NewGeography.com blogs

Dubai Debt Debacle

When a bunch of American bankers woke up last Thursday, I hope they found more to be thankful for than just a traditional turkey dinner. It’s thought that the American banks will have less exposure to Dubai World than most European or Asian banks – although the American banking industry is known to hide a thing or two up their sleeves. Dubai World is asking creditors for a “standstill” – meaning they want the interest to stop accumulating on their debt. It’s a polite way of saying they can’t afford the interest payments anymore.

Dubai is one of the seven states that make up the United Arab Emirates (UAE). Dubai borrowed heavily to finance a building boom supported by high oil prices. They now lay claim to the world's tallest building and an island in the shape of a palm tree – at least General Motors went broke building cars. The capital of the UAE is Abu Dhabi. It’s unlikely that Abu Dhabi can come to the rescue. Just last February Abu Dhabi injected $4.5 billion into five banks that were coming under financial pressure when the real estate market shifted. Bailing out banks seemed to stop the U.S. government from bailing out General Motors.

Dubai World is said to be in debt for $60 billion, although some reports put the figure much higher at about $90 billion. Even at the low end, that figure is equal to all the foreign direct investment in the UAE. (Foreign direct investment is all the money that foreigners invested in UAE.) By comparison, the direct investment of all UAE residents in other countries is less than one half that amount (about $29 billion at the end of December 2008). But don’t think that means that Dubai World’s investments are of little consequence outside the Gulf region. Recent projects include ports in London and Vancouver. DP World was at the center of a controversy in February 2006 when they announced the purchase of a firm that oversees operations at six U.S. ports – DP World subsequently sold them off.

Dubai World is the UAE government’s investment conglomerate. That makes this a crisis in sovereign (public) debt – possibly only the first shoe to drop in the coming crisis I warned about back in July. Hope you don’t get tired of hearing me say “told ya’ so” – I suspect it will happen with increasing frequency during the next twelve months. The real problem with defaulting sovereigns is that there is no Chapter 11 bankruptcy process for them, like there was for General Motors. When a country defaults on their debt, they just stop paying – “governments can change the rules on a whim.”

Bill Gates is Right On – We Can Feed a Growing, Hungry World

The world’s richest man recently sent a shockwave through the world food community by calling for another green revolution built upon n sustainability paired with genetic modification. Gates, one of the preeminent global philanthropists, made the case for empowering Africa’s small landholder farmers to be more productive in drought-ridden and other harsh environments.

"Poor farmers are not a problem to be solved; they are the solution—the best answer for a world that is fighting hunger and poverty, and trying to feed a growing population," Gates said.

Next week in Ghana the first National Farm and Agriculture Show (FAGRO) will be held to take steps that will add value to agriculture and move it from it peasant stage to a commercial stage. According to the Coordinator of FAGRO '09, Ms. Alberta Nana Akyaa Akosa , “agriculture is a highly ignored discipline and this is not good for the growth of the economy. A lot of corporate institutions do not place high priority on Agriculture and we at FAGRO aim to bring a new revolution in the Agriculture sector. This revolution will increase Private Partnership Approach; where Agriculture will not be politically but privately driven; a revolution where most of our young ones will come out of school and yearn to go into Agriculture” she noted. “It is the only way we can free ourselves from the high import rate of all consumables”, she added.

During this Thanksgiving holiday we should be mindful that meeting the food needs of a growing, global population – estimated to be around 9 billion by 2050 – will require harnessing the tremendous productive power of North American agriculture, as well as in producing countries in Oceania and Europe, as well as improving the ability of small farmers around the world to produce more for indigenous and export markets alike.

Precision agriculture can be used to scale up sustainable agricultural practices, reducing energy usage and other environmental ill effects often associated with large-scale production agriculture. Providing small farmers with access to agricultural technologies adaptable to local circumstances and market access should be given highest priority.

Bill Gates knows this. So do developing world visionaries like Alberta Nana Akyaa Akosa.

The Essence and Future of Texas vs. California

I know there have been a lot of articles and references to Texas vs. California recently in this blog, but, well, there's a new one with some genuinely new contributions to the argument ("America's Future: California vs. Texas", Trends magazine, hat tip to Jeff). And it says some nice things about Houston too, so how can I pass on it? The beginning of the article is here - including an overview of both states' situations - but here are some key additional excerpts:

...Both the Brookings Institution and Forbes Magazine studied America’s cities and rated them for how well they create new jobs. All of America’s top five job-creating cities were in Texas. It's more than purely economics and regulation can explain, though. Texas – and Houston in particular – has a broad mix of Hispanics, whites, Asians, and blacks with virtually no racial problems. Texas welcomes new people and exemplifies genuine tolerance. When Hurricane Katrina hit, Houston took in 100,000 people. Not surprisingly, Houston has more foreign consulates than any American city other than New York and Los Angeles.
...
But, how did this happen? What’s wrong with California, and what’s right with Texas? It really comes down to four fundamental differences in the value systems embodied in these states:

First, Texans on average believe in laissez-faire markets with an emphasis on individual responsibility. Since the '80s, California’s policy-makers have favored central planning solutions and a reliance on a government social safety net. This unrelenting commitment to big government has led to a huge tax burden and triggered a mass exodus of jobs. The Trends Editors examined the resulting migration in “Voting with Our Feet,” in the April 2008 issue of Trends.

Second, Californians have largely treated environmentalism as a “religious sacrament” rather than as one component among many in maximizing people's quality of life. As we explained in “The Road Ahead for Housing,” in the June 2009 issue of Trends, environmentally-based land-use restriction centered in California played a huge role in inflating the recent housing bubble. Similarly, an unwillingness to manage ecology proactively for man’s benefit has been behind the recent epidemic of wildfires.

Third, California has placed “ethnic diversity” above “assimilation,” while Texas has done the opposite. “Identity politics” has created psychological ghettos that have prevented many of California’s diverse ethnic groups and subcultures from integrating fully into the mainstream. Texas, on the other hand, has proactively encouraged all the state’s residents to join the mainstream.

Fourth, beyond taxes, diversity, and the environment, Texas has focused on streamlining the regulatory and litigation burden on its residents. Meanwhile, California’s government has attempted to use regulation and litigation to transfer wealth from its creators to various special-interest constituencies.

They go on to make six forecasts:

  1. ...expect to see California’s loss of jobs to Nevada accelerate...
  2. ...expect to see a backlash in California and across the country against regulations, especially green initiatives that can’t clearly demonstrate a positive ROI...
  3. Watch for the smart money, including venture capital, to begin migrating to Texas for start-ups in many areas, including energy, info-tech, manufacturing, and biotech. Just as Delaware’s tax laws once encouraged numerous businesses to incorporate there, even when they had no connection to the state, Texas will become a magnet for new businesses by offering cheap land, a favorable regulatory environment, a business-friendly culture, and a large supply of skilled labor. Unless California revamps dramatically, expect to see its economy languish, even as the recovery takes off.
  4. To make its business climate even more business-friendly, Texas will invest heavily in secondary education and work hard to attract the best talent to its research universities (note the recent Tier 1 proposition and funding). Keep an eye especially on the University of Texas, which already has a first-rate campus and faculty. Within 10 years, UT, as the locals call it, may well rival Stanford or Berkeley.
  5. Other states will adopt tort reform measures pioneered in Texas. Unlike California and most other states, Texas has been aggressive in minimizing the enormous burden of frivolous lawsuits...
  6. Look to Texas to become a cutting-edge cultural mecca. Houston has always offered a vibrant cultural scene, ever since the Alley theater company was founded there in 1947 by Nina Eloise Whittington Vance. In the 1950s, John and Dominique de Menil moved to Houston with one of the most significant private collections of art in the world and began donating art and money to the Houston Museum of Fine Arts. Both institutions have grown to world-class status since then. In the coming years, this trend will spread to the major cities of Texas (take that, Dallas!), attracting the best talent and money and shifting the cultural balance of the nation away from New York and San Francisco.

I can personally vouch for #5. I was just visiting my brother out in CA, and a friend of his with a small store was being hit with a large disability discrimination lawsuit for a minor oversight (handicapped parking was marked on the ground and had the requisite walkways and ramps, but lacked a pole sign). Evidently this has become a cottage industry in California, where lawyers guide the disabled through stores looking for very minor violations of a vague law (things like high shelves or tables), then sue (expecting a quick settlement, of course). Under CA law, discrimination guilt is assumed if there's anything in the store the disabled can't do that a normal customer can do, regardless of the availability of employees to provide assistance. His friend was clearly exasperated with the unwinnable situation. Just plain nuts.

As Jim Goode says, "You might give some serious thought to thanking your lucky stars you're in Texas."

Contrived Sustainability

The draft reauthorization of the federal surface transportation program (highway and transit) in the House of Representatives is filled with initiatives to reduce greenhouse gas emissions, often by seeking to encourage compact development (smart growth) policies. Dr. Ronald D. Utt of the Heritage Foundation discovered an interesting definition in the draft: “sustainable modes of transportation” means public transit, walking, and bicycling” (Section 333(P)7, page 219, accessed November 18, 2009).

This definition would mean that a Toyota Prius that emits one-half as many grams of greenhouse gases per passenger mile as a transit system (not an unusual occurrence) is not sustainable transportation, while the transit system is. There will be more cases like this as time goes on, as vehicle fuel economy improves and the impact of alternative fuel technology is expanded. This is irrational and the worst kind of ideology.

It is possible, of course, that this is simply sloppy legislative drafting. But given the persistence of the compact development lobby and its contribution to pending legislation in Washington in the face of respected research demonstrating its scant potential, something else may be operating. The wording may betray an agenda more concerned with forcing people to accept the favored (and anti-suburban) lifestyles that an urban elite has long sought to impose on others than it is to reduce greenhouse gases. Sustainability in greenhouse gas emissions is not about the hobby horses of one group of advocates or another, it is rather about reducing greenhouse gas emissions as efficiently as possible. The Transportation and Infrastructure Committee and the rest of Washington needs to focus on ends, not means.

Provisions that pick particular strategies, without regard to their effectiveness, have no place in a crusade so much of the scientific community has characterized in apocalyptic terms. Moreover, such disingenuousness, in the longer run, could whittle away the already apparently declining support for reducing greenhouse gas emissions.

Long Beach Freeway Saga

The Los Angeles Times reports progress toward completion of the Long Beach Freeway (I-710) gap between Valley Boulevard in East Los Angeles and Pasadena, with a geologic study finding a tunnel alignment to be feasible. Real progress is overdue. My great aunt and great uncle were forced out of their house in the early 1960s in South Pasadena by the California Highway Department, in anticipation of building the freeway. I suspect the house is still there.

For nearly one-half century, South Pasadena residents have opposed building the “Meridian” route that would have dissected the city. They were not against the freeway per se, but rather preferred the “Westerly” route, which would have skirted the city. The state had selected the Meridian route. In the middle 1980s, while a member of the Los Angeles County Transportation Commission, I served on a special route selection committee chaired by former county supervisor Peter F. Schabarum. Under our legislative authority, we also selected the Meridian route. Nothing came of it.

It is to be hoped that serious efforts to close the gap will be underway soon.

China’s Love Affair with Mobility

China Daily reports that car (light vehicle) sales reached 10.9 million units in the first 10 months of 2009, surpassing sales in the United States by 2.2 million. This was a 38% increase over the same period last year. Part of the increase is attributed to government programs to stimulate automobile sales.

China’s leading manufacturer is General Motors (GM), which experienced a 60% increase in sales compared to last year. By contrast, GM’s sales in the United States fell 33% in the first 10 months of the year on an annual basis. GM sold nearly 1.5 million cars in China, somewhat less than its 1.7 million sales over the same period in the United States.

Texas Dominates Milken's New Best Performing Cities Index

Texas metropolitan regions hold down four of the top five and nine of the top 16 places in Milken's new Best Performing Cities Index, released this morning. The rankings were authored by previous New Geography Contributor Ross DeVol, director of Regional Economics at Milken.

It's refreshing to see a set of rankings attempting to take an objective, hard data-based look at comparative analysis. The Milken Rankings are a combination of job growth, wage and salary growth, high-tech GDP growth, and high-tech location quotients (see page 8 of the report).

A region's industry mix plays a big role in its ranking; you can see energy-centric regions scoring well. But remember that these rankings also explicitly factor in high tech growth and high tech concentration.

Regions that avoided real estate inflation and those maintaining what they have or simply avoiding rapid decline tend to score better.

“‘Best performing’ sometimes means retaining what you have,” said DeVol. “In a period of recession, the index highlights metros that have adapted to weather the storm. As we move forward in a recovery that still lacks jobs, metros will be further tested in their ability to sustain themselves.”

The rankings include 324 regions, breaking them into two groups based on region size.

You can view the full lists at Milken's interactive rankings website, and the full report includes analyses of the top large and small places.

Here's the top and bottom 25 Large places:




Top 25 Large Regions Bottom 25 Large Regions
2009 rank 2008 rank Metropolitan area 2009 rank 2008 rank Metropolitan area
1 4 Austin-Round Rock, TX MSA 176 97 Bradenton-Sarasota-Venice, FL MSA
2 13 Killeen-Temple-Fort Hood, TX MSA 177 150 Birmingham-Hoover, AL MSA
3 3 Salt Lake City, UT MSA 178 144 Memphis, TN-MS-AR MSA
4 7 McAllen-Edinburg-Mission, TX MSA 179 117 Miami-Miami Beach-Kendall, FL MD
5 16 Houston-Sugar Land-Baytown, TX MSA 180 120 Cape Coral-Fort Myers, FL MSA
6 21 Durham, NC MSA 181 183 Spartanburg, SC MSA
7 9 Olympia, WA MSA 182 178 Wilmington, DE-MD-NJ MD
8 5 Huntsville, AL MSA 183 189 Dayton, OH MSA
9 14 Lafayette, LA MSA 184 73 Merced, CA MSA
10 2 Raleigh-Cary, NC MSA 185 191 Hickory-Lenoir-Morganton, NC MSA
11 15 San Antonio, TX MSA 186 193 Cleveland-Elyria-Mentor, OH MSA
12 29 Fort Worth-Arlington, TX MD 187 170 Providence-New Bed.-Fall Riv., RI-MA MSA
13 23 Dallas-Plano-Irving, TX MD 188 186 South Bend-Mishawaka, IN-MI MSA
14 37 El Paso, TX MSA 189 185 Kalamazoo-Portage, MI MSA
15 45 Wichita, KS MSA 190 197 Canton-Massillon, OH MSA
16 88 Corpus Christi, TX MSA 191 192 Ann Arbor, MI MSA
17 17 Seattle-Bellevue-Everett, WA MD 192 187 Atlantic City, NJ MSA
18 40 Baton Rouge, LA MSA 193 188 Youngstown-Warren-Board., OH-PA MSA
19 72 Tulsa, OK MSA 194 190 Grand Rapids-Wyoming, MI MSA
20 20 Greeley, CO MSA 195 196 Lansing-East Lansing, MI MSA
21 8 Tacoma, WA MD 196 199 Holland-Grand Haven, MI MSA
22 48 Fort Collins-Loveland, CO MSA 197 198 Warren-Troy-Farmington Hills, MI MD
23 54 Little Rock-N. Little Rock-Conway, AR MSA 198 194 Toledo, OH MSA
24 67 Shreveport-Bossier City, LA MSA 199 200 Detroit-Livonia-Dearborn, MI MD
25 41 Wash.-Arl.-Alex., DC-VA-MD-WV MD 200 195 Flint, MI MSA




And the top and bottom 25 Small regions:






Top 25 Small Regions Bottom 25 Small Regions
2009 rank 2008 rank Metropolitan area 2009 rank 2008 rank Metropolitan area
1 1 Midland, TX MSA 100 110 Vineland-Millville-Bridgeton, NJ MSA
2 7 Longview, TX MSA 101 94 Parkersburg-Marietta-Vienna, WV-OH MSA
3 5 Grand Junction, CO MSA 102 114 Williamsport, PA MSA
4 26 Tyler, TX MSA 103 117 Mansfield, OH MSA
5 10 Odessa, TX MSA 104 85 Jackson, TN MSA
6 29 Kennewick-Pasco-Richland, WA MSA 105 115 Muncie, IN MSA
7 15 Bismarck, ND MSA 106 63 Flagstaff, AZ MSA
8 6 Warner Robins, GA MSA 107 112 Racine, WI MSA
9 11 Las Cruces, NM MSA 108 70 Dothan, AL MSA
10 17 Fargo, ND-MN MSA 109 105 Sheboygan, WI MSA
11 45 Pascagoula, MS MSA 110 97 Niles-Benton Harbor, MI MSA
12 23 Sioux Falls, SD MSA 111 100 Altoona, PA MSA
13 8 Bellingham, WA MSA 112 95 Terre Haute, IN MSA
14 38 College Station-Bryan, TX MSA 113 59 Redding, CA MSA
15 2 Coeur d'Alene, ID MSA 114 122 Lima, OH MSA
16 12 Cheyenne, WY MSA 115 75 Janesville, WI MSA
17 81 Texarkana, TX-Texarkana, AR MSA 116 96 Elkhart-Goshen, IN MSA
18 27 Waco, TX MSA 117 119 Anderson, SC MSA
19 16 Houma-Bayou Cane-Thibodaux, LA MSA 118 113 Dalton, GA MSA
20 44 Laredo, TX MSA 119 120 Springfield, OH MSA
21 40 Abilene, TX MSA 120 84 Lewiston-Auburn, ME MSA
22 25 Iowa City, IA MSA 121 116 Muskegon-Norton Shores, MI MSA
23 72 Glens Falls, NY MSA 122 121 Saginaw-Saginaw Township North, MI MSA
24 24 Billings, MT MSA 123 123 Battle Creek, MI MSA
25 64 Ithaca, NY MSA 124 124 Jackson, MI MSA

High Speed Rail: Not One Big Happy Family

California High Speed Rail Commission member Rod Diridon is chafing at all of the competition that has been created by the billions committed by the federal government to high speed rail. According to a New York Times report, he called many of the proposed systems around the country “vultures” and told an American Public Transportation Association meeting “If I can borrow a term from our good friends in labor, they are a 'Do not patronize… And I cannot say it any stronger”. Consistent with that view, Diridon urged that the federal government be asked to commit all of its current $8 billion in funds to the California project.

There may be even more disturbing news for Diridon: new competition has appeared on the horizon. A report (page 23) by the David Suzuki Foundation and the Pembina Institute (both of Canada) suggests that:

“Using the Edmonton – Calgary example as a template, judgmentally adjusted for distance, geography and relative land values, we estimate that a full high-speed link would cost about $4 billion. If the cost were shared equally between Canada and the United States, the Canadian total would be about $2 billion.”

Why stop at that? How about getting a quarter each from Zimbabwe and the Honduras? It would certainly make it less expensive for Canadian taxpayers. Perhaps our friends to the North simply made a typographical error, but perhaps not. Stranger things have been proposed.

Urban Youth Deserve Chance to Hear About Service Academies

Here’s a disturbing thought as Veterans Day approaches: Some teachers and administrators of the Los Angeles Unified School District (LAUSD) refuse to allow visits to high school campuses by representatives of the service academies that train young officers.

The service academies have all earned reputations as fine academic institutions that go further on training future officers. There is the U.S. Military Academy; the U.S. Naval Academy; the U.S. Air Force Academy; the U.S. Coast Guard Academy; and the U.S. Merchant Marine Academy. They all offer full scholarships and require five years of service after graduation.

Candidates must meet demanding standards on academics, physical fitness, and extra-curricular activity. They are generally required to secure a nomination from a member of the U.S. Congress, the president, or the vice president.

The merit involved in gaining a nomination, along with the geographic apportionment by Congressional districts, offers the chance to draw candidates from across the socio-economic spectrum. Graduation from a service academy offers young officers from every corner of society the chance to reach significant rank.

Measure that against the LAUSD teachers and administrators who deem a career as a military officer to be unworthy of a hearing at high school campuses. Some will tell you that they object because our wars are fought by too many young persons of color. Others view the “don’t ask, don’t tell” policy on gays in the military as contemptible prejudice.

These objections are absurd. Our civilian leadership decides the actions and policies of the military. War or peace? That’s in the hands of the president and Congress. Gays in the military? Same story.

It’s true that our military stands ready for war if so directed by the civilian leadership of our democracy. It’s also notable that never in the course of history has any institution possessed the war-making might of the U.S. military. And never has an institution in such a position yielded so loyally to the will of unarmed leadership. This sense of duty has lasted through good and bad, gallant victories and horrific mishaps. Never has there been a serious challenge to civilian oversight.

All of that is overlooked by LAUSD teachers and administrators—and their boycotts have an effect. Some members of Congress who represent Los Angeles have chronic difficulty in filling the number of nominations they are allowed to make to the service academies each year. They aren’t coming up short on qualified candidates. They can’t even get that far—not enough young achievers know about the possibilities of the service academies.

It’s time that someone gave these alleged educators who forbid any discussion of service academies a lesson on the honorable history of our military. They should also be reminded that it will require representatives from throughout our society—rich and poor, all colors and creeds, town and country—to keep this line of honorable service intact.

Keeping knowledge of the service academies away from youngsters in our city is nothing short of demographic censorship. It is time for LAUSD to put an end to the practice.

Forgetting Middle Skill Jobs

A new report from Skills2Compete attempts to address a national problem which continues to diminish our country’s competitive edge in the global economy. The loss of middle-skill jobs and the lack of qualified workers to fill the remaining jobs are major barriers, not only to our economic recovery, but also to our ability to sustain a high quality of life for succeeding generations. The report concludes that a new state policy is needed to align the workforce and education and training to better meet California’s labor market demand. Accomplishing that goal means improving basic skills in the workforce and ensuring that skills training and education is available to anyone post high school. A major policy change is a good start, but the report does not go far enough in addressing what is needed to restore the importance of middle-skill jobs to the economy.

Part of the challenge lies with the current mindset of the public education system and parents who value and push college as the only track to a well-paying and satisfying job. This leaves out a large segment of youth and the workforce who are not college bound and who need training and skills and encouragement to fill middle-skill jobs. Where does a high school student get vocational training or learn about middle skill jobs? Remember woodworking? Metal shop? Drafting?

Vocational education was the name of the program that provided these courses, but now it’s labeled “career tech” and the classes are no longer available in most public high schools. As a result, students have little awareness of these careers. A few years ago, while conducting focus groups of freshman and sophomore students, I was stunned to learn that many did not know what an electrician, welder, auto technician, or HVAC technician did and worse, they disdained those jobs because they thought they were “dirty” and didn’t pay well. This doesn’t bode well for a functioning society or economy. Who will service our cars, fix our plumbing, and build machinery to process our food or the solar panels to heat our homes? It will take more than a policy change to transform awareness, perceptions and values about middle-skill jobs.

The last economic boom was sustained, not by wealth created by high value manufacturing jobs, but by unbridled consumer spending particularly for houses and retail goods. If we want that standard of living to return, then we must address the greater challenge of how to grow and sustain an economy driven by production of goods instead of consumption. Along with a paradigm shift in our educational system that recognizes the importance of middle skill jobs, we must change our attitudes about work and what creates value not only for our economy but our worth to society.

We continue to hold on to arcane principles and entitled expectations about work that are increasingly less relevant in a fast-paced globalized world. We are not prepared to re-invent ourselves and our careers in terms of continuous learning of new skills and training either for middle-skill or knowledge jobs. That is what is ultimately needed to succeed in the rapidly changing workplace.

Leslie Parks has spent over ten years as a practitioner and consultant in the fields of economic and workforce development. She recently served as Director of Downtown Management and Industrial Development for the San Jose Redevelopment Agency until September 23, 2009 when she and 24 colleagues were laid off due to significant budget cuts. Leslie is now preparing for yet another career in the 21st Century workplace.