Obama's America

The Suburbanization of Religious Diversity

Travis Vaughn — Fri, 03 Sep 2010 17:35:44 -0400

You can see the changes. A drive through suburban Lake County, IN, an hour from downtown Chicago makes you feel like you are somewhere between the set of Jean Shepherd’s A Christmas Story and the movie Hoosiers. Cultural and religious diversity would probably be the last two things on your mind in a region known more for its steel industry than its sacred space.

Yet a quick glance to the east side of Colorado Street heading south makes you question your assumptions. Neatly tucked between farm land and homes sitting on lots of an acre or more, you see two structures that cause you to scratch your head and wonder, “Am I really in Indiana?” The Northwest Indiana Islamic Center and the region’s Sikh Temple of the Sikh Religious Society of Indiana sit side by side. They provide a visual reminder that suburban America has changed.

In fact, much has changed. Religion in America is alive and well, but it’s different. Although Christian churches continue to dominate the religious landscape in the United States, there are new religious neighbors. Cultures and religious traditions that once existed “somewhere over there”, have moved beyond the large cities of the U.S. into the suburbs and exurbs, places where evangelical mega-churches have flourished for decades.

Today, the United States is arguably the most religiously diverse place on the planet. And if the ethnic makeup of the U.S. stays its course for the next half-century, religious diversity will grow exponentially. The Census Bureau predicts that minorities will become the majority in the U.S. within 40 years. Religion in America could have a more robust Latino-Catholic flavor, with Hispanics numbering one in three U.S. residents by 2050. American religious geography will also include influences from Asian Indian cultural traditions. In Bible Belt states like Georgia, Hinduism is one of the fastest growing religions with more than 40,000 Hindus in the state, according to the New Georgia Encyclopedia. By 2000, Islam had already surpassed Southern Baptists in Chicago, with more than 120,000 adherents. Less than 10 years later, Chicago’s Muslim population is estimated to be around 400,000. The big new thing is that this diversity is increasingly found in suburbs. Throughout the country’s history, the places where religious and cultural diversity have been most concentrated were her cities. In fact, this has been the case around the globe. Immigrants journeyed to urban contexts en masse. The city provided the best place for jobs, people networks, and ethnic and cultural affinities. And, a smorgasbord of religious enclaves in the city made it easy for spiritually-minded people to connect and worship with other adherents in their particular tribe.

On the other hand, the suburban and rural places were viewed as narrow-minded and ethnically homogenous. They were often seemed – and sometimes were – hostile to different religions and cultures.

In the not-too-distant past, the suburbs were, for the most part, devoid of religious adherence outside of Catholic, mainline, or evangelical groups. However, demographic shifts have put the suburbs on a different trajectory. And religious traditions have followed suit.

From an ethnic and religious standpoint, cities and suburbs have changed. Some would say they have changed sides. Of course cities will continue to grow, as more than 50 percent of the world’s population lives in city-regions today. City-regions will undoubtedly become more diverse. However, there are major changes to the way we think about communities and their populations in an area of globalization and urbanization. Demographers like Audrey Singer of the Brookings Institution have pointed out that cities have become more suburban-like, and suburbs have become more city-like, though this transition has been slowed to some degree by the current recession.

Newer cities like Atlanta and older ones like Baltimore share this same pattern. It does not matter if the city is more suburban-like, or if the city is more like the archetypical city built with an infrastructure suitable for immigrants. Both are regions where foreign-born populations bypass the city altogether. This process was well under way before the turn of the last century, when census data revealed that foreign-born populations preferred suburbs over cities.

Not surprisingly, this phenomenon also brought changes in the country’s religious landscape. Yes, the city and her urban districts remain a viable context to find places of faith, but things have shifted a bit.

For example, in the past century, Islam, by design an urban religion, certainly migrated to large cities in the U.S. – notably Detroit, Chicago, and New York. But today the ummah has spread to smaller cities and suburban settings. Many Muslims have moved beyond the urban perimeter. Dearborn, MI and Northwest Indiana’s Lake County are two good examples, but these are by no means the exceptions.

Suburban-friendly cities with large evangelical populations like Atlanta have also seen an increase in other faith traditions. In 2006 and 2007, the BAPS Shri Swaminarayan Mandir Atlanta, said to be the largest Hindu temple of its kind in the United States, was built in suburban Gwinnett County in Lilburn, GA. Much of Georgia’s Hindu population is centered in the sprawling suburbs around Atlanta. The Daily Beast recently ranked Atlanta #6 on their list of the 30 leading cities for Muslims in America (see America’s Muslim Capitals). Two other smaller cities in Georgia made the list, -- Albany and Columbus.

Not only are other religious traditions navigating the suburbs and smaller cities well, but non-Anglo evangelical populations are trending suburban too. Atlanta’s large Korean population is primarily suburban, as are the city’s Korean churches. In the ethnically diverse Atlanta suburb of Duluth, a city of roughly 26,000, the majority of new churches started since 2000 have been Korean. The Korean Church of Atlanta (UMC) is on the path to become a mega-church with new construction and an estimated 1700 people who regularly attend. Korean churches in Duluth and the surrounding area are very diverse themselves, denominationally speaking. Korean congregations include churches from Methodist, Presbyterian, Baptist, and Independent denominations.

Back in Northwest Indiana, despite the decline of manufacturing jobs and high unemployment rates, the region continues to grow, albeit incrementally. Perhaps the most intriguing statistic is the number of immigrants who have moved to the region in recent years. Between 1990 and 2000, more than 70 percent of Lake County’s growth was attributed to immigration, according to a Purdue University study on immigration in Indiana. Ethnic changes in Lake County brought shifts to the area’s religious geography, too. In the county’s suburban communities of Merrillville and Crown Point, residents can find the aforementioned Islamic Center, an Islamic school, an Indian Cultural Center, the Sikh Temple, and Serbian, Macedonian, and Croatian congregations.

Some of these changes to Lake County’s religious community came during a period of rapid decline in church attendance. In 2008, The Northwest Indiana Times reported a drop in church attendance of almost 30 percent between 1990 and 2000. This does not mean that all churches in the county are shrinking. Some, in fact, have become quite large. But their biggest source of growth may not be from less familiar religious traditions.

Economic and social values will continue to intersect new religious traditions in the suburbs as minorities and immigrant populations grow. The culture of suburbs, with individualist values, will continue to have a varying affect on how religious groups establish and sustain themselves. It will be interesting to see how new religious groups affect the culture around them in the suburban neighborhoods they now call home.

Religion is not going away as some 20th century scholars presumed. What is changing is the country’s religious complexion. How communities grapple with this change may say much about how they thrive in the future.

Since 2006, Travis Vaughn has conducted community studies in a number of U.S. cities. He is a visiting instructor at Covenant Theological Seminary and is the catalyst behind cityandcitizen.com, coming in the fall of 2010.

America's 21st-Century Business Model

Joel Kotkin — Tue, 31 Aug 2010 16:25:44 -0400

Current attitudes aren't too kind to the old American way of doing business. In our globalized economy, the most enthusiastically touted approaches are those adopted by centralized, state-dominated economies such as China, Brazil and Russia as well as--somewhat less oppressively--those of the major E.U. states.

Yet the U.S. may well be constructing the best sustainable business model for the 21st Century. It is an approach built on the country's greatest enduring strength--an innovative business culture driven increasingly by a diverse pool of immigrants.

This model, of course, lacks the kind of centralized control beloved by many pundits. Yet its virtues are also missing from statist-oriented European or East Asian capitalism. These other regions' systems may be more disciplined in their thinking, but they do not draw as well on the diversity of human experience and connections that drive America's post-racial economy.

This is not to suggest that state-based, national capitalism is inferior, but that it may not apply so well to this vast, highly diversified economy--just look at the stimulus. If the U.S. wants to retain pre-eminence, it needs to go with what makes it a great country: its protean national and increasingly post-racial business culture.

This evolution is increasingly evident at the very top of our economy. Between 1990 and 2005 immigrants started one quarter of all venture-backed public companies. Large American firms are also increasingly led by people with roots in foreign countries, including 14 of the CEOs of the 2007 Fortune 100. Even the top tier of corporate America--once the almost-exclusive reserve of native-born Anglo-Saxon--increasingly reflects the diversification of the larger society.

Already, for example, eight Indian American CEOs run U.S. corporations with over $2 billion in sales, including companies like Citicorp, Adobe Systems and Pepsico. Pepsi's historic rival, Coca Cola, is now run by Muhtar Kent, a native of Turkey. Foreign CEOs also include Kellogg's Australian-born David Mackay and Ethan Allen's M. Farooq Kathwari, yet another native of India.

This process will intensify in the coming decades. Take for instance the case of Li Lu, a former Tiananmen Square activist now widely expected to take the helm of Warren Buffett's Berkshire-Hathaway when the old billionaire retires. Imagine if a former American radical was placed in charge of one of China's huge state-supported enterprises. Not likely.

One critical harbinger can be seen in the current crop of students at top U.S. business schools. Between one-third and one-half all students at Stanford, MIT, University of Pennsylvania, University of Chicago and UC Berkeley come from abroad. These schools are training camps for immigrants transitioning into careers as American entrepreneurs.

Equally important, immigrant commerce also thrives at the grassroots level. It manifests most visibly in the proliferation of small stores, restaurants, food-processing businesses, garment factories and trucking lines. Overall, immigrants are 60% more likely to start a new business than native-born Americans. The number of self-employed immigrants has grown even in New York City, where the number of self-employed among the native-born has dropped.

Immigrant businesses have thrived by providing basic services, such as banks, insurance agents, funeral homes and grocery stores. Some of these businesses arose because the mainstream community had failed to identify opportunities in these markets or had consciously decided to exclude them.

This follows a historical pattern. In the past many immigrants succeeded by focusing on an economic specialty--Jews in the garment industry, Chinese in laundries, Greeks in diners, and Italians in green groceries, barbershops and fish stores. Ultimately, some moved beyond these niches and began to develop whole new business models. One clear example is A. P. Giannini's Bank of Italy in San Francisco, which eventually became Bank of America, a pioneer in mass market branch banking. Other ethnic businesses, often drawing on ways of doing business brought from abroad, have propelled the growth of whole industries, such as the garment industry in New York and later Los Angeles.

There is clearly something in the immigrant experience that encourages innovation--one can call it the advantage of non-acceptance. Take the founding generation of the film industry--Samuel Goldwyn, Louis B. Mayer, Harry Cohn, Jesse Lasky, Adolph Zukor. They had their roots in the Jewish enclave economy in the eastern cities. The great historian Irving Howe notes that the immigrant need to find an unoccupied or underserved niche shaped these often "vulgar, crude and overbearing" men. That they became founders of the nation's premier cultural industry, Howe noted, "was something of a miracle and something of a joke."

We are now witnessing a continuation of this process, and on a scale simply not seen in other countries. In 2005 the U.S. swore in more new citizens than the next nine countries put together. The national immigration debate may focus largely on low-skilled newcomers, but more than half of all skilled immigrants in the world also come to the U.S. Even with the continent's slow-growing population, Europe continues to be a major source of American immigrants, particularly skilled workers, with some 400,000 E.U. science and technology graduates residing in the U.S.

These newcomers are a prime source of entrepreneurial vitality. In the 21st century Asians, like the Jews and Italians before them, have concentrated in specific niches and expanded outside the boundaries of historic ghettos. Indians from the subcontinent, who arrived in large numbers starting in the 1970s, specialized in hotels and motels across the country. Koreans opened up green groceries in New York and Los Angeles. Vietnamese became well-known for nail parlors, and Cambodians for owning doughnut stores. Overall Asian enterprises expanded roughly twice the national average through the first several years of the new century.

This pattern can be seen particularly in food-related businesses. In Houston, once dominated by Southern cooking, nearly one in three restaurants serves Mexican or Asian cuisine. Together they account for more establishments than hamburger, BBQ and Italian restaurants put together. Nationwide, as pizza, hamburger and "traditional" fast-food restaurants have stagnated, new chains that sell quick, inexpensive Mexican or Asian food have flourished. Immigrant-founded firms such as El Pollo Loco, Wolfgang Puck and Panda Express, are emerging as the McDonalds of 21st-century America.

The emerging post-racial economy provides two distinct opportunities for American business. First the newcomers offer a new domestic "emerging" market. Taken together, purchases by African-Americans, Asians and Native Americans, according to the Selig Center for Economic Growth at the University of Georgia, have exploded, growing far more rapidly than the national average. Combined with Latinos, these minorities could account for over $2.5 trillion by 2010, close to $1 in every $4 in total U.S. consumer spending.

But perhaps even more important may be the uniquely international cast of American business. Heads of corporations and senior executives of many leading American firms will not have to go to graduate school in international training; they will have received theirs at home, talking to parents or grandparents who migrated from Mexico, Cuba, Russia, Iran, China, India, Israel or a host of other countries.

This diversity will allow Americans to tap the global market, and culture, in ways other countries and their state-based enterprises just can't match. It is in this model, not in imitating foreign ones, that American business can find the path to greater success in the globalized, dispersed economy of the 21st century.

This article originally appeared at Forbes.com.

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

Photo by SEIU International

Millennials Are Looking for Something Completely Different

Morley Winograd and Michael D. Hais — Thu, 12 Aug 2010 22:40:51 -0400

As the country’s political distemper grows, many commentators, reflecting their own generational biases, mistakenly assume that voters are looking for less government as the solution to the nation’s ills. But survey research data from Washington think tank, NDN, shows that a majority of Americans (54%), and particularly the country’s youngest generation, Millennials, born 1982-2003, (58%), actually favor a more active government, rather than one that “stays out of society and the economy.”

“Dissatisfaction with Obama and the Democratic Congress,” generational expert Neil Howe has observed, “is probably more fed by their failure to use government boldly and vigorously to face hard challenges than by their excessive boldness.”.

What Millennials are looking for in terms of public policy, to borrow John Cleese’s warning to his Monty Python audience, is something completely different. They are not buying into the tired approaches of either party that have produced the current partisan gridlock in Washington.

Millennials are not interested in letting ideological posturing stand in the way of “getting stuff done,” as they like to say. Their generation’s idealism – in sharp contrast to the more ideological approach adopted by Boomers – is characterized by a pragmatic impulse focused on finding practical solutions to problems. Much like the civic generations – most notably the World War II era “greatest generation” – before them, Millennials want to reinvigorate the nation’s institutions utilizing government to improve basic conditions in areas as diverse as health care, education and environmental protection.

However, unlike America’s last civic generation, the GI Generation (born 1901-1924), Millennials do not want to place responsibility for achieving their desired results in a remote, opaque bureaucracy. After all, Millennials were not shaped either by the New Deal era or the Second World War, when government expanded to deal with economic and international concerns that threatened the very existence of American democracy. . Instead they tend to see government’s role more like that of their parents who set the rules but left room for negotiation on what the rewards would be for abiding by the rules as well as the consequences for not doing so. In this Millennialist approach, government provides information and resources to help individuals connect and learn from each other but let’s each person decide how best to discharge their civic obligations.

The healthcare reform legislation that was forged out of the white heat of the political debate in Congress came surprisingly close to this model. It disappointed ideological Boomers on both sides of the aisle. Liberals didn’t get their dream of a single payer system or even its “nose-under-the-tent” counterpart, the so-called public option. But conservatives were unable, even after Republican Scott Brown’s surprise election as a United States Senator from deep blue Massachusetts, to prevent Congress from mandating that every person in America buy health insurance in order to achieve the goal of universal access. By building a framework for universal coverage on the scaffolding of the existing private insurance system, the final legislative solution used the liberal approach of regulation and national mandates to create a new role for government, but kept government out of the business of actually providing health care.

The final shape of that reform reflects a new Millennialist approach to the making and implementation of public policy. This approach will result in setting new national standards in many aspects of our national life while, at the same time, allowing individuals to make their own choices about how to comply with those standards.

The recent adoption by a majority of states of national curriculum standards for what students must learn in core disciplines such as English, math and science is further evidence of this trend. These standards, developed and coordinated by the National Governors Association Center for Best Practices and the Council of Chief State School Officers, outlines “the knowledge and skills students should have within their K-12 education careers,” without dictating how schools should teach the material.

Meanwhile the Obama administration’s “Race to the Top” grant program, has sparked a firestorm of educational reform legislation in states competing for the money that weaken the hold of administrators and teachers’ unions on what goes on in the classroom. The demands of the parents of Millennials for bottom line results, reflected in such grass roots initiatives as the Parent Revolution in California and Connecticut, is providing the political support needed to take on the current educational monopoly. This will help open the door to widespread experimentation about what works best at the local school level.

As of yet, there is no sign at the national level that a more Millennialist approach to addressing concerns over global warming and environmental degradation has been achieved. But the failure of Congress to pass more bureaucratic approaches, such as cap-and-trade, suggest there is an opportunity for such ideas to take hold in the future. For instance, a campaign to reduce the carbon intensive nature of the nation’s infrastructure could include a government sponsored effort to display the carbon footprint of most consumer products. This would allow individuals decide how to alter their personal purchasing decisions to produce the most environmentally favorable results.

Similarly, the goal of reducing fuel consumption per family could be achieved by providing tax incentives for telecommuting or for trading in aging gas guzzlers for vehicles that exceed the newly strengthened fuel economy standards for passenger cars. These policies, and others like them, would leave it up to each individual to decide the extent to which they wish to contribute to environmental improvement. Just as anti- smoking campaigns financed by taxes on cigarettes has been found to be an effective deterrent to smoking , the strategy would be to “nudge” rather than command behavior in order to achieve the desired policy goal. Given the strong environmental sensitivity of the younger generation, this approach will likely accomplish more in terms of actual carbon usage reduction than the ideologically-driven schemes proposed by Boomers in Congress.

The trajectory of public policy in a Millennial Era is becoming increasingly evident. The push for an increasing number of national standards and preferred behavior will cause libertarians to decry the evolving “nanny state” and argue strenuously against an increasingly intrusive government. But liberals, too, may be upset by approaches that eschew “top down” bureaucratic solutions and focus on using government to improve society without new administrative burden.

In the future the public, led by Millennials, will be the one forging sustainable solutions. National consensus, coupled with localism and individual choice, will become the watchwords of the nation’s newest civic era.

Morley Winograd and Michael D. Hais are fellows of the New Democrat Network and the New Policy Institute and co-authors of Millennial Makeover: MySpace, YouTube, and the Future of American Politics (Rutgers University Press: 2008), named one of the 10 favorite books by the New York Times in 2008.

Photo by Vincent J. Brown

We Trust Family First

Joel Kotkin — Wed, 21 Jul 2010 21:27:12 -0400

Americans, with good reason, increasingly distrust the big, impersonal forces that loom over their lives: Wall Street, federal bureaucracy, Congress and big corporations. But the one thing they still trust is that most basic expression of our mammalian essence: the family.

Family ties dominate our economic life far more than commonly believed. Despite the power of public companies, family businesses control roughly 50% of the country's gross domestic product, according to the research firm Gaebler.com. Some 35% of the Fortune 500 are family businesses, but so too are the vast majority of smaller firms. Family companies represent 60% of the nation's employment and almost 80% of all new jobs.

And despite the glowering about impersonal corporate agriculture and the overall decline in the number of farms since the 1950s, almost 96% of the 2.2 million remaining farms are family-owned. Even among the largest 2% of farms, 84% are family-owned. The recent surge in smaller, specialized farming may actually increase this percentage in the future.

Family life also often determines the economic success of individuals--something widely understood since the controversial 1965 Moynihan Report linked poverty among African-Americans to the decline of intact family units. Today more than half of black children live in households with a single mother, a number that has doubled since the 1960s, and they are much more likely to live in poverty than non-blacks. When you consider intact African-American families the so-called "racial gap" diminishes markedly.

The confluence between upward mobility and strong family networks remains extraordinary not only among African-Americans but among all groups. Only 6% of married-couple families live in poverty, and most of them, like previous generations of newcomers, are likely to climb out of that state. "Families," suggests Nobel Prize-winning economist James Heckman, "are the major source of inequality in American social and economic life."

The critical importance of family runs against the mindset of pundits, corporate marketers and planners. Starting with Vance Packard's 1972 bestseller A Nation of Strangers, Americans have been sold the notion of a more atomized, highly individualized future. Similar alarms have been issued both on the left, from the late Jane Jacobs, and by conservative observers, like Francis Fukuyama and William Bennett.

Yet despite these predictions, our mammalian instinct to trust family first has remained very strong. Some 90% of Americans, notes social historian Stephanie Coontz, consider their parental relations close.

This back-to-family trend has been building for at least a decade. For example, over the past 30 years the percentage of households with more than one generation of adults has grown and now stands at the highest levels since the mid-1950s. Meanwhile the once irrepressible growth of single-family households has begun to slow down, and has even dropped among those over 65. Meanwhile the numbers of adults aged 25 to 39 living with their parents jumped 32% between 2000 and 2008, before the full impact of the recession; the increase in single-centric Manhattan, notes The New York Times' Sam Roberts, was nearly 40%.

Unlike the typically "nuclear" families of the mid-20th century, the current crop, much like earlier generations of American families, tend to be more "blended." In its contemporary form this includes same-sex partners, uncles, aunts, grandparents and stepparents.

Today childrearing extends beyond the biological parents and is often shared by divorced parents, their new spouses and other family members. Grandparents and other relatives help provide care for roughly half of all preschoolers, something that has not changed significantly over time and is unlikely to do so in the future. This is even true in the Obama White House, where Marian Robinson, the First Lady's mother, has moved in to help raise the couple's two children.

Of course, some still celebrate the purported demise of the family unit to support various feminist, green or dense urbanist agendas. They point out with enthusiasm that barely one in five households consists of a married couple with children living at home, even though these households account for more than one-third of the total population ,according to the Census. Yet they miss one critical point: Parents usually continue to care for and be deeply involved with their offspring even after they leave the nest.

When people move somewhere, for instance, they tend not to do so because it is closer to their favorite jazz club or a Starbucks or even because they would get a better job--instead, their main motivation for moving is to be closer to kin. Family, as one Pew researcher notes, "trumps money when people make decisions about where to live."

These nesting patterns are being further buttressed by hard times. People who might have struck out on their own are staying close to home--if not at home.

Last year Pew reported that some 10% of people under 35 moved back in with their parents. Pressed by the bad economy, the number of adults 18 to 29 who lived alone dropped from nearly 8% in 2007 to 7.3%. People are less likely to form new households in tough times.

Similarly if people are looking to start a business, they are more likely to do so within the family. In a time of constricted credit from banks, Pew also reports a growing dependence on family members for loan. In bad times, who else can you trust besides your kin?

Of course, the very affluent can afford to have it all--easy credit, a country house and ease of travel between their "places." But for the middle and working classes, family ties often trump all other considerations. Real estate agent Judy Markowitz, once explained to me that being close to parents remained the primary motivation for young people staying in neighborhoods like Bayside or Middle Village in Queens, N.Y. "In Manhattan they have nannies," she explained. "In Queens we have grandparents."

These basic trends are not likely to be reversed once the economy recovers. For one thing, our increasingly non-white populations remain very committed to inter-generational living; over 20% of African-Americans, Asians and Latino households--compared with 13% of whites--live in such households. Many minorities, particularly immigrants, also often tend to own small family businesses, which rely on credit and labor from extended family networks.

And then we have to consider the new generation. The millennials, note researchers Morley Winograd and Michael Hais, are very family-oriented. Indeed three-quarters of 13-to-24-year-olds, according to one 2007 survey, consider time spent with family the greatest source of their own happiness, rating it even higher than time spent with friends or a significant other. More than 80% think getting married will make them happy, and some 77% say they definitely or probably will want children.

Anyone looking into the future of the country’s economy cannot do so without considering the continued importance of the family. Americans' most important decisions--where to move, what to buy, whether to have children--will continue to revolve largely around the one institution most can still trust: the family.

This article originally appeared in Forbes.com.

Photo: driki

How Obama Lost Small Business

Joel Kotkin — Fri, 16 Jul 2010 00:12:10 -0400

Financial reform might irk Wall Street, but the president’s real problem is with small businesses—the engine of any serious recovery. Joel Kotkin on what he could have done differently.

The stock market, with some fits and starts, has surged since he’s taken office. Wall Street grandees and the big banks have enjoyed record profits. He’s pushed through a namby-pamby reform bill—which even it’s authors acknowledge is “not perfect”—that is more a threat to Main Street than the mega-banks. And yet why is Barack Obama losing the business community, even among those who bankrolled his campaign?

Obama’s big problems with business did not start, and are not deepest, among the corporate elite. Instead, the driver here has been what you might call a bottom-up opposition. The business move against Obama started not in the corporate suites, but among smaller businesses. In the media, this opposition has been linked to Tea Parties, led by people who in any case would have opposed any Democratic administration. But the phenomenon is much broader than that.

The one group that has fared badly in the last two years has been the private-sector middle class, particularly the roughly 25 million small firms spread across the country. Their discontent—not that of the loud-mouthed professional right or the spoiled sports on Wall Street—is what should be keeping Obama and the Democrats awake at night.

Small business should be leading us out of the recession. In the last two deep recessions during the early 1980s and the early 1990s, small firms, particularly the mom and pop shops, helped drive the recovery, adding jobs and starting companies. In contrast, this time the formation rate for new firms has been dropping for months—one reason why unemployment remains so high and new hiring remains insipid at best.

Here’s one heat-check. A poll of small businesses by Citibank, released in May, found that over three quarters of respondents described current business conditions as “fair or poor.” More than two in five said their own business conditions had deteriorated over the past year. Only 17 percent said they expect to be hiring over the next year.

It’s not hard to see the reasons for pessimism. Entrepreneurs see bailed-out Wall Street firms and big banks recovering, while getting credit remains very difficult for the little guy. In addition, many small businesses are terrified of new mandates, in energy or health, which makes them reluctant to hire new people. Small banks—not considered “too big to fail”—fear that they will prove far less capable of meeting new regulatory guidelines than their leviathan competitors.

The small business owners I’ve spoken to—like most of the public—generally don’t seem convinced about the effectiveness of the stimulus, even if the administration claims it helped us avert an economic “catastrophe.” Barely one fourth of voters, according to a recent Rasmussen poll, think it helped the economy.

Obama’s troubles with the bigger firms are more recent. Initially, President Obama wowed the big rich, leading The New York Times to dub him “the hedge fund candidate.” By the time he won the election, he enjoyed wide support from the Business Roundtable, the Silicon Valley venture community and other titans.

Initially, big business was happy with Obama’s stimulus plan, and more or less was ready to acquiesce to both his health-care reforms and cap and trade. After all, most large companies generally provide some health coverage to their employees. For Wall Street, cap and trade represents just one more wonderful way to arbitrage their way to more profits.

Of course, some corporate titans will remain loyal to the White House. Take the lucky folks from Spanish- based Abengoa Solar, who are now getting $1.45 billion in federal loan guarantees for an Arizona solar plant that will create under 100 permanent jobs while providing expensive, subsidized energy to perhaps 70,00 homes. If this is stimulus, it’s less jarring than a decaf from Starbucks. Also let’s dismiss those on Wall Street who whine about the administration’s occasionally tough anti-business rhetoric. Wolves should have thicker skins. The Obama administration and Congress have delivered softball financial reform dressed up as major progressive change. They should be grateful, not petulant.

But there’s clearly something more serious than hurt feelings at play here. The pain felt by small businesses is hitting the big boys, too. After three straight bad years, small businesses buy a lot less stock, business services, and equipment. Big companies can hoard their money and sport big profits, but ultimately they have to sell to consumers and small firms. Maybe that’s something that the media moguls—who after all have to sell to the hoi polloi—have been picking up on, too.

This has led some Obama allies, like GE’s Jeffrey Immelt, to grouse that Obama does not like business, and vice versa. “Government and entrepreneurs are not in sync,” he explained to reporters in Europe. So, too, has Ivan Seidenberg, the head of the once Obama-friendly Business Roundtable, who denounced the administration recently for creating “an increasingly hostile environment for investment and job creation here in this country.”

Among businesses of all sizes, there is now a pervasive sense that the administration does not understand basic economics. This is not to say they believe Obama’s a closet socialist, as some more unhinged conservatives claim. That would be an insult to socialism. Obama’s real problem is that he’s a product, basically, of the fantastical faculty lounge.

For the most part, university professors do not much value economic growth, since they consider themselves, like government workers, a protected class. Many, particularly in planning and environmental study departments, also embrace the views of the president’s academic science adviser, John Holdren, who suggests Western countries undergo “de-development,” which is the opposite of economic growth.

Of course, such ideas, if taken seriously, have economic consequences. You want to see the future? Come to California, where the regulatory stranglehold is killing our economy. Subsidizing favored interests also is not a winning strategy. There’s simply not enough money to maintain a federal version of Chicago-style baksheesh. The parlous state of Obama’s home state of Illinois—which manages to make even California or New York appear models of prudent management—demonstrates the futility of the subsidize-the-base game.

The worst part is that none of this was necessary. A stimulus plan that helped workers and communities by recreating a WPA for the unemployed youths might have gained wide support on Main Street. Credits for hiring, reductions in payroll taxes or a regulatory holiday for small firms also might have bolstered business confidence. Business people, particularly at the grassroots level, would also like to see a return for the detested TARP in a freer flow of credit for their firms. They are not so much hostile to Obama as puzzled by his inability to address their needs.

But for now, the stimulus is widely seen as a wasted opportunity and proof of Washington’s enduring incompetence. As a result, roughly 80 percent of Americans, according to Pew, say they don’t trust the federal government to do the right thing, which does not bode well for a second round of pump-priming.

This leaves business turning back to the Republicans. Not because most see them as competent or even intelligent; GOP rankings are also at a low ebb. Business owners across the spectrum are forced to embrace the “party of no” because Obama and the Democrats have given them so little to say “yes” to.

This article originally appeared in The Daily Beast.

Official White House Photo

The Democrats' Middle-Class Problem

Joel Kotkin — Wed, 14 Jul 2010 12:07:38 -0400

Class, the Industrial Revolution’s great political dividing line, is enjoying Information Age resurgence. It now threatens the political future of presidents, prime ministers and even Politburo chiefs.

As in the Industrial Age, new technology is displacing whole groups of people — blue- and white-collar workers — as it boosts productivity and creates opportunities for others. Inequality is on the rise — from the developing world to historically egalitarian Scandinavia and Britain.

Divisions are evident here in the United States. Throughout the 2008 presidential campaign, Barack Obama lagged in appealing to white middle- and working-class voters who supported Hillary — and former President Bill — Clinton.

Now, these voters, according to recent polls, are increasingly alienated from the Obama administration. Reasons include slow economic growth, high unemployment among blue- and white-collar workers and a persistent credit crunch for small businesses. These factors could cause serious losses for Democrats this fall — and beyond.

This discontent reflects long-term trends. Since 1973, for example, the rate of growth of the “typical family’s income” in the United States has slowed dramatically. For men, it has actually gone backward when adjusted for inflation.

The past few years have been particularly rough. About two in five Americans report household incomes between $35,000 and $100,000 a year. Right now, almost three in five are deeply worried about their financial situation, according to an ABC poll from March.

This should give Democrats an issue, theoretically. But to date, Obama and his party seem incapable of harnessing the growing middle- and working-class unrest.

In fact, according to recent polls, these have been the voters that Democrats and the president have been losing over the past year as the economic stimulus failed to make a major dent in unemployment.

Part of this problem lies with the party’s base, which the urban historian Fred Siegel once labeled “the coalition of the overeducated and the undereducated.” Major urban centers like New York, Chicago and San Francisco might advertise themselves as enlightened, but they have lost much of their middle class and suffer the highest levels of income inequality.

Representatives from these areas now dominate the party and reflect their bifurcated districts. They often stress the concerns of the educated affluent on issues like climate change and gay marriage, while their economic policies focus on the public-sector workers, “green” industries and maintaining the social welfare net.

Not surprisingly, this agenda does little for the middle-class — mostly suburban — voters.

Sen. Scott Brown (R-Mass.), for example, won his margin of victory in largely middle- and working-class suburbs, where many voters had backed Obama in 2008, according to demographer Wendell Cox. Brown lost by almost 2-to-1 among poor voters — and also among those earning more than $85,000 a year.

Given the danger revealed by these numbers, Democrats and other center-left parties around the world should refocus their policies on issues — such as taxes, private-sector job creation and small business — that affect such voters.

For this growing class divide can be found globally: In China, for example, technological change and globalization have produced a new proletariat that, unlike in the past, is disinterested in warmed-over Maoist ideology.

Perhaps nothing demonstrates this more clearly than the unrest at the Foxconn Technology Group. Workers produce cool products — for companies like Apple, Dell and Nintendo — but under such oppressive conditions that some have been driven to suicide.

Mounting protests about Foxconn’s employment practices, and a recent rash of strikes in China’s Honda plants, reveal the disruptive potential of this class conflict.

Even as China’s corporations and government become richer, inequality is widening. Indeed, over the past 20 years, China has shifted from an income-distribution pattern like that of Sweden or Germany to one closer to Argentina’s or Mexico’s. By 2006, China’s level of inequality was greater than that of the United States or India.

Not surprisingly, class anger has reached alarming proportions. Almost 96 percent of respondents, according to one recent survey, agreed that they “resent the rich.”

China’s class divides may be extreme, but similar patterns can be found almost everywhere. From India to Mexico, economic growth has led to a striking increase in the percentage of urbanites living in slum conditions.

In 1971, for example, slum dwellers accounted for one in six Mumbaikars. Today, they are an absolute majority.

This almost guarantees greater class conflict in the future, even as India’s economy booms.

“The boom that is happening is giving more to the wealthy,” said R.N. Sharma of Mumbai’s Tata Institute of Social Sciences. “This is the ‘shining India’ people talk about. But the other part of it is very shocking — all the families where there is not even food security.We must ask: ‘The “shining India” is for whom?’”

This growing inequality in the developing world is already shaping global politics. The failure of the Copenhagen climate change conference can be largely ascribed to the unwillingness of China, India, Brazil and other developing countries to sacrifice wealth creation opportunities for ecological reasons.

Like their counterparts in New Delhi and Beijing, politicians in wealthier countries also face class conflict.

In Britain, for example, even a massive expansion of the welfare state has done little to stop the U.K. from becoming the most unequal among the advanced European democracies.

Alienation among white working-class voters — particularly those in the public sector or with modest small businesses — may have contributed to the Labour Party’s poor showing in the recent elections, according to Liam Byrne, the former Labour treasury secretary.

A similar phenomenon appears in Australia. Labor Prime Minister Kevin Rudd, an icon among upper-class liberals, resigned in large part because of a precipitous decline in the polls among middle- and working-class suburban voters.

What is not clear is whether conservative parties can abandon their often slavish devotion to big corporate interests to take advantage of these new dynamics. For years, these parties have relied on divisive social issues, like immigration, to win working- and middle-class voters. But it’s possible that a focus on profligate government spending might yet increase the right’s appeal among mid-income voters.

As this current shift to greater inequality continues, the self-styled “popular” parties’ tendency to ignore class issues could prove disastrous.

Unless they start addressing class issues in effective ways, they may lose not just their historical base but the political future.

This article originally appeared in Politico.

Official White House Photo by Pete Souza

Economics: Green Shoots & Immigration

Bill Watkins — Sun, 11 Jul 2010 06:38:20 -0400

A year ago we were hearing all about green shoots. Analysts claimed to find them everywhere.

Today, we never see the term. In fact, there seems to be a growing malaise. By the end of June the first quarter’s Gross Domestic Product (GDP) estimate was revised downward a full half a percent, to 2.7 percent. Pundits are depressed. Our President and Secretary of the Treasury are telling the world that the United States cannot lead the world to sustained economic growth. Our Vice President announced that "there's no possibility to restore eight million jobs lost in the Great Recession." Our stock markets are down and volatile. Risk premiums have soared.

What happened?

Reality happened. The green shoots were always ephemeral, the result of massive government spending increases or temporary government programs. We had housing stimulus programs. We had Cash for Clunkers. We had foreclosure programs. We had bailouts.

The increased spending and the various programs had an impact. Because of the way GDP is calculated, an increase in government spending results in an increase in GDP, but that is today’s GDP, not tomorrow’s. Tomorrow’s economic growth is a result of investment today, investment in physical capital, technology, and human capital.

To the extent that government spending detracts from those investments, the growth we saw was cannibalized from the future. For example, the housing stimulus programs served only to change the timing of real estate purchases. Sales fell when the programs ended.

Even worse, some programs resulted in temporary GDP growth, but were actually detrimental to long-term economic growth. The Cash for Clunkers program destroyed capital, since perfectly good cars were crushed. The foreclosure prevention programs delayed the needed decline in home ownership rates.

The bailouts prevented assets from being transferred to more productive uses. Bailouts are inefficient, and they prolong periods of economic weakness. Uncertainty and risk premiums remain elevated, holding investment to a minimum, limiting short-term and long-term economic growth. They also leave a hangover of debt, which limits future growth.

None of the programs addressed the underlying problems of the current economic circumstances, or paved the way for sustained economic growth. The immediate problem was that businesses, consumers, and governments were over-leveraged after September 2008’s asset-value collapse. The longer-term problem was insufficient investment, a result of years of credit-fueled consumption.

What was needed was investment. What was provided was more credit-fueled consumption. You might be able to borrow your way to prosperity, but to do that you better be investing the borrowed funds. We didn’t do that. Instead we used the government as a bank to increase consumption. Credit-based consumption is not the way to long-term prosperity, regardless of who does the borrowing.

And, while it appears that most of the decline in asset values has ended, over-leverage is still with us. Indeed, the increase in government leverage makes it more difficult to employ effective government intervention, government investment in productivity-enhancing capital and technology, and investment tax credits.

Add to these factors the millions of American households, employed and unemployed, that remain over-leveraged. Millions of consumers have been unemployed for months, and many of those still working are uncertain about their future employment. Those who have the income to do so are attempting to pay down debt, and to reduce consumption in the process. The consumer is not likely to soon be a source of rapid economic growth.

So, we have most or all of the problems of a year ago, but now, because of increased government debt, we have fewer options. Even worse, we now have new problems that were not present in September 2008.

Today, sovereign default risks are significant and increasing. While potential sovereign debt problems in Europe have received a great deal of attention, the problems are not limited to the continent. Japan continues to have very high debt and deficits. Several U.S. states could also default. A failure of an American state is likely to have impacts very similar to the failure of a small European country.

I don’t believe that the failure of a country is the most likely outcome, however. Instead, expect to see more international bailouts, just as you can expect to see the federal government bailout several American states.

Our options are limited, but we do have one option that would provide immediate and sustained economic growth without increasing leverage. That option would be a massive increase in immigration.

The initial benefits of a new wave of immigration would be seen remarkably quickly. Housing demand would increase, leading to renewed vigor in our real estate markets and the construction industry. Our inner cities would be renewed, as they always have been by immigration waves. New business formations would soar. The tax base would increase, helping to fund debt repayment and baby-boomer retirements.

Many would oppose such an immigration increase. They worry about increasing job competition, unemployment, crime, and even more demand on welfare programs.

These fears are misplaced. Criminals are easily sorted out by effective screening processes. People don’t migrate for welfare benefits, but if this is a concern, it is easy to deny immigrant access to social programs for some number of years after immigration. Similarly, people don’t migrate to be unemployed, and unemployment benefits can be denied to immigrants.

People migrate to more effectively use their human and physical capital, their technology, and their labor. Effectively, immigration would provide new capital, technology, and labor. This is exactly what we need, and it is free. Immigration has served America well in the past. It can serve us well today.

Red and Green, photo by Rupert Maspero

Bill Watkins is a professor at California Lutheran University and runs the Center for Economic Research and Forecasting, which can be found at clucerf.org.

McChrystal Exit: Obama and His Generals

Matthew Stevenson — Fri, 02 Jul 2010 01:22:49 -0400

General Stanley McChrystal may be the first commanding general in the history of warfare to be relieved of his command because he groaned over the receipt of an email from an ambassador, or because one of his aides whispered to a Rolling Stone reporter that the president had looked “intimidated” in a meeting with the military brass.

In terms of carrying out strategy, it has been stated that the president had no military complaints about the heavy metal general, who was walking the impossibly thin red line between a general war in Afghanistan and a campaign waged only with assassinations and drone missiles.

Just a month before his firing, McChrystal successfully packaged a tour of the White House and Capitol Hill for President Hamid Karzai. In earlier media campaigns — notably when the president flew into Kabul in the dead of night to lecture a pajama-clad Karzi over corruption — the Afghan president was deemed unworthy of an American war effort.

However briefly, McChrystal had succeeded in integrating the Afghan government into the order of battle. So why was he sacked for humming a few bars of Satisfaction in the presence of a rock reporter?

No doubt McChrystal had his enemies within the bureaucracy, including the ubiquitous ambassador Richard Holbrooke, and the U.S. ambassador in Kabul, former general Karl W . Eikenberry. Along with these two add in a legion of jealous Army politicos, all of whom would love to wear combat fatigues to a presidential photo-op.

In relieving General McChrystal, perhaps as part of a search for his mojo, President Obama joins a long line of presidents who never figured out how to command their commanders. Here’s a brief summary of some of the more complicated relationships between American presidents and their field generals:

President Lincoln— Often praised for his habits of command in the Civil War, he nevertheless promoted, endorsed, and endured the incompetence of such generals as McClellan, Meade, Burnside, Pope, and Rosecrans before winning the war with Grant and Sherman, both of whom would horrify a Senate confirmation hearing, let alone the editors of Rolling Stone.

Grant was a drunk who killed thousands at Shiloh and Spotsylvania, and Sherman once celebrated the drowning of a boatload of reporters, pointing out that maybe their “heavy thoughts” had taken them to the bottom. He also burned Atlanta. Both understood how to win modern wars.

President Madison— In the war of 1812, he had to endure generals who botched several invasions of Canada, allowed Washington to burn, and, in the case of Andrew Jackson at New Orleans, fought battles after the peace was signed. (But the Battle of New Orleans did more than Yorktown to forge American independence.)

President Kennedy— He loathed his top generals, blaming them for the Bay of Pigs fiasco and for pushing him into Vietnam, saying “They always give you their bullshit about their instant reaction and split-second timing, but it never works out. No wonder it’s so hard to win a war.” Kennedy’s skepticism about the military command, however, pushed him to ignore their advice for invasion and air strikes in the Cuban Missile Crisis, possibly averting nuclear war.

Presidents Carter and Johnson— In the style of the Obama White House, these two both micro-managed their war efforts. Jimmy Carter was the air traffic controller for Operation Blue Light, the failed attempt to rescue American hostages in Iran. Lyndon Johnson boasted that the Air Force could not hit so much as “a shithouse” in Vietnam without his authorization. Both presidencies were lost due to the foreign entanglements of the commander-in-chief.

President Roosevelt— A successful example of a commander-in-chief; no president handled generals better than FDR, who was a shrewd judge of character. Roosevelt spent many months of the war in proximity to his fighting forces (including his own sons, who were serving officers). He vested authority in a number of competent commanders, starting with General George C. Marshall.

Roosevelt was clear in his strategic objectives and did not meddle, for example, in the deployment of 30,000 troops. Nor did he fire General Patton when he slapped a fatigued soldier. Imagine what General MacArthur would have said about FDR to Rolling Stone? Would FDR have cared? (Eisenhower remarked: "I spent seven years under MacArthur studying dramatics.”)

Despite all the media visibility around his decisions on Afghanistan, we know little about President Obama’s habits of military command. When he's before large audiences, he is good at articulating the role he sees for the United States in the world. For better or worse, he is unafraid to offend traditional allies, such as Israel and Great Britain. He even sided against England in a recent flare-up around the Falkland Islands.

Strategically, however, Obama rarely contradicts his military-industrial complex. Yes, he fired McChrystal, but he replaced him with his boss, mentor, and near Siamese twin, General David Petraeus, as if to imply that the only problem in Afghanistan was McChrystal’s joke about Vice President Biden.

While hitching his political star to the Nobel Prize for Peace, Commander-in-Chief Obama continues to fund Israel’s war footing, stations forces in Iraq, widens the commitment in Afghanistan, attacks Pakistan with drones, and pushes for war sanctions against Iran. In the pulpit, he is Woodrow Wilson; in action, he’s George W. Bush.

Nor has the Obama administration been able to articulate a coherent war aim behind the commitment of additional forces in Afghanistan. Look at the many mixed messages sent to Karzai, who depending on the week is “our man” or the next Diem.

The president’s current directive to his generals is to avoid casualties, hold a mountainous country the size of Texas with eight divisions, foster rural development in places like Helmand, find bin Laden, pacify the federal tribal areas, make President Karzai look democratic, train the Afghan army and police, leer across the border at Iran, and prop up a wobbly government in Pakistan — although, politically speaking, all the administration wants is enough shock and awe so that the Republicans in the 2010 mid-term elections cannot paint it as “weak on terror” or having “lost” Afghanistan.

In turning the strategic decisions about Afghanistan into an endless university teach-in (with all the allusions to “accountability,” “transitions,” and “benchmarks”), the president acts as if all the timing questions in this war were on his side. Let’s hope that the Taliban and other insurgents, especially those now planting car bombs in Islamabad, Baghdad, and Kabul, got the departmental memo that the United States would be on sabbatical in 2011.

In 1815, Andrew Jackson felt he had to attack the British the very night he heard they had landed near New Orleans. By contrast, President Obama spent a leisurely year pondering the Weltanschauung of Afghanistan and publicly ruminating about strategic options. He now feels he can afford the luxury of sacking a field general for failing to sound reverential in an interview. Aren’t there better measures of a commander? (At Bellow Wood, a Marine officer said: “Retreat? Hell, we just got here.”)

Before Lincoln could become the wartime president that we admire, he needed to find a general “who fights,” and he needed to articulate an acceptable and collective war aim, which he achieved with his Gettysburg address and Second Inaugural. He also had to come to the conclusion that Grant, drunk, made more sense than his other generals sober.

President Barack Obama meets with Army Gen. Stanley McChrystal. Official White House photo by Pete Souza.

Matthew Stevenson is the author of Remembering the Twentieth Century Limited, winner of Foreword’s bronze award for best travel essays at this year's BEA. He is also editor of Rules of the Game: The Best Sports Writing from Harper's Magazine. He lives in Switzerland.

The Changing Demographics of America

Joel Kotkin — Sun, 27 Jun 2010 23:49:43 -0400

Estimates of the United states population at the middle of the 21st century vary, from the U.N.’s 404 million to the U.S. Census Bureau’s 422 to 458 million. To develop a snapshot of the nation at 2050, particularly its astonishing diversity and youthfulness, I use the nice round number of 400 million people, or roughly 100 million more than we have today.

The United States is also expected to grow somewhat older. The portion of the population that is currently at least 65 years old—13 percent—is expected to reach about 20 percent by 2050. This “graying of America” has helped convince some commentators of the nation’s declining eminence. For example, an essay by international relations expert Parag Khanna envisions a “shrunken America” lucky to eke out a meager existence between a “triumphant China” and a “retooled Europe.” Morris Berman, a cultural historian, says America “is running on empty.”

But even as the baby boomers age, the population of working and young people is also expected to keep rising, in contrast to most other advanced nations. America’s relatively high fertility rate—the number of children a woman is expected to have in her lifetime—hit 2.1 in 2006, with 4.3 million total births, the highest levels in 45 years, thanks largely to recent immigrants, who tend to have more children than residents whose families have been in the United States for several generations. Moreover, the nation is on the verge of a baby boomlet, when the children of the original boomers have children of their own.

Between 2000 and 2050, census data suggest, the U.S. 15-to-64 age group is expected to grow 42 percent. In contrast, because of falling fertility rates, the number of young and working-age people is expected to decline elsewhere: by 10 percent in China, 25 percent in Europe, 30 percent in South Korea and more than 40 percent in Japan.

Within the next four decades most of the developed countries in Europe and East Asia will become veritable old-age homes: a third or more of their populations will be over 65. By then, the United States is likely to have more than 350 million people under 65.

The prospect of an additional 100 million Americans by 2050 worries some environmentalists. A few have joined traditionally conservative xenophobes and anti-immigration activists in calling for a national policy to slow population growth by severely limiting immigration. The U.S. fertility rate—50 percent higher than that of Russia, Germany and Japan and well above that of China, Italy, Singapore, South Korea and virtually all the rest of Europe—has also prompted criticism.

Colleen Heenan, a feminist author and environmental activist, says Americans who favor larger families are not taking responsibility for “their detrimental contribution” to population growth and “resource shortages.” Similarly, Peter Kareiva, the chief scientist at the Nature Conservancy, compared different conservation measures and concluded that not having a child is the most effective way of reducing carbon emissions and becoming an “eco hero.”

Such critiques don’t seem to take into account that a falling population and a dearth of young people may pose a greater threat to the nation’s well-being than population growth. A rapidly declining population could create a society that doesn’t have the work force to support the elderly and, overall, is less concerned with the nation’s long-term future.

The next surge in growth may be delayed if tough economic times continue, but over time the rise in births, producing a generation slightly larger than the boomers, will add to the work force, boost consumer spending and generate new entrepreneurial businesses. And even with 100 million more people, the United States will be only one-sixth as crowded as Germany is today.

Immigration will continue to be a major force in U.S. life. The United Nations estimates that two million people a year will move from poorer to developed nations over the next 40 years, and more than half of those will come to the United States, the world’s preferred destination for educated, skilled migrants. In 2000, according to the Organisation for Economic Co-operation and Development, an association of 30 democratic, free-market countries, the United States was home to 12.5 million skilled immigrants, equaling the combined total for Germany, France, the United Kingdom, Australia, Canada and Japan.

If recent trends continue, immigrants will play a leading role in our future economy. Between 1990 and 2005, immigrants started one out of four venture-backed public companies. Large American firms are also increasingly led by people with roots in foreign countries, including 15 of the Fortune 100 CEOs in 2007.

For all these reasons, the United States of 2050 will look different from that of today: whites will no longer be in the majority. The U.S. minority population, currently 30 percent, is expected to exceed 50 percent before 2050. No other advanced, populous country will see such diversity.

In fact, most of America’s net population growth will be among its minorities, as well as in a growing mixed-race population. Latino and Asian populations are expected to nearly triple, and the children of immigrants will become more prominent. Today in the United States, 25 percent of children under age 5 are Hispanic; by 2050, that percentage will be almost 40 percent.

Growth places the United States in a radically different position from that of Russia, Japan and Europe. Russia’s low birth and high mortality rates suggest its overall population will drop by 30 percent by 2050, to less than a third of the United States’. No wonder Prime Minister Vladimir Putin has spoken of “the serious threat of turning into a decaying nation.” While China’s population will continue to grow for a while, it may begin to experience decline as early as 2035, first in work force and then in actual population, mostly because of the government’s one-child mandate, instituted in 1979 and still in effect. By 2050, 31 percent of China’s population will be older than 60. More than 41 percent of Japanese will be that old.

Political prognosticators say China and India pose the greatest challenges to American predominance. But China, like Russia, lacks the basic environmental protections, reliable legal structures, favorable demographics and social resilience of the United States. India, for its part, still has an overwhelmingly impoverished population and suffers from ethnic, religious and regional divisions. The vast majority of the Indian population remains semiliterate and lives in poor rural villages. The United States still produces far more engineers per capita than India or China.

Suburbia will continue to be a mainstay of American life. Despite criticisms that suburbs are culturally barren and energy-inefficient, most U.S. metropolitan population growth has taken place in suburbia, confounding oft-repeated predictions of its decline.

Some aspects of suburban life—notably long-distance commuting and heavy reliance on fossil fuels—will have to change. The new suburbia will be far more environmentally friendly—what I call “greenurbia.” The Internet, wireless phones, video conferencing and other communication technologies will allow more people to work from home: at least one in four or five will do so full time or part time, up from roughly one in six or seven today. Also, the greater use of trees for cooling, more sustainable architecture and less wasteful appliances will make the suburban home of the future far less of a danger to ecological health than in the past. Houses may be smaller—lot sizes are already shrinking as a result of land prices—but they will remain, for the most part, single-family dwellings.

A new landscape may emerge, one that resembles the network of smaller towns characteristic of 19th-century America. The nation’s landmass is large enough—about 3 percent is currently urbanized—to accommodate this growth, while still husbanding critical farmland and open space.

In other advanced nations where housing has become both expensive and dense—Japan, Germany, South Korea and Singapore—birthrates have fallen, partly because of the high cost of living, particularly for homes large enough to comfortably raise children. Preserving suburbs may therefore be critical for U.S. demographic vitality.

A 2009 study by the Brookings Institution found that between 1998 and 2006, jobs shifted away from the center and to the periphery in 95 out of 98 leading metropolitan regions—from Dallas and Los Angeles to Chicago and Seattle. Walter Siembab, a planning consultant, calls the process of creating sustainable work environments on the urban periphery “smart sprawl.” Super-fuel-efficient cars of the future are likely to spur smart sprawl. They may be a more reasonable way to meet environmental needs than shifting back to the mass-transit-based models of the industrial age; just 5 percent of the U.S. population uses mass transit on a daily basis.

One of the urban legends of the 20th century—espoused by city planners and pundits (and a staple of Hollywood)—is that suburbanites are alienated, autonomous individuals, while city dwellers have a deep connection to their neighborhoods. As the 2001 book Suburban Nation puts it, once suburbanites leave the “refuge” of their homes they are reduced to “motorist[s] competing for asphalt.”

But suburban residents express a stronger sense of identity and civic involvement than city dwellers. A recent study by Jan Brueckner, a University of California at Irvine economist, found that density does not, as is often assumed, increase social contact between neighbors or raise overall social involvement; compared with residents of high-density urban cores, people in low-density suburbs were 7 percent more likely to talk to their neighbors and 24 percent more likely to belong to a local club.

Suburbs epitomize much of what constitutes the American dream for many people. Minorities, once largely associated with cities, tend to live in the suburbs; in 2008 they were a majority of residents in Texas, New Mexico, California and Hawaii. Nationwide, about 25 percent of suburbanites are minorities; by 2050 immigrants, their children and native-born minorities will become an even more dominant force in shaping suburbia.

The baby boom generation is poised for a large-scale “back to the city” movement, according to many news reports. But Sandra Rosenbloom, a University of Arizona gerontology professor, says roughly three-quarters of retirees in the first bloc of boomers appear to be sticking close to the suburbs, where the vast majority reside. “Everybody in this business wants to talk about the odd person who moves downtown,” Rosenbloom observes. “[But] most people retire in place. When they move, they don’t move downtown, they move to the fringes.”

To be sure, there will be 15 million to 20 million new urban dwellers by 2050. Many will live in what Wharton business professor Joseph Gyourko calls “superstar cities,” such as San Francisco, Boston, Manhattan and western Los Angeles—places adapted to business and recreation for the elite and those who work for them. By 2050, Seattle, Portland and Austin could join their ranks.

But because these elite cities are becoming too expensive for the middle class, the focus of urban life will shift to cities that are more spread out and, by some standards, less attractive. They’re what I call “cities of aspiration,” such as Phoenix, Houston, Dallas, Atlanta and Charlotte. They’ll facilitate upward mobility, as New York and other great industrial cities once did, and begin to compete with the superstar cities for finance, culture and media industries, and the amenities that typically go along with them. The Wall Street Journal noted that commercial success has already turned Houston, once considered a backwater, into “an art mecca.”

One of the least anticipated developments in the nation’s 21st-century geography will be the resurgence of the region often dismissed by coastal dwellers as “flyover country.” For the better part of the 20th century, rural and small-town communities declined in percentage of population and in economic importance. In 1940, 43 percent of Americans lived in rural areas; today it’s less than 20 percent. But population and cost pressures are destined to resurrect the hinterlands. The Internet has broken the traditional isolation of rural communities, and as mass communication improves, the migration of technology companies, business services and manufacturing firms to the heartland is likely to accelerate.

Small Midwestern cities such as Fargo, North Dakota, have experienced higher than average population and job growth over the past decade. These communities, once depopulating, now boast complex economies based on energy, technology and agriculture. (You can even find good restaurants, boutique hotels and coffeehouses in some towns.) Gary Warren heads Hamilton Telecommunications, a call center and telecommunications-services firm that employs 250 people in Aurora, Nebraska. “There is no sense of dying here,” Warren says. “Aurora is all about the future.”

Concerns about energy sources and hydrocarbon emissions will also bolster America’s interior. The region will be pivotal to the century’s most important environmental challenge: the shift to renewable fuels. Recent estimates suggest the United States has the capacity to produce annually more than 1.3 billion dry tons of biomass, or fuels derived from plant materials—enough to displace 30 percent of the current national demand for petroleum fuels. That amount could be produced with only modest changes in land use, agricultural and forest-management practices.

Not since the 19th century, when the heartland was a major source of America’s economic, social and cultural supremacy, has the vast continental expanse been set to play so powerful a role in shaping the nation’s future.

What the United States does with its demographic dividend—its relatively young working-age population—is critical. Simply to keep pace with the growing U.S. population, the nation needs to add 125,000 jobs a month, the New America Foundation estimates. Without robust economic growth but with an expanding population, the country will face a massive decline in living standards.

Entrepreneurs, small businesses and self-employed workers will become more common. Between 1980 and 2000 the number of self-employed individuals expanded, to about 15 percent of the work force. More workers will live in an economic environment like that of Hollywood or Silicon Valley, with constant job hopping and changes in alliances among companies.

For much of American history, race has been the greatest barrier to a common vision of community. Race still remains all too synonymous with poverty: considerably higher poverty rates for blacks and Hispanics persist. But the future will most likely see a dimming of economic distinctions based on ethnic origins.

Since 1960, the proportion of African-American households at or below the poverty line ($22,000 annually for a family of four in 2008 dollars) has dropped from 55 to 25 percent, while the black middle class has grown from 15 to 39 percent. From 1980 to 2008, the proportion who are considered prosperous—households making more than $100,000 a year in 2008 dollars—grew by half, to 10.3 percent. Roughly 50 percent more African-Americans live in suburbs now than in 1980; most of those households are middle class, and some are affluent.

The most pressing social problem facing mid-21st-century America will be fulfilling the historic promise of upward mobility. In recent decades certain high-end occupation incomes grew rapidly, while wages for lower-income and middle-class workers stagnated. Even after the 2008 economic downturn, largely brought on by Wall Street, it was primarily middle-class homeowners and jobholders who bore the brunt, sometimes losing their residences. Most disturbingly, the rate of upward mobility has stagnated overall, as wages have largely failed to keep up with the cost of living. It is no easier for poor and working-class people to move up the socio-economic ladder today than it was in the 1970s; in some ways, it’s more difficult. The income of college-educated younger people, adjusted for inflation, has been in decline since 2000.

To reverse these trends, I think Americans will need to attend to the nation’s basic investments and industries, including manufacturing, energy and agriculture. This runs counter to the fashionable assertion that the American future can be built around a handful of high-end creative jobs and will not require reviving the old industrial economy.

A more competitive and environmentally sustainable America will rely on technology. Fortunately, no nation has been more prodigious in its ability to apply new methods and techniques to solve fundamental problems; the term “technology” was invented in America in 1829. New energy finds, unconventional fuel sources and advanced technology are likely to ameliorate the long-prophesied energy catastrophe. And technology can ease or even reverse the environmental costs of growth. With a population of 300 million, the United States has cleaner air and water now than 40 years ago, when the population was 200 million.

The America of 2050 will most likely remain the one truly transcendent superpower in terms of society, technology and culture. It will rely on what has been called America’s “civil religion”—its ability to forge a unique common national culture amid great diversity of people and place. We have no reason to lose faith in the possibilities of the future.

This article originally appeared in Smithsonian Magazine

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G-20 Summit: There is No One Size Fits All

Susanne Trimbath — Fri, 25 Jun 2010 12:42:44 -0400

There is one thing you need to remember as you listen to the debate about economic and fiscal policy at the G-20 Summit this weekend in Toronto: There is No One-Size-Fits All. There is not even a “One-Size-Fits Twenty.”

Back in 2001, I summarized the few things about finance and economics that most scholars agree will support a growing economy and healthy capital markets:

“Four strategies can be shown to generally promote stable national financial systems: 1) having independent rating agencies; 2) having some safety net; 3) minimizing government ownership and control of national financial assets; and 4) allowing capital market participants to offer a wide-range of services.”

As of today:

1) Our rating agencies are independent of government, but not from the financial institutions who buy the ratings (who also buy the government, but I’ll leave that story to Matt Taibbi over at Rolling Stone …); 2) we bankrupted the Federal Deposit Insurance Corporation in late 2009, before the end of the recession (and that doesn’t even count all the bailouts of Wall Street and Main Street); and 3) the government took ownership positions in all US major financial institutions during the bailout.

I’ll come back to #4 to another time – Congress has vowed to ruin even that one before the 4th of July recess by passing the Wall Street Reform Act.

The United States delegation to the G20 Summit consists of President Obama, his economic advisor Larry Summers and (your friend and mine) Treasury Secretary Tim Geithner. At least one of them should know better than to go around insisting that every nation at the meeting should have the same policy as the United States: damn the torpedoes, full speed ahead! In other words, just as Federal Reserve Chairman Ben Bernanke is firing up the helicopters, keep dropping dollar bills on the economy until something starts growing. In a letter sent to the G-20 leaders in advance of the Summit in Toronto, they made it clear that the rest of the G-20 countries should do the same. While President Obama writes in the letter that the G-20 should “commit to restore sustainable public finances in the medium term” the underlying context is that there should be more fiscal stimulus in the short term.

I’m not the only economist to have said this before: When it comes to developing robust capital markets and a vibrant economy, there is no "one size fits all". This lesson should be familiar to the US delegation. To make it clear, let’s look at the numbers.

	2000	2001	2002	2007	2008	2009
Consumer Inflation Rate
Canada	2.7%	2.5%	2.3%	2.1%	2.4%		0.2%
France	1.7%	1.7%	1.9%	1.5%	2.8%		0.4%
Germany	1.5%	2.0%	1.4%	2.3%	2.6%		0.0%
United Kingdom	2.9%	1.8%	1.6%	4.3%	4.0%		2.2%
United States	3.4%	2.8%	1.6%	2.9%	3.8%		-0.4%

Economic Growth Rate
Canada	5.2%	1.8%	2.9%	2.7%	0.4%		-2.5%
France	3.9%	1.9%	1.0%	2.3%	0.4%		-2.2%
Germany	3.2%	1.2%	0.0%	2.5%	1.3%		-5.0%
United Kingdom	3.9%	2.5%	2.1%	3.0%	0.7%		-4.8%
United States	3.7%	0.8%	1.6%	2.0%	0.4%		-2.4%

The numbers in question are 2007 through 2009, those associated with the current recession. I include 2000-2002 in the table to show what happened in the last recession, for a little perspective. The players in question are US, UK, France and Germany – I include Canada as a courtesy because they are the host country for the summit,. The first thing you’ll notice is that the US is the only one among the group that did not see positive prices increases last year – hence, their continued willingness to employ the cash-dropping helicopters.

French Finance Minister Christine Lagarde is outspoken this week on the subject of getting the federal budget under control in France instead of expanding economic stimulus programs: she believes what’s best for France is to get the deficits under control, which means reducing the budget and not more spending. On this one, I’m with Minister Lagarde: Vive La Différence!

There’s one more thing you need to know about economic growth and that is this: It takes more than a 2.4% increase to make up for a 2.4% decrease. Think of this way: if you start at 1,000 and reduce by 50%, you are left with 500. Now, at 500 if you get a 50% increase, you are only back to 750. To get from 500 back to 1,000, you need a 100% increase. As I wrote back in January: “At this rate, it will take 11 quarters (nearly 3 years) to catch up.” More government spending, however, will not provide a healthy long-term solution.

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

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