San Francisco

Go to Middle America, Young Men & Women

Wendell Cox — Sun, 11 Oct 2009 17:16:20 -0400

A few weeks ago, Eamon Moynihan reviewed economic research on cost of living by state in a newgeography.com article. The results may seem surprising, given that some of the states with the highest median incomes rated far lower once prices were taken into consideration. The dynamic extends to the nation’s 51 metropolitan areas with more than 1,000,000 population (See Table).

There is a general perception that the most affluent metropolitan areas are on the east coast and the west coast. Indeed, 8 of the 10 metropolitan areas with the highest nominal per capita income in 2006 were on the two coasts. These included San Francisco, San Jose and Seattle on the west coast and Washington, Boston, New York, Hartford and Philadelphia on the east coast. Middle-America is represented by Denver and Minneapolis-St. Paul. However, as anyone who has lived on the coasts and Middle America knows, a dollar in New York or San Francisco does not buy nearly as much as a dollar in Dallas-Fort Worth or Cincinnati.

Per Capita Income: Purchasing Power Parity
US Metropolitan Areas over 1,000,000 Population

		2006 Per Capita Income
Rank	Metroplitan Area	Purchasing Power Adjusted	Nominal	Nominal Rank
1	San Francisco	$46,287	$57,747	1
2	Washington	$45,178	$51,868	3
3	Denver	$44,798	$44,691	8
4	Minneapolis-St. Paul	$44,326	$44,237	9
5	Houston	$42,815	$43,174	11
6	Boston	$42,571	$50,542	4
7	Pittsburgh	$41,716	$38,550	20
8	St. Louis	$41,613	$37,652	27
9	Milwaukee	$41,572	$39,536	19
10	Baltimore	$41,451	$43,026	12
11	Seattle	$41,448	$45,369	6
12	Kansas City	$41,329	$37,566	28
13	Hartford	$41,104	$44,835	7
14	New Orleans	$40,935	$40,211	16
15	Philadelphia	$40,725	$43,364	10
16	Dallas-Fort Worth	$40,643	$39,924	17
17	Cleveland	$39,997	$37,406	30
18	Indianapolis	$39,843	$37,735	26
19	Chicago	$39,752	$41,591	14
20	Richmond	$39,282	$38,233	22
21	New York	$39,201	$49,789	5
22	Birmingham	$39,057	$37,331	31
23	Cincinnati	$38,691	$36,650	36
24	Nashville	$38,680	$37,758	25
25	Detroit	$38,670	$38,119	24
26	Charlotte	$38,632	$38,164	23
27	Miami	$38,555	$40,737	15
28	San Jose	$38,505	$55,020	2
29	Jacksonville	$38,413	$37,519	29
30	Louisville	$38,262	$36,000	41
31	Oklahoma City	$38,156	$35,637	42
32	Las Vegas	$37,691	$38,281	21
33	Salt Lake City	$37,381	$35,145	45
34	San Diego	$37,358	$42,801	13
35	Rochester	$37,066	$36,179	38
36	Columbus	$37,058	$36,110	39
37	Atlanta	$36,691	$36,060	40
38	Memphis	$36,501	$35,470	44
39	Tampa-St. Petersburg	$36,260	$35,541	43
40	Portland	$36,131	$36,845	35
41	Buffalo	$36,091	$33,803	48
42	Norfolk (Virginia Beach metropolitan area)	$35,418	$34,858	46
43	Raleigh	$35,087	$37,221	32
44	San Antonio	$34,913	$32,810	50
45	Providence	$34,690	$37,040	34
46	Austin	$33,832	$36,328	37
47	Phoenix	$33,809	$34,215	47
48	Sacramento	$32,750	$37,078	33
49	Los Angeles	$32,544	$39,880	18
50	Orlando	$32,095	$33,092	49
51	Riverside-San Bernardino	$25,840	$27,936	51

Source:
http://www.bea.gov/scb/pdf/2008/11%20November/1108_spotlight_parities.pdf

Purchasing Power Parity: Things change rather dramatically when purchasing power is factored in. Some years ago, international economic organizations, such as the Organization for Economic Cooperation and Development, the World Bank and the International Monetary Fund began using costs of living by nation to compare national economic performance, rather than currency exchange rate. This practice, called “purchasing power parity” is based upon the recognition that there may be substantial differences in the cost of living between nations.

This can be illustrated by comparing Switzerland and the United States. For years, Switzerland has had a higher per capita GDP than the United States on an exchange rate basis. Switzerland’s gross domestic product per capita was $53,300 in 2006, nearly 30% above that of the United States ($42,000). However price levels in Switzerland are so high that incomes do not go nearly as far as the exchange rate would suggest. Once adjusted for purchasing power parity, the Swiss GDP per capita in 2006 drops to $39,000, well below that of the United States. Much of the difference has to do with regulation. The more liberal economy of the United States produces a lower cost economy than in Switzerland, or for that matter most of Western Europe. The US economic advantage would be even greater measured on a household basis, since US households include nearly 10% more members (generally children) than those in Western Europe.

The same concept was applied by the Department of Commerce Bureau of Economic Analysis researchers in their review of purchasing power parities between US metropolitan areas in 2006. When purchasing power is factored in, five of the top metropolitan areas in nominal per capita income (not adjusted for purchasing power) drop out and are replaced by other metropolitan areas rarely thought of as among the nation’s most affluent.

Among the three west coast nominal leaders, San Francisco remains as #1, in both nominal and purchasing power adjusted per capita income. Seattle dropped from 6th to 11th position. However, the real surprise is San Jose, which dropped from 2nd position to 28th.

The east coast regions ranked among the top 10 metropolitan areas in nominal income also were decimated by their high costs, with only Washington (which rose from 3rd to 2nd) and Boston (which fell from 4th to 6th) remaining. New York fell from 5th to 21st, Hartford from 7th to 13th and Philadelphia from 10th to 16th.

The two non-coastal metropolitan areas in the nominal top 10 remain, with Denver rising from to 3rd and Minneapolis-St. Paul rising from 9th to 4th.

It can be argued that Middle-America replaced the five metropolitan areas dropping out of the top ten. Houston, long one of the most disparaged metropolitan areas among urbanists, occupies the 5th position (compared to its 11th ranking in the nominal list). Three of the new entrants are confirmed members of the Rust Belt: Pittsburgh (7th), St. Louis (8th) and Milwaukee (9th). Finally, there is a new east coast entrant, blue-collar Baltimore (10th).

The Impact of Taxes: But that is just the beginning. Taxes also diminish the purchasing power of households. Unfortunately, there is virtually no readily available information on state and local taxation by metropolitan area. There is, however state and local government taxation data at the state level. If it is assumed that this data is representative of metropolitan differences (weighted proportionately by state in multi-state metropolitan areas), there would be changes in rank among the top 10. Denver would displace Washington in the number two position, closing more than one-half the gap with San Francisco. Even more surprisingly, St. Louis would move ahead of both Boston and Pittsburgh to rank 6th. Kansas City would leap over #11 Seattle, Baltimore, Milwaukee and Pittsburgh to rank 8th, trailing #7 Boston by $25, not much more than the price of a Red Sox standing room ticket. Pittsburgh would occupy the #9 position and Milwaukee #10 (See Figure).

More than Housing: The largest differences in purchasing power stem from housing, with east coast and west coast metropolitan areas having generally higher housing costs. As a result of the housing bust and the larger house price drops in those areas, purchasing power adjusted incomes could recover relative to those of Middle America. However, the high cost of living on the east and west coasts extend to more than housing prices. Generally, according to proprietary (and for sale) ACCRA cost of living data, the west coast and east coast metropolitan areas have higher costs of living even without housing. These differences are largely in grocery costs, which probably reflects the anti-big box store planning regulations and politics that exist in many of these areas. Grocery costs in the more affluent middle-American metropolitan areas tend to be lower.

Other Surprises: Outside the top 10 most affluent metropolitan areas, there are other surprises. Urban planning favorite Portland ranks 40th, just above Buffalo. Rust Belt Cleveland ranks 17th, a few positions above New York. Kansas City, with its highly decentralized civic architecture, ranks 12th, just behind Seattle. Indianapolis (17th) is more affluent than Chicago (18th) and both are more affluent than New York.

Five of the bottom 10 metropolitan areas are in the south, including Virginia Beach, Raleigh, Austin, San Antonio and Orlando. But perhaps the biggest surprise of all is that four of the five lowest ranking metropolitan areas are in the southwest: Phoenix (47th), Sacramento (48th), Los Angeles (49th) and Riverside-San Bernardino (51st).

The Dominance of Middle America: But among the 10 most affluent metropolitan areas in the nation, six or seven may be counted as Middle-America (depending on how Baltimore is classified). Only three are from the original group that supplies 8 of the top metropolitan areas when purchasing power is not considered.

Photograph: Pittsburgh

Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris. He was born in Los Angeles and was appointed to three terms on the Los Angeles County Transportation Commission by Mayor Tom Bradley. He is the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life.”

Can Silicon Valley Attract the Right Workforce for its Next Turnaround?

Tamara Carleton — Tue, 06 Oct 2009 23:37:56 -0400

In less than 30 years, Silicon Valley has rocketed to celebrity status. The region serves as the top magnet for innovation, often occupying the coveted #1 position of global hot spot rankings. More of an informal shared experience than a physical place, Silicon Valley capitalizes on being centrally located in the San Francisco Bay Area, a broader regional zone that is an economic powerhouse.

Keeping this leadership position requires constant transformation. The region has weathered and reinvented itself through previous downturns. These next few years, in the wake of what some have termed the Great Recession, will provide another test of economic recovery and relevance.

Based on a recent in-depth research study of global innovation networks, several elements will be essential to the future success of the Bay Area. Two critical but often overlooked factors are specifically community colleges and local demographics. Both are tied directly to people.

Almost any conversation of innovation assumes that the top research institutions are prerequisites. Boston has MIT and Harvard; the Bay Area has Stanford University and the University of California at Berkeley. One university professor said frankly, “Stanford is part of what the outside world sees as part of the Silicon Valley secret.”

These tier-one universities do play a critical role within the local economy, receiving the greatest doses of federal research dollars and enjoying their pick of top young talent. They also soak up the spotlight, so much so that the tiers below them are often ignored by local policymakers.

This elitist mentality dominates the top of the Bay Area food chain. An eminent faculty leader of a biotech institute was astounded when asked about the role of the other local schools for regional growth. He remarked, “We are more focused on the entrepreneurs than the foot soldiers. We kind of believe that [latter] part will take care of itself.”

This kind of thinking is delusional. In truth, community colleges provide the bedrock for the region’s university ecosystem. They channel bright students up the local educational chain, helping train and transfer them to the upper tiers. Within the Bay Area, the Foothill-De Anza Community College has served a diverse student body, which includes a combination of younger, older, and re-entry students, for over 50 years.

In particular, community colleges serve as a gateway to ambitious foreign-born talent. Foothill-De Anza admits more international students than any other community college in the U.S., notes Peter Murray, Foothill’s Dean of Physical Sciences, Mathematics and Engineering. Many of these students from outside the U.S. seek a natural entry to Silicon Valley. Once on a student visa, they aggressively pursue their career interests, often transferring to another state school, such as Stanford or the University of California system, to finish their degrees and join the local workforce. Others gain critical technical skills – such as in database management or bioinformatics – critical to operating sophisticated, technology-based companies.

The community colleges also learn to do more with less. Although state-assisted, Foothill-De Anza funds students at a relatively low rate of $4019 per student, even compared to other national community colleges that average $8041 per student, according to Community College League of California statistics. This is far below what it costs to send students to Berkeley or Stanford.

Most recently, the school’s administration has faced painfully deep state budget cuts, re-juggling curriculum priorities and teaching staff loads. They adjust by being flexible. The community college system recently announced a partnership with the University of California at Santa Cruz with ambitious plans to build a new billion-dollar multi-university campus at the NASA Ames Research Center. Carnegie-Mellon University in Pittsburgh and San Jose State University in San Jose, Calif., have joined the unique venture that mixes private, public, and industry spheres.

The new campus will include a new School of Management, major science laboratories, engineering facilities, classrooms, and homes for 3,000 people on 75 acres. The backers are hopeful that this will lead to a “sustainable community for education and research.” If all goes accordingly to plan, this university will offer a new model of education that combines the best of a local community college, local metropolitan school, two universities at a distance, and a strong industry partner.

Education constitutes only one part of the region’s human capital outlook. Local population trends can reflect the overall strength of the workforce and its ability for continued growth. On a more fundamental level, innovation efforts rest on people who start and grow new ventures. By understanding current demographics, you garner strong hints for future gaps and issues.

Looking just at Silicon Valley, the area’s population grew modestly by 1.6% to a total of 2.6 million residents for 2008, according to the latest Silicon Valley Index. Compared to California and the U.S., Silicon Valley’s population consists of fewer children and more people between working ages (25–64). This combination bodes well for work productivity, but also indicates that many who start families soon drift to other states to raise the next set of young workers.

Silicon Valley does better attracting and retaining foreign talent, who seek new opportunity and prosperity. AnnaLee Saxenian, a dean at the University of California at Berkeley, considers this global migration and circulation to be critical in maintaining regional advantage. Foreign immigration has driven Silicon Valley’s population growth. Looking solely at U.S. Census data estimates for the period of 2000 and 2003, foreign migration to the metropolitan cluster of San Francisco, Oakland, and Fremont rose by 10 percent each year, while domestic migration dropped by nearly 14 percent on average.

Another good sign is that foreign students, particularly those receiving degrees in science and engineering, continue to stay higher in Silicon Valley than other U.S. regions. Unfortunately, when the student visas end, many of these bright workers, who would otherwise stay in the area, take their skills and dreams back home.

More worrying, college graduates – both foreign and domestic – are leaving the region on their own volition. No city in the greater Bay Area sits in the top 20 list of places to work after college. If American youth are relocating to other areas, then the region may be destined to simply age in place. Local parents in my recent research study simply did not make the connection that nearly all their grown children lived elsewhere – and what that implication entailed for long-term regional vitality.

Part of this difference in understanding can be explained by generational biases. Each generation brings a dominant set of traits that shape the tone and direction for local innovation. Baby Boomers (born 1943–1960) are focused on their own pursuits. Even when retired, Boomers stay active as consultants and independent contractors, partly to offset decreased life savings as well as enjoy a self-sufficient lifestyle. Often criticized for being narcissistic, they can help to influence innovation activities for others through policy and funding decisions. A senior research policymaker said emphatically, “What are we going to do for the generations out ahead of us? That’s what I care more about than anything.”

Generation X (born 1961–1981) is the most entrepreneurial generation in U.S. history, but the smallest in size, so policymakers easily overlook them. Certain tensions exist with the prior generation. Research from Neil Howe and William Strauss show that the Boomers are increasingly resisting the decisions made by Gen X to the point of overlooking their contributions in favor of the next generation.

This is a drastic mistake for two reasons. First, the average age for a U.S.-born technology entrepreneur to start a company is 39, which sits squarely in Gen X. This generation has already become the primary engine for Silicon Valley. Second, this generation has the best academic training and international experience in American history. They may be small in their weight class, but Gen X packs a hefty punch overall. The challenge will be for the Bay Area to retain this population group, as their family and career needs shift.

In contrast, the Millennials (born 1982–2005) are generally focused on social bonding, authority approval, and civic duty – attributes that may make parents happy, but do not usually drive new economic growth. As the largest generation in American history, they are proving to be massive consumers of technology and social advocates. By and large, Millennials steer away from high-risk ventures, preferring community-oriented activities, and they bring a different set of demands to the Bay Area.

In the innovation lifecycle, if Boomers serve as advisors and Gen Xers as the entrepreneurs, then the Millennials could provide potent networkers. Each plays an essential role in regional growth, and all frequently vote with their feet. The critical question is whether the Bay Area is positioned to retain the right workforce mix to harness its next turnaround, or whether the dynamism will shift to other regions both in America and abroad.

Tamara Carleton is a doctoral student at Stanford University, studying innovation culture and technology visions. She is also a Fellow of the Foundation for Enterprise Development and the Bay Area Science and Innovation Consortium.

Purple Politics: Is California Moving to the Center?

Joel Kotkin — Tue, 29 Sep 2009 00:28:40 -0400

You don't have to be a genius, or a conservative, to recognize that California's experiment with ultra-progressive politics has gone terribly wrong. Although much of the country has suffered during the recession, California's decline has been particularly precipitous--and may have important political consequences.

Outside Michigan, California now suffers the highest rate of unemployment of all the major states, with a post-World War II record of 12.2%. This statistic does not really touch the depth of the pain being felt, particularly among the middle and working classes, many of whom have become discouraged and are no longer counted in the job market.

Even worse, there seems little prospect of an immediate recovery. The most recent projections by California Lutheran University suggest that next year the state's economy will lag well behind the nation's. Unemployment may peak at close to 14% by late 2010. Retail sales, housing and commercial building permits are not expected to rise until the following year.

This decline seems likely to slow--or even reverse--the state's decade-long leftward lurch. Let's be clear: This is not a red resurgence, just a shift toward a more purplish stance, a hue that is all the more appropriate given the economy's profound lack of oxygen.

There is growing disenchantment with the status quo. The percentage of Californians who consider the state "one of the best places" to live, according to a recent Field poll, has plummeted to 40%, from 76% two decades ago. Pessimism about the state's economy has risen to the highest levels since Field started polling back in 1961.

Inevitably, this angst has affected political attitudes. Though still lionized by the national media, Gov. Schwarzenegger's approval ratings have fallen from the mid-50s two years ago into the low 30s. The 12% approval rate for the state legislature, according to a Public Policy Institute of California survey in May, stands at half the pathetic levels recorded by Congress.

Moreover, voters now favor lower taxes and fewer services by a 49-to-42 margin--as opposed to higher taxes and more services. Support for ultra-green policies aimed to combat global warming has also begun to ebb. For the first time in years, a majority of Californians favors drilling off the coast. Californians might largely support aggressive environmental protections, but not to the extreme of losing their jobs in the process.

Remarkably, state government seems largely oblivious to these growing grassroots concerns. The legislature continues to pile on ever more intrusive regulations and higher taxes on a beleaguered business sector. Agriculture, industry and small business--the traditional linchpins of the economy--continue to be hammered from Sacramento.

Agriculture now suffers from massive cutbacks in water supplies, brought about in part by drought, but seriously worsened by the yammerings of powerful environmental interests. Large swaths of the fertile central valley are turning into a set for a 21st-century version of Steinbeck's Grapes of Wrath.

At the same time, the state's industrial base is rapidly losing its foundation. Toyota recently announced it was closing its joint venture plant in Fremont, the last auto assembly operation in the state, shifting production to Canada and Texas. Even the film business has been experiencing a secular decline; feature film production days have fallen by half over the decade, as movie-making exits for other states and Canada.

Most important, California may be undermining its greatest asset: its diverse, highly creative and adaptive small-business sector. A recent survey by the Small Business and Entrepreneurship Council ranked California's small-business climate 49th in the nation, behind even New York. Only New Jersey performed worse.

Regulation plays a critical role in discouraging small-business expansion, a new report from the Governor's Office of Small Business Advocate suggests. Prepared by researchers from California State University at Sacramento, the report estimates that regulations may be costing the state upward of 3.8 million jobs. California currently has about 14 million jobs, down 1 million since July 2007.

Ironically, the regulatory noose is now slated to tighten even further as a result of radical measures--from energy to land use--tied to reducing greenhouse gases. Another study, authored by California State University researchers, estimates these new laws could cost an additional million jobs.

Many in the state's top policy circles, as well as academics and much of the media, dismiss the notion that regulations could be deepening the recessionary pain. Some of this stems from the delusion--always an important factor in this amazing state--that ultra-green policies will actually solidify California's 21st-century leadership. Few seem to realize that other states, witnessing the Golden State's economic meltdown, might not rush to emulate California's policy agenda.

Internally, discontent with the current agenda seems particularly strong in the blue-collar, interior regions of the state. Brookings demographer Bill Frey and I have described this area as the "Third California." In the first part of the decade, this region expanded roughly three times as rapidly as Southern California, while the Bay Area's population remained stagnant.

Today the Third California represents roughly 30% of the state's population, compared with barely 18% for the ultra-blue Bay Area. The most conservative part of the state has skewed somewhat more Democratic in recent elections, largely due to migration from coastal California and an expanding Latino population.

But the intense economic distress now afflicting the interior counties--where unemployment rates are approaching 20%--may now reverse this process. The ultra-green politics embraced by the Democrats' two prospective gubernatorial nominees-Attorney General Jerry Brown and San Francisco Mayor Gavin Newsom--may not appeal much to a workforce heavily dependent on greenhouse-gas-emitting industries like farming, manufacturing and construction.

Eventually, the Democrats may rue their failure to run a pro-business, pro-growth candidate, particularly one with roots in the interior region. This oversight could cost them votes among, say, Latinos, who have been far harder hit by the recession than the more affluent (and overwhelmingly white) coastal progressives epitomized by Brown and Newsom. Along with independents, roughly one-fifth of the electorate, Latinos could prove the critical element in the state's purplization.

This, of course, depends on the Republicans developing an attractive pro-growth alternative. In recent years, the party's emphasis on conservative cultural issues and xenophobic anti-immigrant agitation has hurt the GOP in the increasingly socially liberal and ethnically diverse California.

Although he has proved a poor chief executive, Gov. Schwarzenegger did at least show such a political approach could work. The recent emergence of three attractive Silicon Valley-based candidates, including former eBay CEO Meg Whitman and State Insurance Commissioner Steve Poizner, as well as the likable libertarian-leaning former congressman Tom Campbell, could score well at the polls.

This political course-correction should be welcomed not only by Republicans but by California's moderate Democrats and Independents. However blessed by nature and its entrepreneurial legacy, California needs to move back to the pro-growth center if it hopes to revive both its economy and the aspirations of its people.

This article originally appeared at Forbes.

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 next book, The Next Hundred Million: America in 2050, will be published by Penguin Press early next year.

California Golden Dreams

Joel Kotkin — Fri, 18 Sep 2009 10:57:53 -0400

California may yet be a civilization that is too young to have produced its Thucydides or Edward Gibbon, but if it has, the leading candidate would be Kevin Starr. His eight-part “Dream” series on the evolution of the Golden State stands alone as the basic comprehensive work on California. Nothing else comes remotely close.

His most recent volume, “Golden Dreams: California in an Age of Abundance, 1950-1963,” covers what might be seen as the state’s true Golden Age. To be sure, there is some intriguing history before—the evolution of Hollywood in the 1920s, the reaction to the Depression and the fevered buildup during the Second World War—but this was California’s great moment, its Periclean peak or Augustan age.

“It was a time of growth and abundance,” Starr writes in his preface, and provides the numbers to prove it. In 1950, California was home to 10.7 million, making it a large state to be sure, but hardly a dominant one. By the early 1960s, the population passed 16 million, slipping by New York state in population.

Yet it was not a mere matter of numbers that made California so appealing or important. It was the idea of California as not only a part of America, but also something more. To millions in America and around the world, California grew to mean opportunity, sunshine and innovation.

The state’s business elite, for example, did not identify with the button-down hierarchy that sat atop teeming New York, and its second-tier competitors like Chicago. The leaders of Los Angeles would never consider it a second city, but simply a different, and generally, better one. There was no need for the excessive Manhattan penis envy that led Chicago to keep trying to build higher buildings than Gotham.

In a different way, San Francisco’s top executives also did not crave that their city be New York—it was always more beautiful, nuttier, freer and more creative than Gotham. What they shared with their downstate rivals was a sense of superiority over the old part of the country. If anything, they felt a mixture of contempt—particularly the conservatives—and condescension about an older, decaying society that fixated on tradition, order and breeding.

“California,” Cyril Magnin, scion of one of San Francisco’s great families, told me back in the late 1970s, “has recaptured what America once had—the spirit of pioneering. People in business out here are creative; they’re willing to take risks.”

Geography also plays a role here. Leaders in California, starting at least by the turn of the last century, looked out across the Pacific and saw themselves as part of an emerging shift from Europe to Asia, a process that continues and will dominate the rest of this century. This connection, suggested Pete Hannaford, a public relations executive and partner of Ronald Reagan’s Svengali, Michael Deaver, took on an almost Spenglerian inevitability. “Out here there’s a sense of being where the action is,” Hannaford believed, “with Japan and the Pacific.”

Starr captures these attitudes, which already had become deeply entrenched by the late 1950s and early 1960s. There was, as he writes, “a conviction that California was the best place to seek and attain a better American life.” However, it was more than money or power. It was about the quality of life. Success in California was not a matter of living by the rules, sheltered in a dark Manhattan apartment, but about the seduction of the physical world. In California, Starr writes, “Eros vanquished Thanatos.”

Yet Starr’s book is not merely about the rich, the powerful, and even the culturally influential. He finds his primary muse not in the Bohemian realms of San Francisco or the mansions of Beverly Hills, but in that most democratic of everyman’s places, the San Fernando Valley, the place author Kevin Roderick aptly dubbed “America’s Suburb.”

To see long excerpts from “Golden Dreams,” click here.

“The Valley” lies over the Santa Monica Mountains from the Los Angeles Basin. As late as the 1930s, it was largely an arid district of ranches, citrus orchards and chicken farms. The area’s postwar expansion was rapid, even by California standards. Between 1945 and 1950 alone, the Valley’s population more than doubled to nearly 500,000. By 1960, it had doubled again.

This growth was far more than the mindless bedroom sprawl often depicted by aesthetes and urban intellectuals. People in the Valley did not depend largely on the old part of Los Angeles the way, for example, Long Island lived off Manhattan. Most of the Valley’s growth was homegrown—driven by local industry such as aerospace, entertainment, electronics and until the 1960s automobiles.

Even today, the Valley has very much its own economy and sense of separation from Los Angeles. However, more important, the Valley was, first, a middle-class phenomenon. A cosmopolitan of the first order, Starr manages to chronicle California’s artistic and literary elites, but does not see in them the essence of the state’s appeal. Instead, he explores the everyday wonders of the Valley’s families, single-family homes and swimming pools—6,000 permitted in one year, between 1959 and 1960!

As a Valley resident myself, I can still see the basic imprint of that culture, what Starr calls its “way of life.” Compared to the tony Westside and hardscrabble east and southside of Los Angeles, the Valley has remained a relatively safe “child-oriented” society, with a big emphasis on restaurants, malls, ball fields, churches and synagogues.

The single-family tracts, of course, have changed hands, and the majority of the owners have changed. The primarily WASP and second-generation Eastern European Jews are still there, but they have steadily been augmented, and sometimes outnumbered, by others—Armenians, Orthodox Jews, Israelis, Persians, Thais, Chinese, Mexicans, Salvadorans, African-Americans and at least 10 groups I somehow will neglect and no doubt offend.

Yet the essential way of life forged in the 1950s and 1960s has remained a constant, and that remains the source of California’s attraction. Of course, it is no longer just a “Valley” phenomenon. As California has grown, there are many such places, outside San Diego, in Orange County, the Inland Empire, outside Sacramento, Fresno and scores of other towns. Almost all have the same imprint—an auto-dominated culture, dispersed workplaces, pools and a culture of aspiration.

In the ensuing decades, perhaps to be covered in Starr’s next book, this archetype evolved mightily. The San Gabriel Valley, once a plain vanilla suburban appendage, has morphed into the country’s largest Asian suburbia, complete with a shopping center jokingly referred to as “the Great Mall of China.” The often-monotonous housing tracts between San Jose and Palo Alto, on the San Francisco Peninsula, also attracted hundreds of thousands of Asians but also produced something equally astounding—the Silicon Valley, the world’s leading center for technology.

These suburban developments long ago surpassed in importance the urban roots of California metropolises. A serious corporate center during the time covered by Starr’s volume, San Francisco has devolved in a ultra-politically correct, hip and cool urban Disneyland for Silicon Valley, providing good restaurants and housing for those still too young to crave a house on the Peninsula. The San Gabriel Chinatown long ago replaced the older one in downtown Los Angeles as the center of Asian culture and cuisine.

These places grew before the current malaise infected the state. As Starr points out, California based its ascendancy on two seemingly contradictory principles: entrepreneurship and activist government. Under Gov. Earl Warren, but also Goodwin Knight and finally Pat Brown, the state made a commitment both to basic infrastructure—energy, water, roads, schools, parks—and expanding its economy.

By the early 1960s, this system was hitting on all cylinders. New roads, power plants and water systems opened lands for development for farms, subdivisions, factories. Ever expanding and improving schools produced a work force capable of performing higher-end tasks, and capable of earning higher wages. New parks preserved at least some of the landscape, and gave families a place to recreate.

For Pat Brown, arguably the greatest governor in American history, this was all part of California’s “destiny.” Starr describes Brown’s California as “a modernist commonwealth, a triumph of engineering, a megastate committed to growth as its first premise.” Yet within this great modernist project was also stirring opposition, on both left and right, that would soon place this Golden Age at its end.

Many of the objections were legitimate. The Sierra Club and its many spinoffs rightfully saw the Brown development machine as threatening California’s landscape, wildlife and, in important ways, the appeal of its way of life. More careful controls on growth clearly were needed. The battle over the nature of those controls continues to this day.

Some more angry voices, then as now, targeted the very existence of suburbia, the dominant form of the state’s growth, and eventually sought its eradication. This struggle goes on to this day with a religious fervor, led, ironically, by the former and perhaps future governor, Jerry Brown, currently attorney general and leading Torquemada of the greens.

Minorities also began to stir amid the celebrations of the 1950s and early 1960s. Woefully underrepresented in the halls of power and the corridors of business, Asians and Latinos remained largely passive politically. However, by the early 1960s acceptance of exclusion was giving way to more assertive attitudes. Ultimately the massive immigration that swelled both their numbers in the 1970s and beyond would ensure these groups far more influence both on the politics and in the economy of the state.

Yet it was the African-American who would really upset the balance of the golden era. Never discriminated against as in the South, black Californians felt the lash of a thousand, often-informal exclusions. As the civil rights movement grew, with it less deferential attitudes, particularly toward the police, a powder keg was building. In 1964, the first year after the era chronicled in “Golden Dreams,” Watts blew up, shattering the comfortable assumptions of a progressive, post-racial state.

Finally, as Starr reports, there was mounting thunder on the right. The business elite and the middle class were financing the ever-expanding California state. They saw their money go to the poor, to minorities and state employees. Particularly annoying were the university students, many of whom were in open revolt against the state, in the mind of much of the public that had nurtured them.

By the early 1960s many of these latter Californians also were angry, but their rage would express itself not in riots, but at the ballot box, ushering in the age of Ronald Reagan. The period that follows “Golden Dreams” emerges as one of conflicting visions, between greens, students and minorities, on the one hand, and largely suburban middle-class workers and business owners on the other.

These two groups would battle over the next generation, with the advantage oscillating over time. Today the heirs of the protesters—greens, minority activists and former ’60s radicals—hold the political advantage, although the state they dominate has fallen on parlous times.

In retrospect, the golden era before these conflicts does indeed seem like a high point. The question now is whether California, down on its luck, will find a way to rebound, much as imperial Rome did after the demise of the Julian dynasty, or fall, like Athens, into ever more squalid decline. Does the state have a bright “destiny” ahead or only more ruin?

This, of course, will be the basis for another historical epoch. Let us hope Kevin Starr be around to chronicle it for the rest of us.

This piece originally appeared at Truthdig.com

Golden Dreams: California in an Age of Abundance, 1950-1963 at Amazon.com.

California Wastes Its Public Space

Fri, 14 Aug 2009 01:08:52 -0400

California’s favorable climate makes it a haven for outdoor activity. Enlightened and forward-looking planning has largely preserved the waterfronts for public access and set aside a lot of space for public use and activity. Yet despite this, there are few great urban gathering spaces. This is most obvious in the two largest population centers – Los Angeles and San Francisco.

As a result, potentially great urban districts are dragged down by a dearth of desirable activity, something exacerbated by an already damaging real estate slump. Although all is not lost in these cities, some of the most high profile public spaces fail to attract large numbers of visitors on a daily basis, particularly when no special events are planned.

Pershing Square, Los Angeles – Located in the heart of downtown, Pershing Square is poorly designed, both as its own project and in a contextual sense. In an already warm climate made even hotter by its CBD location, there is too much hardscape. Extensive softscape, whether flowers, grass, and/or trees, would provide a cooling effect. There are also too many symbolic structures serving no purpose. These are expensive to install and maintain; they provide very little benefit. Also, an already bad relationship to the street was made worse by restricting access points and hiding the interior space. Although some changes over the past several years have softened the space somewhat, it still lacks some basic creature comforts, such as adequate lighting and clean restrooms, to make it a daily destination for the scores of office workers within easy walking distance.

County Mall, Los Angeles – County Mall, located west of Los Angeles City Hall between Broadway and Grand Avenue, is in the unenviable position of being relatively unknown. Poor graphics and signage do little to improve its profile. Although there was extensive softscape in the design, many of the original shrubs and flowers have eroded. Further, the large space is not properly organized to allow and encourage different types of activity. Adjacent uses alone are not enough to sustain the park. Unlike in Pershing Square, the design here is not the primary issue. Instead, more programming and better maintenance would make County Mall successful, and provide for a dramatic promenade connecting City Hall and the Los Angeles Music Center.

Union Square, San Francisco – Despite an expensive redesign nearly five years ago, Union Square is still not the central urban gathering space for San Francisco. Although it does serve as an incidental focus of pedestrian activity within the immediate neighborhood, the primarily hardscaped design is too fussy and too formal to encourage casual passive use and extended stays, except, perhaps, within limited zones at the fringes. The little available seating is poorly designed, intended to prevent homeless use rather than to promote use by casual park visitors. Primarily a concrete space with grass at the corners, Union Square lacks the “warmth” that makes such spaces comfortable. Imagine a Union Square with a great lawn in the middle, rather than cold (and expensive) hardscape.

Market Street, San Francisco – Punctuated by intermittent triangular plazas along most of its downtown stretches, portions of Market Street’s public space are more the domain of homeless panhandlers than workers, residents, strollers, and the like (it should be noted, however, that some parts of Market Street, such as in the Financial District, can be pleasant at times). The plazas, quality architecture, and mix of uses create potential. But the pedestrian environment discourages extended dwell times, except by the homeless, panhandlers and drug dealers, many of whom, the city has documented, commute daily to Market Street from elsewhere in the Bay Area. The design offers little in the way of seating options and softscape. Sanitation and maintenance need to be substantially upgraded and programming is needed.

Proper seating, adequate lighting, and extensive horticultural displays would serve to populate these public spaces. Proper management and maintenance would ensure long-term success. Places such as Bryant Park in Midtown Manhattan, itself the beneficiary of a remarkable turnaround masterminded by Daniel Biederman of the Bryant Park Restoration Corporation, have shown what visionary management can do to struggling urban public spaces. [Kozloff worked for BRV Corp., Biederman’s private consulting company that is independent of the Bryant Park Restoration Corporation, from 2001-2004.] Although once run on a city budget of $200,000, Bryant Park is now managed on a privately-funded budget. Biederman turned Bryant Park – once the domain of drug dealers and other such undesirables – into Manhattan’s premier address without using public coffers.

Given the warm weather, long growing seasons, and urban renaissance occurring in adjacent portions of Los Angeles and San Francisco, even in the midst of our current downturn, there are opportunities to improve the public realm so that it serves its intended purpose, including boosting civic pride and, in turn, encouraging public stewardship. And, these improvements could be made without costly redesigns and extensive capital construction. Urban environments do not need places that drain public funds and then are shunned by the citizenry; there are enough other issues for urban mayors to deal with. Great cities need comfortable and inviting gathering places that both anchor and bolster civic pride, and simultaneously provide backdrops for special events and day-to-day activity.

Howard Kozloff is Manager of Development Strategies and Director of Operations at Hart Howerton, an international strategy, planning and design firm based in New York, San Francisco and London. Kozloff is also a lecturer on Urban Real Estate Markets at the University of Pennsylvania.

Tracking Business Services: Best And Worst Cities For High-Paying Jobs

Joel Kotkin — Tue, 14 Jul 2009 00:11:21 -0400

Media coverage of America's best jobs usually focuses on blue-collar sectors, like manufacturing, or elite ones, such as finance or technology. But if you're seeking high-wage employment, your best bet lies in the massive "business and professional services" sector.

This unsung division of the economy is basically a mirror of any and all productive industry. It includes everything from human resources and administration to technical and scientific positions, as well as accounting, legal and architectural firms.

Overall there are roughly 17 million professional and business services jobs, 4 million more than manufacturing. This makes it twice as big as the finance sector and five times the size of the much-ballyhooed tech sector. While its average salary – roughly $55,000 a year – is somewhat lower than in those other elite sectors, its wages are still higher than those in all the other large sectors, like health. The sector's $1 trillion in total pay per year accounts for nearly 20% of all wages paid in the nation; finance and tech together only account for $812 billion.

More than that, the business and professional services sector has encompassed the fastest-growing part of the high-wage economy. Employment in lower-wage sectors like education has also grown quickly. But employment in other sectors that pay their employees well, such as technology, has remained stagnant; jobs in some, such as manufacturing, have fallen sharply. Critically, the business services sector – particularly at the better-paying end – seems to have weathered the current recession better than these other high-wage sectors.

The crucial question remains: In what regions is this critical economic cog booming? In a new analysis with my colleagues at the Praxis Strategy Group, we examined Bureau of Labor Statistics employment data for this sector, keeping an eye on trends over both the last year and the last decade. Some of the metropolitan areas that boasted short-term growth in this sector also maintained steady employment success over the long-term, which suggests that these particular cities have sturdy economies that aren't as prone to intense boom-bust cycles.

At the top of our list of best places is greater Washington, D.C., and its surrounding suburbs in Virginia and Maryland. Government jobs may drive that economy, but it is the lawyers, consultants and technical services firms who harvest the richest benefits. As New York University public policy professor Mitchell Moss observes, Washington has emerged as the "real winner" in the recession – not just for public-sector workers but private-sector ones too.

Fastest Growing Professional and Business Services Sectors
Area Name	Jobs in Sector 2009 (thousands)	Sector Share of Jobs 2009 (percent of total)	Growth 2008 - 2009 (percent growth)	Cumulative Growth 2001 - 2009 (percent growth)	2001-2009 Job Change (thousands)	2008-2009 Job Change (thousands)
Northern Virginia, VA	355.2	27.2%	1.5%	22.4%	65.0	5.2
Washington-Arlington-Alexandria, DC-VA-MD-WV	558.7	23.0%	0.9%	22.8%	103.6	5.1
Austin-Round Rock, TX	112.4	14.4%	3.3%	18.7%	17.7	3.6
Houston-Sugar Land-Baytown, TX	382.3	14.7%	0.9%	19.2%	61.5	3.2
Virginia Beach-Norfolk-Newport News, VA-NC	106.6	14.0%	2.8%	8.0%	7.9	2.9
Bethesda-Frederick-Rockville, MD	125.7	21.9%	2.1%	9.0%	10.4	2.6
Wichita, KS	31.5	10.1%	3.5%	16.4%	4.4	1.1
Chattanooga, TN-GA	25.9	10.6%	4.3%	11.8%	2.7	1.1
Peoria, IL	23.0	12.1%	4.5%	43.2%	6.9	1.0
Rochester, NY	61.8	11.9%	1.5%	1.9%	1.1	0.9
Augusta-Richmond County, GA-SC	31.0	14.5%	3.0%	7.5%	2.2	0.9
Mansfield, OH	5.1	9.1%	19.4%	4.1%	0.2	0.8
Kennewick-Pasco-Richland, WA	20.8	22.2%	4.2%	20.2%	3.5	0.8
St. Louis, MO-IL	195.4	14.6%	0.4%	3.9%	7.4	0.8
Fayetteville-Springdale-Rogers, AR-MO	33.5	16.2%	2.2%	34.2%	8.5	0.7
Macon, GA	12.1	11.9%	5.5%	31.2%	2.9	0.6
Pittsburgh, PA	158.9	13.9%	0.4%	14.5%	20.1	0.6
Fresno, CA	30.7	10.3%	1.9%	23.3%	5.8	0.6
Provo-Orem, UT	23.3	12.4%	2.5%	16.7%	3.3	0.6
Charleston-North Charleston-Summerville, SC	42.2	14.3%	1.3%	31.1%	10.0	0.5

Over the past year, parts of northern Virginia – ground zero for the so-called "beltway bandits" who work in industries the government depends on to do its job – have enjoyed the fastest growth in business and professional services, adding over 5,200 jobs despite the current downturn.

Other areas around the nation's capital have also seen strong growth. The Washington D.C.-Arlington-Alexandria area, for example, came in second on our list, gaining nearly 5,100 positions, while No. 6 the Bethesda-Frederick-Rockville, Md., metro area added 2,600. In addition, yet another Virginia area – No. 5-ranked Virginia Beach-Norfolk-Newport News, a center for military-related industries – gained nearly 2,900 jobs in this sector.

It's far too early to thank the free-spending ways of Barack Obama's administration for all this growth. As anyone can tell you, the Bush White House and its Republican Congress were not exactly models of fiscal restraint. Plus, Washington and Northern Virginia have seen growth in their business services sectors over the last several years, in the period stretching from 2001 to 2009. Together those two metros added over 165,000 new jobs in this critical, high-wage sector.

Of course, you don't have to head to Washington to find a high-paying job – although you might not be able to escape unpleasant summer weather. The other major group of business-services hot spots includes Austin, Texas, at No. 3, and Houston, at No. 4. These Lone Star local economies have continued to thrive not only during the current recession but also over the last decade.

The others winners include farther-afield locales in Kansas, Tennessee, Illinois and New York. These areas could be gaining both from companies seeking to lower costs and from the new capabilities for remote work due to the Internet. Even though they didn't make our list, a host of smaller communities – like Mansfield, Ohio; Provo, Utah; and Charleston, S.C. – also enjoyed significant growth in the business services sector over the past year.

So if these are the places where this segment of the economy is growing and high-paying jobs are easier to come by, where is the opposite true? The worst cities on our list span three archetypes: Rust Belt basket cases, Sunbelt flame-outs and expensive big cities. Perhaps the toughest losses were in Michigan: Detroit and the Warren-Troy metro area suffered big setbacks both in the last year and over the last decade.

Fastest Declining Professional and Business Services Sectors
Area Name	Jobs in Sector 2009 (thousands)	Sector Share of Jobs 2009 (percent of total)	Growth 2008 - 2009 (percent growth)	Cumulative Growth 2001 - 2009 (percent growth)	2001-2009 Job Change (thousands)	2008-2009 Job Change (thousands)
Phoenix-Mesa-Scottsdale, AZ	289.2	16.0%	-10.8%	7.9%	21.2	-35.1
Warren-Troy-Farmington Hills, MI	202.5	18.5%	-12.0%	-21.2%	-54.4	-27.7
Chicago-Naperville-Joliet, IL	633.6	16.8%	-4.1%	-2.9%	-19.0	-27.0
Los Angeles-Long Beach-Glendale, CA	574.7	14.3%	-4.2%	-3.4%	-20.4	-25.2
Atlanta-Sandy Springs-Marietta, GA	390.3	16.4%	-5.9%	-1.3%	-5.1	-24.4
Orlando-Kissimmee, FL	170.9	16.2%	-8.5%	7.7%	12.3	-16.0
Santa Ana-Anaheim-Irvine, CA	261.9	18.0%	-4.7%	4.0%	10.2	-12.8
Minneapolis-St. Paul-Bloomington, MN-WI	253.4	14.4%	-4.6%	-4.6%	-12.2	-12.3
Edison-New Brunswick, NJ	164.5	16.3%	-6.7%	-2.6%	-4.4	-11.9
Detroit-Livonia-Dearborn, MI	108.9	14.7%	-9.5%	-20.9%	-28.8	-11.4
Indianapolis-Carmel, IN	120.3	13.4%	-8.3%	13.6%	14.4	-10.8
Riverside-San Bernardino-Ontario, CA	133.7	11.2%	-6.5%	36.0%	35.4	-9.2
Tampa-St. Petersburg-Clearwater, FL	223.2	18.5%	-3.7%	12.3%	24.5	-8.6
New York City, NY	595.7	15.8%	-1.4%	-0.8%	-5.1	-8.4
Newark-Union, NJ-PA	163.5	16.0%	-4.7%	-0.5%	-0.8	-8.0
Bergen-Hudson-Passaic, NJ	130.6	14.6%	-5.8%	-9.1%	-13.0	-8.0
Milwaukee-Waukesha-West Allis, WI	107.6	12.9%	-6.6%	-1.7%	-1.8	-7.6
Miami-Miami Beach-Kendall, FL	139.1	13.4%	-4.7%	2.2%	3.0	-6.8
Oakland-Fremont-Hayward, CA	158.0	15.6%	-4.0%	-7.1%	-12.2	-6.7
Las Vegas-Paradise, NV	108.2	12.1%	-5.8%	38.1%	29.9	-6.6
Boston-Cambridge-Quincy, MA	308.8	18.2%	-2.0%	-6.8%	-22.5	-6.4
Sacramento--Arden-Arcade--Roseville, CA	106.1	12.3%	-5.6%	-1.8%	-1.9	-6.3
Cleveland-Elyria-Mentor, OH	137.8	13.3%	-4.3%	-5.2%	-7.6	-6.1
Denver-Aurora-Broomfield, CO	207.0	16.9%	-2.9%	4.0%	8.0	-6.1

Consistent job losses in business services in these areas – some 54,000 in the Troy area since 2001 – reveal the clear connection between employment in business services and in the region's fundamental auto industry. It turns out that elite services often prove dependent on basic industry. When industrial plants shut down, it's not just blue-collar workers and company executives that suffer; as a result, these firms will use fewer lawyers, accountants, architects and technical consultants.

A similar picture emerges in cities like Phoenix, which lost about 35,000 business-services jobs in just one year. This loss stems from the collapse of the housing bubble, which powered the rest of the regional economy. The same meltdown caused smaller but still significant reversals in one-time boomtowns like Orlando, Fla., Atlanta and Southern California's Santa Ana region, which encompasses Orange County, where business service employment dropped by double-digit rates over the past year.

Yet these same areas should see some recovery, perhaps more so than the traditional auto manufacturing-focused towns. Phoenix, Orlando and other Sun Belt locations – including a host of other areas in Florida – all saw increasing employment in business services over the past decade. If the economy comes back, along with a stabilization of the residential real estate market, business-services job growth will likely begin to take off again. After all, the fundamental reasons for the success of these areas, such as warm weather, lower costs and the need to serve a growing population, have not fundamentally changed.

Perhaps most perplexing is the fate of some of the other places on our worst cities list, particularly the biggest metropolitan areas. The professional and business services sector is widely considered ideal for large, cosmopolitan centers, since lots of industries require support. But Chicago experienced a huge chunk of job losses – almost 25% – in this sector during the last year. Other big cities, including Los Angeles, Minneapolis and New York, also suffered.

This is not a new phenomenon. These and other big cities, like Boston and San Jose, San Francisco and Oakland in California, have been shedding these types of jobs since 2001. These losses, however, have been concentrated at the lower-wage end of the business service pyramid, in areas like human resources and administration. These are the positions that companies can fill more easily and cheaply using the Internet or by hiring in less expensive outposts.

That's why Washington and its environs, which has seen across-the-board business growth, remain the great exception. Many business-services jobs outside the beltway appear to be becoming more nomadic, based in places where firms face lower costs and where workers can afford to live well on middle-income salaries. Even the long-term resiliency of higher-wage employment like law and accounting in traditional business hubs like New York could be at risk over time, with some jobs shifting to less expensive locales or even overseas.

The changing nature of business services presents a boon to some communities and a challenge to others as they seek to survive and thrive in spite of the current recession. How some cities manage to grow this segment of their economies may well presage which parts of the country will thrive best during the years of recovery – and beyond.

This article originally appeared at Forbes.

Joel Kotkin is executive editor of NewGeography.com and is a presidential fellow in urban futures at Chapman University. He is author of The City: A Global History. His next book, The Next Hundred Million: America in 2050, will be published by Penguin early next year.

Who Killed California's Economy?

Joel Kotkin — Tue, 07 Jul 2009 00:26:28 -0400

Right now California's economy is moribund, and the prospects for a quick turnaround are not good. Unable to pay its bills, the state is issuing IOUs; its once strong credit rating has collapsed. The state that once boasted the seventh-largest gross domestic product in the world is looking less like a celebrated global innovator and more like a fiscal basket case along the lines of Argentina or Latvia.

It took some amazing incompetence to toss this best-endowed of places down into the dustbin of history. Yet conventional wisdom views the crisis largely as a legacy of Proposition 13, which in effect capped only taxes.

This lets too many malefactors off the hook. I covered the Proposition 13 campaign for the Washington Post and examined its aftermath up close. It passed because California was running huge surpluses at the time, even as soaring property taxes were driving people from their homes.

Admittedly it was a crude instrument, but by limiting those property taxes Proposition 13 managed to save people's houses. To the surprise of many prognosticators, the state government did not go out of business. It has continued to expand faster than either its income or population. Between 2003 and 2007, spending grew 31%, compared with a 5% population increase. Today the overall tax burden as percent of state income, according to the Tax Foundation, has risen to the sixth-highest in the nation.

The media and political pundits refuse to see this gap between the state's budget and its ability to pay as an essential issue. It is. (This is not to say structural reform is not needed. I would support, for example, reforming some of the unintended ill-effects of Proposition 13 that weakened local government and left control of the budget to Sacramento.)

But the fundamental problem remains. California's economy--once wondrously diverse with aerospace, high-tech, agriculture and international trade--has run aground. Burdened by taxes and ever-growing regulation, the state is routinely rated by executives as having among the worst business climates in the nation. No surprise, then, that California's jobs engine has sputtered, and it may be heading toward 15% unemployment.

So if we are to assign blame, let's not start with the poor, old anti-tax activist Howard Jarvis (who helped pass Proposition 13 and passed away over 20 years ago), but with the bigger culprits behind California's fall. Here are five contenders:

1. Arnold Schwarzenegger

The Terminator came to power with the support of much of the middle class and business community. But since taking office, he's resembled not the single-minded character for which he's famous but rather someone with multiple personalities.

First, he played the governator, a tough guy ready to blow up the dysfunctional structure of government. He picked a street fight against all the powerful liberal interest groups. But the meathead lacked his hero Ronald Reagan's communication skills and political focus. Defeated in a series of initiative battles, he was left bleeding the streets by those who he had once labeled "girlie men."

Next Arnold quickly discovered his feminine side, becoming a kinder, ultra-green terminator. He waxed poetic about California's special mission as the earth's guardian. While the housing bubble was filling the state coffers, he believed the delusions of his chief financial adviser, San Francisco investment banker David Crane, that California represented "ground zero for creative destruction."

Yet over the past few years there's been more destruction than creation. Employment in high-tech fields has stagnated (See related story, "Best Cities For Technology Jobs") while there have been huge setbacks in the construction, manufacturing, warehousing and agricultural sectors.

Driven away by strict regulations, businesses take their jobs outside California even in relatively good times. Indeed, according to a recent Milken Institute report, between 2000 and 2007 California lost nearly 400,000 manufacturing jobs. All that time, industrial employment was growing in major competitive rivals like Texas and Arizona.

With the state reeling, Arnold has decided, once again, to try out a new part. Now he's posturing as the strong man who stands up to dominant liberal interests. But few on the left, few on the right or few in the middle take him seriously anymore. He may still earn acclaim from Manhattan media offices or Barack Obama's EPA, but in his home state he looks more an over-sized lame duck, quacking meaninglessly for the cameras.

2. The Public Sector

Who needs an economy when you have fat pensions and almost unlimited political power? That's the mentality of California's 356,000 workers and their unions, who make up the best-organized, best-funded and most powerful interest group in the state.

State government continued to expand in size even when anyone with a room-temperature IQ knew California was headed for a massive financial meltdown. Scattered layoffs and the short-term salary givebacks now being considered won't cure the core problem: an overgenerous retirement system. The unfunded liabilities for these employees' generous pensions are now estimated at over $200 billion.

The people who preside over these pensions represent the apex of this labor aristocracy. This year two of the biggest public pension funds, CalPERS and CalSTERS, handed out six-figure bonuses to its top executives even though they had lost workers billions of dollars.

Almost no one dares suggest trimming the pension funds, particularly Democrats who are often pawns of the public unions. Some reforms on the table, like gutting the two-thirds majority required to pass the budget, would effectively hand these unions keys to the treasury.

3. The Environment

Obama holds up California's environmental policy as a model for the nation. May God protect the rest of the country. California's environmental activists once did an enviable job protecting our coasts and mountains, expanding public lands and working to improve water and air resources. But now, like sailors who have taken possession of a distillery, they have gotten drunk on power and now rampage through every part of the economy.

In California today, everyone who makes a buck in the private sector--from developers and manufacturers to energy producers and farmers--cringes in fear of draconian regulations in the name of protecting the environment. The activists don't much care, since they get their money from trust-funders and their nonprofits. The losers are California's middle and working classes, the people who drive trucks, who work in factories and warehouses or who have white-collar jobs tied to these industries.

Historically, many of these environmentally unfriendly jobs have been sources of upward mobility for Latino immigrants. Latinos also make up the vast majority of workers in the rich Central Valley. Large swaths of this area are being de-developed back to desert--due less to a mild drought than to regulations designed to save obscure fish species in the state's delta. Over 450,000 acres have already been allowed to go fallow. Nearly 30,000 agriculture jobs--held mostly by Latinos--were lost in the month of May alone. Unemployment, which is at a 17% rate across the Valley, reaches upward of 40% in some towns such as Mendota.

4. The Business Community

This insanity has been enabled by a lack of strong opposition to it. One potential source--California's business leadership--has become progressively more feeble over the past generation. Some members of the business elite, like those who work in Hollywood and Silicon Valley, tend to be too self-referential and complacent to care about the bigger issues. Others have either given up or are afraid to oppose the dominant forces of the environmental activists and the public sector.

Theoretically, according to business consultant Larry Kosmont, business should be able to make a strong case, particularly with the growing Latino caucus in the legislature. "You have all these job losses in Latino districts represented by Latino legislators who don't realize what they are doing to their own people," he says. "They have forgotten there's an economy to think about."

But so far California's business executives have failed to adopt a strategy to make this case to the public. Nor can they count on the largely clueless Republicans for support, since GOP members are often too narrowly identified as anti-tax and anti-immigration zealots to make much of a case with the mainstream voter. "The business community is so afraid they are keeping their heads down," observes Ross DeVol, director of regional economics at the Milken Institute. "I feel they if they keep this up much longer, they won't have heads."

5. Californians

At some point Californians--the ones paying the bills and getting little in return--need to rouse themselves. The problem could be demographic. Over the past few years much of our middle class has fled the state, including a growing number to "dust bowl" states like Oklahoma, Texas and Arkansas from which so many Californians trace their roots.

The last hope lies with those of us still enamored with California. We have allowed ourselves to be ruled by a motley alliance of self-righteous zealots, fools and cowards; now we must do something. Some think the solution is reining in citizens' power by using the jury pool to staff a state convention, as proposed by the Bay Area Council, or finding ways to undermine the initiative system, which would remove critical checks on legislative power.

We should, however, be very cautious about handing more power to the state's leaders. With our acquiescence, they have led this most blessed state toward utter ruin. Structural reforms alone, however necessary, won't turn around the economy's fundamental problems and help California reclaim its role as a productive driver of the American dream.

This article originally appeared at Forbes.

Special Report: Infill in US Urban Areas

Wendell Cox — Mon, 15 Jun 2009 01:35:57 -0400

One of the favored strategies of current urban planning is “infill” development. This is development that occurs within the existing urban footprint, as opposed that taking place on the fringe of the urban footprint (suburbanization). For the first time, the United States Bureau of the Census is producing data that readily reveals infill, as measured by population growth, in the nation’s urban areas.

2000 Urban Footprint Populations

The new 2007 estimates relate to urban areas or urban footprints as defined in 2000 and are produced by the American Community Survey program of the Bureau of the Census. Urban areas are the continuous urbanization that one would observe as the lights of a “city” on a clear night from an airplane. It is the extent of development from one side of the urban form to the other. Further, urban areas are not metropolitan areas, which are always larger and are defined by work trip travel patterns. Metropolitan areas always include adjacent rural areas, while urban areas never do.

The Process of Infill

Although embraced with often religious passion within the urban planning community, infill is neither good nor bad in terms of social or environmental impact. Infill always increases population densities and that means more traffic. If road capacity is increased sufficiently, traffic congestion can be kept at previous levels. If on the other hand, nothing is done, traffic congestion is likely to increase along with population. This means slower traffic and more stop and go operations, which inevitably increases the intensity of air pollution with the potential to cancel out any reductions in greenhouse gas emissions (GHG) that might occur if average car trip lengths decline. Similar difficulties can occur with respect to other infrastructure systems, such as sewer and water. Expanding roads, sewer and water systems in already developed areas can be far more expensive than new systems on greenfield sites. Regrettably, boosters of infill routinely ignore these issues.

But infill has been going on for years, along with suburbanization, both in the United States and in other first world nations. This is indicated by the general densification trend that occurred in US urban areas between 1990 and 2000 and the longer term densification trends that occurred in a number of southwestern urban areas, such as Los Angeles, San Jose, Riverside-San Bernardino, Phoenix, Dallas-Fort Worth and Las Vegas. All these traditionally “sprawling” areas have, in fact, been densifying since 1960 or before. Since 2000, 33 of the nation’s 37 urban areas with a population exceeding 1,000,000 population experienced population infill to their 2000 urban footprints.

Infill in Traditionally Regulated Markets (More Responsive Markets)

Infill is a natural consequence of the traditional post-World War II land use regulation, which tends towards accommodating both demographic growth and market forces. This has been replaced by more prescriptive (often called “smart growth”) land use regulation in some urban areas. Under traditional regulation, suburban development followed a “leap frog” process, moving ever further out. This is roundly condemned in today’s planning literature and among leading academics and policy makers.

Leap frog development occurs where urban development skips over empty land and creates a less continuous urban fabric. Land is developed based upon the interplay between sellers and buyers. Due to fewer planning restrictions, no seller can be sure that their land will be purchased since there is always plenty of land that buyers can otherwise purchase. This keeps land prices down. In the more responsive markets, it is typical for land and site infrastructure costs to be 20 percent of the total price land and house price.

Infill occurs as land that has been “leaped” over is subsequently purchased for development. Again, because buyers have plenty of choices, prices of the infill land remains low, so that land and infrastructure costs remain relatively affordable in relationship to the overall new house purchase price.

The result is an urban area that is generally continuous, though with a transitional “ragged edge.” The ragged edge enabled the broad expansion of home ownership that occurred in the decades following World War II by keeping house prices low.

Infill in More Prescriptive Markets (Smart Growth)

The infill process is quite dramatically different in more prescriptive markets. Infill might be mandated as a percentage of total development or by severely limiting the development allowed to occur closer to the urban fringe. Sellers of land on which development is permitted have disproportionate power to charge higher prices because the planning regime seriously limits the availability of alternative sites for buyers. This, of course, flows through to house prices. The share of land and site infrastructure can rise to two-thirds of the house and land cost. The urban area may have a “clearer” edge, but at a significant loss in housing affordability.

Infill Trends in the 2000s

The new infill estimates indicate that American urban areas continue to densify. Between 2000 and 2007, the 33 of the 37 urban areas of more than 1,000,000 population experienced densification in their 2000 urban footprints. The average population infill increase was 5.6 percent (See Table the following table).

Population Infill in 2000 Urban Footprints
2000-2007
	Population Change: 2000 Urban Footprint					Population Density of 2000 Urban Footprint in 2007
Urban Area	2000 Census	2007 Estimate	Change	%	Rank	Population Density of 2000 Urban Footprint in 2007	Rank
Riverside--San Bernardino, CA	1,506,816	1,800,117	293,301	19.5%	1	4,110	8
Atlanta, GA	3,499,840	4,118,485	618,645	17.7%	2	2,100	36
Austin, TX	901,920	1,051,962	150,042	16.6%	3	3,308	17
Las Vegas, NV	1,314,357	1,518,835	204,478	15.6%	4	5,311	5
Houston, TX	3,822,509	4,370,475	547,966	14.3%	5	3,377	16
Portland, OR--WA	1,583,138	1,779,705	196,567	12.4%	6	3,755	12
Phoenix, AZ	2,907,049	3,254,634	347,585	12.0%	7	4,078	9
Dallas--Fort Worth, TX	4,145,659	4,549,281	403,622	9.7%	8	3,236	18
Orlando, FL	1,157,431	1,267,976	110,545	9.6%	9	2,799	24
San Antonio, TX	1,327,554	1,440,794	113,240	8.5%	10	3,540	14
Tampa--St. Petersburg, FL	2,062,339	2,209,067	146,728	7.1%	11	2,754	25
Sacramento, CA	1,393,498	1,488,647	95,149	6.8%	12	4,034	10
Seattle, WA	2,712,205	2,896,844	184,639	6.8%	13	3,040	21
Miami, FL	4,919,036	5,243,679	324,643	6.6%	14	4,703	6
Washington, DC--VA--MD	3,933,920	4,174,187	240,267	6.1%	15	3,611	13
Denver, CO	1,984,887	2,087,803	102,916	5.2%	16	4,192	7
Indianapolis, IN	1,218,919	1,278,687	59,768	4.9%	17	2,316	34
Columbus, OH	1,133,193	1,175,132	41,939	3.7%	18	2,960	22
Kansas City, MO--KS	1,361,744	1,408,900	47,156	3.5%	19	2,413	31
Virginia Beach, VA	1,394,439	1,442,494	48,055	3.4%	20	2,742	26
San Jose, CA	1,538,312	1,588,544	50,232	3.3%	21	6,110	2
Los Angeles, CA	11,789,487	12,171,625	382,138	3.2%	22	7,302	1
Cincinnati, OH--KY--IN	1,503,262	1,546,730	43,468	2.9%	23	2,305	35
Baltimore, MD	2,076,354	2,133,371	57,017	2.7%	24	3,128	19
San Diego, CA	2,674,436	2,747,620	73,184	2.7%	25	3,514	15
New York, NY--NJ--CT	17,799,861	18,223,567	423,706	2.4%	26	5,440	4
Minneapolis--St. Paul, MN	2,388,593	2,438,359	49,766	2.1%	27	2,727	27
Chicago, IL--IN	8,307,904	8,467,804	159,900	1.9%	28	3,992	11
St. Louis, MO--IL	2,077,662	2,103,040	25,378	1.2%	29	2,540	30
Milwaukee, WI	1,308,913	1,324,365	15,452	1.2%	30	2,719	28
Boston, MA--NH--RI	4,032,484	4,077,659	45,175	1.1%	31	2,350	33
Providence, RI--MA	1,174,548	1,183,622	9,074	0.8%	32	2,353	32
Philadelphia, PA--NJ--DE--MD	5,149,079	5,178,918	29,839	0.6%	33	2,880	23
San Francisco, CA	3,228,605	3,214,137	(14,468)	-0.4%	34	6,099	3
Detroit, MI	3,903,377	3,831,575	(71,802)	-1.8%	35	3,041	20
Pittsburgh, PA	1,753,136	1,687,509	(65,627)	-3.7%	36	1,981	37
Cleveland, OH	1,786,647	1,705,917	(80,730)	-4.5%	37	2,641	29
Total	116,773,113	122,182,066	5,408,953	5.6%
Data from US Bureau of the Census

Riverside-San Bernardino, long castigated as a “sprawl” market, had the largest population infill, at 19.5 percent. Atlanta ranked number two, at 17.7 percent. This is a real surprise, since Atlanta was the least dense major urban area in the world in 2000, ranked second in 2000s infill. As a result, it is likely that Pittsburgh- often held up as a model of urban regeneration - is now the world’s least dense major urban area. On the other hand, if Atlanta’s infill rate continues, its 2000 urban footprint will be more dense than that of Boston by 2015.

Austin ranked third, adding 16.6 percent population to its 2000 urban footprint. Las Vegas ranked fourth, with a 15.6 percent increase in its 2000 urban footprint. The density of Las Vegas is increasing so rapidly that by the 2010 census its 2000 urban footprint will be more dense than the 2000 New York urban footprint, should the current rates continue.

Perhaps most surprising of all is that Houston ranked fifth, added 14.3 percent to its 2000 urban footprint. This may surprise those who have denounced Houston’s largely deregulated regulatory environment, both in the city and in unincorporated county areas in the suburbs. Yet overall Houston’s infill exceeded that of smart growth model Portland. The Rose City stood at sixth, adding 12.4 percent to its 2000 urban footprint.

Perhaps equally surprising, Portland remains less dense than average for a western urban area. Its 2000 urban footprint density trailing Los Angeles, San Jose, San Francisco, Las Vegas, Denver, Riverside-San Bernardino, Phoenix and Sacramento, while leading only San Diego and Seattle.

The top ten were rounded out by Phoenix (7th), Dallas-Fort Worth (8th), Orlando (9th) and San Antonio (10th). It is worth noting that like Houston, the unincorporated suburbs of Austin, Dallas-Fort Worth and San Antonio have largely deregulated land use regulation, yet these urban areas ranked high in infill.

Interestingly some of the greatest infill growth also took place in the fastest growing, traditionally “sprawling” cities. Atlanta also had the largest numeric increase in the population of its 2000 urban footprint, at more than 600,000. Houston was a close second, at nearly 550,000.

In contrast, population losses since 2000 in the urban footprints of Cleveland, Pittsburgh, Detroit and San Francisco, means these urban areas experienced no population infill. San Francisco’s loss enabled San Jose to move into second position nationally after Los Angeles in the population density of its 2000 urban footprint.

How the Core Cities Fared

The core cities (municipalities) attracted, on average, their population share. Approximately 30 percent of the infill growth occurred inside the core cities. Even this figure may be a bit high, due to the impacts of annexation

All of the infill in Philadelphia, Baltimore, Chicago, Providence and Minneapolis-St. Paul occurred outside the core cities. The city of Portland attracted barely 10 percent of its urban area infill, despite highly publicized (and subsidized) infill projects such as the Pearl District. Core cities attracted the largest share of infill growth in such diverse cities as San Antonio, San Jose, Columbus, Phoenix and New York.

Note: Additional information available at http://www.demographia.com/db-uzafoot2007.pdf

San Jose, California: Bustling Metropolis or Bedroom Community?

Adam Mayer — Mon, 01 Jun 2009 01:57:00 -0400

Dionne Warwick posed the question more than 40 years ago, yet most Americans still don’t know ‘The way to San Jose’. Possessing neither the international cachet of San Francisco nor the notoriety of Oakland, San Jose continues to fly under the national radar in comparison to its Bay Area compatriots. Even with its self-proclaimed status as the ‘Heart of Silicon Valley’, many would be hard pressed to locate San Jose on a map of California.

More well-known American cities may try to gain population by branding themselves as interesting places, but San Jose does not struggle to attract newcomers. Sprawling over 178 square miles, San Jose sits at the southern end of the San Francisco Bay. This year the city exceeded the 1 million population mark for the first time.

So what makes this city, the 10th-largest in the United States, appealing? Unlike its precious neighbor 50 miles to the north, San Francisco, people move to San Jose primarily for jobs – especially those related to the coveted technology sector. Whereas San Francisco balances its role as playground for the independently wealthy and welfare state for the lumpenproletariat, San Jose remains favored among families and those looking for a safe environment in which to raise children – not to mention, the weather is better.

San Jose does not stimulate a sense of urban exaltation. Aside from a commercial downtown core with a collection of mediocre high-rises (limited in height due to do downtown’s adjacency to the San Jose Airport), the city is unapologetically suburban in a character.

San Jose’s pattern of development can be traced back to its origins as an agricultural community supporting early Spanish settlers who chose to settle in the fertile Santa Clara Valley. It remained a modest-size agrarian community until the end of World War II when it underwent a period of rapid expansion-not unlike that of Los Angeles to the south. During the 1950s, with the emergence of semiconductor technology derived from silicon, San Jose and the greater Santa Clara Valley exploded into a center for the evolution of computer technology.

Today, San Jose can best be understood by its ambivalent relationship with neighboring Silicon Valley cities. Mid-size suburbs such as Cupertino, Sunnyvale, Mountain View and Palo Alto, all located west/northwest of San Jose as one travels up the peninsula towards San Francisco, are very distinct and separate entities. Home to some of Silicon Valley’s heaviest hitters (Cupertino has Apple, Sunnyvale has Yahoo!, Mountain View has Google, Palo Alto has Hewlett-Packard, Facebook and Stanford University), these cities largely define the technology-focused region. To be sure, San Jose’s has its share of big players, including eBay and Adobe as well as the ‘Innovation Triangle’, an industrial area of north San Jose, home to the headquarters of large companies like Cisco Systems and Cypress Semiconductor.

Yet, despite the presence of these firms, San Jose has become ever more a residential community, with among the worst jobs to housing balances in the region. Furthermore, a whopping 59% of the city’s developed land constitutes residential use – 78% of that being single-family detached housing. In this sense, despite being the largest city, San Jose essentially serves as a ‘bedroom community’ for the rest of Silicon Valley.

This has been a burden for the city, which, unlike its neighbors, lacks enough large information technology companies to help fill their tax coffers. In contrast job rich ‘green’ cities like Palo Alto have remained staunchly ‘anti-growth’ regarding residential development and consequently have very high housing prices.

This pattern poses fiscal problems for San Jose. City officials have long been aware of the need to stimulate economic development instead of continuing to lose out to its neighbors but the city seems determined to increase further its role as dormitory for its neighbors. Indeed, amazingly the city’s development agenda has in recent years shifted to a relentless focus on high-density, multi-family residential in the downtown core and along transit corridors. In 2007, 79% of all new housing built in San Jose was multi-family – a staggering deviation from its history of low density development.

Though well-intentioned, the slant towards densification has yielded a glut of empty condo units throughout the city. Those that have purchased units in new developments often find themselves with underwater mortgages. During a recent visit to one the flashy new downtown condo buildings, The 88, I entered a desolate sales office and was greeted by a skittish sales agent. When asked how sales were, my question was deferred without a direct answer in an act of not-so-quiet desperation.

Although it’s clear most people in San Jose prefer lower density living, the city government continues hedging tax dollars against a future in which newcomers will want to live in a high-density setting. Outside of downtown, low to mid-rise multi-family housing has been built along the city’s light-rail lines in what are conceived to be ‘transit villages’. The popularity for such a lifestyle is questionable given the high price point and unreasonable HOA dues of these condo units, particularly when single-family detached houses can be purchased at comparable prices.

Despite these issues, San Jose seems hell-bent on its path towards densification. The city has major plans to develop the area around its Diridon Train Station, just west of downtown, as California High-Speed Rail and BART are projected to make their way to San Jose. Furthermore, the city government is counting on the Oakland A’s baseball team making a move to San Jose.

From the Champs-Élysées to Tiananmen Square, grand urban visions are what have defined cities historically. As a product of the Silicon Valley ethos as well as an observer of planning trends, I would argue that this is no longer valid – especially for any city with the hopes of a prosperous future. Rather, in democratic societies, it will be the idiosyncrasies of individual actors and the prospect of upward mobility that will define a sense of place.

Obsessed with density and urban form, planners don’t seem to grasp the chicken and egg conundrum – the notion that lifestyle amenities follow on the heels of economic opportunity. San Jose needs to cast its future on nurturing its entrepreneurs instead of trying to become something it is not yet ready to become.

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

Can California Make A Comeback?

Joel Kotkin — Tue, 26 May 2009 00:17:16 -0400

These are times that thrill some easterners' souls. However bad things might be on Wall Street or Beacon Hill, there's nothing more pleasing to Atlantic America than the whiff of devastation on the other coast.

And to be sure, you can make a strong case that the California dream is all but dead. The state is effectively bankrupt, its political leadership discredited and the economy, with some exceptions, doing considerably worse than most anyplace outside Michigan. By next year, suggests forecaster Bill Watkins, unemployment could nudge up towards an almost Depression-like 15%.

Despite all this, I am not ready to write off the Golden State. For one thing, I've seen this movie before. The first time was in the mid 1970s. The end of the Vietnam War devastated the state's then powerful defense industry, leaving large swaths of unemployment and generating the first talk about the state's long-term decline.

An even scarier remake came out in the 1990s. Everything was going wrong, from the collapse of the Soviet Union and the unexpected deflating of Japan to a nearly Pharaonic set of plagues, ranging from earthquakes and fires to the awful Los Angeles riots of 1992.

Yet each time California came roaring back, having reformed itself and discovered new ways to create wealth. In the wake of the early '70s decline came the first full flowering of Silicon Valley as well as other tech regions, from the west San Fernando Valley to Orange and San Diego counties. Much of the spark for this explosion of growth came from those formerly employed in the defense and space sectors.

The '90s recovery was even more remarkable. Amazingly, the politicians actually were part of the solution. Aware the state's economy was crashing, the state's top pols--Assembly Speaker Willie Brown, Sen. John Vasconcellos, Gov. Pete Wilson--made a concerted effort to reform the state's regulatory regime and otherwise welcomed businesses.

The private sector responded. High-tech, Hollywood, international trade, fashion, agriculture and a growing immigrant entrepreneurial culture all generated jobs and restored the state's faded luster.

These sectors still exist and still excel even under difficult conditions. The problem this time is that the political class seems clueless how to meet the challenge.

Politics have not always been a curse to California. In the 1950s and 1960s, the Golden State's growth stemmed in large part from what historian Kevin Starr describes as "a sense of mission" on the part of leaders in both parties. Starr chronicles this period in his forthcoming book, Golden Dreams: California in an Age of Abundance, 1950-1963.

Under figures like Earl Warren, Goodwin Knight and Pat Brown, Starr notes, California "assembled the infrastructure for a great commonwealth." Their legacy--the great University system, the California Water Project, the freeways and state park system--still undergirds what's left of the state economy.

Perhaps the best thing about these investments was that they helped the middle class. Sure, nasty growers, missile makers and rapacious developers all made out like bandits--which is why many of them also backed Pat Brown. But the '50s and '60s also ushered in a remarkable period of widespread prosperity.

Millions of working- and middle-class people gained good-paying jobs, and could send their children to what was widely seen as the world's best public university system. People who grew up in New York tenements or dusty Midwest farm towns now could enjoy a suburban lifestyle complete with single-family homes, cars, swimming pools and drive-through hamburger stands.

"This was an epic success story for the middle class," historian Starr notes. It's one reason why, when people ask me about my politics, I proudly identify myself as a Pat Brown Democrat.

That's why California's current decline is so bothersome. A state that once was home to a huge aspirational middle class has become increasingly bifurcated between a sizable overclass, clustered largely near the coast, and a growing poverty population.

Over the past 40 years California's official poverty rate grew from 9% to nearly 13% in 2007, before the recession. Three of its counties--Monterey, San Francisco and Los Angeles--boast large populations of the über rich but, adjusted for cost of living, also suffer some of the highest percentages of impoverished households in the nation.

Most worrisome has been the decline of the middle--the increasingly diverse ranks of homeowners, small business people and professionals. The middle has been heading out of state for much of the past decade. Politically, they have proven no match for the power of the wealthy trustfunders of the left, the powerful public employee union as well as a small, but determined right wing.

The good news is that the middle class shows signs of stirring. The nearly two-to-one rejection of the governor's budget compromise reflected a groundswell of anger toward both the Terminator and his allies in the legislature.

Simply put, California voters sense we need something more than an artful quick fix built to please the various Sacramento interest groups. Required now is a more sweeping revolutionary change that takes power away from the state's most powerful lobby, the public employees, whose one desired reform would be ending the two-thirds rule for approval of new taxes and budgets.

Middle-class Californians are asking, with justification, why we should be increasing taxes--we're ranked sixth-highest in the nation--to pay for gold-plated state employee pensions as well as an ever-expanding social welfare program. Although state spending has grown at an adjusted 26% per capita over the past 10 years, it is hard to discern any improvement in roads, schools or much of anything else.

As an opening gambit, the right's solution--strict limits on state spending--makes perfect sense. However, long-lasting reform needs to be about more than preserving property and low taxes. To appeal to the state's increasingly minority population, as well as the younger generation, a reform movement also has to be about economic growth and jobs.

Not surprisingly, local leaders of the "tea party" movement gained some profile from last week's vote. Yet the right, which has exhibited strong nativist tendencies, is not likely to win over an increasingly diverse state.

In my mind, California's revival depends on three key things. First, the lobbyist-dominated Sacramento cabal needs to be shattered, perhaps turning the legislature into a part-time body, as proposed by one group. Perhaps the cleverest plan has come from Robert Hertzberg, a former Speaker of the Assembly who heads up the reformist California Forward group.

Hertzberg proposes a radical decentralization of power to the state's various regions, as well as cities and even boroughs in urban areas like Los Angeles. This would break the power of the Sacramento system by devolving tax and spending authority to local governments.

Secondly, California needs to develop a long-term economic growth strategy. Over the past decade, California's growth has become ever more bubblicious, dependent first on the dot-com bubble and then one in housing. The basic economy--manufacturing, business services, agriculture, energy--has been either ignored or overly regulated. Not surprisingly, we could see 20% unemployment, or worse, in places like Salinas and Fresno by next year.

Third, both political reform and an economic strategy aimed at restoring upward mobility depends on a revival of middle-class politics in this state. It would include building an alliance between the more reasoned tea partiers and saner elements of the progressive community.

The new alliance would not be red or blue, liberal or conservative, but would represent what historian Starr calls "the party of California." At last there could be a political home for Californians who are angry as hell but still not yet ready to give up on the most intriguing, attractive and potentially productive of all the states.

This article originally appeared at Forbes.

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