Sunday, July 27th, 2014
One of the more highly touted concepts in the urbanism world is the idea of “smart cities.” Wikipedia says of the smart city: “A city can be defined as ‘smart’ when investments in human and social capital and traditional (transport) and modern (ICT) communication infrastructure fuel sustainable economic development and a high quality of life, with a wise management of natural resources, through participatory action and engagement.” The basic idea is “better urban living through technology”.
That smart cities has captured a huge amount of media and mindshare is unsurprising, given our technophilic society and the sums of money being spent by major corporations to promote it. But the smart city has proven to be elusive in practice and slow to materialize. What is it a city is actually supposed to do to become smart? And why haven’t we seen more of it?
As I said, smart city tech vendors have been making a major marketing push and so they are a fixture sponsors of conferences. Last month at New Cities, I saw several tech firms present their ideas on the topic, and it helped me understand more about why smart cities has proven elusive.
It’s already been observed that the citizen perspective is all too often missing in the smart city discussion. But listening to the providers in the space, it became clearer why. Namely because all of them are B2B companies who sell to the corporate C-suite and its public sector equivalent. They do not have a consumer heritage and thus they don’t have a lot of experience or heritage in end user applications, hence by default don’t see the city from the citizen perspective.
Think about a company like Cisco. Cisco sells most of the gear that makes the internet run. The people who buy their stuff expect it to work, all the time. They have to have carrier grade five 9′s reliability. These systems have to have the so-called traits of reliability, availability, and serviceability. They also have to be efficient and predictable in their operations. The idea is sort of like the Maytag repairman mentality. It just has to work.
This produces an operating model that would be, from the standpoint of a person, stifling or even dehumanizing. So it shouldn’t be any surprise the public and politicians by and large haven’t jumped in with both feet.
I want to stress that there’s actually huge value potential in this B2B, carrier grade type model. Not just Cisco’s business customers but all of us absolutely expect our phone to work and our internet to be up. All. The. Time. Comedians like Louis CK have skits mocking our entitled, unrealistic expectations about our technology (“I hate Verzion!”) The minute our home internet goes down, what do we do? Pick up our phones and start Tweeting about how much we hate AT&T/Comcast/Cox/etc. One reason we are so annoyed by them is that outages are so rare. Thank folks like Cisco for that.
Similarly, a Bombardier rep was talking at New Cities about his firm’s desire to sell managed services, not just trains, into the public transit market. If they were able to make trains run as reliably as phones work, there would be huge public benefit there.
So I don’t want to downplay the importance of that kind of stuff. In everything from water to 911 emergency dispatch, we need a whole lot of stuff in our cities to just work and work reliably. This necessitates the type of approach to gear and its implementation and management that comes from the B2B, sell to the CIO or operations manager mentality. It’s mission critical to public safety and quality of life.
On the other hand, that’s not the only type of application there is. Unfortunately, the smart city dialog has been dominated by it, with the exception of the open data movement, which I don’t generally see labeled as falling under the smart cities domain.
One thing I might suggest that these major vendors explore in trying to better capture the public imagination and drive uptake is to create a connection to the citizen by getting into some consumer businesses. Now this would be problematic strategically I know. Investors would probably hate it. But at least something small scale might be interesting. There’s probably a lot that could be learned.
Google is a B2B and B2C company, but one predominantly focused on software. They’ve been diversifying into hardware however, both by creating their own products like Google Glasses, and buying smart thermostat maker Nest. The latter I find particularly intriguing as these are in a sense a type of smart city application, but focused on the person in the city instead of back end infrastructure. Google is trying to learn the hardware space to be sure they don’t end up outflanked in the “internet of things.” (They are also getting into the infrastructure business as well though things like Google Fiber).
Potentially something like buying a Nest type vendor could be something these major smart city companies could do to put their toes in the water of the consumer space. Obviously any deal has to make sense from an investor perspective, but the idea here is that this is almost an R&D operation to create a pipeline of knowledge about the citizens of the city and what they value and how they live and create their lives. That then informs the smart city vision beyond efficiency and RAS, notably the “participatory action and engagement,” which is something you definitely don’t want on your router configuration.
This raises an interesting competitive question: will the majority of the profits in say the application of smart city ideas to energy efficiency go to someone like the smart meter vendor or to someone like Google/Nest? If I were the vendors in the space conventionally labeled smart cities, I’d be working hard to make sure the answer to that question was “me”. In the meantime, building relationships to citizens/consumers can help to shape the smart city idea into something with more marketplace uptake and public resonance.
For further perspectives on smart cities, see my previous post with my thoughts after I moderated a technology panel at Barcelona’s Smart City World Expo in 2012. Also, Adam Greenfield took a very negative view of the idea in his eBook that gives a different perspective on the issue.
Thursday, July 24th, 2014
I’m always amazed at the low degree of self-awareness many of those who complain about gentrification have about their own role as gentrifiers. Back in 2013 John Joe Schlichtman and Jason Patch took this on with an paper that appeared in the International Journal of Urban and Regional Research called “Gentrifier? Who, Me? Interrogating the Gentrifier in the Mirror.” The full piece is available for download at Schlichtman’s site.
As they put it:
At the 2009 RC-21 conference in São Paulo, a young scholar began her presentation with the premise ‘we all know that gentrification is bad’. Urban scholars rail against the process of gentrification and its destruction of working-class communities. We read about the waves of gentrifiers and the kinds of cafes, boutiques and new amenities that they bring. We express worry to our peers that the city is going to become a bastion of elitism or a generic suburb stripped of diversity. Often, we treat gentrification as a contemporary form of urban class and racial warfare (Smith, 1996). As urbanists, however, we increasingly notice an elephant sitting in the academic corner: many (dare we say most — ‘mainstream’ and critical) urbanists are gentrifiers themselves. As Brown-Saracino (2010: 356) suggests, ‘many of us have firsthand experience with gentrification’. But what difference has this made on our research? Very little. We have created an artificial distance in our analysis because we do not examine our own relationship to the data. The last few years have witnessed lively debates among urbanists on the topic of gentrification. Some of these debates have seemed quite personal. The truth is that those of us situated in the phenomenon of gentrification carry suppositions on the issue that are deeply rooted in our personal biographies.
Their approach to this is to start with themselves, and provide an overview of their “journey lines” and how their own lives and academic careers interact with gentrification. Included is an overview of some of the forces that they see driving decisions that ultimately produce gentrification. It’s worth a read. Here’s a brief excerpt from Schlichtman’s story:
Over the last 15 years, I have lived in three clearly-gentrifying neighborhoods. In all three gentrifying neighborhoods, as with four other residences that I will not discuss, an economic pull has been a key impetus in my residential decision. In Fort Greene, Brooklyn, in 1998, I rented a $500/month room in a subdivided brownstone of single rooms with kitchenettes where residents on each floor shared a bathroom. In Bedford-Stuyvesant, Brooklyn, from 2006 to 2007, my wife (who grew up in the neighborhood) and I rented an $800/month apartment on the top floor of my in-laws’ brownstone. In 2009, my wife and I purchased a home in Golden Hill, San Diego. At this writing, we are in the process of a move to Chicago.
In Fort Greene and Bedford-Stuyvesant, I feel that I was an unwitting gentrifier. I use the term ‘unwitting gentrifier’ to express the fact that I chose to live in these two neighborhoods for economic and practical reasons alone, two considerations that play into every voluntary re-location choice made by any consumer. I moved to New York for graduate school in the late 1990s and lived at Long Island University in downtown Brooklyn (although I attended New York University) because it was the most inexpensive housing arrangement available.
Unlike a lot of academic papers, this one is written in plain English, so don’t be afraid to read the whole thing.
Wednesday, July 23rd, 2014
This week’s time lapse feature takes us to Vancouver, with two video look at that city. The first is called “Discover Vancouver.” If the embed doesn’t display for you, watch on Vimeo. h/t Likecool
The next one is called “Vancouver City.” If the embed doesn’t display for you, watch on YouTube. h/t Greg Randall
Tuesday, July 22nd, 2014
[ Kokomo, Indiana is a small industrial city about an hour north of Indianapolis. It is one of the rare ones whose industry remains largely intact, with two large auto-related plants. This makes them different from the type of community that really has deindustrialized. Yet they fret that those who earn decent incomes in their town too often decide to live in the Indianapolis suburbs. Hence a program to upgrade quality of life in the city. It should be noted that while they've managed to do this without incurring debt, Kokomo arguably benefited more than any city in America outside Detroit from the massive federal auto bailout. Their civic improvements have in a sense been financed by a unique external windfall unavailable to others. Nevertheless, lots of places have received windfalls and spent them poorly. Cities may not be able to control our circumstances, good and bad, but they at least have some control over how they respond to them. This piece from American Dirt takes a look at Kokomo's response. Keep in mind it ran in 2012 and there are likely some anachronisms by now - Aaron. ]
Across the country—but particularly in the heavily industrialized Northeast and Midwest—smaller cities have confronted the grim realities of the unflattering “Rust Belt” moniker, and all of its associated characteristics, with varying degrees of success. With an aging work force, difficulty in retaining college graduates, and a frequently decaying building stock, the challenges they face are formidable. Cites from between 30,000 and 80,000 inhabitants typically boomed due to the exponential growth of a single industry, and, in many cases, the bulwark of that industry left the municipality nearly a half century ago, for a location (possibly international) where the cost of doing business is much cheaper. Essentially, everything the smaller Rust Belt cities had to offer is completely tradable in a globalized market; the resources that provided the town’s life blood are either depleted or are simply to expensive to cultivate further.
Reinvention is the only condition likely to save many of these cities from persistent economic contraction, but, with an overabundance of retirees and older workers, these towns lack the collective civic will that could be expected in larger communities with more diversified economies. An absence of young people intensifies (and, to a certain extent, justifies) the low level of civic investment in one’s own community; after all, if a resident is six months from retirement, how likely is it that he or she would support public investments intended to improve quality of life for twenty or thirty years into the future? For that matter, how likely will a population of retirees remain engaged to encourage or challenge major private sector investments as well?
By no means am I intending to denigrate needs and ambitions of the senior population; I’m merely observing that a stagnant Rust Belt city with this demographic profile will demonstrate vastly different priorities from a city rife with young families. While every Rust Belt city large and small must avoid obsolescence that results from the spoils of globalization, the smaller cities—which have tended to be dominated in the past by a single thriving industry—are less likely to claim alternative sectors and labor pools if their primary manufacturing lifeblood fails. A dying city of 80,000 may not exert the same impact within a region (particularly in the densely populated Midwest and Northeast) that a city of 500,000 would, but it is far more of black eye for the state than a town of 2,000 that has lost its raison d’être. This conclusion is obvious. Many of these small cities must reordering of their economies comprehensively; while the state, the county, or private foundations may offer some outside help, the constituents of these cities themselves are typically the best equipped to understand how their city should evolve. Unfortunately, many of these communities aren’t yet even aware of the need for this reinvention, let alone which avenue to pursue in order to achieve it.
It is with no small amount of reassurance that I can assert that Kokomo, Indiana is not one of these latter cities.
No Rust Belt complacency on display here in the City of Firsts. Though as recently as 2008 it was on Forbes’ list of America’s Fastest Dying Towns, a recent visit shows much more evidence than I’ve seen of some comparably sized cities in the region that the civic culture is neither resting on its laurels nor wringing its hands about how much better things used to be. In fact, one of the Indianapolis Star’s leading editorialists, Erika Smith, recently visited the city, and, after receiving a tour from the Mayor, was pleasantly surprised by how proactive it has been in implementing precisely the type of quality-of-life initiatives largely perceived as necessary to help a historically blue-collar city stave off a brain drain or descend into irrelevancy.
I, too, recently received the Kokomo tour, followed by a meeting with Mayor Greg Goodnight, and I can also recognize some of the city’s most impressive achievements at shaking off the post-industrial malaise that saddled the city with double-digit unemployment rates as recently as a few years ago. Since then, the city has introduced a trolley system at no charge to users; prior to this initiative, the city had had no mass transit for decades. The Mayor pushed successfully to annex 11 square miles in the town’s periphery, therefore elevating the population by about 10,000 people. The Mayor’s team worked to convert all one-way streets in Kokomo’s downtown to two-ways, recognizing that accommodating high-speed automobile traffic in a pedestrian-oriented environment only detracts from the appeal. The team has restriped several miles of urban streets to incorporate bike lanes, and it has converted a segment of an abandoned rail line into a rail-with-trail path, branding it by linking it to the city’s industrial heritage. They have deflected graffiti from several bridges and buildings through an expansive and growing mural project. They have upgraded the riverfront park with an amphitheatre and recreational path. They have introduced several sculptural installations, the most prominent of which is the KokoMantis, a giant praying mantis made entirely of repurposed metal and funded privately. And my personal favorite: with the support of the City, the school superintendent has integrated a prestigious International Baccalaureate (IB) program to the public school system, including an international exchange program for young men from several foreign countries (a girls’ program should arrive in the next year or two) who live in a recently restored historic structure in Kokomo’s walkable downtown, attending demanding courses that bolster their chances of admittance in a coveted American university. Most impressively, the City of Kokomo has achieved all of this without incurring any public debt in the past year.
Obviously the individuals offering me this tour are going to make sure their Cinderella is fully dressed for the ball, and I recognize that not a small amount of the securing of certain infrastructural projects and transportation enhancement grants requires a political savvy that the current civic leadership has in abundance. And I don’t want to rehash Ms. Smith’s article, which more than effectively chronicles this approach at a macro level. In addition, Erika Smith recognizes, as do I, that very few of these initiatives (the IB foreign exchange program notwithstanding) are really particularly earth-shattering. But when most other similarly sized cities in the Midwest seem to be engaged in a race to the bottom, luring new industry through generous tax breaks (often initiated at the state level), Kokomo seems to recognize that a town lacking any amenities outside of low cost of living has to compete with dozens of other cities in Ohio and Michigan and Pennsylvania, and elsewhere in Indiana, that offer the exact same brand. Whether this investment yields a long-term return remains to be seen, but it certainly demonstrates the right gestures necessary to instill civic stewardship in a place whose decades of job loss have seriously scratched its mirror of self-examination.
What ultimately struck me about Kokomo—which Erika Smith only touched upon—was the level of design sophistication evident in some of these civic projects. I need only focus on a single location in the city, in which two particularly laudatory techniques are on display. At the intersection of Markland Avenue and Main Street, just south of downtown, the Industrial Heritage Trail begins its journey southward. Here’s a view as the trail terminates at its junction with those two streets, looking northwestward:
Here is a view in the other direction:
Continuing a bit further in this direction, one encounters this painted wall:
And, pivoting slightly to the left, another mural that is still in progress:
This photo series identifies two amenities that stand out for the astute decision-making that apparently took place during the implementation. The Industrial Heritage Trail clearly operates in a railway corridor, but it is not a rail-trail. Unlike the more common rail-trail conversion, this Kokomo trail did not incorporate the removal of the original rail infrastructure. The Rails to Trails Conservancy would label this approach a rail-with-trail, indicating that the trail shares the railway easement, typically separated by fencing. Rail-trails such as the Monon Trail in metro Indianapolis are still the more common practice. However, a growing number of communities are embracing rail-with-trails, not only because they obviate the need for costly removal of rails, ties, and ballast, but they reserve the rail infrastructure for the possibility that a railroad company may reactivate the line in the future. If the sponsors of Kokomo’s Industrial Heritage Trail had removed the infrastructure, the possibility of ever reintroducing rail along the corridor would be virtually nil. As it stands, the only conceivable disadvantage to rail-with-trails is that, in the event a rail company reintroduces train service, its close proximity to the path may prove hazardous to bicyclists or pedestrians. Otherwise, the decision to retain the railway not only helped to diversify options, it most likely saved a considerable amount of money.
The other smart decision was the site selection for those murals. The ones featured in the photos above are part of a growing mural campaign that the City of Kokomo introduced, and every one that I recall shows real foresight in the locational decisions. What makes them so good? The murals in the photos above front a public right-of-way, minimizing if not completely precluding the chance that later development will conceal them. I blogged a few years ago about an excellent mural in Indianapolis that showed wonderful care and craft in the entire implementation process…except where the conceivers chose to locate it. Not only did they paint on a cheap, cinder-block building that will likely tumble down if market pressures encourage new development in the neighborhood, but the mural also faces a vacant lot which is large enough to host a new structure that would block it completely, no doubt frustrating the community and pitting them against a developer.
Compare this to Kokomo’s murals. Here’s one a little further south on the Industrial Heritage Trail:
Again, it fronts the trail itself—not a chance that a developer will try to block it. And here’s another along a bridge underpass for the recently completed trail along the Wildcat Creek:
The original intention of the mural was to repel vandals at spot that previously suffered from it frequently; this approach has proven successful in locations across the country. But it also sits in a park along a new greenway, so it should remain in perpetuity. Granted, Indianapolis has plenty of murals along retaining walls and buildings that front the aforementioned Monon Trail. Those, too, should survive far into the future. But in recent years, the City of Indianapolis has encouraged countless murals on the side walls of commercial buildings—sites where a blank wall faces a parking lot, where a building once stood. While these bare walls often scream for some ornamentation to help distract from what used to be there (another adjoining building), in many instances the parking lots will likely fall under increasing development pressure in upcoming years. Will the locals thwart development in order to save the mural? This remains to be seen, and I don’t want to base too much of an analysis on speculation. But it’s hard to deny that these public art investments seem less astute than the once I witnessed in Kokomo.
One could argue that Kokomo is merely taking advantage of the fact that it is jumping into the game relatively late; it benefits by learning from the mistakes of others. But decisions that stand the test of time also contribute their fair share to foster civic goodwill. Taxpayers are rarely too forgiving of poorly conceived projects, and several successive blunders, no matter how small they may be, demonstrate poor accountability. Only time will determine the return on investment, but Kokomo certainly has a leg up on many of its competing small cities. My suspicion is, if these projects stimulate the discussion and enthusiasm for proactive leadership that they suggest (Mayor Goodnight was re-elected last year by a landslide), the citizens of Kokomo are only beginning to stoke the fire.
This post originally ran in American Dirt on November 16, 2012.
Monday, July 21st, 2014
I was briefly back on the homefront earlier this month to check out the now fully opened Big Four Bridge pedestrian path across the Ohio River in Louisville. While there I spent some time in NuLu, a retail and restaurant district centered on Market St. just east of downtown, and had dinner at a French bistro type place called La Coop. This place focuses on what I’d call the basics – it’s not trying to be a super high end kind of place. But I’m not going to lie, the undistinguished frites aside, the meal was spectacular front to back, and my date agreed.
Louisville is known for its many high quality restaurants. I doubt La Coop is tops on many people’s list, nor does it aspire to be. Yet preparing to drive back to Indy I was struck that La Coop is better than any restaurant in Indianapolis. My meal at La Coop was probably better than any one I’d had in Indy since L’Explorateur closed in 2009. And that’s a not uncommon occurrence when dining in Louisville. What’s more, La Coop was bustling by 8pm on a Tuesday night. While tables were certainly available, you can’t assume you can just walk in to a top restaurant there without a reservation, even on a weeknight.
Louisville clearly values fine dining in a way that Indianapolis doesn’t. Metro Indy is larger, better educated, richer, and much less provincial. Given that amenities generally fall along a size-wealth slope, by default you’d think Indy would do better on the restaurant front. But it doesn’t. Why is this?
Louisville clearly punches above its weight on restaurants. Part of this is due to the presence of a major culinary school. But that doesn’t explain the demand side of the equation. What does?
I see this as resulting at least in part from a cultural divide between the Midwest and the South, which seems to fall somewhere between these two cities. I argue the stronger aristocratic heritage of the South creates the conditions in which excellence is encouraged (or at least respected), versus the leveling democratic social state of the Midwest that anathematizes any distinctions between high and low and thus creates a climate in which excellence is disparaged (or distrusted at best).
Tocqueville is of course the best writer on the differences between aristocracy and democracy. Of aristocratic heritage himself, he recognized the overall superiority of the democratic state in uplifting the common man. The average condition in a democratic social state he would note, is higher than that of an aristocracy. He also saw clearly the many flaws of the aristocratic state. Yet he also realized that with the passing of aristocracy, things would be lost, especially in the realm of fine arts and refinement more broadly construed.
Tocqueville (among others) noted that the South was the most aristocratic region of the United States. That doesn’t mean he approved. In fact, he was not a fan of the US South, and wrote of its many manifest flaws, including the injustice of slavery and the many pernicious effects it had on the character of whites as well.
One of traits of aristocracy that seems to remain present in the South is the existence and embrace of an aristocratic class or caste. In many cases this is family based, such that, for example, you could never become full part of the elite of Charleston as an outsider no matter how much money, talent, or class you have. But carpetbaggers and the nouveau riche are able to assimilate to some degree.
As with a feudal landholding, this aristocratic class exists as part of an integrated system with the lower classes. Thus the lower classes not only recognize the rights of aristocratic class to homage and such, the elites can even be a source of pride to ordinary residents of the community.
In this system, the upper class can cultivate high end tastes without incurring the opprobrium of the community. They are literally a class apart and are expected to depart from the average resident in terms of tastes and manners.
We see this clearly in the case of the so-called “Millionaire’s Row” at the Kentucky Derby. Actually, many Louisville locals never even attend the Kentucky Derby, instead attending the Kentucky Oaks, which is held the day before and is known as the race for the locals. (The Oaks itself attracts over 100,000 attendees). Most of them will certainly never visit the Derby’s more elite precincts. Yet, seeing the presence of celebrities and local elites in their finery on TV doesn’t produce resentment, but rather pride. The conspicuous consumption and lavish traditions of elite Louisville are something the average resident sees as reflecting well on their community as a whole, and hence to some extent even on themselves.
In terms of how this affects restaurants, Louisville’s elite can patronize high quality, high status establishments without shame. There is nothing seen as wrong in the community with them pursuing aristocratic tastes. Again, the high quality of Louisville’s restaurants can be a source of pride even to those who don’t patronize them. There are, of course, class tensions in Louisville such as the East End-South End divide. But class conflict itself implies multiple classes of people.
The situation is totally different in Indianapolis. In Indiana, the idea of an aristocratic type class would be viewed with hostility. There’s a democratic social state norm in which anyone who is viewed as too uppity is seen as having a moral defect. There’s only supposed to be one class of people. This has its virtues, but has debilitating effects as well. Take for example the classic line “He might have book learning but he doesn’t have any common sense.” You literally hear this in Indiana. Admittedly, in my case it may have been true. But the moral system underpinning it clearly explains why education is held in such low regard in the Midwest. It’s not just that education as such is viewed as not worth it; the pursuit of education indicates a type of moral deficiency.
So take a look at the traditions of the Indianapolis 500. Obviously US auto racing has a different culture than horse racing. But it still aligns with the social state. The 500 is a classic everyman’s type event, with a blue collar ethos, in which actual attendance by locals plays a major role. There are some celebrities of course, but celebrity/elite culture plays a very limited role there in contrast to the Kentucky Derby and certainly than international auto racing such Formula 1. (The biggest personalities at the 500 are those with a particularly local traditional appeal – like Jim Nabors and Florence Henderson – versus contemporary celebrity star power).
This bleeds through into nearly every aspect of the civic culture in the state. I’ve long noted that there’s no culture of connoisseurship in Indianapolis. This is true for pretty much everything. Restaurants are but one example. While much better on average than they used to be, and certainly not bad by any means, Indy’s restaurants don’t measure up to Louisville’s with the notable exception of breakfast places. As the case with the aforementioned L’Exporateur shows, when Indy chefs do decide to put out a world class product, it isn’t patronized because it isn’t valued. It’s not about culinary talent, it’s about the customer base or lack thereof. The chef behind L’Ex opened a pizza place next. It should be no surprise that Indianapolis Monthly once had a cover story dubbing the city “Chain City, USA.”
My understanding is that there is a group of hardcore food and wine folks in Indy, but they do most of their consumption at private dinners and out of their private cellars. Public displays of refinement or luxurious consumption in Indianapolis are simply not acceptable.
This is but one example of how the pursuit of excellence in all varieties is disparaged and subject to active suppression in the state. This is hardly limited to Indiana and is a near universal Midwestern trait from what I’ve seen. Chicago offers the major exception, and I’ll exclude Minnesota as well for now since I don’t fully grok the culture there.
It’s been said pejoratively that “Indiana is the ‘middle finger of the South’ sticking into the Midwest.” And while it’s true that parts of Southern Indiana such as my hometown, being in Louisville’s orbit, have a heavy Southern influence, the state is not Southern in my view. It’s very different culturally and here we have one example. I easily see the same dynamic that exists in Indiana to various degrees in Illinois, Ohio, Wisconsin, and Michigan.
That this is a cultural value is most clearly seen in the exceptions that prove the rule, like Columbus, Indiana. Columbus is by far the most successful small industrial city in the state, and home to a world-renowned collection of modern architecture among other distinctives. In a major essay on that city, I noted that “in Columbus, excellence is not a byword.” This was perhaps imposed externally by local business magnate J. Irwin Miller, but appears to have been stamped to some degree on the character of the community. As local business owner Tony Moravec put it, “We do things first class here.” Whether the value will be retained or dissipate now that Miller is dead remains to be seen, but it’s still there for now.
But in a state replete with struggling communities, has anyplace ever looked to imitate Columbus? Has it been held up as a model? No. Why not? It’s because Indiana as a whole rejects the values that made Columbus successful. J. Irwin Miller famously said that “a mediocrity is expensive.” True, but that misses the point re:Indiana. Mediocrity isn’t an economic value in the state. It’s a moral value. People aren’t choosing mediocrity in the mistaken belief that it’s cheap. They think aspiring to better is a character defect. That sacralization of average is why many of its communities are willing to martyr themselves in its honor. And if a place tries to aspire to better, don’t worry. The General Assembly will soon be introducing legislation to make sure that doesn’t spread.
This produces an enormous cultural headwind that is an impediment to even the cultural elite in their attempts to create high quality things, from good architecture to good restaurants. The attempts are compromised both via the internalization of this value, and external forces expressing it. As Paul Graham put it:
How much does it matter what message a city sends? Empirically, the answer seems to be: a lot. You might think that if you had enough strength of mind to do great things, you’d be able to transcend your environment. Where you live should make at most a couple percent difference. But if you look at the historical evidence, it seems to matter more than that.
The restaurants of Indianapolis are well beyond mediocre, but they have clearly been affected by this characteristic of the social state in which they are operating.
One exception to this rule about the pursuit of excellence is in sports, and it’s a telling one. Hoosiers and Midwesterners want to see their teams win, but they want to see them win the right way and with the right kind of people that reflect the character of the state’s residents. In the South they just want wins and they don’t care how they get them.
Do you think anybody in Kentucky cares about the Calipari Way as long as UK is racking up wins and championships? Is it any surprise that it’s North Carolina where athletes get A’s in fake classes? Nobody cares in the South as long the wins come and behavior doesn’t get so bad it brings national publicity.
By contrast, Big Ten schools by and large expect their players to get an education and graduate, to demonstrate good character, and there’s a lifelong commitment and bond between coaches, fans, and players. When IU tried to import a UK style into its program with the Kelvin Sampson hire, the fanbase rejected it almost immediately. (By the way, I’ll never consider Penn State a Big Ten school, and Pennsylvania is not the Midwest). It’s similar in the way that the brawl era Pacers saw their fan support vaporize.
In Indiana particularly, from Milan High School to Steve Alford’s Indiana Hoosiers, the self-effacing, fundamentally sound, clean cut, small town type of player and team had big success. (Oscar Robertson was a player in the same mold. Though he never got his due at the time thanks to racism, he shows that even black Indiana players exhibited the same character traits). This perhaps convinced Hoosiers that their preferred style of doing things would bring success as well.
Unfortunately that hasn’t played out much recently, either in sports or economically. This produces cognitive dissonance and a sense of bitterness about a world that seems to have gone wrong. As I wrote re:Columbus and about how that city’s embrace of excellence paid economic rewards in a world where cheap places to do business are a dime a dozen:
It isn’t just something that affects architecture….This is a place with high standards for itself. This pays huge dividends in the economic development sphere. In a competitive world, only firms that deliver excellence can survive the brutal global competition. Which workers are more likely to produce excellent products, ones that demand excellence in their own communities, or ones who disparage it? How can any investor believe that residents who tolerate a run down, mediocre community for their own family to live in will suddenly start taking pride in the products coming off their employers’ production lines? It makes no sense at all.
I’m not sure the Midwest understands this lesson, or would take heed of it if it did. Rather there is, I detect, a martyrdom complex. People in the Midwest believe they are entitled to success the way they used to enjoy it because they live the right way. But if they don’t get it, at least their communities can die with their values intact. If this is in fact the case, it’s impossible to gainsay the decision. It’s even admirable in a sense. I myself would never adopt the values of UK basketball no matter how many championships it would bring. But then again I’m a Hoosier so of course I feel that way.
In any case, as Richard Longworth put it in his book about the failures of the Midwest in the age of globalization, “The first task is to tell the truth.” Simply stating the obvious truth that Louisville has better restaurants than Indy may generate blowback. But the larger and more painful truth is that Indiana and the Midwest have embraced mediocrity as a value in a way that hobbles the pursuit of excellence there, and has terrible economic and other consequences that go far beyond restaurants. Unless and until that truth is faced and things change, which may require something like an influx of outsiders not wedded to the status quo, the enormous potential of this region and its people will continue to be squandered.
Thursday, July 17th, 2014
Der Spiegel had an interesting article this week called “Angry Germans: Big Projects Face Growing Resistance.” The article (linked version is English) talks about how it is increasingly difficult to get infrastructure projects built in Germany.
Wherever ambitious construction ventures loom on the horizon in Germany — from the cities to the countryside, from the coastlines in the north to the Black Forest in the south — opponents are taking to the streets…. As the public’s enthusiasm for constant innovation has lessened, so has the appeal of these sorts of projects, and, as a result, they now inevitably come accompanied by picketers. Germany’s graying society, it seems, is so cozy and settled that it resists anything threatening to upset the status quo. In the process, it has lost sight of the bigger picture.
There are a lot of key points in this article that immediately raised parallels to the United States, where infrastructure projects are also under increasing siege. In fact, some of this reminded me of elements of the Tea Party movement. The protestors are uninterested in compromise. They are devoted, full time activists who are unrelentingly opposed to the projects in question:
[Hartmut] Binner’s form of protest has a radical undercurrent: Well-informed, confrontational and devoid of respect for authority, he is typical of the new grassroots activism spreading across Germany.
Binner’s entire life revolves around the campaign. He monitors the routes of departing and landing planes. He plays his self-designed noise simulator on market squares. He kicks off his court appearances by singing the Bavarian national anthem. “If you want to be heard as a member of the public, you need to push the envelope,” he shrugs.
These days, he sees grassroots protests, activism and political responsibility from a different perspective. “The typical protesters are gray-haired, know-it-alls and very networked,” [Freiburg Mayor Dieter Salomon] says. “But they’re not remotely interested in consensus-building, political processes and pluralism.”
Grassroots groups have become so livid, intransigent and single-minded that even the most respected politician in the country, Angela Merkel, is feeling their sting. In early May, hundreds of furious residents had gathered in central Ingolstadt to protest against the construction of a power line from Bad Lauchstädt in Sachsen-Anhalt to Meitingen in Bavaria.
This certainly reminds me of the no-compromises view of the Tea Party. Also, a number of early American Tea Party activists were unemployed, and thus able to basically be full time activists. Even the singing of national anthem has echoes of the Tea Party and their tricorn hats. I don’t want to claim there’s a philosophical or other link between the Tea Partiers and Germany, however.
Not everything lines up with the Tea Party, however. In Germany it seems to be disproportionately retirees who are the most engaged and militant:
Germany’s graying society, it seems, is so cozy and settled that it resists anything threatening to upset the status quo. In the process, it has lost sight of the bigger picture.
Many of the protestors are pensioners with no vested interest in Germany’s future. “It’s striking that the leader of the protests against the Munich runway is a 75-year-old and not someone in the middle of his working life,” [Munich Airport CEO Michael Kerkloh] points out.
Salomon’s nemesis is Gerlinde Schrempp, a determined and argumentative 67-year-old retired teacher with attitude to spare. She’s the leader of the Freiburg Lebenswert movement, which translates roughly to “make Freiburg worth living in. The movement just got elected on to the district council and is first and foremost opposed to any new building in the city.
There’s a stereotype out there of the average Republican voter as an old white guy. But the average Tea Party activist I’ve seen tends to be working age. I look at this one a bit differently. We need to see these types of controversies against the substrate of an aging population. Aging populations are not noted for dynamism, and older people’s self-interest is better served by starving investment for the future in order to save money and avoid uncomfortable change in the present. As a country whose population is projected to decline into the future thanks to this demographic inversion, we are seeing in Germany what’s likely a preview of coming attractions elsewhere around the world.
Indeed, I’m reminded of what one analyst friend of mine in Indiana has said about the property tax caps there. He sees the push to cap property taxes as driven by an aging population in a stagnant state. Old people generally aren’t earning a lot of taxable income nor are they buying huge amounts of stuff, so they are disproportionately less affected by income and sales tax hikes, whereas they often own homes and are hit hard by property taxes. Thus property tax caps serve as another income transfer mechanism from young to old, holding revenue constant. They are in part an artifact of an aging society. Disinvestment in infrastructure can be seen in the same light.
But there’s another part of this that shines a light on yet another group of opponents, namely the intelligentsia.
The term “Wutbürger” (“enraged citizen”) was coined during the Stuttgart 21 fiasco to describe people like Hartmut Binner, and much has been written about them since. They often aren’t the “common man.” According to the Göttingen Institute for Democracy Studies, they tend to be highly educated people with steady incomes and white collar jobs. And while protests movements of the past were often steered by sociologists, today their leaders are more likely to stem from the technical professions, the researchers found.
When we look at opposition to infrastructure in the United States, at least certain types of infrastructure, we see a similar profile of people (though not necessarily technical) behind it. It’s the leftist intelligentsia that oppose the Keystone Pipeline, suburban highway projects, fracking, and many other types of things, often with a militant unwillingness to compromise similar to the Tea Party.
As with Germany, this opposition is enabled by environmental reviews and public participation laws that, while they serve important public purposes, make it easy to delay projects for years through repeated objections and scorched earth litigation. Traditionally environmental lawsuits were associated with the left, but conservatives have started saying, why not us too? Hence litigation against San Francisco’s regional plan. The Hollywood densification plan was recently overturned by lawsuits, and lawsuits have plagued California’s proposed high speed rail line as well.
Whatever the project, it’s sure that somebody on the left and/or the right hates it, and thus will do everything in their power to kill it, which probably means years of delays and untold millions in increased costs.
Also as with the United States, German governments have shot themselves in the foot with a series of financial debacles:
Political and bureaucratic bodies are partly to blame for their own diminished authority. Every major venture seems to entail spiraling costs. Berlin’s new airport was supposed to cost €1.7 billion, a price tag that has shot up to well over €5 billion. Meanwhile, the €187 million earmarked for the Elbphilharmonie concert hall under construction in Hamburg is expected to exceed €865 million by the time the project is completed. Albig is well aware how bad this looks. “People see us as financially incompetent,” he says.
Until politicians can convince the public they have a handle on this, the taxpayer will remain rightly skeptical of many major megaprojects. This is doubly true since it’s very clear, as has been documented by folks like Oxford professor Bent Flyvbjerg, that in many of these cases the politicians were simply lying all along about the real costs.
I’m not sure what all the takeaways are, but there are clearly many forces operating on a global basis to inhibit the development of infrastructure in the West.
Wednesday, July 16th, 2014
NYU Economist Paul Romer gave a great talk at last month’s New Cities conference in Dallas. Called “Urbanization as Opportunity,” it’s now online and I’ll embed below. The first 2-3 minutes are warm up then it really gets going. Great stuff around crime, public space, etc. If the embed doesn’t display for you, watch on You Tube.
There are large number of additional New Cities videos online should you wish to browse them.
Wednesday, July 16th, 2014
This week back to the timelapse with a gorgeous high definition look at Las Vegas by Keith Kiska. This is one for full screen high def to be sure. If the embed doesn’t display for you, watch on You Tube. h/t Likecool
As a bonus, here’s another timelapse of Los Angeles called “Above LA.” If this embed doesn’t display for you, watch at Vimeo. h/t Likecool
Sunday, July 13th, 2014
Justin Katz, writing at a web site called the Ocean State Current that appears to be published by a libertarian think tank in the state, is unhappy with my proposals. In fact, he’s giving a point by point rebuttal to my six part toolkit, which you can read here, here, here, here, here and here. I think it’s fair to say he thinks Rhode Island needs much more radical change than I prescribe, and can’t rely on a gradual approach among many other complaints.
Right or wrong, here is my thesis. A free market agenda along the lines of a Tennessee or Texas is dead on a arrival in Rhode Island. It’s simply not possible to pass. Among other reasons, this is because the people of Rhode Island by and large have some degree of progressive orientation. That’s very different from say Indiana, where every other person you meet on the street has Tea Party sympathies, and it takes a lot of police possibilities off the table. I also believe that most progressives in Rhode Island genuinely want to see a better economy in the state. Hence my pitch is aimed at providing analysis and policy recommendations that might have a chance at appealing to the Rhode Island electorate, and thus have some hope of getting implemented or affecting how people think about the issues. If Katz & Co. prefer a different approach, I’m all in favor of the marketplace of ideas.
By the way, even if you go on Atkins or some other rapid change program of weight loss and are successful, the weight seldom stays off as we know. Slow and steady changes in lifestyle are the best way for sustainable change.
Today I want to give a starter set of policy ideas for changing the trajectory in Rhode Island. I won’t claim these are a panacea or represent a comprehensive to do list, but you have to start somewhere. This is an expanded list from my City Journal piece.
Taxes and Fees
1. Seek a “grand bargain” on revenue neutral tax reform. Here the idea is not necessarily to reduce tax revenue overall, but to adjust the levers to make the system less onerous on entrepreneurship and small business. One conceptual idea – and I stress this is a hypothetical – might be to raise the income tax on top earners making over say $500K/yr (a shibboleth of the left) to eliminate the 7% sales tax businesses pay on utility bills. I’ll be returning to the matter of utilities again as it’s an important issue.
2. Repeal the $500 minimum corporation tax. Rhode Island shouldn’t add insult to injury by making a business that loses money pay a tax on top of it just for the privilege of existing. I know at least one person who killed off a side business just for this reason. To be sure it was a hobby, but hobbies sometimes germinate into actual full time businesses.
3. Waive permit and other fees for the first year for new businesses. So many startup businesses don’t even last a year. Why not wait until we see until there’s at least baseline viability before socking them with a bunch of fees? You could easily implement this by charging in arrears. Obviously you’d have to be careful to avoid burdening the system with people getting “just in case” permits such as creating tons of shell companies, but I think this can be managed.
4. Reform unemployment insurance. Benefits are too high and ideally Rhode Island should be closer to the national median. But this would be hard to achieve and a start at reform can be achieved without it. The focus here would be eliminating market-distorting cross-subsidies that favor frequent users of the system, and revisiting business successor rules that punish people for buying and saving failing or bankrupt businesses.
Regulations and Mandates
5. Reform temporary disability insurance (TDI). This is one that wasn’t on my radar until I heard Republican gubernatorial candidate Ken Block call for reform. But when I looked into it this appears to be an even bigger problem than he suggests. Rhode Island is one of only five states with mandatory TDI. The others are California, New York, New Jersey, and Hawaii, all states with fortress industries and such that make them most definitely not Rhode Island’s peer group. It has the second highest benefit levels. It has a state run monopoly system. It allows employees to double dip. And I believe Rhode Island’s program is one of only two along with California that has a temporary caregiver leave component. I’d completely repeal mandatory TDI. But again, reform of some sort should be possible without triggering political nuclear war. Eliminate the state run system and tell businesses to buy coverage from the marketplace. Eliminate double-dipping. Make temporary caregiver leave a one time only or one per decade type benefit instead of annual recurring one. Put a lifetime cap on weeks of benefits and beyond that claimants should utilize long term disability coverage. Again, whatever we think about the idea of this system, Rhode Island is a huge outlier here and has little leverage to lead the way on this.
6. Perform a post-Obamamcare health insurance mandate review. Rhode Island has more items of mandated insurance coverage than any other state. Coming from Illinois – a blue state mind you – I was stunned at how much individual health insurance costs in Rhode Island. Obamacare seems to have largely standardized coverage and I would suggest defaulting to its coverage guidelines. If Rhode Island has items that go beyond this, it should eliminate any where at least ten other states (including at least MA and CT) don’t already mandate it.
7. Pass a clean semi-monthly payroll act. Until last year, Rhode Island was the only state in America that required companies to pay their employees weekly. That was changed to enable bi-weekly/semi-monthly payroll, but only for businesses whose average pay is twice the minimum wage and can post a surety bond, get the written permission of any unions affected, and recertify with the state every four years. You know what I call that? Progress. That’s good news. But in keeping with the continuous improvement theme, the legislature should follow-up with a clean semi-monthly payroll bill.
8. Create a “most favored nation” regulatory policy with regards to Massachusetts and Connecticut. It’s hard to argue that neighboring states have different core values. So their regulatory systems should be considered prima facie adequate for Rhode Island. Unlike California, a big and rich state, businesses are not going to jump through hoops for the privilege of serving small and economically challenged Rhode Island. So to make it easy, I suggest harmonizing regulations with Massachusetts (and if possible Connecticut) to create a mini type of EU style common market effect. This could be implemented via a most favored nation policy saying that “If it’s legal in MA or CT, it’s legal in Rhode Island. If you’re licensed to do it in MA or CT, you’re licensed to do it in Rhode Island.” Rhode Island is really subscale to be running its own regulatory system anyway, so outsource it.
This doesn’t even scratch the surface of what’s needed on the regulatory front. Many of you probably saw the recent Thumbtack survey that ranked Rhode Island the worst state in the country for its small business climate, as rated by small businesses themselves. Metro Providence was ranked the second worst metro. Fixing this is actually much more critical than taxes in my view, but also harder as many of the worst regulations around land use and such are at the local level. So this is where local reformers should focus.
When I spoke to the Rhode Island House of Representative earlier this year, the other speaker was a representative from CVS sharing his perspectives on what that company looks for in places to invest. One item he mentioned as important is utility costs. Hence my thought about utility taxes above. But beyond that, Rhode Island’s electric bills are among the highest in the country and gas prices are high too. There needs to be a focus on bringing those down. Lowering electric rates doesn’t deprive the treasury of much and actually saves money on government electricity purchases. Unfortunately, as someone pointed out to me, in Rhode Island it works just the opposite; because it doesn’t appear to be a tax, the legislature feels free to pass laws that send rates through the roof.
9. Kill Deepwater Wind by any means necessary. Deepwater Wind is a crony capitalism fiasco of epic proportions involving an offshore wind farm. Billed by some as the “next 38 Studios”, it’s actually even worse as the price tag will be hundreds of millions of dollars. IIRC, the increased cost to governments alone from purchasing inflated electricity will be $1.5 million a year. The environmentalists I know don’t even like the project. The only plus side to anybody other than cronies appears to be reduced electric rates on Block Island. Well, I may have cheaper electricity, but I don’t get to live on an amazing island. Nevertheless, if it’s important to bring those rates down, then direct subsidies would be cheaper.
10. Partner with other New England states on increasing gas pipeline capacity into New England. A while back City Lab ran a story talking about a new gas pipeline under the Hudson River into New York City. As you probably know, gas is dirt cheap right now because of plentiful supplies from fracking in places like Pennsylvania. But that doesn’t help if the gas can’t get there. The Northeast has been under-pipelined. But as you can see, New York City is seeing the infrastructure investment to bring this online. New England isn’t. Here’s the money chart showing the price spikes this produces:
I’m not sure why no new pipelines have come into New England, but I’d certainly make it my business to find out. By the way, some residents do heat their homes with natural gas. I did when I lived in the state. So beyond industrial customers, think about what that chart means to struggling Rhode Islanders’ winter heating bills.
Sadly, the state seems to be moving in the opposite direction as the legislature passed more laws this year that will at first glance raise rates still higher.
11. Cut to Invest With a Major Infrastructure Bond. Bruce Katz at the Brookings Institution likes to talk about a principle called “cut to invest.” That means making cuts in current spending in order to invest in critical items like infrastructure. Rhode Island’s infrastructure is in rough shape so that approach is needed here. Interest rates are rock bottom right now so there’s no better time to borrow. As the Fed dials back on quantitative easing, the window may start closing on this. Rhode Island needs to identify cuts in ongoing spending sufficient to finance payment on a major infrastructure bond targeting roads, bridges, and schools. I’m not talking about adding any new road capacity here, just doing things like rehabbing or replacing the existing crumbling bridges and obsolete school buildings.
As the Sakonnet River Bridge debacle shows, this money is going to be spent one way or another. Better to do it now on the state’s terms instead of later when it will cost a whole lot more to, for example, fully replace decayed structures that could have been saved if they’d only been properly maintained.
Under no circumstances should Rhode Island issue a bond without the full necessary funding stream for repayment allocated up front.
12. Investigate shared startup/co-working facilities. Instead of paying companies to set up shop in Rhode Island, invest the sales effort into luring operators like TechShop to create locations in Rhode Island. These types of co-working facilities can reduce the cost of capital and risk of entrepreneurship. I’m not a big fan of government building these directly, but they are a key part of the startup infrastructure of a community these days.
13. Build more Quonsets. NYU economist Paul Romer has advocated for a “charter city” concept in developing countries along the lines of a charter school as a way to bypass dysfunction. Rhode Island already basically applied that concept at the former Quonset naval base. Quonset is everything Rhode Island is not. They’ve invested in first class infrastructure. They have a single zoning classification, business friendly performance-based development standards, pre-permitted sites, a single point of contact for approvals, and a 90 days to groundbreaking pledge. Port users even have a tax advantage in that they are exempt from the Army Corps of Engineers import duty because the state instead of the feds paid for the port improvements. The result: 9,000 jobs, including 3,500 created in just the last few years.
Why not replace this model elsewhere by partnering with towns to create more Quonsets? When I pitched this idea at a RIPEC event, an economist with Beacon Hill Institute in Boston wasn’t a big fan. He critiqued it on two basic points. One is that the businesses who located there probably would have been elsewhere in Rhode Island. The other was that the $10,000 a job in infrastructure investment was too high.
I think the first criticism is fair and must be true to some extent. Additionally, some of the jobs are directly port related and there isn’t another deepwater port handy that I’m aware of. However, there’s no hard data on this and my assumption would be that at least some of the non-port jobs must represent a net gain to the state. In any case, Quonset is the best thing going in the state right now, so why not give the model another chance? Also, keep in mind that a state like Tennessee paid $250,000+ per job for a VW plant. $10K/job – not in subsidies, but infrastructure – is small potatoes as these things go, particularly in state where the infrastructure is decrepit. I’m pretty sure if I told the legislature they could create middle class jobs at $10K a pop in infrastructure, they’d sign checks all day long.
At Quonset, the state is the developer. For new sites, I’d look to partner with a private developer, with a state authority as infrastructure partner and approval provider a la Quonset.
I won’t suggest this list is anywhere near where the state needs to be. It doesn’t address key issues as the local level like regulations that hobble building, or the corruption/cronyism issues. But hopefully this provides at least some tangible first steps that could get the state pointing in the direction it needs to go.
As with my guiding principles list, some of these items were originally suggested by other people.
Thursday, July 10th, 2014
Sunday I described how Rhode Island’s fundamental economic problem is that it has been acting like it’s selling a premium product from a structurally advantaged position when in reality it’s selling a commodity product into a highly competitive global marketplace. Unsurprisingly, it hasn’t gotten a lot of takers.
Before giving my starter set of action items, I want to provide a brief decision toolkit in the form of a set of guiding principles or questions to help people evaluate any proposed solutions. I won’t pretend this is a totally comprehensive list, but clearly these ought to be front and center.
Here are six questions that should be asked in evaluating policy:
1. What does this proposed policy mean to us, considering our competitive context?. This is where Rhode Island has to swallow hard and recognize that it is not a premium location for business and has start behaving like and making decisions like it’s in a competitive market. That’s gonna be tough, but it’s imperative.
Another way to think of this is my question about how to best embody the values of Rhode Islanders into a contextually appropriate policy set. It may be that in some cases, economic development takes a back seat. For example, Rhode Island is a “must shelter” state for homeless families. That is, families have to be given a place to stay, even a hotel room, if they are homeless. I’m sure this costs a lot of money, but I don’t care. I’d personally be willing to sacrifice some economic growth for this purpose (assuming someone made the case that eliminating this mandate would affect that). On the other hand, is it really necessary for people on temporary disability to be able to double-dip from both their employer and the state administered benefits fund? I don’t think so.
Rhode Island has to ask what the results of a policy will be in the Ocean State, not just how well it worked out in New York, San Francisco, or Seattle. Again, like it or not, the state border is never more than a few miles away, and in today’s globalized economy, localities are at the mercy of the market. As progressive commentator Ramsin Canon put it regarding Chicago:
What we’re feeling viscerally, but seeing from too close to appreciate, is the logical end of decades of neoliberalization of government, which has transformed a managerial state into an entrepreneurial one. Our Mayors are now “entrepreneurs-in-chief,” and the result is that governance has been transformed from a participatory process of pooling resources and regulating behavior for the public good into one of government by private negotiation and enticement of capital through competition between states, cities, and even neighborhoods.
Why not raise property or luxury taxes, or institute a city income tax, to make up the deficit? Why not divert money from the TIF districts? See above; Chicago is no longer a political community, it is an economic entity that is in competition with other cities in the region, in the state, across the world. In that mental framework, tax is cost, or price. You raise prices, you drive away your clients.
Read the full piece for his prescription for change – again from a staunch progressive. Regardless of what we think of current conditions, anyone left or right has to start with an acknowledgement of reality.
In my view this means that in most cases Rhode Island needs to be a bandwagon jumper, not a bleeding edge innovator, on things like green energy and social service levels. Let California experiment with cap and trade or other things, succeed or fail as the case may be, and once there’s a proven model that’s economically efficient, jump on board. It’s like how flat panel TVs were originally the province of the rich, but eventually got perfected and prices collapsed down to where they became the norm. Similarly, when it comes to mandated benefits, if there’s one the state wants, rather than being one of the top five early adopters, wait till a tipping point gets hit (say 25 states) and join in then. Or think of it as a “pick your battles carefully” approach. But always be aware of the competitive context.
2. Is Rhode Island continuously improving at a rate faster than its competitors on a long term, sustainable basis? A second factor to consider is that it took a long time to get into this situation, and it will take a long time to get out. It’s just like losing weight. There is no silver bullet. There is no quick fix. There is no magic pill. We need to make lifestyle changes over the long term to get us where we want and need to be. As local consultant Kevin Hively once put it, “Rhode Island needs to change its diet, not take a shot of 5hr Energy.” And that’s dead on.
The guiding principle here should be: “Continuously improve at a rate faster than your competitors are improving over the long term.” And that’s the second way to evaluate policy proposals. Are they part of a sustainable program of change? Or are they just a flash the pan? Are they a gimmick? And are they improvements that are outpacing the improvements we know every other state is striving to make? Just because it’s better than the state’s past doesn’t mean it isn’t still falling further behind. Rhode Island needs to keep a finger on the pulse of the competition and what it’s doing. But it’s a journey and it’s lifestyle change.
And it needs to be maintained for the long term. Short term upticks can lull us into complacency. For example, as the national jobs picture improves, Rhode Island’s unemployment rate has fallen. But we’ve seen this movie before. Back in 1984 when the Greenhouse Compact failed, its opponent did a jig on its grave when Rhode Island’s economy had a moment in the sun. But it quickly faded and look where the state came to decades later. Rhode Island has to see evidence of improving strength across business cycles, not just following along in the footsteps of the national economy.
3. Is Rhode Island addressing the areas where it is worst in class or otherwise particularly disadvantaged? Since it is a long journey, Rhode Island has to know where to start and where to go next. The state should start where it’s worst in class or where it has things that are particularly causing competitive problems, the things that are directly a burden on job creation and economic growth.
For example, I hear about people wanting to eliminate the estate tax. I’m not a big fan estate taxes, and there were some particular problems with the so-called “cliff” that the legislature did something about this year. But is the estate tax the biggest thing discouraging people from starting a business in Rhode Island? I don’t think so. You have to have earn your estate first before you worry about paying taxes on it.
Similarly, the Republicans have really focused on the sales tax. Rhode Island’s sales tax isn’t low, but it’s not nearly the highest in the country either, especially when local taxes in other states are factored in. It’s almost 10% in Chicago, for example. In response to my City Journal piece, one local free market type said that his reason for advocating a sales tax cut was border arbitrage. But “beggar thy neighbor” policies and border wars are seldom positives over the longer term and generally indicative of “5Hr Energy” thinking. That’s doubly true in this case when Massachusetts has way more ammunition to fight with. The sales tax needs to be looked at competitively, but in a broader context and at a the right time.
On the other hand, Rhode Island has the worst rated unemployment insurance system in the country. That’s a direct burden on business. Places like that are where to start.
4. Is Rhode Island moving toward or away from the right balance between consumption vs. investment spending? Rhode Island government as a whole only spends 4.8% more per capita than the national average. But Rhode Island is well above average in spending on consumption items like social services and very below average in spending on investment items like infrastructure and higher education. Rhode Island spends 52% more per capita on human services than the national average. But it’s 47th in per capita higher education spending and has the 4th worst rated bridges in the nation.
I believe the state has to rebalance away from consumption towards investment. I’m not suggesting that Rhode Island gut its safety net. I’ve personally received government benefits and can attest to their importance. I won’t even say Rhode Island needs to have below average social services. But on a whole range of items it’s in the top five states in America. That’s simply not realistic given the competitive context, financial condition of the state, and the dire need for longer term investment.
But whatever your take, you should come up with a point of view on the right balance, and evaluate policies based on how they adjust the dials towards or away from that target balance.
5. Is Rhode Island promoting and de-risking entrepreneurship and the scaling of local businesses inside the state (vs. targeting large corporations and luring businesses from elsewhere)? Rhode Island needs to remember how it made its money in the first place. It did it through mostly through home grown businesses. It’s the same with other places. The Big Three were founded in Michigan. Most firms in the Bay Area started there – Google, Intel, Cisco, etc. Facebook may have moved, but it was tiny at the time.
So the state needs to adopt that mindset again. It’s going to have to grow its own success stories, and focus on creating an environment that’s conducive to that, not convincing fickle firms from elsewhere to pick it in a site selection. Post 38 Studios, I think that should almost go without saying. And again, the state doesn’t have enough financial ammo to get in bidding wars for business in any case.
CVS is an interesting case study here. It does get subsidies from the state, but fundamentally why is CVS in Rhode Island? Because, although it was originally started in Mass, the founders were from Woonsocket. So they grew it there and now the company has a huge headquarters in the state. Rhode Island needs to build more home grown success stories like that over the longer term.
6. Is Rhode Island setting policies and making investments like an integrated urban region (a city state)? Rhode Island is the city-state. People there say it a lot, but don’t act like it. Instead, all of its 39 cities and towns are treated similarly, and as completely autonomous independent entities, not part of overall urban or metropolitan region.
In the 21st century economy, it’s metropolitan areas, and particularly metropolitan areas of greater than a million people, that are the hubs of economic activity. That’s Rhode Island (aka Metropolitan Providence). That’s good news. That is a structural advantage, but the state isn’t taking advantage of it because it doesn’t make policies like it’s an urban region. Its policies today seem more like it thinks it’s collections of villages in the English countryside.
For example, when the state extends the T to Wickford Jct. and proposes to extend it all way the Westerly, that’s not investing like an urban region. When I hear people pounding the table for why agriculture is so key to the state’s future, that’s not thinking like an urban region. Clearly the tradition of New England towns isn’t going away and that limits what can be accomplished, but it’s important to ask what can be done to move the needle in the right direction.
So those are six questions to ask when assessing policy. In my final installment, I’ll give some specific suggestions for how to get started moving forward.
Full disclosure: I took a couple of these ideas from someone else who I’ll leave anonymous so he or she doesn’t end up guilty by association with me.