurance that they are being taken seriously by the city and aren’t just being used as ATM machines for redistribution.

The change in the macro-economy that led to the income gap, including national policies that favor finance and technology rather than traditional manufacturing and energy type sectors, plays a huge role as well. These elite industries require a highly educated, highly skilled workforce and they are subject to clustering economics. Theories like “Creative Class” that describe this phenomenon suggest that this is a fickle group of people who seek out a gentrified neighborhood consisting largely of people like themselves. This has been glommed onto by the elite themselves – the various politicians, the wealthy, business executives, cultural leaders, academics and others. They hold power in cities and use this to justify further investment in gentrification related programs – that is, their own class interest – although these programs do little for anyone who is not elite.

Lastly, changes in the composition of local elites favor the publicly subsidized luxury real estate projects aimed at gentrification. In previous generations the CEOs of local operating businesses like banks and utilities were major power players. These tended to be fragmented industries and predominantly local in focus, so the overall civic health – in everything from education to infrastructure – was critical to the health of their core business. The interests of the community and CEOs were aligned.

Today, most large-scale, and even many smaller, businesses have been nationalized or globalized, and the local power players are increasingly people like lawyers, real estate developers, and construction magnates who make money by the hour or project. The shift from locally focused operating businesses to national or global operating businesses, with remaining locally owned and focused businesses tending to be of the transactional type, produced a local elite who prefers doing deals than building broad community success. Unsurprisingly, they’ve doubled down on high end luxury developments, often subsidized by the government.

Lastly, once the ball gets rolling on gentrification, market forces can sustain it provided that the overall policy set remains favorable to elite type development. And having a lot of high end, swanky type development generates buzz for a city, something more prosaic, and more broadly based, working class success never does.

Given the lack of proven alternative models and the alignment of multiple incentives behind it, there’s no surprise gentrification is the almost universal aspirational choice for cities in redevelopment. But the gentrification model in most places is simply too narrow to move the needle or produce any benefits down the economic ladder. It is imperative that urban thinkers and leaders try harder to find models that provide more inclusive and broadly-based and socially sustainable benefits.

Aaron M. Renn is an independent writer on urban affairs and the founder of Telestrian, a data analysis and mapping tool. He writes at The Urbanophile.

Photo by Dom Dada.

The Cleveland Miracle That Should Never Have Been

Richey Piiparinen — Wed, 08 May 2013 16:45:54 -0400

“[T]he most obvious, ubiquitous, important realities are often the ones that are the hardest to see and talk about.” Writer David Foster Wallace

The story of the three Cleveland women kidnapped over 10 years ago and recently found alive in a house on the city’s Near West Side has captivated the national imagination. There is the miracle aspect from the fact that such situations rarely end this way. There is the hero aspect that is Charles Ramsey, the raw dog, uber-Cleveland man that tells it like it is (e.g., “Bro, I knew something was wrong when a little, pretty white girl ran into a black man's arms.”) But that is not what this essay is about. Rather, it is about our failure as a city, particularly a failure of priority.

On Monday, May 6th, the feeling in the air as one of the girls-turned-women emerged into her freedom was torn. There was elation at the miracle that the supposed dead were alive, yet there was also a collective unease that comes with the reality that Cleveland can be a violent city, and that there was a need for a miracle in the first place.

Worse, the fact that the decades-long captivity occurred in the shadows of Cleveland’s revitalization success story, Ohio City—the city’s artisan district and home of the West Side Market—well, let’s just say it was enough to give many in this city pause. Including myself.

Specifically, the week’s events left me acutely aware that Cleveland is still comprised of remnants of a post-industrial community. For it is a city still reeling. Still struggling. Still failing the most vulnerable. And it is a city still culpable, if only through fostering a continued failure in leadership that refuses to build the city the right way.

Yes, like many cities, there are pockets of reinvestment, such as the gentrifying neighborhoods of Detroit Shoreway, Downtown, University Circle, Ohio City, and Tremont. And reinvestment in inner-city neighborhoods is needed, as concentrated poverty and segregation is no path forward. But Cleveland is not going to consume and play its way out of this. Re-treading the entertainment district into whatever urban revitalization fad appears to be going on in any given decade will only lead to what we always got: a perpetual state of “revitalization”. What will work is a real reconstitution of Cleveland’s neighborhoods; that is, a reconstitution of people, and not simply of place. To that end, think of the city as a net. No amount of investment will stick until we rethread our community fabric, which involves growing the people that comprise a community in the first place.

How does a city do this? Well, the first step is to not get too cute, and to do the obvious realities right.. No amount of beautification projects will save a post-industrial city. A city needs to focus on the basics, as you develop a city like you grow a child. Here, the psychologist Albert Maslow’s hierarchy of needs can help.

To wit, city leaders must prioritize physiological needs: eradicate food deserts, curb environmental threats, etc. Then, focus on safety. Not just manning safety force slots, but making sure those protecting us respect their duty. There are big questions about this in Cleveland. Also, shelter. Real local housing policies are needed, as are innovative educational and workforce development strategies. If you want to get creative, you can even leverage and strategize various needs together, like utilizing a glut of vacant storefronts into small business/entrepreneurial initiatives. Next, encourage social and cultural attachment so the benefits of community capital can be had. Don’t worry. If persons can breathe, eat, work, feel safe, and go home, they are likely to do this on their own. In fact that is the beauty of a hierarchy approach, as investment at the bottom turns into a self-fulfilling process up top. And then the icing on the cake: actualizing individuals, perhaps through fostering creative capital programs. That said, creatively classifying a city is doing it backwards if you haven’t built your city from the foundation up. Said Maslow: “A first-rate soup is more creative than a second-rate painting.”

And while this makes intuitive sense to regular Clevelanders, it is confusing for the local leaders, if only through the advice of revitalization experts. For instance, in an article addressing concerns over whether or not Detroit’s investment should go to a bike path initiative, the author references an expert as to why the answer is “yes”:

As Peter Kageyama argues in his book For the Love of Cities, “In the city making ‘hierarchy of needs’ we see most communities focused on bottom-line, core issues of making cities functional and safe. There still are many communities that struggle to even deliver functional and safe but that is not the problem. The problem is when communities only focus on the functional and safe and never raise their aspirations.”…Ultimately, places that do not engage us emotionally do not feel worth caring about.

Clicking on the link above to Kageyama’s page, the expert details his thoughts and his audience:

I focus primarily on American cities though the ideas are relevant to any place. I pay particular attention to some of our most challenged places such as Detroit, Cleveland and New Orleans as they have become hot beds of social innovation as government and the “official” city-makers have struggled to reconcile shrinking budgets and diminished capabilities. Into this vacuum has flowed a new breed of city-maker – usually young, independent, unofficial, creative, rule breaking and entrepreneurial. These are the new “frontiersmen” and “frontierswomen” who are rebuilding these cities from the ground up.

There are a few problems here. First, while attachment to place is important, the logic is a bit flawed. A person insecure in various aspects of livability, like food and shelter, is not going to have their concerns addressed via an emotional connection to a given place. I am not saying developing place is bad. I am only saying such an approach is akin investing in nice drapes as your house is on fire. Put the fire out. Protect your people. Grow your people. After all, according to economic developer Jim Russell, people develop, not places.

Second, local leaders are elected for a reason. To lead. And to serve and protect. “Frontiersmen” or Frontierswomen” are not going to protect the preyed upon—notwithstanding Charles Ramsey, though I doubt that is what Kageyama had in mind.

No doubt, the events in Cleveland have shaken the city—yet another tear in an already torn city. And while the local and national news media is branding the escape of three women and one child as the “Miracle in Cleveland”, it wasn’t. At least not for us. We failed these young women. We failed the women before them. I hope this serves as our wake-up call. We will not play our way out of this. And if we continue to try, there will always be shame in the shadows of our revitalization.

Richey Piiparinen is a writer and policy researcher based in Cleveland. He is co-editor of Rust Belt Chic: The Cleveland Anthology. Read more from him at his blog and at Rust Belt Chic.

Top photo Courtesy of WOIO/AP

Can Public Banks Help Fix Local Finance?

Jason Sibert — Wed, 08 May 2013 01:38:31 -0400

Are public banks the answer for the recession-induced decline in municipal revenue and other ills that plague our cities? It’s a solution being discussed in more than one American city.

Mike Krauss, a founder of the Public Banking Institute and a chairmen of the Pennsylvania Pubic Bank Project, both non-profits that promote public banking, said this month an ad hoc committee made up of Philadelphia City Council members and civic groups started working on the adoption of language for a public bank in the city. He also said the measure is being adopted out of a need for “affordable and sustainable credit.” The PPBP is leading the effort for public banking in the city.

The recession’s impact on municipal taxes and anger at Wall Street were factors in the push for a public bank. Krauss described the losses to Philadelphia’s school district, street, police and fire departments as “phenomenal.”

Krauss mentioned North Dakota’s public bank, founded in 1919 to promote agriculture, commerce and industry in the state, as a role model for cities. The North Dakota bank arose in reaction to farmers’ anger over the predatory practices of East Coast and Minneapolis banks. The bank’s revenues come from the state’s general revenue fund. Krauss cites the Bank of North Dakota’s 2.9 billion portfolio in a state with a population of roughly 600,000 as an example of its success. Philadelphia has a population of approximately 1.5 million. Krauss also said a public bank would be a job creator for cities and again used the BND as an example, as it produced a job for every 100,000 dollars it loaned.

Like North Dakota’s bank, the proposed public bank in Philadelphia wouldn’t be a commercial bank that offers checking and savings accounts. It would lend money for city projects and also partner with local commercial banks on loans. There are also efforts underway for public banks in San Francisco and Boston, according to Krauss.

Public Banking Institute Chairmen Marc Armstrong said that over a trillion dollars in revenue from states and municipalities are deposited in big Wall Street banks every year. Armstrong also said many of the deposits are used to provide loans for transnational corporations that don’t invest in their states and cities. Public banks can provide loans as low as one percent interest, and Wall Street banks consider their existence as a threat, said Armstrong. When it comes to taxation and other issues that confront cities, a public bank could be used as a weapon against the rent-seeking – meaning using social and political circumstances to extract more money out of the public – activities by financiers. The public bank would instead invest in higher education, automotive and banking industries and as a tool for productive economic enterprises and individuals. This weapon could in turn create more vibrant activities in urban economies.

Krauss admitted the possibilities for the use of revenue generated by a public bank are endless, and he said investment in the school district, infrastructure and public safety would be positives. However, other job creating services and projects could be a reality – free wi-fi, the construction of affordable rental housing for retired people and low income residents, rent-to-own home ownership (or condo) programs, research and development to support public science, scientific innovation and high technology industries, childcare facilities, higher education for city residents, public media, new parks, free or reduced utilities for businesses and individuals, and also investments in energy efficiency, recycling, renewable energy and car sharing.

The positive impacts of the above mentioned investments go beyond public banking, as it is the starting point for a more vibrant urban economy, education system and ecology. With a new source of revenue, business taxes could be slashed to promote business formation in public banking inclined cities, and more businesses within city limits would mean even more revenue.

Similar to slashing taxes for business, free or reduced costs on wi-fi and utilities would also help local businesses and individuals by reducing their overhead costs and in turn create more jobs, as more money could be spent in the form of investment by businesses themselves and in increased individual purchasing power that works its way back into local businesses.

Recycling would have a similar effect, as it’s cheaper for a city to recycle, if the program is a well-run, than to pay for waste collection, land filling and incineration. By reducing the costs of waste, cities could again reduce business taxes and once again create more business formation, and at the same time reduce greenhouse gas emissions. Recycling reduces pollution not only by reducing the waste sent to landfills, but it also reduces the need for cutting down more trees and the inputs needed to manufacture a product.

Urban and non-urban citizens all create waste and for that reason recycling is a bigger job creator than renewable energy which cannot produce all of our energy due to intermittency and also the cost, as it’s still more expensive than traditional forms. Despite these drawbacks, new revenue could be used to create jobs in solar energy by installing solar panels on public buildings – school district offices, schools, and city hall. Also worth thinking about is the possibility of constructing biogas plants that break down organic waste – which can come from the vast amount of sewage a city creates – to create another, perhaps more reliable form of renewable energy.

The additional revenue produced by the use of public banking and increased business formation could also be used to lift the burden of rent-seeking higher education institutions by offering lower interest loans to help young people attain a higher education, affordable rent and affordable home or condo ownership without acquiring crushing debt. Cities could offer a few years of free vocational, art, culinary and business education. The media is full of stories of urban residents burdened with student loan debt which benefits universities, colleges and the government and decreases the amount of money circulating into local businesses. Also, cities would benefit from this investment by creating a new generation of productive workers, chefs and artists and the businesses that are created along with them.

Low interest loans could also be offered to local real estate interest for rent-to-own condo and house programs and affordable apartments could be constructed with low-interest loan portfolios. Of course, landlords would have to abide by low-rent policies if they are to take advantage of the policies, blunting the rent raising effects of gentrification while maintaining its’ positive side.

Cities could also put public dollars behind a new innovation in transportation – car sharing - which has been pioneered by Zipcar. Cities could help expand the company’s business by offering it low tax rates and subsides to locate within their borders; those arguing they would wasteful should take a second look at what’s spent on sports stadiums. Or maybe cities could building their own car sharing industry with local business leaders. The expansion of car sharing would mean less impact on the infrastructure and reduce the amount spent on infrastructure. It would also reduce traffic congestion and make it possible for residents of surrounding suburbs to enjoy the city’s attractions.

Cities can and should be hubs for creative people and immigrants, as they see life in almost-dead neighborhoods and create gentrifying enterprises such as restaurants, cafes, music venues, art galleries, artisan manufacturing, coffee roasting, small boutique retailers and all sorts of internet and technology businesses. However, cities can’t and shouldn’t lose focus on what sustains critical functions such as public safety, infrastructure and education – revenue. The public bank offers an opportunity for cities to invest in themselves, not the profit portfolios of Wall Street.

Jason Sibert is a freelance writer who has lived in the St. Louis Metro Area since the late 90's. He worked for the Suburban Journals for a decade and his work has appeared in various publications over the last four years.

Photo by David Shankbone.

The Myth of Green Australia

John Muscat — Sat, 04 May 2013 01:38:37 -0400

Having collected the Nobel peace prize in 2007, Al Gore’s fortunes as a climate crusader slid into the doldrums. But 8th November 2011 arrived as a ray of sunshine. On that day Australia’s parliament passed into law the world’s first economy-wide carbon tax. Rushing to his blog, Gore posted a short but rapturous statement, cross-posted in The Huffington Post. His fervent language echoed in progressive circles across the globe. Australians have been held-up as pioneering environmentalists ever since, putting Americans to shame.

“This is a historic moment”, thundered Gore. “With this vote”, he blogged, “the world … turned a pivotal corner in the collective effort to solve the climate crisis”. He proclaimed it “the result of tireless work of an unprecedented coalition that came together to support the legislation”; he praised the “leadership of Prime Minister [Julia] Gillard and the courage of legislators”; and he declared “the voice of the people of Australia has rung loud and clear”.

But maybe Gore’s enthusiasm was a bit misplaced. In September, less than two years later, Australians seem likely, according to the polls, to hand the Gillard Labor government a stinging landslide defeat.

“A pivotal corner in the collective effort”

As it turns out, and not for the first time, Gore’s analysis was wrong. For one thing, calling the carbon tax “pivotal” is pure hyperbole. Although a relatively large land mass, Australia is populated by just 23 million people who collectively emit a minuscule 1.5 per cent of the world’s greenhouse gases. Nor is the country influential in a broader political union or association beyond its borders. Since climate change alarmists suggest that global emissions must fall by 25 to 40 per cent in 2020 compared to 1990 levels, Australia’s efforts must be seen as more symbolic than effective. Currently, the tax and its post-2015 form as an emissions trading scheme (ETS) are adjusted for a trivial 5 per cent cut from 2000 levels in 2020; 5 percent of 1.5 percent of the world’s emissions barely registers against a few days increase in countries like China.

Environmentalists maintain that the important thing is not results, but setting a moral example of climate action. They argue Australia’s emissions may be tiny in absolute terms, but amongst the highest in per capita terms. Major emitters like the US, China, India and the EU, they argue, can be shamed into action by Australia’s noble sacrifice. Unfortunately for them, this argument, not very strong to being with, deflated like a punctured balloon since the shambles at Copenhagen.

We’ve been here before. In December 2009 Australia’s newly minted Labor Prime Minister, Kevin Rudd, with a bulging entourage of 114 officials, descended on the Copenhagen conference to negotiate a successor to the Kyoto Protocol. He was awarded the task of preparing a draft negotiating text. Rudd played an active role in the lead up, having signed Kyoto and undertaken to legislate for an ETS in his first term, a serious step given Australia’s status as the world’s leading coal exporter. Before flying out to Denmark, he introduced the necessary bills into parliament for a second time.

Copenhagen was a test of the ‘noble sacrifice’ argument driving Rudd’s activism but resulted in an epic fail. Rudd’s draft text was tossed aside and the conference collapsed into bickering between delegations from the developed and developing worlds. There was no successor to Kyoto, just a flimsy, non-binding accord the delegates “took note of” but didn’t adopt. Greenpeace called Copenhagen “a crime scene”.

The UN’s Framework Convention on Climate Change has stayed off the rails ever since. Later Conferences of the Parties (COPs) at Cancun and Durban did little more than kick the can down the road. Durban opened twenty days after the “historic moment” of Australia’s carbon tax, but delegates deferred all talk of a binding agreement to 2015, anticipating a possible start in 2020. Canada pulled the plug on Kyoto altogether, later followed by Japan and Russia. “This empty shell of a plan leaves the planet hurtling towards catastrophic climate change”, huffed Friends of the Earth.

Under the non-binding Copenhagen Accord, parties were invited to submit emission reduction “pledges”, and most have done so. Even if achieved, though, they get the world nowhere near 25 to 40 per cent reductions on 1990 levels in 2020. Writing in Nature, analysts from the Potsdam Institute of Climate Impacts dismiss them as “paltry”. Amid rising emissions, Australia’s “pivotal” carbon tax is but a straw in the wind.

“An unprecedented coalition that came together”

At the end of 2009, Rudd’s ETS was rejected by parliament a second time, due in part from rising doubts about the climate agenda. As 2010 progressed, his popularity waned, battered by his inept handling of the contentious mining tax. Labor colleagues bristled at his secretive and high-handed manner, while powerful union bosses resented his indifference to their concerns. Taking advantage of drooping opinion polls, Rudd was sacked and replaced with Deputy Prime Minister Julia Gillard.

This sent shockwaves through the country, which had never seen a sitting prime minister dumped in his first term. Fearing a backlash, Gillard hastily called an election for 21st August, hoping to exploit positive feelings around serving as Australia’s first female leader. She proved a poor campaigner, however, and a series of damaging leaks scuttled her efforts. Labor’s support faded and on election night Gillard was left with 72 seats, four short of a majority in the 150 seat House of Representatives. The Liberal-National opposition ended up with 73 seats, also short of a majority. The balance of power was in the hands of one Greens Party member and four independents.

After weeks of negotiations, the Greens and three of the independents pledged support for a Labor Government under Gillard, the first minority government since the 1940s. But it became increasingly clear that a fresh election would produce a solid Liberal-National Party majority. Returning to the people for a new mandate was never in Gillard’s interests. As for the Greens and independents, fortune delivered them more power than they ever had or would ever have again. Making the most of their time in the sun, they opted for Gillard, who wasn’t about to call another election. Gillard’s coalition may be “unprecedented”, in Al Gore’s words, but it’s untrue that they “came together to support” high principle. They were thrown together by electoral chance and stuck together out of grim self-interest.

“Leadership of Prime Minister Gillard and the courage of legislators”

After the second rejection of his ETS, Rudd shelved the policy indefinitely, to the dismay of the world’s environmentalists. The inner circle which advised him to take this course, according to later revelations, included Julia Gillard. On becoming prime minister she showed little enthusiasm for the climate cause, ruling out a price on carbon unless there was “a deep and abiding community consensus”. Her tokenistic policy at the 2010 election was “citizen’s assembly” to canvass options. The opposition also ruled out a price on carbon. Twice in the lead up to polling day, Gillard explicitly denied rumours of a hidden agenda, uttering the now infamous words “there will be no carbon tax under the government I lead”.

Gillard entered the post-election negotiations desperately hoping to save her prime ministership. The radical Greens would never have backed the conservative opposition. But when they demanded a carbon tax as the price of their support, she caved in a fit of panic, displaying little of the courage praised by Gore. The independents signed on to keep the minority government in business.

Labor’s Clean Energy Future package includes a carbon tax, but also billions of dollars of compensation and credits to cushion the blow. In a massive money churn, around $5 billion of the revenue is disbursed to households in higher benefits and tax breaks, and $9.2 billion goes to industry assistance, including free permits for high emitting industries, $300 million to the steel industry, $1.26 billion to the coal sector, and $1.2 billion to manufacturing. Unhappy about these handouts, the Greens were bought off with a $10 billion Clean Energy Finance Corporation. Australians are left wondering how all of this encourages shifts to “cleaner” energy sources. The handouts muffle some damaging impacts of the tax, but they are hardly “courageous” from the perspective of Al Gore.

“The voice of the people of Australia has rung loud and clear”

Gillard made her plans for a carbon tax public on 25th February 2011. Her residual popularity sank like a stone. The Newspoll of 18-20 February 2011 recorded 50 per cent satisfied and 39 per cent dissatisfied with her performance. In the next survey of 4-6 March 2011, those figures were reversed: 39 per cent satisfied, 51 per cent dissatisfied. Labor’s support (first preference) plunged to 30 per cent in the March survey, from 38 per cent at the election. These results were consistent with a general fall in support for climate action. From a high of 68 per cent in 2006, reported the Lowy Institute Poll, it dropped to 41 per cent in 2011. Only 32 per cent of Australians supported the carbon tax when Gore wrote his rapturous blog post.

Gillard’s frantic attempts to recover have come to nothing, and calling an election for 14th September hasn’t helped. The latest Newspoll of 5-7 April 2013 had her satisfaction rating at a dismal 28 per cent, with 62 per cent dissatisfied. Labor’s support is still in the basement at 32 per cent, with the Liberal-Nationals at 48 per cent. Likely, the government faces a devastating loss of around 20 seats.

The opposition’s implacable campaign against the carbon tax has rocked Gillard’s time in office. They promise to repeal it, dismantle much of the Clean Energy Future package and even abolish the Department of Climate Change. Since the 2010 election Labor has suffered a succession of defeats at the state level, losing power in New South Wales, Victoria, Queensland and the Northern Territory, while the Liberal-National Coalition improved their majority in Western Australia. These elections were fought on state issues, but in every case the conservatives echoed Opposition Leader Tony Abbott’s anti-carbon tax message. Closer to home, Gillard was forced to stare down moves against her by colleagues to restore Kevin Rudd, once in February 2012 and again in March this year. Four senior cabinet ministers were sacked or resigned after the second episode. Labor limps forward in the worst possible shape.

A Liberal-National victory would probably mean the end of climate change as a major political priority in Australian politics. Al Gore was mistaken. He didn’t hear “the voice of the people of Australia” on 8th November 2011; but if he’s listening he’ll hear it “loud and clear” on 14th September 2013.

John Muscat is a co-editor of The New City Journal.

Enterprising States 2013: Getting Down to Small Business

Praxis Strategy Group — Wed, 01 May 2013 01:20:55 -0400

The following is an exerpt form a new report, Enterprising States, released this week by the U.S. Chamber of Commerce Foundation and written by Praxis Strategy Group and Joel Kotkin. Visit this site to download the full pdf version of the report, or check the interactive dashboard to see how your state ranks in economic performance and in the five policy areas studied in the report.

Nothing better expresses America’s aspirational ideal than the notion of small enterprise as the primary creator of jobs and innovation. Small businesses, defined as companies with fewer than 500 employees, have traditionally driven our economy, particularly after recessions. Yet today, in a manner not seen since the 1950s, the very relevance and vitality of our startup culture is under assault. For the country and the states, this is a matter of the utmost urgency.

The central motor of the job engine clearly is not firing on all cylinders. Historically, small business has accounted for almost two-thirds of all net new job creation, but recent research shows that the rates of new business startups are at record lows. The “gazelle companies”—fast-growing firms, mostly younger ones—have traditionally made outsized contributions to new job creation. After previous recessions, these businesses drove job growth and, perhaps more important, created innovations that often spread to larger, older, more established firms, which sometimes later acquired them.

Weak job growth has touched the entire economy. Gross domestic product growth is weak, unemployment remains at nearly 8%, and business sentiment is far from optimal. Despite high stock prices and consistently strong corporate profits, the rate of employment growth remains lower than the rate of the expansion of the workforce. Given the understandable focus of larger firms on boosting productivity and on investing capital into technology, it’s highly unlikely these companies will create enough jobs to dent our huge and growing employment deficit.

Policymakers ignore small business at their own peril and that of the economy.

The Changing Nature of Small Business

Small business may be down, but it is far from out. There have been some small, subtle upward shifts in employment in three of the industries—construction, manufacturing, and retail—that bore the brunt of the recession-driven job losses. Any sustained uptick in growth will further widen the opportunities for small business to expand and perhaps recover something of its past vigor.

It is critical that states and communities that embrace a pro-enterprise vision address a rapidly changing small business environment. Small business today reflects a host of ethnic, social, and generational changes. Successful programs will need to adapt to these new realities that reflect a far more diverse, and profoundly different, set of players.

Immigrants constitute a growing and important part of the entrepreneurial landscape. Even in the midst of the recession, newcomers continued to form businesses at a record rate. The number of women-owned firms has grown at one and a half times the rate of other small enterprises over the past 15 years. These companies now account for almost 30% of all enterprises. Finally, there is the issue of generational change. Baby boomers were, on the whole, a profoundly entrepreneurial generation, and by many measurements their Generation X successors have proven even more so. The millennial generation, based on recent assessments, may be somewhat less entrepreneurial than their predecessors.

We are also witnessing the rise of a new kind of enterprise that often employs no more than the proprietors but frequently provides quite sophisticated high-level products or services. In many cases, these “jobless entrepreneurs” include corporate executives, technicians, and marketing professionals who, by either choice or necessity, have chosen to strike out in their own micro-enterprises. A large portion of this growing “1099 economy” comes from the growing ranks of boomers who are no longer willing or able to work for a larger enterprise. According to the Census Bureau, small business without payroll makes up more than 70% of America’s 27 million companies, with annual sales of $887 billion.

The States Get Down to Small Business

Every state has policies and programs that are intended to encourage entrepreneurship and support small business development and expansion. Many states have introduced legislation or established programs to focus on startup companies, and many states have bolstered policies targeted at helping existing businesses grow and expand their markets. State funding of programs for entrepreneurial development is estimated to have increased by 30% between 2012 and 2013.

States vary considerably in the policies, regulations, and taxes that affect small business. Most states have an array of loosely integrated small business programs, although some have a more comprehensive, integrated small business policy and program framework. No state has the “best” tax policy for all entrepreneurs. Instead, different states have tax policies that suit certain types of companies better than others. Consequently, the states that are best for new businesses are not always the most favorable for existing small businesses; the states that are best for one business sector may not be best for another.

States and cities should consider small business development not as a separate cause, but as a basic building block for economic growth. Even if state governments can do little to promote enterprise and small business development directly, there are things they can do to increase the chances that entrepreneurs will thrive. Smart, pragmatic economic policymaking at the state level can play an instrumental role in fostering startups and growing companies, particularly when programs are effectively deployed right where the businesses are located.

The following are some new and innovative policy and program approaches that states are employing and/or supporting to create and expand small businesses, often in cooperation with local and regional development organizations:

Accelerator initiatives that focus on starting high-growth firms by turning startups into enduring companies.
Economic gardening initiatives that focus on expanding existing firms with strong growth potential.
Business plan competitions to identify companies with exciting ideas and high potential.
Business ecosystem initiatives, often with a regional focus, that take a comprehensive approach to creating an environment that is highly conducive to startups.
Workforce development initiatives that help small businesses find and train the talent they need to operate and compete.
Seed and venture funds that focus on startups and expanding firms.
Networking and collaboration initiatives that bring small businesses and self-employed entrepreneurs together with large companies and universities.
International trade programs that help small businesses reach out to new global export markets.
Streamlined state administrative processes and regulatory procedures for small business by cleaning up the DURT (delays, uncertainty, regulations, taxes) that impede small business success.
Broadband investments that provide small businesses of all types with the online access necessary in the 21st century.

Governors of states recognize the importance of small businesses and often take the lead in reforming state policy and service delivery to make growth and commerce easier for small business. Governors can offer fast-track access to financial resources and a full slate of state services that help small businesses connect with technical expertise, customers, suppliers, and state agencies that interact with small business as regulators or partners in development.

State and local chambers of commerce are on the front lines of promoting a pro-business free enterprise agenda and thwarting anti-business legislation, regulations, and rules. Across the country, chambers of commerce lead the way in advocating on behalf of their members for lower costs of doing business, fairer taxes, fairer regulations, and less regulatory paperwork. They work with the U.S. Chamber of Commerce, governors, industry, and professional associations to pursue outcomes that are beneficial to all businesses and, thereby, advance America’s free enterprise economy.

Visit this site to download the full pdf version of the report, or check the interactive dashboard to see how your state ranks in economic performance and in the five policy areas studied in the report.

Praxis Strategy Group is an economic research, analysis, and strategic planning firm. Joel Kotkin is executive editor of NewGeography.com and author of The Next Hundred Million: America in 2050.

Visions of the Rust Belt Future (Part 1)

Richey Piiparinen — Sat, 27 Apr 2013 01:38:41 -0400

“Men often applaud an imitation and hiss the real thing”--Aesop

There are interesting developments being played out in the Rust Belt. Some cities, like Detroit, seem to be embarking whole hog down the creative class path. Others, like Pittsburgh, have their own thing going on, a thing Economic Geographer Jim Russell has delineated as the “Rust Belt Chic” model of economic development, with no modest amount of success. How a given Rust Belt city reinvests will have a large say in its future.

Part 1 of this series, below, examines the nascent creative classification of Detroit. Part 2 analyzes whether or not there is a new way forward for post-industrial cities, using the lessons from Pittsburgh and Cleveland as the building blocks to developing an alternative set of strategies for struggling cities.

Detroit Rock (Ventures) City

In Detroit, the scene is playing out as such: rampant disinvestment in the core and extreme poverty around it. To help fix this, ties between Rock Ventures head and real estate billionaire Dan Gilbert, urbanist Richard Florida, and the non-profit Project for Public Spaces have been initiated. The goal, laudable enough, is to reinvest in downtown. And while the renewal formula planned is not new, the extent that the milieu is a controlled environment for an urban experiment is perhaps ahistorical, if only because Detroit’s level of disinvestment has created a vacuum that, naturally, power abhors.

To wit, a recent New York Time’s article entitled “A Missionary’s Quest to Remake Motor City” hints at the level Dan Gilbert—who has bought $1 billion in downtown property in what has been called a “skyscraper sale”—and his advisors have been handed the keys:

“My job,” said Dave Bing, the Detroit mayor and former National Basketball Association star, “is to knock down as many barriers as possible and get out of the way.”

And:

“Mr. Gilbert met in a conference room for his twice-a-month Detroit real estate meeting, with about a dozen people who work for him, plus a lawyer and leasing agent. If Detroit 2.0, as this group often calls the effort, has a planning committee, this is it.”

And:

“[H]e and his staff will apparently have a largely free hand.”

Now, the plan, and how the plan for Detroit’s future came about.

A wealthy investor, Dan Gilbert, buys downtown properties. That investor goes on the record as to the importance of reinvesting into the urban core. That investor moves his mortgage company’s employees from suburban office parks into his own downtown real estate. Then, the investor, taking cues from his consultants, throws in something about innovation, which, at its lowest common denominator, means designing your way to a “culture of innovation”. Thus, the investor encourages that Romper Room-style office setting complete with what some would say is tacky décor wholly out of line with the soul of “the D”, but yet which is said to fun-birth inspiration—i.e., “[A] karaoke machine sat in an aisle. Guys threw footballs to one another; one employee shot at colleagues with a Nerf gun”; and “A Quicken promotional video solidifies the company's attempts at over-the-top marketing, prominently featuring the space's inexplicable Pac-Man theme”—despite the fact that your primary product line, i.e., mortgages, needs far less innovation than it does a modicum of conventionality and ethics. Nonetheless, the sentiment of creative destruction is there.

This basic process, then, is multiplied out from the office setting into strategic urban space, particularly around Gilbert’s real estate. The idea here is to design space so as to create vibrancy so as to galvanize commerce so as to ignite broad economic growth.

Enter the partnership with the Project for Public Spaces, who is working with Gilbert’s group to do a set of “Lighter, Quicker, Cheaper” placemaking interventions, including pop-up shops. The conceptual girth behind the plan, according to a recent article “Detroit Leads the Way on Place-Centered Revitalization”, is described as such:

“We proposed developing a Placemaking vision for the major public spaces, and refining the plan through the Power of 10 concept,” says Meg Walker, a Vice President at PPS who worked on the project. “…A lot of developers aren’t as enlightened as Dan Gilbert…they wouldn’t necessarily think about the glue that’s holding this all together.”

“The Power of 10 framework suggests that a great city needs at least ten great districts, each with at least ten great places, which in turn each have at least ten things to do. Great public spaces produce an energy and enthusiasm that spills over into surrounding areas…

With the conceptual description as a guide, this is a classic case of the urbanists’ version of trickled-down economics, in which an influx of capital into finite corridors is meant to attract wealth that “spills over” into surrounding areas. Unfortunately, there is little by way of evidence that this works, as was recently admitted by Richard Florida himself. What it may do, however, is fill real estate supply by pursuing a select target market, as placemaking can act as a grease to create pockets of creative class demand to support condos or retail and office space. And while one can certainly argue it beats rampant core disinvestment, it’s not the path of a bold new way that will measurably change the trajectory of Detroit, so says U of M Professor Michael Gordon. In effect, it’s simply shifting people from one set of real estate to another, with nothing undertaken on a systemic level to tackle Detroit’s real problem: poverty and disenfranchisement in its neighborhoods. Worse, re-urbanization as such is likely to exacerbate class and race divides that have plagued Detroit for decades, thus worsening Detroit’s real problem: poverty and disenfranchisement in its neighborhoods.

Besides, we have been here before. Michigan via its Cool Cities campaign had a plan based off the same Detroit 2.0 premise, switch out the window dressing. Design place, accrue vibrancy, growth wealth. Obviously, the multi-million dollar economic development initiative didn’t work. Neither have similar initiatives across the whole of the Rust Belt.

So, where’s the beef? What makes Detroit 2.0 different?

Naturally, this is where the economic development buzzwords “start-up” and “tech district” enter into the Detroit 2.0 lexicon; that is, creating dense city areas will nurture spontaneous interactions that will foster Detroit’s innovation community, putting it firmly on the path to be the “Silicon Valley of the Midwest”. But every city wants this (or at least they are informed they do)—e.g., “Miami Wants to Be the Next Big Start-Up City”—and so the effort ultimately comes off as anything but visionary, rather visionless, trying.

Cue the Onion. From an article entitled “St. Louis Mayor Has Sad Little Plan For Turning City Into High-Tech Hub”:

In what appears to be a completely earnest attempt to revitalize a sluggish local economy, St. Louis mayor Francis G. Slay unveiled Thursday a detailed, ambitious, and truly depressing plan to turn his city into a major technology hub. “We’re going to show America, and the rest of world, just how innovative and cutting-edge St. Louis can be,” said the mayor, who displayed genuine optimism as he outlined a desperate strategy to woo major players in the high-tech sector with a sad little series of subsidies and tax incentives his city cannot afford… The mayor ended his presentation by pleading with reporters to dub the hopelessly untenable project “St. Louis 2.0.”

In all, the current Detroit economic development approach is copycat urbanism at its finest, as there is nothing inherently “Detroit” about it. Nothing that intrinsically builds off its only true competitive advantage: itself.

For instance, Motor City is Motor City for a reason: it builds things. It designs things. Like, for instance, cars, which, by last count, are still being used, with over 254 million registered passenger vehicles in the US in 2009 alone. And while technology-based automation is increasing manufacturing output at the expense of jobs, production is still huge business in the Rust Belt, with automotive-related STEM jobs (i.e., science, technology, engineering and mathematics-related employment)—i.e., the creative class before the “creative class” became the “creative class”)—aiding Detroit’s regional resurgence, with its 10.5% STEM job growth leading the country from 2010 to 2012. And no, this is not to say Detroit will recoup manufacturing jobs lost from its heyday. But it’s absurd for Detroit to neglect training and flexing its muscle—or its legacy of concept, design, and production—for a future with no middle between start-ups and baristas. I mean, advanced manufacturing isn’t nostalgia. It exists.

So, why this path? Why pretty Detroit? Why make it culturally less distinct? Why embark on a plan of hyper-modern ephemerality when your distinction is resilience, making things, and hard work? Why? Where is the evidence that this even works? What in the hell is even going on here?

To get to the bottom of this you need to be aware of parallel events in Cleveland. There, Dan Gilbert has hands in that city’s Downtown redevelopment as well. But it is not what you think. And therein lies the problem.

You see, if the Detroit Dan Gilbert is the urbanists’ Dr. Jekyll than in Cleveland he becomes the anti-urban Mr. Hyde. In fact, the Cleveland Dan literally embarks on nearly all the urbanists’ seven deadly sins, including owning and running a casino placed right beside the city’s iconic Public Square, demolishing historic buildings for the creation of a VIP valet center, planning to ruin the iconic Terminal Tower by connecting an enclosed pedestrian tunnel from a parking garage into its face—the Plain Dealer architecture critic stated it was akin to “poking a straw in Mona Lisa’s nose”—and, more generally, pissing off Millennials.

From a recent Atlantic Cities piece entitled “If Other Cities Are Demolishing Skywalks, Why Does Cleveland Want a New One?”, the author, who omits Dan Gilbert’s name, writes:

“In the last decades of the 20th century, many American cities built skywalks in a desperate attempt to seem modern, hoping to create a sanitized urban experience that would compete with the sanitized suburban experience of indoor malls.

For the most part, it didn’t work, and now cities…are tearing down the skywalks…in an effort to return pedestrian life and vitality to the street.

Meanwhile, in Cleveland, the owners of the year-old Horseshoe Casino downtown are planning to build a brand-new skywalk…For many of the young people moving to Cleveland in search of a 21st-century urban experience – pedestrian-friendly, with lots of people out and about – it seems like a step backward in time.”

Why is Gilbert going all anti-urban in Cleveland, then? In a word: money, as Moody’s just issued a report saying a walkway would help the casino reach predicted income streams, as it has been underperforming. Obviously casino ownership is a no frills money-making operation, as is real estate. With each: immediate financial return trumps the nurturing of human and community capital to support a vision of long-term economic growth.

But Detroit Dan is different, right? He is a walkability guru’s guru. One of the “enlightened developers” as was stated above.

Well, you be the judge. Here’s a blog post excerpt covering the recent Placemaking Leadership Council hosted in Detroit, with Detroit 2.0 taking center stage.

Dan Gilbert, head of Rock Ventures and Quicken Loans, genuinely seemed to defer to Kent [the Project for Public Spaces head] when it came to his part of the presentation Thursday. Gilbert, who has millions of hours of public-speaking practice behind him, often turned to Kent to fill in the details on the upcoming renovations to Campus Martius, Cadillac Square, Capitol Park, Grand Circus Park and Paradise Valley.

“Genuinely seemed to defer” is right. Or just bored as hell.

And then there is this. This. Courtesy of a Curbed Detroit blog post called “Development In Downtown Detroit Is Playing Out Like A Huff Po Blog Post From 2009”. The referenced Huffington Post piece is by Detroiter Toby Barlow that is called “How a Billionaire Can Make a Billion Dollars”. The strategy? Buy Detroit, not “metaphorically” but “literally”, yet do it “very quietly, so as not to inflate any prices”. Then, according to Barlow, since a billionaire owns thing, he moves his employees to his buildings and gives them “incentives to live down near their work so that they'll buy your residential property”. Barlow concludes:

So, I don't have to spell out the rest, do I? Real estate values will quickly soar as other companies, encouraged by your brazen move, make similar leaps into what will still be an incredibly affordable market. The momentum will build as the ever-frenzied media piles on.

Yes, Detroit’s plan for the future pre-dated by a Huff Po blog entry from 2009.

The big revelation here?

Look, in the end, the Dan Gilbert’s of the world are in their line of work for one reason and one reason only: to make money. They will don whatever mask they need to play the part, be it the urban-loving Jekyll or the anti-urban Hyde. That’s the problem with creative class urbanism. It is dependent on developers who could care less. It is a means to an end for those who implement it.

Too bad this end is not the beginning of a true path forward for a real Rust Belt recovery.

Detroiters, like most Rust Belters, have been through enough. They deserve better.

Richey Piiparinen is a writer and policy researcher based in Cleveland. He is co-editor of Rust Belt Chic: The Cleveland Anthology. Read more from him at his blog and at Rust Belt Chic.

Megacities And The Density Delusion: Why More People Doesn't Equal More Wealth

Joel Kotkin — Tue, 16 Apr 2013 16:46:28 -0400

Perhaps no idea is more widely accepted among urban core theorists than the notion that higher population densities lead to more productivity and sustainable economic growth. Yet upon examination, there are less than compelling moorings for the beliefs of what Pittsburgh blogger Jim Russell calls “the density cult,” whose adherents include many planners and urban land speculators.

Let’s start at the top of the urban food chain, the world’s 28 megacities of over 10 million people (which we are defining as areas of continuous urban development, incorporating suburbs and satellite communities). Is greater density the key to great prosperity? For the most part, the world’s densest megacities are the poorest. Take the densest, the Bangladeshi capital of Dhaka. Its 14 million residents are squeezed into an area of 125 square miles, making for a population density of 115,000 per square mile, as reported in the latest edition of Demographia World Urban Areas (which includes estimates for all known urban areas in the world with at least 500,000 residents). Dhaka’s per capita gross domestic product, $3,100, is the lowest of all the world’s megacities.

Three other megacities — Mumbai, Karachi, Delhi — have population densities that are between three to seven times as high as the biggest megacity, Tokyo-Yokohama, which has a density of 11,000 per square mile. Tokyo is also much richer; the region’s per capita GDP tops $41,100, while the three ultra-crowded metropolises on the subcontinent have GDPs under $10,000 per capita. In contrast the two most spread out megacities, Los Angeles and New York, have population densities about half or less of Tokyo’s, but their per capita GDPs rank number rank first and third ($63,100 in New York and $54,400 in Los Angeles).

Do any dense metropolitan areas boast higher GDPs? Seoul-Incheon, South Korea, packs more than 20 million people into an area roughly a quarter of Tokyo’s and at a density four times that of Los Angeles. Its per capita GDP, at $32,200, is the highest among the 10 most dense megacities. Paris, which is twice as dense as New York and 50% more dense than Los Angeles, stands at $53,900. (Yes, Los Angeles is denser than New York — despite its small central core, L.A. lacks the wide stretches of bucolic suburbia common in eastern cities).

This imperfect, if not inverse, relationship between density and wealth is widely ignored by most urban core boosters, many of whom argue that packing people together is the true key to economic growth. But more often than not, notes Russell, the objective is aggrandizing the “creative class” — those who tend to settle in dense urban cores and also work in industries that do best there, but with little positive for everyone else.

Many retro-urban theorists maintain that high density is the key to urban prosperity. These theorists often point for justification to Santa Fe Institute research that, they claim, links productivity with density. Yet in reality it does nothing of the kind. Instead the study emphasizes that population size, not compactness, is the decisive factor.

Size does matter. A region is helped by the infrastructure that generally comes only with a large population, for example airports. But being big does not mean being dense. In fact the U.S. cities that made the largest gains in GDP in 2011 — Houston, Dallas-Fort Worth and greater Detroit — are not dense cities at all.

Some of the metropolitan regions that have the highest per capita GDPs in the world based on purchasing power are not particularly dense. The two regions at the top — Hartford, Conn. and San Jose, Calif., — are if anything largely suburban in character. Neither has a strong central core, and most of the jobs in the areas are on the periphery.

These areas are marked by everything that density advocates detest: They have very low levels of transit ridership and are largely dominated by single-family homes. The most affluent, Hartford, has among the lowest urban population densities in the world. It turns out that our low-density, “sprawling” metropolitan areas do very well in terms of wealth creation. Of the top 10 urban regions in the world in terms of GDP per capita all but one — Abu Dhabi in the United Arab Emirates — are located inside the United States.

There are many thriving American urban areas with densities below the U.S. average for large urban areas.This includes not only Hartford, but also Boston, Durham, Seattle and Houston. Indeed, smaller, low-density Des Moines nearly broke into the top 10 (13th), reflective of the economic gains being made in the Great Plains.

We may think, for example, of Boston, which ranks fifth in the world in per capita GDP, as a tightly packed urban area. But once one gets behind the relatively small urban core, the overall density is barely 2,200 per square mile, less than half San Jose or Los Angeles, hardly a fifth that of Tokyo and not much more than Atlanta, the least dense major city in the world with more than 2.5 million residents.

Why is this the case? One key reason is that cities, as they evolve, naturally spread out. As New York University’s Shlomo Angel has pointed out, virtually all major cities in the world are growing more outward than inward, and becoming less dense in the process. This is not only true in the United States, but also in Europe and, even more surprisingly developing countries as well. For example, over the past four decades, everyone’s favorite dense core city, Paris, has seen its urban land area expand 55%, while its population has risen only 21%. Today, the geographical extent of urban Paris is more than 25 times that of the ville de Paris, home to most of the familiar tourist attractions.

In some ascendant countries, notably China, American-style suburbs are being duplicated; and when Chinese and other Asians immigrate, they tend to move to lower-density suburban areas. The only exceptions have been cities where development has been distorted by ideology, such as Moscow before the fall of the Soviet Union, notes Alain Bertaud, a former principal planner World Bank.

The reason for moving outward may be lost on theorists and their real estate backers, but they remain compelling for many people, particularly families. A national association of realtors survey in 2011 found that roughly 8o% of adults prefer to live in detached single-family houses while only 8% preferred an apartment. It is thus not surprising that the suburbs, which abound in detached housing, contain nearly three-quarters of America’s major metropolitan population or that areas outside the urban core accounted for 99% of growth between 2000 and 2010.

For the most part, this suggest the population, for the most part, will continue to seek out the periphery. This is not only true, as NYU’s Angel points out, in the United States or in similar countries such as Australia or Canada. As people seek out more affordable and larger housing, they tend to spread out from their historic cores. It happens most decisively in wealthy areas that are also land-rich.

This is not to say that the higher-density enclaves of urban areas do not have an important place. In terms of culture, finance, media and certain other transaction-based industries, a number of dense urban cores remain unassailable in their efficiency and appeal. But in the United States, and much of the rest of the high-income world, this is accomplished by bringing residents from the periphery to the core — by car, train, bus and increasingly through telecommunications, even as most jobs are located elsewhere in the urban area.

The future shape of the city is likely to continue expanding, even as some urban cores grow. Visit any burgeoning city in the developing world from Shanghai to Mexico City and the same reality emerges: as cities get larger, they spread out, as people begin to aspire, as best they can, for the quality of life that most North Americans and Europeans already take for granted.

Joel Kotkin is executive editor of NewGeography.com and a distinguished presidential fellow in urban futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

This piece originally appeared at Forbes.com.

Dhaka photo by wiki commons user BL2593.

Density Boondoggles

Jim Russell — Thu, 11 Apr 2013 01:38:15 -0400

Is it density or migration? Venture capitalist Brad Feld weighs in:

The cities that have the most movement in and out of them are the most vibrant.

The densest city in the world won't be as vibrant as the city with the most talent churn. Yet planners and urbanists tout the former over the latter. We've reached the point of density for the sake of density. It is an end instead of a means to an end. The art of the density boondoggle:

The following is the conversation held at every regional summit on Long Island:

Advocate: Let’s keep our young people from leaving! There’s a…brain drain!

Public: How do we stop it?

Developer: Build denser housing! Let’s make it…affordable! Walkable! Let’s make it…mixed-use sustainable smart growth…with a downtown, pedestrian-friendly feel.

Municipality: Development approved!

What's the question? Greater density is the answer. It will plug the brain drain. I promise. But plugging the brain drain will reduce talent churn. Long Island will be less vibrant.

There is a name for the Cult of Density. It now has its very own -ism. All hail Vancouverism:

Vancouverism is, at the root, a movement to go from low density, to higher density, to make Canadian and North American cities about people once again.

Making cities all about people sounds great. All I hear is the chant of the Underpants Gnomes:

Phase 1: Create a cool city.
Phase 2: ?
Phase 3: Retain talent.

That will be $500,000. Thank you for your patronage, Memphis. Consulting is fun!

Development approved. That's the story line playing out in downtown Las Vegas with Zappos. Density is king. Don't listen to Brad Feld. Talent churn doesn't matter.

If Vancouverism were harmless, then I wouldn't blog about it. The misplaced emphasis on density has negative impacts. Vancouver is more about people, those who are young, single and college-educated:

'Revitalizing,' but leaving seniors behind

Last July, Vancouver city council unanimously approved a three-year Chinatown Neighbourhood Plan and Economic Revitalization Strategy. More than a decade in the making, the plan focused on economic revitalization, after two-thirds of businesses surveyed in Vancouver's original Chinatown reported declining revenues between 2008 and 2011 -- blamed mainly on losses to newer Chinese-language communities in suburbs like Richmond.

The revitalization plan envisions new residential development, "to connect with younger generations and reach out to people of all backgrounds to ensure Chinatown is increasingly relevant to a more multi-cultural Vancouver." At the same time, it acknowledged that in a neighborhood where 67 per cent of households are low-income -- more than twice the City of Vancouver average -- such redevelopment "can displace low-income residents." What is good for old Chinatown's businesses, in short, may be less so for its poor and isolated elderly.

S.U.C.C.E.S.S., Vancouver's primary provider of culturally- and linguistically-supportive housing and services for Chinese seniors, is providing a partial answer. It operates a single multi-level care facility in old Chinatown for people with cognitive impairments or who require round-the-clock nursing. But its 103 beds, soon to be 113, are about one-tenth of what the UBC Centre for Urban Economics anticipates will be needed over the next 15 years to house Chinese seniors.

Meanwhile, the support it offers seem a world away from Rosesari and her neighbours living in privately operated SROs like the May Wah Hotel. Yet the women are spirited and resilient. "I'm happy and I'm healthy," Rosesari told me through Pang's interpretation. Both she and Lin say they like living in Chinatown. They feel at home here, where the language spoken is the one they know.

They are also in their 90s. As time goes on, they and others may no longer be able to manage the May Wah's staircases, its lack of mobility aids, and its communal bathing facilities. The alternatives available to them then are in terribly short supply.

Welcome to the dark side of the obsession with wants and needs of the Creative Class. Vancouverism is boutique urbanism, catering to a specific demographic at the exclusion of all others. People are either displaced or fall into the cracks. Bike lanes and food trucks trump the needs of seniors.

Jim Russell is a talent geographer with particular interest in the Rust Belt. Read his blog at Burgh Diaspora, where this piece originally appeared.

Downtown Vancouver photo by runningclouds

CEO Bonuses: Who Pays the Price?

Matthew Stevenson — Thu, 28 Mar 2013 01:38:17 -0400

Because so many chief executives of failed or mediocre companies have walked away with millions in bonuses and swag bags, both Switzerland and the European Union recently voted to put a cap on corporate bonuses, limiting them to a small multiple of base salary. What prompted the acceptance of the “Minder Initiative”—named after the independent parliamentarian who sponsored the referendum — is a string of stunning business losses that had no affect on the bonuses paid to the sitting executives.

Swissair went bankrupt in 2001, although not before it could pay out a $10 million bonus to its grounded chairman. The chief executive of the Swiss pharmaceutical giant, Novartis, was recently offered a $78 million sendoff. The Swiss bank, UBS AG, appears regularly in the headlines as the poster-child of bad loans ($40 billion absorbed by the government), LIBOR rate rigging ($1.5 billion in fines), and other dim practices (a so-called rogue trader lost $2.3 billion in London), although the losses are never enough to drain the bonus pool.

The architect that turned the once-staid UBS into an off-track betting parlor, chairman Marcel Ospel, regularly paid himself CHF (Swiss Francs) 24 million in annual salary, something that Swiss voters had in mind, along with the Novartis proposal, when casting their votes with Minder. After the vote, UBS quietly offered an incoming executive a $28 million sign-on bonus — something the law, when enacted, will prohibit.

In the US, corporate activists and some regulators want shareholders to have a “say on pay” of the top CEOs, or for Congress to tax away paycheck windfalls. So far, most reforms have been non-binding.

Members of the business community, nevertheless, resent the intrusion of state or federal bureaucracies into their corner offices. In their minds, salaries are best left to compensation committees and captive boards of directors, which are free to rain money on a handful of senior executives, some of whom are chairmen of the same boards that dole out their pay.

According to the latest estimate, Fortune 500 CEOs have to scrape by with compensation that averages $12 million a year and that is 380 times the pay of the average worker. In 1965, this ratio stood at 24 times and in 1990 it was 71 times.

Meanwhile, real American wages have been declining since 1974, and per capita average income in the country is about $27,000, just above the poverty line of $21,000. The median income for American households is about $50,000 a year. The reason most American corporations reward senior management and stiff the rest of the work force is because many public companies are little different from banana republics.

In theory, the shareholders elect the board, and the board watches their interests, a mandate that includes signing off on the top salaries. In practice, shareholders, even big ones, have little say in who is put on the board, especially if the CEO is also chairman. In those cases, board members serve at the whim of the same CEO. Often such an approval rating depends on voting the prince a big salary, along with big bonuses and stock options.

Under the new Swiss law and other corporate reform proposals, shareholders are given the right to approve the top pay packages in a company. This sounds democratic enough, except that most corporate proxy votes turn out results that would be familiar to commissars in the Soviet Union.

One reason is that many mutual and pension funds, which own the large positions in many public companies, are required by charter to vote with management or, if they disagree, to sell the positions. It's unusual for a large institutional shareholder to both hold on to a position and vote against management. So letting shareholders approve top compensation will not keep managers from pocketing $50 million pay envelopes.

The usual justification for multimillion-dollar rewards is that the company has performed well “in the market” or “exceeded the budget forecasts.” Of course, meeting such a benchmark explains a bonus of $250,000, not necessarily one of $20 million. Yes, the CEO has responsibilities and “duties of care,” but if the board were to auction off the position of CEO in most companies, it's likely that they would find many qualified takers for $1 million a year.

The truism about salaries—“You don’t get what you deserve; you get what you negotiate”—does not apply to the C-suite, which gets what the board is dumb enough to give away almost blindly. They go along with the lavish payouts based on similar compensation paid by competitors.

Because of this mutual-remuneration self-congratulatory circle, salaries have skyrocketed, even if stock prices have remained flat or plummeted. General Electric’s CEO has earned $54 million in the past five years, while the company’s stock went from $37 to $7 and back up to $23 a share. As the Death of Salesman line goes, “No man only needs a little salary.”

Ex-Treasury Secretary Robert Rubin pulled down $126 million from 1999 to 2009 as a top Citigroup senior executive, but when it went bust said that he had no responsibility for the bank’s creditworthiness. He confessed, “My great regret is that I and so many of us who have been involved in this industry for so long did not recognize the serious possibility of the extreme circumstances that the financial system faces today.” But he didn’t give back any of the money. Rubin’s boss, Charles Prince, left the chairmanship of Citi with about $80 million in his pockets, even though the company went to the wall the moment he was out the door.

The goal should not be just to limit CEO pay, but to increase average wages and salaries, and think of increasing the dividend, especially in companies eager to throw millions at the boss. Stock options and profit sharing could be allocated equally to all employees, and not simply reserved as corner-suite perks.

Likewise, cumulative voting of board directors allows smaller blocks of shareholders to elect a representative (you put all of your votes on one candidate).

Many top CEOs live in a bubble of private jets and pillowed suites, and are accountable to only a handful of cronies—certainly not the vote of the employees or the shareholders. They thrive in the cozy confines of oligopoly — think of a golf club lounge — in which a corporation’s success is due only to the top managers, not to the shareholders’ capital or to the workers.

Why not have a companywide plebiscite on the chief executive every two years? The Greeks knew that war was too important to be left to the generals, and had their soldiers elect them.

Employees, pensioners and shareholders all ought to have seats at the table. The Chinese garment workers in sweat shops who stitch together all those sailor suits that are sold at vast markups might be less inclined to pay Ralph Lauren $66 million a year than the board in New York would.

Minder’s law and its clones in the EU or, were legislation to come about, in the US, won't solve the problem on their own. Rather than passing legislation that sounds good in the headlines (The Economist: “Fixing the Fat Cats”) but achieves little reform at the office, the most significant recovery for the ransoms paid to many senior executives would be to overhaul how boards of directors are established and operated — to make them legally accountable for the company’s performance and representative of all stakeholders, including the work force. Keep in mind that when salesman Willy Loman asked for a golden parachute, he only needed fifty dollars "to set his table.”

Flickr photo by World Affairs Council of Philadelphia: Former Citigroup Director and executive Robert Rubin. Is that the size of his bonus?

Matthew Stevenson, a contributing editor of Harper’s Magazine, is the author of Remembering the Twentieth Century Limited, a collection of historical travel essays. His next book is Whistle-Stopping America.