Thursday, July 17th, 2014

Germany Also Having Big Problems Building Infrastructure

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

Paul Romer: Urbanization as Opportunity

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.

Tuesday, July 15th, 2014

The Uniqueness of Detroit’s Housing Stock by Pete Saunders

[ I've posted a number of pieces by Pete Saunders here in the past. He's not just a great analyst generally, he's particularly great on Detroit. His post laying out nine reasons why Detroit failed has more page views than any other article in Urbanophile history. (The top four posts are all about Detroit, showing the powerful hold that city has on the public consciousness). In his blog, Corner Side Yard, he's bee revisiting that post to go in depth on each of his nine points. Today I'm pleased to be able to repost his analysis of Detroit's housing stock, along with that of many other Midwest cities - Aaron. ]

A scene from the Grixdale neighborhood on Detroit’s northeast side.  Source: Google Earth.

Last week, as part of my series on planning reasons behind Detroit’s decline, part 2 of the nine-part series was about the city’s poor housing stock.  I started to play with some numbers to see if there was any validity to my opinions about the city’s housing, and I found some very intriguing things.  Detroit’s housing stock is definitely unique among its Midwestern and Rust Belt peer cities, and perhaps among cities nationwide.  Let’s examine.

Grouping the cities by population figures from the 2013 U.S. Census population estimates, and housing data from the 2008-2012 American Community Survey, I looked at housing age and single family detached housing data for 15 Midwest/Rust Belt cities with populations above 250,000.  One city I typically include in an analysis like this, Louisville, was not included due to a lack of ACS data.  Data for the Twin Cities of Minneapolis and St. Paul were aggregated into one (sorry, Minneapolis and St. Paul) because they jointly function as the core city for their region.  Here’s the big table with all the data:

That’s a lot to digest, so I’ll take the data piece by piece.  First, let’s look at the cities ranked by their percentage of housing units built in 1969 or earlier:

You’ll see here that, perhaps following the general national perception of Detroit housing, the Motor City has an older housing stock.  Only Buffalo has a higher percentage of older housing. Generally speaking, the cities at the top half of this list have older housing because they lack redevelopment activity that replaces older housing, while cities at the bottom half consists of cities with decent levels of redevelopment activity, or more recently built housing that’s been annexed into the city in recent decades.  Here, Detroit does seem to fit the pattern.

But does it really?  If you look at the Census’ earliest category for age of structure, 1939 or earlier, Detroit drops considerably on the list:

Instead of ranking second as in the earlier table, Detroit falls to tenth.  The rest generally hold the same spots they occupied from the previous table as well. The only ones ranking lower than Detroit here are smaller cities (Omaha, Ft. Wayne) and the cities that annexed large amounts of land post 1970 (Kansas City, Indianapolis, Columbus).

Next, let’s look at how the cities rank in terms of their concentrations of single family detached homes:

Detroit shows up here with the second highest percentage of single family detached homes, comprising nearly two-thirds of the city’s housing stock.  Once again, the only comparable cities are the smaller cities and the big annexers.

Clearly, most observers believe Detroit has more in common with Buffalo, Cleveland and Pittsburgh than with Ft. Wayne, Kansas City and Indianapolis.  What happened to Detroit’s housing stock that gave it such an odd profile?

To understand, let’s pull out a specific category on the age of structure table, the 1950-1959 category:

Here, we find that Detroit has, by far, the highest concentration of housing units built between 1950-59 of all its peer cities.  Nearly one in four homes in Detroit were built during this period.  In fact, Detroit, along with Milwaukee and Toledo, occupies a strange space among Midwestern/Rust Belt cities.  (Side note: the more I study Detroit against other Midwestern cities, the more I find that Detroit and Milwaukee are virtually the same city.  And it doesn’t surprise me that Toledo, just 75 miles from Detroit, would share its characteristics as well).  Detroit, Milwaukee and Toledo all added their greatest numbers of housing at the outset of the modern suburban development period, what I’ve called the Levittown Period in my so-called Big Theory of American Urban Development.  This supports my thinking that if anyone was ever interested in establishing a Levittown-style national historic district, Detroit would be a good candidate.  The Motor City has perhaps more small Cape Cod-style, three-bedroom, one-bath single family homes than any city in the nation.

How did Detroit get this way?  Housing demolition likely had some role in a city that lost so much.  Detroit likely lost older single family homes and multifamily buildings over the last few decades, leading to skewed numbers.  The same is also true of Indianapolis, Kansas City and Columbus, cities that annexed large undeveloped areas after 1970 and built new housing there.  Keep in mind, though, that Milwaukee and Toledo, Detroit’s comparables, may not have had the same level of demolition loss that Detroit had, yet they still match the Motor City well.

That leads me to believe that a concentration of housing development at a unique time is a crucial piece in understanding Detroit’s housing stock.

Here’s another way of looking at this.  I grouped the cities by age and single family home concentration and came up with interesting groupings:

Here it becomes clearer that Detroit and Toledo stand alone as locations for old or moderately old structures that are largely single family.  Also, Milwaukee’s greater mix of single family and multifamily units begins to set it apart from Detroit and Toledo, even when it has a similar concentration of Levittown-style housing.

Finally, let’s consider housing adaptability as part of the housing stock analysis.  Chicago, the region’s largest city and lone “global city” member of the group, comfortably rests in the middle of all tables except for the single family detached table, where it shows the lowest concentration of single family homes.  My guess is that Chicago’s continued desirability means more newer housing has been built, and that its lower single family housing numbers mean that other housing types (lofts, condos and the ubiquitous 2-flat and 3-flat) created a more flexible and adaptable housing development landscape.

Assuming that younger structures are more often suitable to renovation for adaptability, moderately old structures require more intense rehabs, and older types are more often subject to demolition and rebuilding, I reorganized the previous table in terms of housing adaptability:

And if I put in the cities next to this adaptability scale, it’s easy to see the magnitude of Detroit’s housing challenges:

Detroit is such a unique city in so many ways.  The Motor City needs more research and analysis that highlights its uniqueness and adds to our understanding of the what led to its downfall, and less of our ire and contempt.

The more I study Detroit, the more I see the seeds of a similar downfall in other cities nationwide.

This post originally appeared in Corner Side Yard on July 6, 2014.

Sunday, July 6th, 2014

Ruining Rhode Island – Missing the Context

My latest article is online over at City Journal, and shows how Rhode Island has become an economic and demographic basket case, one not making headlines largely because the state is small enough to fly under the radar. I’ll give you a trigger warning on this one. While making clear that the Republicans of Rhode Island have hardly crowned themselves in glory, I focus on the follies of the Democrats who have had overwhelming control in the state since 1935. If you don’t want to read this one, try one my previous posts about the Tea Party instead. You can also read a response from the left at RI Future.

In my article, titled “The Bluest State,” I attribute the state’s failure to poor governance and corruption (bi-partisan), a complacent populace, and far left policies that have imposed top 5 or top 10 levels of high taxation, high service/low investment spending priorities, stifling regulations, and very powerful public sector unions on a state radically unsuited to them.

The response by some in Rhode Island was to say that while the legislature is controlled by Democrats, they are conservatives, not progressives. Or pointing out Republican failures like Gov. Don Carcieri. I have a very simple reply to that. If the policies of Rhode Island are indeed conservative, then progressives should have no problem rolling back the taxes and regulation, rebalancing spending, and curtailing union abuses there. Welcome aboard.

In any case, the macro problem is that this collection of policies was implemented in a place completely unsuited for them. The ideas were imported from elsewhere and implemented in a way that ignores the context. I plan to explore that in a three part series starting today. This post will be about the competitive context of Rhode Island. Thursday I’ll lay out a “decision toolkit” of questions that can be used to evaluate any proposed policies there. And next week I’ll give some very specific recommendations in the form of an expanded and more detailed list from my article.

Let’s start with the context. That’s something that’s really been missing from the Rhode Island discussion and is absolutely critical – because without the context, you can’t really property evaluate any proposed solutions to the economy.

I want to start by going back to the Slater Mill in Pawtucket 1793. Why did America’s industrial revolution begin in Rhode Island? There are a lot of reasons. We were a coastal country, and Rhode Island was on the coast. Rhode Island was right in the middle of that Northeast Corridor from Philadelphia to Boston that was far more dominant then than it is now. So Rhode Island was in the middle of the action – it was centrally located. It was an era of water transport and power, and Rhode Island had the seaport access, and numerous small rivers it could dam for power. It was in the intellectual center of America, and had a freethinking culture that was open to the new and the different. And once the first mill was built, Rhode Island had first mover advantage in the marketplace.

So in a sense where else in America other than New England could this have happened? Not too many places. You couldn’t have done textiles in North Carolina back then because their entire economy and culture was a slave based agricultural economy, for example. It would have been a non-starter.

So what we see is that Rhode Island and New England had major structural competitive advantages that let them initiate and then dominate the early stages of the industrial economy in America. It was like Detroit in cars, or Silicon Valley in tech today.

Fast forward a hundred years to the 1890s, and that’s when Rhode Island’s textile base began to erode. What happened in that hundred years that caused this change? Well America was a very different place in the 1893 than 1793. Instead of a coastal nation we were a continental nation. Rhode Island was no longer centrally located, it was on the periphery. The primary transport mechanism was no longer ship, it was rail. Power was no longer water, it was coal, steam, and electricity. Slavery was abolished in the South, and they had to find something else to do. Religious freedom and free thinking ways were no longer the exclusive possession of Rhode Island. And as a consequence of these changes, Rhode Island no longer had a structural competitive advantage or fortress position in the industrial marketplace. Instead, it was subject to something it didn’t have originally, and that was competition. This newly competitive environment posed – and still poses – particular challenges for Rhode Island because it is so geographically small and thus border arbitrage is easy.

What Rhode Island needed to do was to recognize that its circumstances had changed, and that it need to start acting like it was in a very competitive market instead of one in which it held all the cards. That would have been difficult in the best of circumstances candidly. But it didn’t do that. And I’d argue that’s true up to the present day. And it’s easy to understand why. Rhode Island had a 100 year run in a market dominant position. Keep in mind, Detroit only had 60 years of success and dominance in autos, max. Rhode Island had a hundred years of industrial dominance, and successful merchant trading and such industries before that. So clearly that stamps the thinking of a people. It has to. But nevertheless, the situation has changed.

And that, fundamentally, is the most important thing to understand about Rhode Island’s condition. It’s been acting like it’s still selling a premium product from a structurally advantaged position like it was at the beginning, when it’s actually selling a commodity product into a highly competitive global marketplace. It’s been trying to sell a commodity product at a premium price point in terms of costs, taxes, regulation, etc. and unsurprisingly hasn’t gotten a lot of takers. The stone cold reality is that with limited exceptions, Rhode Island has no marketplace leverage. One might blame this on federal level neoliberal policies, but that doesn’t make reality any less real for the Ocean State.

The state hasn’t recognized its problem of trying to sell a commodity at a premium price point. That’s for several reasons. First is that the policies that are intended to embody Rhode Island’s values were imported from other places that have radically different conditions. Rhode Island is a state with progressive values. There’s nothing wrong with those values and in fact I share many of them. But where do the policy ideas that instantiate progressive values come from?

To just pick an area that’s been a debate in the gubernatorial race, every Democratic candidate has pledged to raise the state minimum wage to $10.10/hr, which would be the highest statewide level in the country. Where did that idea come from? Did it originate in Rhode Island? I don’t think so. So the question we need to ask is where did it originate, and what are the conditions like there?

I’d argue most progressive policy ideas come from three primary places: San Francisco, New York, and Washington, DC. And if you look at those cities, or other progressive capitals like Boston, what you see is that they are like Rhode Island was back in 1793. They have a structural competitive advantage in the marketplace because they have captive, high value industries that are bound to the geography where they are located, operate at global scale, and spin off huge amounts of cash. Wall Street prints money and it isn’t going anywhere. Silicon Valley isn’t going anywhere. Speaking of printing money, the federal government literally prints it and is not pulling out of DC. Harvard and MIT aren’t moving out of Greater Boston. These places have cash registers that never stop ringing. So those cities can get away with doing things Rhode Island can’t because it no longer has those fortress industries like they still do today. So the state has been importing policy ideas from places that are nothing like Rhode Island.

That includes the rest of New England. If you pan back the lens, what you see is that there are really only two poles of wealth in New England. One radiating out of Boston. The other out of New York City into Connecticut. To the extent that you’re able to tap into Boston or New York money, you’re doing pretty well. To the extent that you’re not, you’re likely as bad off as Rhode Island. Most of Massachusetts, its so-called Gateway Cities and all that, are exactly like Rhode Island. Connecticut is chock full of struggling industrial cities like New Haven and Bridgeport. Even their white collar economy is in trouble.

The states of Massachusetts and Connecticut only are able to do what they do because of the high value they capture in Boston and places like Greenwich and Stamford. Even New Hampshire similarly is almost entirely dependent on access to Boston money. Rhode Island simply looks worse, because it has less access to New York and Boston money than those other states.

That’s where I’ll actually defend Rhode Island’s leadership. In a previous article, I argued that Rhode Island’s problem isn’t poor leadership. I’d like to qualify that. Rhode Island has indeed been poorly governed, and that’s a problem. But it hasn’t had uniquely bad leadership. Some people like to say that the problem is Rhode Island’s leaders are stupid whereas those in other states are smarter or less venal. I don’t think that’s the case. Three House speakers in a row got indicted in Massachusetts. But you can get away with things in Massachusetts that you can’t in Rhode Island because of the Boston area economy. It’s like Warren Buffett said: when the tide goes out we get to see who’s been swimming naked. The tide went out on Rhode Island a long time ago whereas some other places have been luckier in that regard.

This is a painful reality for the state because Rhode Island takes its cues from its neighbors. But they’re richer. It’s like three brothers, one’s a doctor, one’s a lawyer, and one’s a teacher. The teacher isn’t going to be able to live in as a nice a house as his brothers. That’s just financial reality. And that’s the situation Rhode Island is in. Because neighboring states have access to money from fortress industries. Rhode Island doesn’t. They’re market makers; Rhode Island is a market taker.

Another aspect of missed context is that Rhode Island has over-estimated its quality of life advantage. It really struck me when I was living there that the idea that Rhode Island has a markedly superior quality of life to other places is just sort of taken for granted. It’s a bedrock axiom. I think the quality of life is good in Rhode Island. I’m not going to criticize it. And I think that the assumption of superiority actually was true not that long ago.

But I visit a lot of places, and I can tell you, America has really raised its game in the last two decades. I live Indianapolis now, and when I first started spending time there back in the early 90s, to be honest, it was like Siberia. You wouldn’t want to live there unless you were from there. Today, it’s completely different. Indianapolis has more and better microbreweries than Rhode Island, better coffee, pretty good restaurants – not as good as Rhode Island’s but definitely serviceable – a big farm to table movement, their own local fashion magazine – I mean like a real print magazine – and a lot more. It’s night and day.

Rhode Island hasn’t fully woken up to how much better life has gotten in a lot of places you never would have considered living before. There’s a new level of competition out there that was never there before.

Add it up and Rhode Island needs to have a big mindset shift. My observation is that candidly, it’s had an entitlement mentality. I attribute that to three sources I talked about above:

One is Rhode Island’s rich historic legacy which is a justifiably proud history. Part of that legacy is its history as a highly competitively advantaged economy in the past. But that history can blind the state to the reality of today, which is very different.

Two is that Rhode Island feels entitled to live like its neighbors, its brothers if you will, in New England, when they’ve got better jobs.

Three is that Rhode Island hasn’t recognized the extent to which other places have improved their quality of life such that its advantage is much slimmer than it realizes.

Rhode Island has to realize that it is not entitled to live like it used to or like California lives today. And that’s tough to accept. In America especially, with this deep seated narrative of economic progress, regression is a bitter pill to swallow. We’ve seen the results of that in post-industrial America across the board.

That doesn’t mean rejecting every progressive idea. It does mean assessing what makes sense for the state in light of its weak marketplace position. The values of Rhode Islanders have to be embodied in a policy set that makes sense with its own economic competitive context, not somebody else’s.

The problem here is that there’s hasn’t been indigenous R&D to create locally appropriate policies. That’s actually one reason I started my site so many years ago when it was focused on smaller Midwest cities. Those cities were – and sadly still are for the most part – passive importers of ideas about what cities should be. I wanted to start a conversation about Midwest cities on their own terms. I’m all in favor of stealing good ideas from anybody, even NYC. But you have to ask whether it makes sense locally and how to do it. And also be developing your own “in-house” ideas as well. That’s what I set out to do with this site.

So if Rhode Island wants to perform differently, it needs to create an indigenous R&D capability, especially as most national progressive ideas emanate from elite citadels, which Rhode Island is not. This will be hard because to many of Rhode Island’s intellectual elite came from places like New York and Boston, and thus are steeped in that way of thinking.

But I have an idea. There are a lot of people in Rhode Island who are heavily involved in boosting the fortunes of developing counties. Would they go into a developing country and say that the leaders there should adopt California style taxes, services, and regulations? No way. They’d realize that these places need to start with where they are at. The immediate needs in many places are better governance (esp. less corruption), basic services like clean water and sanitation, education, upgrading infrastructure, and facilitating economic development. Rhode Island isn’t a developing country by any means, but it’s not California or New York either. No matter how much people in Rhode Island might be in agreement with the values or policies of those places, the state is simply in a completely different situation. It needs to focus on the basics. So maybe those Rhode Islanders who are involved in developing country work can try to think about Rhode Island through that lens to see what ideas can be generated. Again, Rhode Island is NOT a developing country, but there may be things that can be learned.

The good news is that change is possible. Though Rhode Island has huge problems and a long road back to recovery, I believe there’s certainly a lot of room to believe that it can be a lot more successful than it is. I’ll delve into the specifics of a starter program in the next two installments.

Tuesday, July 1st, 2014

Confessions of a Rust Belt Orphan by Jason Segedy

[ I originally found this post by Jason Segedy at Rust Wire. Thanks to him for letting me share it here. His web site is "Notes From the Underground" and you can also follow him on Twittter at @thestile1972 - Aaron. ]

How I Learned to Stop Worrying and Love Northeast Ohio

Image Source: Wikipedia: Change in total number of manufacturing jobs in metropolitan areas, 1954-2002. Dark red is very bad. Akron is dark red.

Go to sleep, Captain Future, in your lair of art deco
You were our pioneer of progress, but tomorrow’s been postponed
Go to sleep, Captain Future, let corrosion close your eyes
If the board should vote to restore hope, we’ll pass along the lie

-The Secret Sound of the NSA, Captain Future

As near as I can tell, the term “Rust Belt” originated sometime in the mid-1980s. That sounds about right.

I originated slightly earlier, in 1972, at St. Thomas Hospital in Akron, Ohio, Rubber Capital of the World. My very earliest memory is of a day, sometime in the Summer of 1975, that my parents, my baby brother, and I went on a camping trip to Lake Milton, just west of Youngstown. I was three years old. To this day, I have no idea why, of all of the things that I could remember, but don’t, I happen to remember this one. But it is a good place to start.

The memory is so vivid that I can still remember looking at the green overhead freeway signs along the West Expressway in Akron. Some of the signs were in kilometers, as well as in miles back then, due to an ill-fated attempt to convert Americans to the Metric system in the 1970s. I remember the overpoweringly pungent smell of rubber wafting from the smokestacks of B.F. Goodrich and Firestone. I recall asking my mother about it, and her explaining that those were the factories where the tires, and the rubber, and the chemicals were made. They were made by hard-working, good people – people like my Uncle Jim – but more on that, later.

When I was a little bit older, I would learn that this was the smell of good jobs; of hard, dangerous work; and of the way of life that built the modern version of this quirky and gritty town. It was the smell that tripled Akron’s population between 1910 and 1920, transforming it from a sleepy former canal-town to the 32nd largest city in America. It is a smell laced with melancholy, ambivalence, and nostalgia – for it was the smell of an era that was quickly coming to an end (although I was far too young to be aware of this fact at the time). It was sometimes the smell of tragedy.

We stopped by my grandparents’ house, in Firestone Park, on the way to the campground. I can still remember my grandmother giving me a box of Barnum’s Animals crackers for the road. She was always kind and generous like that.

Who were my grandparents? My grandparents were Akron. It’s as simple as that. Their story was Akron’s story. My grandfather was born in 1916, in Barnesboro, a small coal-mining town in Western Pennsylvania, somewhere between Johnstown, DuBois, and nowhere. His father, a coal miner, had emigrated there from Hungary nine years earlier. My grandmother was born in Barberton, in 1920. Barberton was reportedly the most-industrialized city in the United States, per-capita, at some point around that time.

They were both factory workers for their entire working lives (I don’t think they called jobs like that “careers” back then). My grandfather worked at the Firestone Tire & Rubber Company. My grandmother worked at Saalfield Publishing, a factory that was one of the largest producers of children’s books, games, and puzzles in the world. Today, both of the plants where they worked form part of a gutted, derelict, post-apocalyptic moonscape in South Akron, located between that same West Expressway and perdition. The City of Akron has plans for revitalizing this former industrial area. It needs to happen, but there are ghosts there…

My name is Ozymandias, King of Kings,
Look on my works, ye Mighty, and despair!
Nothing beside remains. Round the decay
Of that colossal wreck, boundless and bare
The lone and level sands stretch far away.

-Percy Bysshe Shelley, Ozymandias

My grandparents’ house exemplified what it was to live in working-class Akron in the late 1970s and early 1980s. My stream-of-consciousness memories of that house include: lots of cigarettes and ashtrays; Hee-Haw; The Joker’s Wild; fresh tomatoes and peppers; Fred & Lamont Sanford; Archie & Edith Bunker; Herb Score and Indians baseball on the radio on the front porch; hand-knitted afghans; UHF/VHF; 3, 5, 8, and 43; cold cans of Coca-Cola and Pabst Blue Ribbon (back when the pop-tops still came off of the can); the Ohio Lottery; chicken and galuskas (dumplings); a garage floor that you could eat off of; a meticulously maintained 14-year-old Chrysler with 29,000 miles on it; a refrigerator in the dining room because the kitchen was too small; catching fireflies in jars; and all being right with the world.

I always associate the familiar comfort of that tiny two-bedroom bungalow with the omnipresence of cigarette smoke and television. I remember sitting there on May 18, 1980. It was my eighth birthday. We were sitting in front of the TV, watching coverage of the Mount St. Helens eruption in Washington State. I remember talking about the fact that it was going to be the year 2000 (the Future!) in just twenty years. It was an odd conversation for an eight year old to be having with adults (planning for the future already, and for a life without friends, apparently). I remember thinking about the fact that I would be 28 years old then, and how inconceivably distant it all seemed. Things seem so permanent when you’re eight, and time moves ever-so-slowly.

More often than not, when we visited my grandparents, my Uncle Jim and Aunt Helen would be there. Uncle Jim was born in 1936, in West Virginia. His family, too, had come to Akron to find work that was better-paying, steadier, and (relatively) less dangerous than the work in the coal mines. Uncle Jim was a rubber worker, first at Mohawk Rubber and then later at B.F. Goodrich. Uncle Jim also cut hair over at the most-appropriately named West Virginia Barbershop, on South Arlington Street in East Akron. He was one of the best, most decent, kindest people that I have ever known.

I remember asking my mother once why Uncle Jim never washed his hands. She scolded me, explaining that he did wash his hands, but that because he built tires, his hands were stained with carbon-black, which wouldn’t come out no matter how hard you scrubbed. I learned later, that it would take about six months for that stuff to leach out of your pores, once you quit working.

Uncle Jim died in 1983, killed in an industrial accident on the job at B.F. Goodrich. He was only 47. The plant would close for good about a year later.

It was an unthinkably tragic event, at a singularly traumatic time for Akron. It was the end of an era.

Times Change

My friend Della Rucker recently wrote a great post entitled The Elder Children of the Rust Belt over at her blog, Wise Economy. It dredged up all of these old memories, and it got me thinking about childhood, about this place that I love, and about the experience of growing up just as an economic era (perhaps the most prosperous and anomalous one in modern history) was coming to an end.

That is what the late 1970s and early 1980s was: the end of one thing, and the beginning of a (still yet-to-be-determined) something else. I didn’t know it at the time, but that’s because I was just a kid.

In retrospect it was obvious: the decay; the deterioration, the decomposition, the slow-at-first, and then faster-than-you-can-see-it unwinding of an industrial machine that had been wound-up far, far, too-tight. The machine runs until it breaks down; then it is replaced with a new and more efficient one – a perfectly ironic metaphor for an industrial society that killed the goose that laid the golden egg. It was a machine made up of unions, and management, and capitalized sunk costs, and supply chains, and commodity prices, and globalization. Except it wasn’t really a machine at all. It was really just people. And people aren’t machines. When they are treated as such, and then discarded as obsolete, there are consequences.

You could hear it in the music: from the decadent, desperately-seeking-something (escape) pulse of Disco, to the (first) nihilistic and (then) fatalistic sound of Punk and Post-Punk. It’s not an accident that a band called Devo came from Akron, Ohio. De-evolution: the idea that instead of evolving, mankind has actually regressed, as evidenced by the dysfunction and herd mentality of American society. It sounded a lot like Akron in the late 1970s. It still sounds a little bit like the Rust Belt today.

As an adult, looking back at the experience of growing up at that time, you realize how much it colors your thinking and outlook on life. It’s all the more poignant when you realize that the “end-of-an-era” is never really an “end” as such, but is really a transition to something else. But to what exactly?

The end of that era, which was marked by strikes, layoffs, and unemployment, was followed by its echoes and repercussions: economic dislocation, outmigration, poverty, and abandonment; as well as the more intangible psychological detritus – the pains from the phantom limb long after the amputation; the vertiginous sensation of watching someone (or something) die.

And it came to me then
That every plan
Is a tiny prayer to Father Time

As I stared at my shoes
In the ICU
That reeked of piss and 409

It sung like a violent wind
That our memories depend
On a faulty camera in our minds

‘Cause there’s no comfort in the waiting room
Just nervous paces bracing for bad news

Love is watching someone die…

-Death Cab For Cutie, What Sarah Said

But it is both our tragedy and our glory that life goes on.

Della raised a lot of these issues in her post: our generation’s ambivalent relationship with the American Dream (like Della, I feel the same unpleasant taste of rust in my mouth whenever I write or utter that phrase); our distrust of organizations and institutions; and our realization that you have to keep going, fight, and survive, in spite of it all. She talked about how we came of age at a time of loss:

not loss like a massive destruction, but a loss like something insidious, deep, pervasive.

It is so true, and it is so misunderstood. One of the people commenting on her blog post said, essentially, that it is dangerous to romanticize about a “golden age”; that all generations struggle; and that life is hard.

Yes, those things are all true. But they are largely irrelevant to the topic at hand.

There is a very large middle ground between a “golden age” and an “existential struggle”. The time and place about which we are both writing (the late 1970s through the present, in the Rust Belt) is neither. But it is undoubtedly a time of extreme transition. It is a great economic unraveling, and we are collectively and individually still trying to figure out how to navigate through it, survive it, and ultimately build something better out of it.

History is cyclical. Regardless of how enamored Americans, in general, may be with the idea, it is not linear. It is neither a long, slow march toward utopia, nor toward oblivion. When I look at history, I see times of relative (and it’s all relative, this side of paradise) peace, prosperity, and stability; and other times of relative strife, economic upheaval, uncertainty, and instability. We really did move from one of those times to the other, beginning in the 1970s, and continuing through the present.

The point that is easy to miss when uttering phrases like “life is hard for every generation” is that none of this discussion about the Rust Belt – where it’s been, where it is going – has anything to do with a “golden age”. But it has everything to do with the fact that this time of transition was an era (like all eras) that meant a lot (good and bad) to the people that lived through it. It helped make them who they are today, and it helped make where they live what it is today.

For those that were kids at the time that the great unraveling began (people like me, and people like Della) it is partially about the narrative that we were socialized to believe in at a very young age, and how that narrative went up in a puff of smoke. In 1977, I could smell rubber in the air, and many of my family members and friends’ parents worked in rubber factories. In 1982, the last passenger tire was built in Akron. By 1984, 90% of those jobs were gone, many of those people had moved out of town, and the whole thing was already a fading memory. Just as when a person dies, many people reacted with a mixture of silence, embarrassment, and denial.

As a kid, especially, you construct your identity based upon the place in which you live. The whole identity that I had built, even as a small child, as a proud Akronite: This is the RUBBER CAPITAL OF THE WORLD; this is where we make lots and lots of Useful Things for people all over the world; this is where Real Americans Do Real Work; this is where people from Europe, the South, and Appalachia come to make a Better Life for themselves; well, that all got yanked away. I couldn’t believe any of those things anymore, because they were no longer true, and I knew it. I could see it with my own two eyes. Maybe some of them were never true to begin with, but kids can’t live a lie the way that adults can. When the place that you thought you lived in turns out not to be the place that you actually live, it can be jarring and disorienting. It can even be heartbreaking.

We’re the middle children of history, man. No purpose or place. We have no Great War. No Great Depression. Our great war is a spiritual war. Our great depression is our lives.

-Tyler Durden, Fight Club

I’m fond of the above quote. I was even fonder of it when I was 28 years old. Time, and the realization that life is short, and that you ultimately have to participate and do something with it besides analyze it as an outside observer, has lessened its power considerably. It remains the quintessential Generation X quote, from the quintessential Generation X movie. It certainly fits in quite well with all of this. But, then again, maybe it shouldn’t.

I use the phrase “Rust Belt Orphan” in the title of this post, because that is what the experience of coming of age at the time of the great economic unraveling feels like at the gut-level. But it’s a dangerous and unproductive combination, when coupled with the whole Gen-X thing.

In many ways, the Rust Belt is the “Generation X” of regions – the place that just doesn’t seem to fit in; the place that most people would just as soon forget about; the place that would, in fact, just as soon forget about itself; the place that, if it does dare to acknowledge its own existence or needs, barely notices the surprised frowns of displeasure and disdain from those on the outside, because they have already been subsumed by the place’s own self-doubt and self-loathing.

A fake chinese rubber plant
In the fake plastic earth
That she bought from a rubber man
In a town full of rubber plans
To get rid of itself

-Radiohead, Fake Plastic Trees

The whole Gen-X misfit wandering-in-the-Rust Belt-wilderness meme is a palpably prevalent, but seldom acknowledged part of our regional culture. It is probably just as well. It’s so easy for the whole smoldering heap of negativity to degenerate into a viscous morass of alienation and anomie. Little good can come from going any further down that dead-end road.

Whither the Future?

The Greek word for “return” is nostos. Algos means “suffering.” So nostalgia is the suffering caused by an unappeased yearning to return.
Milan Kundera, Ignorance

So where does this all leave us?

First, as a region, I think we have to get serious about making our peace with the past and moving on. We have begun to do this in Akron, and, if the stories and anecdotal evidence are to be believed, we are probably ahead of the region as a whole.

But what does “making our peace” and “moving on” really mean? In many ways, I think that our region has been going through a collective period of mourning for the better part of four decades. Nostalgia and angst regarding the things that have been lost (some of our identity, prosperity, and national prominence) is all part of the grieving process. The best way out is always through.

But we should grieve, not so we can wallow in the experience and refuse to move on, but so we can gain a better understanding of who we are and where we come from. Coming to grips with and acknowledging those things, ultimately enables us to help make these places that we love better.

We Americans are generally not all that good at, or comfortable with, mourning or grief. There’s a very American idea that grieving is synonymous with “moving on” and (even worse) that “moving on” is synonymous with “getting over it”.

We’re very comfortable with that neat and tidy straight, upwardly-trending line toward the future (and a more prosperous, progressive, and enlightened future it will always be, world without end, Amen.)

We’re not so comfortable with that messy and confusing historical cycle of boom-and-bust, of evolution and de-evolution, of creation and destruction and reinvention. But that’s the world as we actually experience it, and it’s the one that we must live in. It is far from perfect. I wish that I had another one to offer you. But there isn’t one on this side of the Great Beyond. For all of its trials and tribulations, the world that we inhabit has one inestimable advantage: it is unambiguously real.

“Moving on” means refusing to become paralyzed by the past; living up to our present responsibilities; and striving every day to become the type of people that are better able to help others. But “moving on” doesn’t mean that we forget about the past, that we pretend that we didn’t experience what we did, or that we create an alternate reality to avoid playing the hand that we’ve actually been dealt.

Second, I don’t think we can, or should, “get over” the Rust Belt. The very phrase “get over it” traffics in denial, wishful thinking, and the estrangement of one’s self from one’s roots. Countless attempts to “get over” the Rust Belt have resulted in the innumerable short-sighted, “get rich quick” economic development projects, and public-private pyramid-schemes that many of us have come to find so distasteful, ineffective, and expensive.

We don’t have to be (and can’t be, even if we want to) something that we are not. But we do have to be the best place that we can be. This might mean that we are a smaller, relatively less-prominent place. But it also means that we can be a much better-connected, more cohesive, coherent, and equitable place. The only people that can stop us from becoming that place are we ourselves.

For a place that has been burned so badly by the vicissitudes of the global economy, Big Business, and Big Industry, we always seem to be so quick to put our faith in the Next Big Project, the Next Big Organization, and the Next Big Thing. I’m not sure whether this is the cause of our current economic malaise, or the effect, or both. Whatever it is, we need to stop doing it.

Does this mean that we should never do or dream anything big? No. Absolutely not. But it does mean that we should be prudent and wise, and that we should tend to prefer our economic development and public investment to be hyper-nimble, hyper-scalable, hyper-neighborhood-focused, and ultra-diverse. Fetishizing Daniel Burnham’s famous “Make no little plans…” quote has done us much harm. Sometimes “little plans” are exactly what we need, because they often involve fundamentals, are easier to pull-off, and more readily establish trust, inspire hope, and build relationships.

Those of us that came of age during the great economic unraveling and (still painful) transition from the Great American Manufacturing Belt to the Rust Belt might just be in a better position to understand our challenges, and to find the creative solutions required to meet them head-on. Those of us that stuck it out and still live here, know where we came from. We’re under no illusions about who we are or where we live. I think Della Rucker was on to something when she listed what we can bring to the table:

  • Determination
  • Long-game focus
  • Understanding the depth of the pit and the long way left to climb out of it
  • Resourcefulness
  • Ability to salvage
  • Expectation that there are no easy answers
  • Disinclination to believe that everything will be all right if only we do this One Big Thing

When I look at this list, I see pragmatism, resilience, self-knowledge, survival skills, and leadership. It all rings true.

He wanted to care, and he could not care. For he had gone away and he could never go back any more. The gates were closed, the sun was gone down, and there was no beauty but the gray beauty of steel that withstands all time. Even the grief he could have borne was left behind in the country of illusion, of youth, of the richness of life, where his winter dreams had flourished.

“Long ago,” he said, “long ago, there was something in me, but now that thing is gone. Now that thing is gone, that thing is gone. I cannot cry. I cannot care. That thing will come back no more.”

-F. Scott Fitzgerald, Winter Dreams

So, let’s have our final elegy for the Rust Belt. Then, let’s get to work.

This post originally appeared in Notes From the Underground on November 2, 2013.

Sunday, June 29th, 2014

Columbus: Getting Fit For the Competition Ahead

This is the last of my entries prompted by my recent trip to Columbus. I’ve noted before that Columbus and Indianapolis are twin cities in many ways, though with some important differences.

One of those differences is that the civic discussion in Indianapolis today is heavily driven by the urgency of reversing the decline of Marion County as the city of Indianapolis increasingly loses out demographically and economically to its suburbs. In Columbus, by contrast, I didn’t sense nearly the same concern about suburban competition. While again I only have limited data points to go by, what conversations I did have if anything suggested to me that the city of Columbus thinks it’s holding most of the cards in the region. I suggest letting Indianapolis be a cautionary tale, and that Columbus should be much more focused on how to manage future suburban competition than it presently seems to be.

By the late 1960s Indianapolis had, like most cities, been steadily losing ground to suburban development. The response was a city-county merger called Unigov* that in effect annexed all important contemporary suburbs are well as most of the empty land that would be urbanized in the next two decades. This allowed Indianapolis to capture that suburban tax base and avoid many of the problems that plagued other older cities during the 1970s.

Fast forward to the present and it’s clear that the Unigov model is out of gas. Marion County is now largely full apart from some areas in the southern parts, and has a fairly flat growth curve in population. Most the growth is now in the collar counties. What’s more, there’s been a huge employment shift as well, with the city losing 41,000 jobs since 2000 and the suburbs gaining 78,000. I gave an overview of the dynamics in a previous post.

Today Indianapolis has a serious problem on its hand. How did this happen? It’s pretty simple. Unigov bought he city 40 years. But what did it do with that time? It built up its downtown to one of America’s best, a legitimately impressive and important accomplishment. But beyond that it was basically business as usual. Unfortunately, the 5.5 square miles of downtown can’t carry the rest of the city’s nearly 400. The city should have been aggressively preparing for the day when Unigov would reach exhaustion. But it did not.

Columbus utilized a similar technique to Unigov by aggressively annexing suburban development. And it had fairly similar results, doing well and avoiding the problems. But it seems to be widely accepted in Columbus that the city is nearing the end of its growth by annexation phase. While unlike in Indiana, Ohio makes it fairly easy to annex across county lines, and Columbus extends into multiple counties already, annexation has slowed to a crawl. In part I’m told that they are now reaching into territories that have other sources of water than the city of Columbus water utility, and thus the city has less leverage to annex than before. While technically not hemmed in, Columbus has less room for growth than before. This raises the question of when the dynamics of decline will set in within the newly stagnant city.

Columbus appears to be in better shape than Indy right now. I’d say this is for a few reasons. First, Franklin County, Columbus’ home base, is geographically bigger than Indy’s Marion County, giving Columbus a larger area of natural historic dominance. Columbus is also home to newer office/retail suburban development than Indianapolis. For example, Indy’s Keystone Crossing area is based on edge city and power center templates that are dated, while the corresponding Easton area in Columbus is newer and built to a lifestyle center type template that’s a bit more up to date. Columbus similarly has the relatively new Polaris area inside its borders.

What’s more, Columbus’ suburbs are comparatively underdeveloped and thus aren’t rivals as of yet. Indianapolis has five suburbs with more than 50,000 people – two of them with more than 80,000. Columbus has none. Only Dublin, which has 43,000 people, 9.5 million square feet of office space, and major downtown development ambitions, appears to be a full scale competitor at this point. Most other suburban municipalities are much smaller (e.g., New Albany has less than 10,000 people) and/or enclosed by the city of Columbus and thus limited in growth. Favored quarter suburban Delaware County has 185,000 people (some of which are in the city of Columbus) vs. nearly 300,000 for analogous Hamilton County, IN. What’s more, Hamilton County is far ahead in infrastructure vs. Delaware County. Delaware County has next to no upgraded east-west or “crosstown” arterials. Two reservoirs there make developing them difficult, with one of them separating I-71 from the developed parts of the county. Thus the county is even lacking in north-south “radial” movements.

These factors and others have essentially kept Columbus from facing any significant suburban competition. But unless the city wants to somehow double down on annexation and try to restart that engine, at some point these dynamics will change and the city of Columbus will find itself physically constrained and competitively disadvantaged vs. newer and now more powerfully developed suburban entities. Dublin is likely a preview of coming attractions.

I don’t have any particular policy suggestion in mind here, nor am I saying that anything the city is doing is necessarily wrong. But given what has happened in Indianapolis, I would certainly encourage the future prospect of suburban competition to be top of mind. The city of Columbus should be aggressively scenario planning for how this will play out, and use the runway that it has left to be preparing for the era of more intense intra-regional competition to come. Better to err on the side of paranoia, because the risks of waiting until you’ve got a serious problem on your hands are too high to ignore.

* Unigov also ensured a white majority in the city

Sunday, June 22nd, 2014

Dallas: A City in Transition

Dallas Skyline. Source: Wikipedia

I was in Dallas this past week for the New Cities Summit, so it’s a good time to post an update on the city.

I don’t think many of us realize the scale to which Sunbelt mega-boomtowns like Dallas have grown. The Dallas-Ft. Worth metro area is now the fourth largest in the United States with 6.8 million people, and it continues to pile on people and jobs at a fiendish clip.

Many urbanists are not fans of DFW, and it’s easy to understand why. But I think it’s unfair to judge the quality of a city without considering where it is at in its lifecycle. Dallas has been around since the 1800s, but the metroplex is only just now starting to come into its own as a region. It is still in the hypergrowth and wealth building stage, similar to where a place like Chicago was back in the late 19th century. Unsurprisingly, filthy, crass, money-grubbing, unsophisticated Chicago did not appeal to the sophisticates of its day either. But once Chicago got rich, it decided to get classy. Its business booster class endowed first rate cultural institutions like the Art Institute, and tremendous efforts were made to upgrade the quality of the city and deal with the congestion, pollution, substandard housing, and fallout from rapid growth, which threatened to choke off the city’s future success. At some point in its journey, Chicago reached an inflection point where it transitioned to a more mature state. One can perhaps see the 1909 Burnham Plan as the best symbol of this. In addition to addressing practical concerns like street congestion, the Burnham Plan also sought to create a city that could hold its own among the world’s elite. And you’d have to argue the city largely succeeded in that vision.

The DFW area is now at that transition point. They realize that as a city they need to be about more than just growth and money making. They need to have quality and they need to address issues in the system. Much like Burnham Plan era Chicago, this perhaps makes DFW a potentially very exciting place to be. It’s not everyday when you can be part of building a new aspirational future for a city that’s already been a successful boomtown. The locals I talked to were pretty pumped about their city and where it’s going.

How true this is I don’t know, but some people have attributed a change in mindset to the loss in the competition to land Boeing’s headquarters. Boeing ended up choosing Chicago over Dallas. In part this was because Chicago bought the business with lavish subsidies that far outclassed what Dallas put on the table. But it was also because Boeing saw Chicago as a more congenial environment for global company C-suite and other top executives to be, both from a lifestyle perspective and that of access to other globally elite firms and workers available in Chicago.

Meanwhile, the cracks in the DFW growth model were becoming apparent, especially in the core city of Dallas. Ten years ago the Dallas Morning News ran a series called “Dallas at a Tipping Point: A Roadmap For Renewal.” This series was underpinned by a report prepared by the consulting firm Booz Allen. This report is well worth reading by almost anyone today as it is a rare example of a city that was able to get insight and recommendations from the type of tier one strategy firm used by major corporations. Booz Allen was direct in their findings, though perhaps with a bit of hyperbole in the Detroit comparison:

Dallas stands at the verge of entering a cycle of decline…On its current path, Dallas will, in the next 20 years, go the way of declining cities like Detroit – a hollow core abandoned by the middle class and surrounded by suburbs that outperform the city but inevitably are dragged down by it.
If the City of Dallas were a corporate client, we would note that it has fallen significantly behind its competitors. We would warn that its product offering is becoming less and less compelling to its core group of target customers…We would further caution the management that they are in an especially dangerous position because overall growth in the market…is masking the depth of its underlying problems. We would explain that in our experience, companies in fast growing markets are often those most at risk because they frequently do not realize they are falling behind until the situation is irreversible.

Put into the language of business, we would note that Dallas is under-investing in its core product, has not embraced best practices throughout its management or operations, and is fast becoming burdened by long term liabilities that could bankrupt the company if the market takes a downturn.

The city responded in a number of ways, some of which were similar to Chicago at its inflection point. Many of these involve various urbanist “best practices” or conventional wisdom type trends.

By far the most important of these was adopting modern statistically driven policing approaches. As crime plummeted in places like New York during the 1990s, Dallas did not see a decline of its own. But with the expansion of police headcount and adoption of new strategies by new police chief David Kunkle in 2004 – and no doubt some help from national trends – crime fell steeply during the 2000s. The Dallas Morning News says that the city’s violent and property crime rates fell by a greater percentage than any other city with over one million residents over the last decade. In 2013, Dallas had its overall lowest crime rate in 47 years.

This is critical because nothing else matters without safe streets. I’ve had many a jousting match with other urbanists on discussion boards about where crime falls on the list of priorities. In my view it’s clearly #1 – even more so than education. It’s simply a prerequisite to almost any other systemic good happening in your cities. Students can’t learn effectively if they live and attend school in dangerous environments, for example. NYU economist Paul Romer made this point forcefully in his New Cities keynote, saying that fighting crime is the most important function of government and that if you don’t deliver on crime control your city will go into decline. Fortunately, Dallas seems to have gotten the message.

But there’s been attention to physical infrastructure as well. The area has built America’s largest light rail system (which was in the works since the early 1980s).

Dallas Area Rapid Transit (DART) light rail train. Source: Wikipedia

Both the city and region remain fundamentally auto-centric, however, and this is unlikely to change.

There’s been a significant investment in quality green spaces. A major initiative called the Trinity River Project is designed to reclaim the Trinity River corridor through the city as a recreational amenity. This is underway but proceeding slowing. Among the aspects of the project is a series of three planned signature bridges designed by Santiago Calatrava. The only one completed is the Margaret Hunt Hill Bridge.

The Margaret Hunt Hill Bridge in Downtown Dallas. Designed by Santiago Calatrava. Source: Wikipedia

The single bridge tower is quite an imposing presence on the skyline. However, the size of the bridge creates an awkward contrast with the glorified creek that is the Trinity River. It looks to me like they significantly over-engineered what should have been a fairly straightforward flood plain to span just so they could create a major structure.

Another green space project – and the best thing I saw in my trip to Dallas – is Klyde Warren Park, which is built on a freeway cap. About half the cost came from $50 million donations. I’ll be going into more detail on this in my next installment, but here’s a teaser photo:

Klyde Warren Park. Source: Wikipedia

The Calatrava bridge shows that Dallas has embraced the starchitect trend. This was also on display in the creation of the Dallas Arts District. Complementing the Dallas Museum of Art are a billion dollars worth of starchitect designed facilities including Renzo Piano’s Nasher Sculpture Center, IM Pei’s symphony center, Norman Foster’s Winspear Opera House, and OMA’s Wyly Theatre.

Dee and Charles Wyly Theatre. Designed by OMA’s Joshua Prince-Ramus (partner in charge) and Rem Koolhaas

This arts district – which naturally Dallas boasts is the world’s largest – along with the other major investments that were funded with significant private contributions show a major advantage Texas metros like DFW and Houston have: philanthropy. These are new money towns on their way up and local billionaires are willing to open their wallets bigtime in an attempt to realize world class ambitions, exactly the way Chicago’s did all those decades back.

By contrast many northern tier cities are dependent on legacy philanthropy, such as foundations set up in an era when they were industrial power houses. This is a dwindling inheritance. What’s more, what wealthy residents they do have are as likely to be taking money out of their cities through cash for cronies projects than they are to be putting it in. Thus they can be a negative not positive influence.

This shows the importance of wealth building in cities. Commercial endeavors can appear crass or greedy at times, and deservedly so. But without wealth, you can’t afford to do anything. There’s a reason Dallas could build America’s largest light rail system – it had the money to do so. Similarly with this performing arts district. To be a city of ambition requires that a place also be an engine of wealth generation.

I’m sure that Dallas’ moneyed elite are well taken care of locally and exert outsized influence on decision making. I don’t want to make them out to be puristic altruists. But they’ve shown they are willing to open their wallets in a serious way, something that’s not true everywhere.

This is a flavor of what Dallas has been up to. It’s too early to say whether the city will make the same transition Chicago did. Its greatest challenge also awaits some time in the future. When DFW’s hypergrowth phase ends and the city must, like New York and Chicago before it, reinvent itself for a new age, that’s when we will find out if DFW has what it takes to join the world’s elite, or whether it will fade like a flower as Detroit and so many other places did.

Toyota did just announce it’s moving 3,500 jobs to north suburban Plano. But corporations have long seen Dallas a place for large white collar operations. Boeing was what I call an “executive headquarters” – a fairly small operation consisting of only the most senior people. I haven’t seen Dallas win any of these as of yet.

The Dallas Morning News takes a somewhat mixed view on the city itself. They just did a special section called “Future Dallas: Making Strides, Facing Challenges,” the title of which sums it up. Dallas has put a lot of pieces on the board and made major progress on areas like crime, but it’s failed to make a dent in others, such as Booz Allen’s call to make the city more attractive to middle class families. Poverty is actually up since then, and the city is increasingly unequal in its income distribution. Dallas is not unique in that, but that’s cold comfort.

Despite gigantic regional growth, the city’s population has been nearly flat. Despite the vaunted Texas and DFW jobs engine, Dallas County has lost about 100,000 jobs since 2000. The core is clearly continuing in relative decline, and the Dallas County job losses are particularly troubling. I’m no believer in this idea that everybody is going to abandon the suburbs and head back to the city. But as former Indianapolis Mayor Bill Hudnut put it, you can’t be a suburb of nowhere. If the core loses economic vitality, the entire DFW regional will take a hit to its growth.

I highlighted some of what Dallas has accomplished recently, as well as continued areas of concern. On Thursday I’ll be back with another installment taking at look at downtown and the visitor experience.

Sunday, June 15th, 2014

Is Brazil Still the Country of the Future?

Not long ago, Brazil was riding high. It was feted as one of the “BRIC” nations destined to be the next world economic powers. The commodities boom had its natural resources and agricultural sectors humming. The press – for example, Monocle magazine’s swooning over Brazil’s push to boost its diplomatic presence – was adoring. And Rio was awarded the 2014 World Cup and the 2016 Olympics, two events that were intended to both serve as a catalyst for further development, and also as a coming out party of sorts for the country.

The World Cup is underway, but otherwise things haven’t quite worked out as Brazil thought they would. The average citizen of the country is upset at the vast sums being spent on international events that don’t benefit them. The last two years have featured riots, strikes, and various other expressions of unrest. Economic growth in the country has collapsed. In a special section last September, the Economist asked, “Has Brazil Blown It?

Late last month the McKinsey Global Institute issued a major report on the country called “Connecting Brazil to the World: A Path to Inclusive Growth.” At 104 pages, it’s massive, but a must read for anybody interested in South America’s giant.

And it’s a somewhat depressing read as well. Though there are immense strengths and opportunities for the future, Brazil has big problems too, most of them longstanding, and which hobble its aspirations.

Brazil is the 7th largest economy in the world and the 7th leading destination for foreign direct investment. But it’s 95th in per capita GDP, 114th in the quality of its infrastructure, and 124th in its level of ease in trading across borders. Its export sector is also heavily commodity dependent, particularly oil. Ranked only 43rd in global connectedness on McKinsey’s index, they estimate a potential boost of 1.25% (presumably percentage points) to annual GDP growth from improvements on that measure alone.

Three particular items jumped out at me from the study. One is the “custo Brasil” – the Brazil cost, so notorious it gets its own Wikipedia entry. A variety of factors from bureaucracy to the tax regime to an uncertain legal climate, poor infrastructure, crime, and corruption make the cost of doing business in Brazil very pricey indeed.

The second is the very low rate of investment in the economy. Brazil’s gross investment rate as a percentage of GDP is 18%, compared with 26% in Chile, 29% in Mexico, 40% in India, and 49% in China. Conversely, government consumption is at 22% in Brazil vs. 12% in Chile and Mexico, 13% in India, and 14% in China. Private consumption is similar in the countries except for China, which is notably lower. This probably helps explain the poor state of the infrastructure in the country.

The third is something I have personal experience with, namely protectionist trade barriers designed to create and sustain domestic industries in sectors like autos and computers. I suspect these rules were modeled on Japan, and more lately China, which used rules and business practices to build successful local champions. But in Brazil this has rendered its industry sclerotic. In effect, cars sold in Brazil have to be made in Brazil, ditto for computers, etc. This is where my personal experience comes in. When we were doing global PC procurement, Brazil was always a special case and our vendors had to have special Brazil made PCs for domestic use. This may not be an actual rule, but tariffs produce a de facto barrier. While this technique may have worked in Japan, it’s clear that it failed in Brazil. As the exception that proves the rule, McKinsey uses the example of regional jet manufacturer Embraer as a counterfactual. That company was privatized and opened to global competition. The result is that its got tough itself and is now an industrial champion for Brazil.

There are tons of statistics in the study that are worth scanning just to see. Brazil is consistently benchmarked against Chile and Mexico in Latin America, as well as fellow BRICs India and China. The comparisons aren’t pretty.

Reading a lot about the country in the last year, I put its problems into three categories: poor governance, geographic disadvantage, and scale disadvantage.

1. Poor Governance
Most of the issues pointed out by McKinsey fall squarely under the heading of poor governance. The contrast with nearby Chile could not be more plain across every dimension: corruption, the rule of law, investment, public sector debt, tax burden, infrastructure, regulation, etc.

Latin America seems to prefer two sorts of governments these days. One is a right wing nationalist heir to the military juntas of the past, best exemplified by the Kirchner regime in Argentina. The other are left wing populist-nationalist movements like Venezuela that tend to feature a streak of anti-Americanism. Both of these have produced pitiful results.

Brazil is a sort of lite version of the latter. Lula da Silva was a charismatic labor activist who led strikes and was jailed by the previous military dictatorship in his youth. Post-democratization, he went into politics. After moderating some of his more radical views, he was elected president on a reform agenda. While he had some success and was arguably and improvement on his predecessors, he ultimately failed to deliver on material changes in governance. His hand picked successor Dilma Rousseff has not been as effective and is in an electoral struggle for another term.

In line with the nationalist streak of this governing type, one of Da Silva’s primary concerns was Brazil’s amour-propre. As one of the world’s largest countries, he found it self-evident that Brazil should be treated as a great power. He lobbied for Brazil to have a permanent seat on the UN Security Council. He and others responded in kind to any affront to the nation’s pride, such as requiring American and only American visitors to be finger printed after the US imposed a fingerprinting requirement on foreign visitors. He sought out diplomatic coups where ever he could find them, which included cozying up to unsavory characters like Mahmoud Ahmadinejad who thinks Israel should be destroyed and that Iran has no gays (presumably because he has them executed when he can find them).

Da Silva forgot that there’s more to being a great power than being a big country – you’ve got to earn it. And as a very popular politician he did not seize his moment of opportunity to truly grasp the nettle of reform.

Meanwhile nearby Chile is one of the Latin American governments that’s followed a different model. It’s been run by center-left governments more or less the entire time since the restoration of democracy, and they’ve delivered on a good governance model that has taken them to effectively developed country status. Chile is now even a member of the OECD. Chile is basically the Minnesota of Latin America, and the results demonstrate it. This should show Brazil the size of the prize if the get their act together.

2. Geographic Disadvantage
Brazil is simply a long way from major developed markets. This puts it at a geographic disadvantage versus many other countries. Current airplanes cannot make a non-stop flight from Brazil to East Asia, arguably the most important emerging part of the world. It’s even a long haul from the United States, with relatively few gateway cities vs. say major European capitals. Brazil is time-zone advantaged with the US, however. It also speaks Portuguese instead of Spanish, which imposes a linguistic handicap.

3. Scale Disadvantage
Brazil is a big country, geographically and in population. Size can be an advantage, but it also makes reform difficult as it’s hard to turn a battleship. Brazil’s population of 200 million is more than ten times that of Chile.

Brazil’s two principal cities, São Paulo and Rio de Janeiro, are also megacities. São Paulo in particular is huge, and at north of 20 million people (more than the entire country of Chile) is the 10th largest city in the world. I recently wrote that it’s unlikely the world’s emerging megacities will turn the corner in eliminating dysfunction. Their problems are just too huge and their national growth rate too low. Though I’d consider this more hypothesis than conclusion at this point, my rule of thumb is that a megacity can only achieve escape velocity from pervasive dysfunction if they are a major city in a country that is the world’s current rising economic (or historically imperial) power.

Brazil is not that country, and two mega cities will be a drag on growth. Although São Paulo is an important emerging global city – 23rd in the world in a forthcoming report I helped create – I’m told that both São Paulo and Rio are growing more slowly than secondary cities in the country. A previous McKinsey study threw cold water on the idea that megacities are an advantage, noting their under performance by saying:

It is a common misperception that megacities have been driving global growth for the past 15 years. In fact, most have not grown faster than their host economies, and MGI expects this trend to continue. Today’s 23 megacities—with populations of 10 million or more—will contribute about 10 percent of global growth to 2025, below their 14 percent share of global GDP.

In contrast, 577 middleweights—cities with populations of between 150,000 and 10 million, are seen contributing more than half of global growth to 2025, gaining share from today’s megacities.

So I’m not surprised that it’s Curitiba, not one of the megacities, that’s where the innovative BRT revolution was begun. If I were looking to invest in Brazil, I’d be looking at this next tier of cities. Nor is it surprising that Santiago, Chile (population 5.4 million) has had great success in modernizing given its more moderate size.

Plain and simple the degree of difficulty is higher in Brazil because of the size.

Brazil is also a very racially diverse country with a number of challenges resulting from its history of oppression. Brazil had more slaves than any other country in the world and was the last New World colony/nation to abolish it. If slave reparations are on the agenda in the United States, how much more so similar issues in Brazil? Again, contrast with Chile, which never had very many slaves and abolished slavery in 1818. With the exception of a relatively few indigenous peoples on reservations, Chileans largely perceive themselves as ethnically homogenous, though with some skin tone based status (moderately sized…historically racially homogenous…Minnesota?)

Which is to say that it’s tough to entirely fault Brazil for not living up to the example of Chile. Its degree of difficulty is much higher. And its geography hamstrings its global interaction.

Nevertheless, solving the governance challenges to address the real issues Brazil faces remains the top agenda item. McKinsey has laid out a number of good suggestions, the real question is whether or not Brazil’s socio-political system can produce the ability to implement them.

Thursday, June 12th, 2014

Will the World’s Emerging Megacities Turn the Corner?

My latest post is online over at New Geography and is called “Will the World’s Emerging Megacities Turn the Corner?” There’s an explosion of megacities happening around the world, often in developing countries. These cities face huge infrastructure issues, social issues, poverty and slums, etc. The question is whether they will ever achieve escape velocity from that. I don’t think so. Here’s an excerpt:

Most emerging megacities likely will never turn the corner to developed status and achieve a decent standard of living and quality of life for their residents. They may be important national centers of aspiration, but most of them will never become influential global cities. Their huge size and vast problems will leave them with perpetual entrenched poverty, poor infrastructure and public services, and low quality of life by global standards.

The general rule seems to be that a megacity can only escape pervasive dysfunction if they are a major city in a country that is the world’s current rising economic (or historically imperial) power.
In the second edition of Peter Hall’s landmark book The World Cities, he describes a 1970s Tokyo in which the night soil pickup industry was alive and well. Only in an era of national economic hyper growth – culminating in the 1980s – was Japan able to fully modernize its urban infrastructure and clean up the massive environmental problems resulting from its rapid industrialization and urbanization. This was the time when Japan seemed destined to become the world’s leading economic power, and America was fretting as Japanese investors bought trophy assets ranging from Columbia Pictures to Rockefeller Center.

We are witnessing the same today in China. It’s no accident that cities like Beijing and Shanghai are becoming fully modernized at the same time that China is the world’s rising economic power. Even there, serious problems with social integration, pollution, and low quality development remain. China had best hope its economic growth continues until such time as it’s rich enough to solve those problems too.

Tuesday, June 10th, 2014

On Being Priced Out of Downtown Detroit by Daniel Hertz

[ After my recent post on people saying they were priced out of downtown Detroit, Daniel Hertz followed up with some thoughts of his own over at this excellent City Notes blog on that and other topics. He graciously allowed me to share them here. Also, I'd like to clarify one thing which is that in my original post I was referring to people in Detroit wanting more construction in their preferred neighborhoods, not Daniel personally. I included that bit from Pete's post to help make Pete's point in context - Aaron. ]

Okay, on to the funner stuff. Attempting to keep this organized:

1. Jim’s post: I don’t actually really disagree with anything here. My objection to his previous post was mostly about this line:

What a superstar metro doesn’t mean is strong population growth and demand for housing outstripping supply.

Maybe I misunderstood, or maybe he changed his emphasis, but whatever the reason, the latest post makes clear that both supply restrictions and increasing demand are playing a role in exacerbating housing prices. I think that’s exactly right.

2. Aaron’s post: Responding to an article about rising home prices and displacement in downtown Detroit, Aaron basically picks out three dynamics that are important. The first is short-term:

Now, what about supply? Is the city of Detroit telling people they can’t build downtown?… What we would appear to have here instead is a lag issue. Real estate development isn’t like ramping production up or down in a factory. It takes time to do.

Right. Given that it can take a year or two for projects to be conceived, engineered, financed, and built, it’s pretty common for areas where demand increases very quickly to suffer a temporary shortage of supply as a result of this kind of lag. It makes sense that this would be the case in downtown Detroit.

Dan Gilbert imagines all the light-skinned people who will use his new toys.

The second problem is longer-term, but quite specific to places like downtown Detroit where there have been very few residential buildings at all, prior to the increase in demand:

Additionally, with higher income demand in the market, new units are going to be built to serve that market, not lower income people. If you own land and have a market that gives you the choice of either building a higher profit building or a lower profit building, which one will you choose?

I would actually make this even stronger. Given construction costs, very few new homes are built for low-income people without some sort of subsidy: it’s just not profitable to do. This is why even people like Ed Glaeser, a free market-oriented economist and champion of increasing housing supply to lower prices, say that housing subsidies will be needed no matter what we do: at the moment, the cost of building new housing requires sales prices that are too high for low-income people to afford.

In established low-income residential neighborhoods that experience gentrification, this can be less of an issue. If building new homes is difficult, then landlords of older buildings can make a lot of money by renovating their apartments and renting them at much higher prices to the wealthy newcomers, displacing the existing residents. But if building is easy, then lots of the newcomers will move to fancier, newly built homes, and the old landlords won’t face nearly the incentive to renovate and raise rents. In that case, the older, more affordable housing stock can be preserved.

But if there is no older, more affordable housing stock – as in places like downtown Detroit – then the only housing is the new, expensive stuff, and you’ll get a pretty economically homogeneous neighborhood no matter how much you build. (At least, that is, until that new housing stock becomes old enough to lose value.)

The last problem is the peculiar geography of demand.

Which brings us back to the juxtaposition of high demand in Downtown/Midtown Detroit vs. the low or no demand in most of the rest of the city. Why wouldn’t the people who can’t afford downtown rents just move into one of those areas?

The answer is obvious: they want to live downtown specifically.

This, I think, is the thorniest and most interesting issue: it’s obviously the case that in a place like Detroit – to a much greater extent even than Chicago – there is a “supply problem” only in very geographically limited areas. And that geography, as Aaron, Jim, and Pete Saunders have pointed out, is defined by where the people driving demand actually want to live: in this case, downtown, Midtown, and almost nowhere else.

Where I think Aaron and Pete are wrong, though, is in glossing over the reasons that demand is shaped this way. Their focus, as I understand it, is on status and yuppie comfort: where the hip neighborhoods, the hip bars, and so on, are. And, correctly, they argue that no one is entitled to live in the hippest part of a city.

But although status certainly plays a large role in determining where people want to live, you’re missing a lot if that’s all you’re thinking about. I would divide the reasons that people limit their housing searches to downtown and Midtown Detroit – or the North Side in Chicago, or (fill in the blank) in your city – into basically two categories:

1. Economic factors. This is economics broadly construed, and basically covers all of the concrete advantages or disadvantages to a particular place: not just access to jobs, but the quality of the local schools; access to amenities, from essentials like grocery stores to luxuries like cafes; the likelihood that you will be a victim of serious crime; and so on.

2. Social factors. This includes both conscious and semi-conscious concerns about status – I want to live in Lincoln Park, because the kind of person I want to be would live in Lincoln Park – but also the more invisible issues of social networks, or the extent to which you are aware of different neighborhoods. What my professors would call a “choice set” – what is the menu of options you’re consciously choosing from?

I guess my argument is that Aaron and Pete are focused on a subset of Category 2, but that in fact there’s a lot more going on.

More than that, I would suggest that, to a large extent, social factors are mostly secondary: that is, when you consider where to live, you first narrow down the options with economic factors – where can I get to my job, send my kid to okay schools, and not be afraid to walk home at night – and then you make your final choice using social factors.

In other words, you don’t need to use some status argument to explain why middle-class gentrifiers in Detroit refuse to move to most neighborhoods in that city: you just need to know that most of Detroit has terrible public transit (and therefore terrible access to jobs for people who don’t want to drive every day), high crime, and few essential amenities like grocery stores. Avoiding those sorts of disadvantages is a pretty obvious move.

Now, that said, I think Pete’s important insight is that sometimes, social factors are so powerful that they override economic factors, and neighborhoods that meet the basic economic qualifications are eliminated from consideration anyway. One of the main ways that happens is racist heuristics: black neighborhoods, no matter what their attractions, are just not in the “choice set” for white people (and, depending on the city, for Asian-American or Hispanic people, too). Thus Pete’s (and my) frustration that the middle-class black neighborhoods in Detroit, or places like Chatham or South Shore in Chicago, get no attention from the non-black middle class, while it flocks to working-class white or Latino neighborhoods.

Chatham: It’s pretty.

There’s some evidence that that’s partly because of ignorance – white folks in Chicago literally are not aware that Chatham or South Shore exist as relatively pleasant, attractive neighborhoods. There’s also a good amount of evidence that white people, and other non-blacks, just aren’t very comfortable with the idea of living in a majority-black neighborhood. My suspicion is that the latter factor is pretty powerful, which makes me pretty pessimistic about the prospects for large-scale integration in the next decade or two. But I could be wrong.

Evanston, IL, used to allow apartment buildings like this, which allowed people of moderate incomes to live in an affluent suburb with great access to jobs, other amenities, and good schools. But since the 1970s, that hasn’t been the case, and Evanston’s population hasn’t grown since.

But I also think that this whole conversation, by focusing on the choices of financially comfortable people choosing whether to live in downtown Detroit or some other comfortable neighborhood, is missing what the housing supply argument is really about: people who are currently stuck in neighborhoods that would fail any middle-class household’s economic test, and who can’t afford to move to one that would pass. Those are the people who suffer the most under our current housing system, and who would stand to gain the most if supply restrictions were lifted.

There’s a lot more to say about this; it’ll come next week.

This post originally appeared in City Notes on May 31, 2014.

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