Sunday, December 1st, 2013
Jim Russell and Richey Piiparinen have released a new whitepaper on Cleveland that should be read by anyone looking to reboot the economies of struggling post-industrial cities. Released under the auspices of Ohio City, Inc., “From Balkanized Cleveland to Global Cleveland: A Theory of Change For Legacy Cities” looks at how a lack of population churn has stunted Cleveland’s ability to connect to the global economy.
This paper puts a different spin on talent and the knowledge economy. “Knowledge” is not just facts acquired through education or work experience. It also includes the set of personal relationships and knowledge of other places and social networks that we all carry to some extent. Global cities not only score well on traditional knowledge measures, but because they are destinations for migrants, they excel in this more broader notion as well.
Cleveland is not a global city. In fact, in his book Caught in the Middle, Richard Longworth said, “When I went to Cleveland I found not alarm but complacency. In a city that is being destroyed by global forces…I found almost nobody willing to actually talk about globalization or global challenges…In all my travels through the Midwest, Cleveland was the only place, big or small, that seemed heedless of the global challenge.”
Part of that comes from a lack of migrants coming in to bring global knowledge and connectivity to global networks. Using IRS data from Telestrian, Russell and Piiparinen note that Cleveland actually only ranks 34th in America in its outflow of people, versus being the 28th largest metropolitan area. The city is actually doing a better than average job of retention.
The problem is that Cleveland ranks 47th in inflow of people. Attraction is very weak. Hence population decline, but also an inbred, closed society. About 75% of the people in metro Cleveland were born in Ohio, versus 30-60% in other, more globalized cities. Among large metros in the US, Cleveland ranks 6th in its percentage of the population living in the state they were born. (In fairness, this in part derives from a low foreign born percentage and the fact that the Cleveland region isn’t a multi-state metro).
I did my own analysis to take a look at the in-migration shed of the city. Cuyahoga County (the central county of the Cleveland region) had reported in-migration from 320 counties during the 2000s, with 228 of these sending at least 100 people to Cleveland. I decided to contrast with better preforming Columbus. There, the core county of Franklin drew people from 486 counties, with 335 of them having at least 100 people. Now Columbus is a huge university town, so I also looked at Indianapolis. Indy’s central county of Marion, which is significantly smaller than Cuyahoga in population, drew from 381 counties, including 273 of 100 or more people.
Clearly Cleveland is drawing fewer people from the outside world, and drawing from fewer places, than cities that are performing better, though one could quibble with the causality arrow here.
As a result, we see what is frequently true in such places. Cleveland’s social and power networks have balkinized. They don’t receive much new information or many new people, and what they do receive they don’t integrate well. Hence what Longworth observed. Cleveland needs much more demographic churn to open up these social networks and generate more global connectivity.
That’s the bad news. The good news is that there’s evidence this is already happening. The authors note that several central city areas have attracted newcomers from both inside and outside of the region – and these are disproportionately young. My own analysis showed that Cleveland had surprisingly strong downtown population growth of 4,200 people, one of the best showings in the Midwest.
The authors also note other potentially encouraging trends. A good number of Cleveland’s gentrifying neighborhoods are also becoming more not less diverse. While all they note diversity doesn’t mean people automatically start interacting with each other, it’s a start. What’s more, they suggest that the decline in social capital that results in diverse neighborhoods might paradoxically be a plus, as Cleveland suffers from excess social capital today. Lastly, they note that Cleveland has pretty high churn already with both New York and Chicago, making it one of the few similar types of cities that already has well-established migration paths. They believe this is poised to continue as high costs and “cool fatigue” push people out of many of today’s key global hubs like New York.
The potential for Cleveland in capturing this is significant in their view. As the paper notes, “This scenario, then, that’s unfolding in which coastal talent is arriving, or re-arriving, into the legacy city landscape can foretell an economic sea change…The long-term economic potential for this talent migration rests not in how many microbrews are consumed or condos are leased, but rather how it affects Cleveland’s global interconnectivity. These migrations are re-arranging Cleveland’s historical insular social networks, with the gentrifying neighborhoods acting as urban portals to the global flow of information.”
This was not intended as a critique of microbreweries. Rather, the idea is that luring people is about way more than just boosting the consuming classes, it’s about tangible change in the social and economic structure of the community.
No one should pretend that positive indicators like strong downtown population growth means Cleveland’s problems are solved. I’d describe this more as “green shoots” than anything. But it’s undeniably positive and provides a platform for further growth.
The authors don’t suggest any particular policies in response to their findings. They were more interested in moving beyond the traditional “brain drain” frame of talent and inject both some key facts around Cleveland’s migration patterns and their talent churn theory of civic change into the local discourse. They got a nice writeup in the Plain Dealer, so they are off to a good start there. But more work will need to be done in the future on an effective policy response.
Tuesday, November 19th, 2013
[ This week's guest post is from Sam Hersh. I'll hopefully have more of my own perspectives on the de Blasio phenomenon in the future. In the meantime, here's his take - Aaron. ]
When Bill De Blasio won New York’s mayoral election a few weeks ago, it came as no surprise to anyone. His impassioned analogies to New York’s “Tale of Two Cities” and his call for a city that provided not just for the wealthiest one or two percent, but for all, appealed to the growing sense that New York is an increasingly unfair and unequal place.
The angst felt by New Yorkers is not contained only to that city. In Chicago, real estate companies have poured investment into the Loop and a handful of adjacent residential and mixed-use neighborhoods. Yet, whole swaths of the city’s south and southwest side have remained in a state that would rival war-zones and have earned the city a reputation as America’s murder and gang capital du jour. San Francisco’s recent transit strikes, and the ensuing scandal that followed a Silicon Valley tycoon’s less than empathetic statements on Facebook have highlighted that city’s class tensions.
Saskia Sassen pointed out in her 1991 book The Global City that globalization and modern technologies should push wealth and geopolitical power to a small number of globally connected and powerful metropolises. And in many ways, this thesis has born itself out as financial centers in New York and, to a lesser extent, Chicago and Boston as well as technology in San Francisco and “Eds and Meds” in Philadelphia, Pittsburgh and Boston have all “revitalized” these legacy cities that only thirty years ago would have been widely assumed to be dead. Meanwhile, smaller, less connected legacy cities have shrunk in global importance.
Left out of many people’s analysis of Sassen’s writings – an analysis that equates geopolitical power with urban success – is the simple fact that a geopolitically powerful city does not always mean a city of evenly distributed wealth or equality. The urban poor in New York, Chicago, or Philadelphia are not necessarily better off than those in Buffalo, St. Louis, or Detroit. In some ways, the low cost of living in “unsuccessful” legacy cities means that quality of life is in many cases better than in those cities widely regarded as a success.
Given our assumptions about urban success – that it should involve a thriving private sector, a critical mass of wealthy taxpayers, and a sustainable level of investment (as an aside, I know few people who would describe investment in New York as “sustainable” at this point) – it should come as no surprise that the method most commonly employed to realize these goals, economic development, would fail so spectacularly to deliver positive changes in the lives of the urban poor.
While a thriving private sector, a critical mass of wealthy taxpayers, and a sustainable level of investment certainly register among the necessary descriptions of a successful city, urban economic development too often equates better cities with attracting better people at the cost of dealing with the populations already residing within a city. While the last few decades have seen the resurgence of once decrepit metropolises through TIFs and BIDs and tax breaks aimed at capturing employers of what Richard Florida would describe as “the creative class” – engineers, lawyers, artists, and bankers – De Blasio’s win, along with political movements like Occupy Wall Street augur a shift in focus from the technocratic priorities of Giuliani or Daley to a De Blasio-style redistributive view of urban justice.
So far I have ignored a bit of nuance between Bloomberg’s market-oriented (some might say neoliberal) focus on growth in “creative class” (high skill and high pay) sectors, and his classically progressive restraints in other initiatives (smoking, trans fat) and the degree to which other mayors have followed New York’s lead in this type of leadership. While I tend to hope that a market-oriented solution to urban problems can be found, the vehicle for urban revitalization seems almost irrelevant when we consider the degree to which it has benefitted the urban wealthy at the exclusion, and occasionally cost, of the urban poor.
Obviously, inequities in quality of life have been most pronounced in New York where wealth is profligate and new construction has been tightly regulated, pushing cost of living ever upward. Yet, the De Blasio election means less for New York’s poor than it does for the country as a whole. Whether the Rahm Emanuels and Michael Nutters of America’s cities are replaced by De Blasio democrats in the next election will mean a lot for the priorities of development in our cities.
It’s easy to dismiss the De Blasio win as an event isolated to the confines of New York as the logical end to both Bloomberg’s overreaching policies and “quality of life” initiatives which arguably placed a premium on attracting and retaining the wealthy. But, we should not ignore the very real possibility that De Blasio’s win, and the disdain growing for economic development-focused politicians, may lead to a spiral of urban disinvestment wherein wealthier taxpayers leave cities, making cities ever less attractive places to live, thereby further escalating the effects repelling the middle and upper classes from urban cores. The reason we should not ignore this possibility, though it may seem inflammatory at first consideration, is simple: we are still recovering from its effects throughout the last half of the previous century.
Yet, De Blasio is probably not as leftist as right-leaning pundits have bombastically proclaimed in the wake of his election. Hopefully, De Blasio and the growing urban left can pull off a type of development that prioritizes development for all, not just for the wealthiest residents, without falling into the traps of the union-entrenched Democrat machines that oversaw the urban perdition of the last half century. The death of urban economic development may well be upon us, but hopefully if it is, something that provides for the development of the whole city will emerge.
Sam Hersh is currently a student of urban studies at Haverford College in Pennsylvania hoping to use the worlds’ cities to more effectively catalyze human opportunity when he graduates. He can be reached at email@example.com.
Sunday, November 17th, 2013
Not long ago there were pretty clear boundaries between the personal sphere and the commercial one, as well as more clear boundaries between public and private space. What’s more, most things, both personal and commercial, were heavily based on a model of exclusive use. Today these lines are increasingly dissolving in ways that upset current business models and lifestyles. It portends a present and a future in which property is increasingly shared, not exclusive, and where there are a mixture of public, private, personal, and commercial entities intersecting in the same spaces. The key driver of this is technology, which has reduced barriers and transaction costs in a way that enables things like car sharing that would have been impossible not long ago. However, our legal frameworks have often not kept up with this. Some people who benefit from the current models would like to keep it that way. But if we let the marketplace evolve, then institute good rules to fit this new reality, it promises to hold huge benefits to the public.
First an example that’s by now old hat. In an age before cell phones and personal computers, there was a more rigorous separation of work and personal life. People need to be physically co-located in a office. They commuted there every day, worked in a dedicated personal office or cubicle, then went home where work as a rule did not intrude. Today’s workers are checking email every waking hour (and even being interrupted during the night), while also spending much more time on personal things (online banking, fantasy football, or random web surfing) while in the office. The internet has enabled distributed work environments, in which teams collaborate from offices, airports, and homes around the world. Companies increasingly have turned to “hoteling” or other shared space concepts in the office on the assumption employees no longer need dedicated space. Many people have flexible work arrangements or otherwise telecommute. In the latter case, home and office have literally merged.
This has had huge benefits across the board. Companies love it because they can access cheap labor pools overseas, effectively recruit people with a need for workplace flexibility, and reduce their office space needs. Joel Kotkin has said the latter trend may mean America has hit “peak office.” Workers get the flexibility they like, can save on commuting costs, access geographically remote clients, etc. The environment benefits from reduced commuting. The ultimate green commute is one you don’t have to make. I would say that the balance of the benefits here has accrued to business, while workers have sometimes had arrangements they don’t like forced on them. Still, on the whole this shows great promise of being a win, win, win.
The “hoteling” concept and “just in time” delivery aren’t limited to corporate uses. Things like car share are bringing them to the household market. The average personal car is supposedly idle 90% of the time. When you factor in all the additional infrastructure costs needed to support a one person, one car model (e.g., parking), the deadweight loss from all that idle capacity is stunning. Imagine factories that sat idle 90% of the time doing nothing. If a corporate manager had this low a rate of asset utilization, he’d be in deep trouble.
When you sign up for Zipcar or another service, you avoid some of this deadweight loss. By effectively sharing a fleet of vehicles with others, a relatively small number of cars can serve a large number of people, greatly improving asset utilization rates and delivering big value to consumers, even when they are paying a business to manage the fleet for them. It’s a huge form of productivity gain. This also has the effect of converting transportation from a largely fixed cost to a mostly variable one, with signficiant impacts on the decision making process for everything that involves transportation (mostly positive, I believe).
Though having a limited addressable market at present, obviously car sharing in the Zipcar style poses a threat to the entire US car industry, arguably one of the most important employers in the country and one President Obama himself personally intervened to save during the meltdown. Clearly the highest levels of politics in America will defend the car industry, though to date there’s been very little complaint from them about car sharing.
Things have been different when it’s transport service providers who are threatened. Public transit agencies have long been unrelentingly hostile to jitney services. Today car service booking tool Uber and ride sharing company Lyft have experienced an all out regulatory assault from entrenched interests. Lyft is a particularly interesting case. It’s a peer to peer ride sharing platform. Just as 90% of the time a private car is unused, when it is used, 80% of the available seat capacity goes vacant. Again, this is a massive deadweight loss. (The amount of theoretically wasted capacity in the world of private cars is stunning). Imagine an airline trying to make a business out of 20% load factors. It just doesn’t work, yet we as individuals run a “business” like that every time we drive our cars solo. Lyft helps fill up those empty seats, and even get some money – “donations” – in the process.
In other words, Lyft is a business that effectively turns your personal vehicle into a pseudo-livery vehicle. I’ve long argued that we should have “every car a jitney” by legalizing it and having personal auto polices cover ancillary commercial use as a matter of course. Lyft is trying to solve that problem and make it happen. Obviously the traditional “commercial” sector (e.g., taxis), which is highly regulated and subject to many taxes and fees hates this. They feel, rightly to some extent, that there’s a double standard. This is the type of conflict and legal uncertainty are spurred when the boundaries between personal and business, and between exclusive and shared use, start breaking down.
The big kahuna in provoking outrage of late has been AirBnB, an application that lets people rent out rooms in their homes as de facto hotel spaces. Again, the same principle applies. An empty bedroom is deadweight loss just like an empty office or an idle factory. It makes sense to put those spaces to work where feasible. This had been done previously in the form of house swaps and couch surfing. But the rise of commercially oriented AirBnB has raised hackles, especially in governments that have strict rules and high taxes on hotels. There have been a number of media articles of late taking note of or weighing in on the controversy. For example, in the New York Times piece, “The Airbnb Economy in New York: Lucrative but Often Illegal.”
Again, the benefits are clear in the improved utilization of space which is a pure efficiency gain. What’s more, AirBnB was even used by the government during Hurricane Sandy to find temporary free housing for those displaced by the storm. Peter Hirshberg noted that this type of distributed app might be the real killer app for smart cities, and will play an increasingly important role in urban resiliency. But it legitimately does create a set of parallel environments and rule sets, and exposes a world in which ancillary commercial activity at a residence is something that doesn’t really fit into our existing categories.
The list of situations like this are endless. Many zoning laws don’t appropriately allow home based businesses. Fund raising bake sales have been banned because it’s not legal to sell products prepared at home. In some places there have been issues with selling vegetables from home gardens.
Then there’s the disputes arising from the increasing use of public space for commercial purposes, whether that be curb side intercity bus service or food trucks. Pushcart style food vendors, often ethnic, are also often technically illegal (e.g., rogue elotes stands).
In short, traditional barriers are falling and boundaries are dissolving, especially when it comes to those key dimensions of personal-commercial, exclusive-shared, and public-private.
I don’t want to suggest all of the complaints about these are unfounded, though many of them are pure rent seeking. From the standpoint of someone running a fully commercial operation, who complies with massive amounts of costly red tape, it certainly seems unfair that others are allowed to operate what are basically businesses under a lighter tough regulatory scheme. The status quo isn’t necessarily where we need to be.
But let’s take a step back and look at the big picture. Our economy is in huge need of a massive injection of dynamism and new value creation. Many observers have said we need a completely new economic model. Walter Russell Mead has called this “beyond blue”. Richard Florida styles it the “great reset”. But clearly the old ways of doing things aren’t working and we need change.
This new style “shareable” economy based on peer to peer production in a distributed, small scale form is one that promises to provide at least part of the answer. It also renders addressable a huge amount of previously trapped value. Companies reaped huge amounts of gains by eschewing vertical integration in favor of more networked relationships. That’s corporate-speak for peer to peer sourcing. Similarly, things like hoteling, just in time delivery, etc. have let to much greater and more effective asset utilization. The amount of under-utilized assets in the household sector is stunning. This is about bringing to that household sector the same types of efficiency boosting and value creating techniques previously employed only by traditional businesses.
But beyond the sheer efficiency gains, I think it’s under appreciated in developed countries how economic informality can create economic dynamism. Peruvian economist Hernando de Soto noted that lack of property titles and difficulties of the formal economy perpetuated poverty because people in developing countries couldn’t access the system for credit to fuel business, etc. In the developed world we’ve got a similar problem brewing. Our economy has been largely entirely formalized to the point where we are choking in red tape that has produced an economic system that has failed too many of its residents and leading to the creation of these informal economies as a safety valve. And our societies are very ill equipped to deal with that as we’ve become excessively formalized.
We don’t need to establish property titles as we already have them, but we do need regulatory systems that enable entrepreneurship and new business models like peer to peer to thrive. What’s more, I think enabling some level of an informal sector to flourish is actually a good thing, as it’s a de facto “incubator” for new ideas that can later be developed into a more officialized system. Without a toleration of informality, these would never get off the ground. I’ve highlighted how this worked with regards to uncertain property titles on abandoned buildings in Berlin that helped launch the creative scene there. I also highlighted similar trends in Detroit. Those again were born of desperation, but we’re starting to get there in our economy more broadly.
It seems hypocritical to me for businesses to suggest that consumers be prohibited from doing exactly what business does every single day to improve productivity and generate more value. (It would hardly be the first time though. Business love globalization – for themselves. They can buy raw materials in Brazil, manufacture in China, do their IT in India, etc. But you try applying “consumer direct globalization” by purchasing your drugs from Canada or buying an out of region DVD and see how far you get. It’s a completely two tier system designed to free corporations while trapping the consumer in hyper-segregated markets).
This would seem to be one area where the left and right could agree. Free marketers should love light-touch regulation and lower taxes in the new peer to peer economy. The left should like the way it frees consumers from dependency on big business/neoliberalism, sustainability, etc.
Adjusting our rules to make this happen is an imperative. A non-profit called Shareable and the Sustainable Economies Law Center recently issued a report called “Policies for Shareable Cities” that talk about what a lot of places have been doing to make this happen. For example, they explained how Portland updated its zoning code to allow “food distribution” an accessory use in all zones in order to facilitate the development of the Community Supported Agriculture Model. Similarly, Marcus Westbury has talked about the need to update the software of cities in order to help redevelopment, as he helped with in the Renew Newcastle project.
But beyond new rules, maybe we should just go along with no rules for a while, and let this sector develop. After all, that’s what we did with tech. The government took a hands off approach and the feds even prohibited levying taxes. This helped the United States build a massive industry off internet technology, one that has continued to thrive even with the rise of offshoring. We should do the same here to see if we can replicate that success with peer to peer shared production in the household/personal sector.
Tuesday, November 12th, 2013
[ Ramsin Canon is one of the most keen left political observers I know in Chicago. Among other things he's been the politics editor at Gapers Blocks, a union organizer, and is now a law student I believe. Needless to say, he's no fan of "neoliberalism", even when practiced by those on the left. Here he provides his frame and critique of the current reigning governance model in our various levels of government re:cities. I may revisit this topic with my own thoughts in the future, but I'd like to make a couple of observations here. 1) Canon sees the locus of the problems facing cities as being at the federal level or otherwise beyond their control such that the response he decries is at least somewhat rational (if not the right one in his view). I take this as similar to my view that "gentry liberalism" has a certain sort of logic to it. 2) His articulation of the background is one that even many with diametrically opposite policy views could endorse. They just might take different lessons away (e.g., that federal intervention in cities actually caused many of the problems, see:urban renewal, downtown freeways, war on poverty, etc). This provides potential touchpoints for debate. In any case, this definitely makes you think about where we are, how we got here, and what to do about it. - Aaron. ]
Jamelle Bouie, a moderate liberal writer for The American Prospect, tweeted this:
There’s nothing good for workers in places where cities scramble to give benefits to companies for a handful of shitty jobs.
— Jamelle Bouie (@jbouie) December 12, 2012
around the same time that Mick Dumke, a left-leaning Chicago Reader reporter, wrote this:
Desperate for money, state and local governments around the country have explored all sorts of privatization deals, or public-private partnerships, as advocates prefer to call them. Florida, Arizona, and other states have sent inmates to private prisons. Detroit has considered outsourcing management of its street lighting system…Chicago isn’t just part of the trend. For more than two decades, it’s been one of the privatization leaders. “You could say they’re at the head of the pack,” says Leonard Gilroy, director of government reform at the libertarian Reason Foundation. “Chicago is reflective of the outsourcing that’s been going on for years.”
Not long after, we read about this:
Beginning January 1, Chicago’s parking meters will be the most expensive in North America. It’ll cost drivers $6.50 per hour to park in the Loop. Near downtown the rate will be $4 per hour. Other metered areas throughout the city will be $2 per hour.
For Skyway drivers, tolls are going up from $3.50 to $4.
Mayor Rahm Emanuel’s administration will explore the possibility of privatizing Midway Airport but will take a shorter-term, more tightly controlled approach than was employed by former Mayor Richard Daley’s team on the city’s first go-round.
All the while, Mayor Rahm Emanuel continues to be lauded by left-neoliberals and fellow travelers for his aggressively pro-business economic development policies, including mass privatization. Meanwhile labor unions and community organizations scrambled to find a critique of these policies that will resonate with a public increasingly incensed with a policy atmosphere that regressively taxes them while slashing jobs and services.
With the election over and no longer sucking all the air out of the room, and with President Obama comfortable ensconced in his second term but before the 2016 jockeying starts in earnest, now may be the time to step back and think about the big picture. What is this amorphous policy regime to which Mayor Emanuel, and mayors across the country hew? A policy regime that is comfortable enough for the wealthiest and most powerful Americans that they can comfortably donate both to Mayor Emanuel and Mitt Romney?
What we’re feeling viscerally, but seeing from too close to appreciate, is the logical end of decades of neoliberalization of government, which has transformed a managerial state into an entrepreneurial one. Our Mayors are now “entrepreneurs-in-chief,” and the result is that governance has been transformed from a participatory process of pooling resources and regulating behavior for the public good into one of government by private negotiation and enticement of capital through competition between states, cities, and even neighborhoods.
The neoliberalization process, broadly speaking, began in the 1970s. Neoliberalization impacted local governments in various ways, but the most directly relevant are, first, the shift in federal policy from direct spending to “pro-growth” policies and, second, the liberalization of trade and regulatory regimes that introduced international competitive pressures on localities, particularly cities. The abandonment of federal and state commitments to infrastructure and social welfare programs required localities to resort to debt (in the form of bonds) and the active pursuit of capital investment to make up attendant budgetary shortfalls. The introduction of international competitive pressures made this need more acute.
In the pre-neoliberal Keynesian context, cities behaved more managerially, responsible for administering programs like public housing and developing regimes like Euclidean zoning, as well as encouraging business development and protecting labor interests. When cities were “disciplined” by a loss of federal and state funds, they were expected to either shrink in size or find private sources for revenue–the antithesis of the Keynesian principles of recession response. Both to avoid capital flight and to attract new capital, therefore, cities must act entrepreneurially, engaging businesses and enticing them to develop new projects.
Enticing investment can take many forms, of course. Among these are tax incentives like tax-increment financing (“TIF”) overlay districts or sales tax rebates, direct subsidies, and “particularized” regulations that permit the government to be more flexible to the needs of development parties. Particularized regulations (for example, development agreements with developers that exempt them from the controls in a zoning statute) counter the unpredictability and vicissitudes of the administrative and legislative process and thus have inherent value to businesses; it reduces risk by vesting contractual rights, and thus ensuring predictability. The parking meter “lease” deal is a perfect example.
The story of the parking meter lease deal is the perfect neoliberal story. Throughout the late 90s and early 2000s, Chicago’s budget survived in large part on a particular tax, the real estate transfer tax. In the housing bubble years, there was no problem relying on this revenue to fund transportation, mental health clinics, and living wage city jobs. But as with the neoliberal bubbles of the past, it couldn’t last; between 2006 and 2009, revenues from the transfer tax cratered, from $242 million to $63 million. Between 2007 and 2008, the drop was over $80 million–representing nearly 40% of the budget deficit in the year the parking meter lease deal was made. It’s no secret now that Mayor Daley entered the deal to make up for a huge deficit without raising taxes.
Bubble that made some people very rich bursts. Revenues disappear. Working class families pay the price (see above, “most expensive parking.”) Only two options are available to the government of the New Model Entrepreneurial City: race to the bottom in terms of taxes and regulations to encourage “growth,” and thus boost revenues, and start selling off assets.
Why not raise property or luxury taxes, or institute a city income tax, to make up the deficit? Why not divert money from the TIF districts?
See above; Chicago is no longer a political community, it is an economic entity that is in competition with other cities in the region, in the state, across the world. In that mental framework, tax is cost, or price. You raise prices, you drive away your clients. In the case of the neoliberal city, the client is the developer, the investor, the employer. The federal government and the state are not going to give the city any real money; they are not investing in infrastructure, or education, or social welfare in any real way, the way they did up through the late 1970s and 1980s. The name of the game is “growth” through enticement of capital.
And capital plays the game perfectly. They condition “jobs” they’re supposedly creating on tax rebates, regulatory relief (i.e., from zoning codes), and more and more say in how the city is run–World Business Chicago being an example of that. Big business can always periodically threaten to leave the city, setting off the competition between cities and states that drive down standards, that abrogates regulations, that eliminates taxes.
This is our challenge in the coming era. Breaking this backward idea that the purpose of the city is to prostrate itself in pursuit of investment that is never really satisfied. Part of this will be a political solution: we need a Mayor unsatisfied with his pathetic role as an entrepreneur begging for investment, and willing to work politically to change the status quo. The other answer is a social one: alternative models to big business investment. Whether that means large-scale cooperatives, developing local sources of investment that can be pooled to provide employment, or some other method doesn’t matter. What matters is that cities begin to show that they can remove themselves from the uneven geographic development of capitalism that forces cities to regressively tax working class families and immiserate workers through wage depression and service elimination.
This post originally appeared in Same Subject, Continued on January 4, 2013.
Sunday, November 3rd, 2013
A couple weeks ago the Economist ran a leader and an article on the plight of smaller post-industrial cities, noting that these days the worst urban decay is found not in big cities but in small ones. They observe:
Partly, this reflects the extraordinary success of London and continuing deindustrialisation in the north of England. Areas such as Teesside have been struggling, on and off, since the first world war. But whereas over the past two decades England’s big cities have developed strong service-sector economies, its smaller industrial towns have continued their relative decline. Hartlepool is typical of Britain’s rust belt in that it has grown far more slowly than the region it is in. So too is Wolverhampton, a small city west of Birmingham, and Hull, a city in east Yorkshire.
And even with growth, the most ambitious and best-educated people will still tend to leave places like Hull. Their size, location and demographics means that they will never offer the sorts of restaurants or shops that the middle classes like.
Their editorial forthrightly embraces a policy of triage, saying “The fate of these once-confident places is sad. That so many well-intentioned people are trying so hard to save them suggests how much affection they still claim. The coalition is trying to help in its own way, by setting up ‘enterprise zones’ where taxes are low and broadband fast. But these kindly efforts are misguided. Governments should not try to rescue failing towns. Instead, they should support the people who live in them.”
This same dynamic is clearly evident in the United States as well. Bigger cities have tended to weather industrial decline far better than smaller ones. There seems to be some threshold size below which it is difficult to support the infrastructure, the amenities, and the thick labor markets that attract the people and businesses in 21st century growth industries. My “Urbanophile Conjecture” heuristic suggests that you need to be a state capital with a population greater than 500,000 to be thriving. But even larger places that aren’t capitals and conventionally viewed as failures like Detroit retain powerful metro area economies and large concentrations of educated workers, especially in the suburbs. Conversely, smaller places like Youngstown, Ohio and Flint, Michigan face much bleaker circumstances.
There are exceptions to the rule, including many delightful college towns or the occasional oddball like Columbus, Indiana, but for the most part smaller post-industrial cities have really struggled to reinvent themselves.
In part this is because a rising tide hasn’t lifted all boats, only some of them. As economist Michael Hicks noted, “Almost all our local economic policies target business investment, and masquerade as job creation efforts. We abate taxes, apply TIF’s and woo businesses all over the state, but then the employees who receive middle class wages (say $18 an hour or more) choose the nicest place to live within a 40-mile radius. So, we bring a nice factory to Muncie, and the employees all commute from Noblesville.”
In short, growth actually fuels divergence because a) the growth disproportionately accrues to the places that are doing well in the first place and b) even when struggling cities can attract jobs, people earning middle class wages frequently live elsewhere. Doug Masson likened this to Jesus’ statement that “For he that hath, to him shall be given: and he that hath not, from him shall be taken even that which he hath.” I think there’s a lot of evidence that for bigger cities a lot of activity is exhibiting a convergent or flattening effect. That’s why so many places today have decent startup scenes, quality food, agglomerations of talent, etc. But for smaller cities my observation is that it’s still a divergent world.
You see this on full display in central Illinois, where the town of Danville (population 33,000) and Champaign-Urbana (combined population 124,000) are only about half an hour’s drive apart on I-74. Danville is one of the bleakest towns I’ve ever visited in the Rust Belt. When your Main Street is a STROAD, you know you’re in trouble. Champaign-Urbana by contrast, is a fairly healthy community. It’s home to the main campus of the University of Illinois, seems to be reasonably thriving, has many high quality residential streets, a direct rail connection to Chicago, etc. As a college town, it’s one of those “exception” smaller places.
Anyone within reasonable driving distance with a choice would almost undoubtedly choose to live in Champaign over Danville, unless they had a family or personal connection to the latter. It’s an easy slam dunk decision. In effect, proximity to Champaign acts as kryptonite to Danville’s revitalization. Again, a rising tide only fuels this divergence.
This sort of divide between communities mirrors the divide in society as well. The question is, what approach should be taken to address these disparities? One approach is to focus on the people, and leave the places to rot. Jim Russell has noted that “people develop, not places” thus most place based economic strategies are destined to fail. This approach has also been advocated by economist Ed Glaeser, who in an article title, “Can Buffalo Ever Come Back?” answered his own question by saying, “probably not—and government should stop bribing people to stay there.”
This is obviously unpalatable to policy makers of either the left or the right, as no one has yet embraced it openly. How then have the left and right responded? The response of the left seems to be what Walter Russell Mead has labeled the “blue model” solution. His basic view is that the post-war economy was based around a policy consensus he labeled the blue social model (and which Urbanophile contributor Robert Munson has simply labeled the New Deal). This involved large corporations, powerful unions, extensive industrial regulation, and an expanding safety net. Those who wish to retain the model suggest allowing divergence to continue, but raising taxes on the wealthy and successful in order to redistribute them to sustain those at the bottom of the ladder (via an expanded welfare state), who are in effect seen as lost causes in the modern global knowledge economy, though few of them will openly say it. So the idea is to invest in success, and redistribute the harvest aggressively. That’s why you see lots of left advocacy in favor of tax increases on higher income earners and against food stamp and other benefit cuts, but a paucity of ideas for how to provide the left behinds with jobs and opportunity.
Mead suggests there’s no such thing as the red social model, and perhaps he’s right in that there’s never been a national policy consensus we could label as such, but there’s certainly a red model response to current conditions and it’s called the Tea Party, or what Mead has labeled a “Red Dawn” in many places like Kansas, North Carolina, and New Mexico. This is a type of single factor determinism model. In these kinds of models, a single factor like education, transportation infrastructure, climate, etc is treated as overwhelmingly determinant in driving the economic structure and outcomes. The factor posited by the Red Dawn model is government, therefore the red model response is to slash and burn government (with the potential exception of highway spending) to lower costs, taxes, and regulatory barriers that are perceived to be holding the economy back. In other words, government is the base, and the economy and everything else is the superstructure. Fix the base and the superstructure will correct itself. That’s the theory.
Broadly speaking, these are the paths that Illinois and Indiana have followed. Chicago’s size enables it and its values to political dominate the state in the modern era. With only a rump of a Republican Party, the Democrats are free to do what they like. Conversely, in Southern influenced Indiana it is the outstate areas that are numerically superior to the successful urban regions, thus the state follows their policy preference, and Republicans overwhelmingly dominate the state so there’s little real opposition to red model policies.
What have the results been? Most obviously, Illinois is nearly bankrupt while Indiana is sitting on a AAA credit rating and a $2 billion surplus in the bank. (It has a pension deficit, but it’s manageable and there’s a funding strategy in place). Clearly Indiana has a more functional political system than Illinois, which somehow manages to remain gridlocked despite a “four horseman” style legislative system and overwhelming Democratic dominance. So score two for Indiana.
Finances aside, what have the results been? Illinois has poured massive quantities of cash into building on success, with items like the O’Hare Modernization Program and Millennium Park. The successful side of the economy, epitomized by the global city portion of Chicago, has soared to incredible heights. This is a city that earned at seat at the table of the global elite. On the other hand, the overlooked areas like much of the south and west sides of Chicago and places like Danville, are in horrific shape. The goal of allowing divergence clearly worked. However, with the state’s finances in abysmal shape, the redistribution portion did not happen. Indeed, the social safety net and basic services depended on by the rest of Illinois are being shredded. Even if you believe that it’s viable to simply support a large lumpenproletariat in perpetuity on welfare – which is doubtful – financial extremis means Illinois isn’t even able to try.
Meanwhile in Indiana, pretty much the entire state policy has been reoriented towards making the left behind areas attractive to lower wage businesses. Policies that would cater to higher end businesses in successful urban areas have been less popular. That’s not to say there’s been nothing. Gov. Pence recently agreed to subsidize a non-stop flight between Indianapolis and San Francisco to help the local tech industry, for example. And he’s supported efforts to boost the life sciences sector. But I think think it’s fair to say low costs and low taxes are the watchword, with right to work, light touch environmental regulation, mass transit skepticism, etc.
However, most of Indiana’s left behind type places have not recovered. Overall the state has retained a stubbornly high unemployment rate significantly above the US average, and, even more worrying, incomes have been declining relative to the US. Metropolitan Indianapolis, Lafayette, Bloomington, and Columbus have done reasonably well. Much of the rest of the state has continued to struggle, particularly in adding jobs with middle class wages. As the recent commentary by Brian Howey, Michael Hicks, and Doug Masson shows, Indiana retains its “Noblesville-Muncie” divides mirroring Illinois’ “Champaign-Danville” ones.
In short, the blue and the red model produced some success, albeit in different modes (think San Francisco vs. Houston, Chicago vs. Indianapolis), for the “haves” side of the equation but haven’t yet proven equal to the “have nots.” The Economist makes it clear the totaly different policy configurations of the UK haven’t made a dent in it either. Post-industrial blight in much of Europe tells a similar tale. This suggests that there are powerful macro forces at work that are extremely difficult if not impossible to overcome. It’s no surprise then that the Economist suggests giving up.
Again, that’s not likely, so what should we do? I won’t pretend to have all the answers to a very difficult question. However, I’ll suggest a few possibilities:
- Seek to stop the civic death spiral. This means getting ahead of the decline curve by seeking to halt the cycle of people and businesses leaving, leading to revenue declines and degraded quality of place, leading in turn to to service cuts and tax increases and disinvestment, which leads to more people and businesses leaving. This involves getting ahead of decline and restructuring government to a place where you can hold a defensible position on services and taxes from which you can seek to rebuild.
- Integrate with metropolitan economies. Rather than Muncie trying to hold Noblesville/Metro Indy at bay, or Danville the same to Champaign, closer connectivity is the key. I’ve written on this before regarding Indiana. In the short term losing the highly paid employees to a nearby municipality is a good thing. Without those living options for the managers, etc. you’d never be in play for the plant in the first place. That connection expands your labor pool, provides trade opportunities, etc. Just the property taxes from the plant is valuable, and can be used in rebuilding. Fostering these connections would require decisions that seem counter-intuitive on the short run. For example, Ball State University in Muncie should clearly expand its downtown Indianapolis presence. That isn’t necessarily taking away from Muncie. It’s building new connections and opportunities for Muncie where they don’t exist today.
- Find a claim to fame around which to rebuild. Carl Wohlt says that every commercial district needs to be known for at least one sure thing. Similarly, what’s Danville’s sure thing? Some towns like Warsaw or Elkhart already have it and need to build on it. Others need to find one. That’s not to say one thing is the only thing you’ll ever need or that you aren’t opportunistic around potentials deals that come your way. But you have to start somewhere. Where do you put your limited available civic funds?
I’m not so naive as to think this it the complete answer. But if there’s to be a genuine attempt to rescue places, then new thinking is needed and a turnaround will take a long time. In the meantime in parallel, clearly people-centric solutions also need to be pursued, to give people the best opportunity to realize their potential and dreams in life, where ever that may take them. No city is a failure that does this for its citizens.
Sunday, October 27th, 2013
If you look at the list of target industries for any given city or state, you usually find several from the same list of five common items: high technology, life sciences (under various names), green tech, advanced manufacturing, logistics. Take a few from this list, and add a legacy industry if there’s one or two where you are already particularly strong, and there you have it.
The problem is that everybody and their brother is now claiming to be a tech or startup “hub”, etc. And there’s probably some fairness in that. Starting companies is much easier than it used to be, and despite the so-called “20 minute rule”, venture capitalists seem very willing to travel to find deals where they can make good money. For example, payments startup Dwolla didn’t have trouble attracting top name backers even though it was in Des Moines.
So in a sense everybody can play right now. At some point though, there will inevitably be another shakeout of sorts. If you want to be a long term survivor, have a claim to fame that will make you stand out from the crowd, generate above average returns, etc., you need to have something that makes you distinct.
One way to do that is to be sub-specialized. “High tech” is an extremely broad category. A city could have a large number of nominally high tech companies that are totally unalike, and which do not form any type of real ecosystem, integrated supply chain, etc. This is a cluster in name only.
One way to stand out is a concept I’ve called “microclusters”. That is, rather than simply saying “We’re high tech”, you have some specialty within the broader tech industry where you can be a real national leader.
A couple of news stories make me revisit this with regards to the internet marketing microcluster in Indianapolis. Like most cities, Indy is targeting, you guessed it, high tech, life sciences, green tech, advanced manufacturing, and logistics. The main promotional organization for high tech is called Techpoint. (I should note this organization does double duty as a statewide group as well).
But somehow, organically, within tech generally Indianapolis had a lot of startups in the internet marketing space. There were something like 70 or so last time I saw someone who had made a list. One of them, Exact Target, was recently acquired by Salesforce.com for $2.5 billion. That’s a legitimate exit by any standards. Also recently, a content marketing cloud provider called Compendium was bought by Oracle for its own marketing cloud suite. (Terms not disclosed but surely much, much smaller).
When two tech bluechip names decide to go fishing in the same pond for companies in the same field, you start to think there’s something to it. (Salesforce and Oracle weren’t the first either. Terradata bought out a company called Aprimo for $525 million a couple years ago). Wanting to build on the momentum, Techpoint just held a big shindig called M-Tech to launch a campaign they are launching in an effort to boost the city’s marketing technology cluster.
What will this turn into? I don’t know. A news report about M-Tech noted potential challenges from competitors. What’s more, if there’s no pipeline of new companies, this sort of thing will fizzle out. But if money and talent continues to develop new solutions and companies in a place where there’s real domain expertise and a bona fide ecosystem, it will potentially give the city a niche where it can be a truly top tier player and not just another me-too startup hub.
On a more mature level, I wrote some years back about the motorsports industry cluster in Indianapolis. Everybody knows the Indianapolis Motor Speedway and the 500-mile Race, but Indianapolis Raceway Park (now Lucas Oil Raceway) in Brownsburg also happens to be home to arguably the top drag racing event in the US. It’s near Brownsburg predominantly where a collection of (as of 2008 when I got the last report) 400 motorsports companies, employing 8,800 people at average wages of around $50,000/year is centered. Thus this cluster is both a sub-industry (a type of advanced manufacturing) microcluster and a geographic one. (I might note it’s certainly not the only global location in this industry as places like London and Charlotte also have such clusters). People have actually moved to Indianapolis from as far away as Australia and England to start companies in this space, a pretty good indicator it’s a real opportunity zone.
Again, both of these grew organically, so I don’t want to suggest that you can conjure one up with an economic development program. But I suspect most cities have a few of these out there or in the process of developing. It just so happens I know Indianapolis well and so can name what’s there. Identifying these and providing institutional or infrastructural support (e.g., specialized community college training programs) is probably a worthwhile endeavor.
Today’s economy doesn’t have one plant employing 10,000 people. But a good microcluster can be as impactful if not more so. Obviously the smaller your metro, the bigger a splash something like this will make. What’s more, specialization and a true integrated ecosystem can produce what Warren Buffett calls a “wide moat” business that can be defended against upstarts. Also recall that Jack Welch at GE famously didn’t want to be in a business if he couldn’t be #1 or #2 at it. It’s not realistic for smaller cities to ever think they’ll be #1 or #2 in tech generally, nor even have the large tech scene of a New York or Chicago. But they can find particular areas where they can punch above their weight. And as the recent Indy acquisitions show, generate legitimate big dollar exits.
Update: Richard Layman posted some additional thoughts on his blog.
Friday, October 25th, 2013
I’ve written a lot about the two Chicagos, one successful, one struggling. Obviously that’s a problem, but from the standpoint of a lot of Midwest cities that’s a nice problem to have as they have more broadly struggled to reinvent themselves for the new economy. While most Midwest cities have areas of relative affluence, mostly in favored quarter suburbs, very few of them have managed to pull off any type of material urban core revival. Although incomplete and not inclusive, Chicago has many square miles of thriving neighborhoods. How did this happen?
There are a lot of reasons, but I want to highlight one thing about Chicago that seems to me to be different from other cities: the unusually strong commitment of the corporate community to Chicago. I’ve written before about the decline of civic leadership culture resulting from structural economic change. And while Chicago has experienced many of the same things – the fortunes of its businesses and executives are seldom actually linked to the success of Chicago as a whole, for example – corporate leadership has retained an usually strong civic commitment.
One way this has manifested itself is in defending corporate headquarters, especially through mergers. When Bank One of Columbus, Ohio bought first Chicago, First Chicago agreed to be bought, but insisted that the HQ be in Chicago. IIRC, Jamie Dimon was Bank One’s CEO at the time and took over the merged entity. (You can argue that with somewhere around 15,000 JP Morgan employees, Columbus still got the better end of the bargain, but the symbolism of the headquarters was important). Similarly, in the Continental-United merger, United was ok with Continental’s CEO taking over, but the merged airline had to be based in Chicago. When AON insurance reincorporated its HQ in London and moved 50 employees there (a fairly minor move in the grand scheme of things), the Chicago directors on the board, although they agreed with the business logic I suspect, decided to abstain from the approval vote.
You might throw out a name like Dan Gilbert as an old school industrial titan who’s a booster for his hometown of Detroit, but he’s of recent vintage. Clearly in other cities corporations and their chieftains are involved in various civic ventures, but my anecdotal observation is that there’s something different in Chicago.
A Well-Heeled Followup
In follow-up to my recent article on Chicago’s active pursuit of elite oriented urbanism, this week provided yet another clear example of it. In a shrewd move designed I suspect mostly to embarrass Rahm Emanuel by making him put his cards on the table, a south side alderman proposed implementing a $25/year bicycle registration fee.
Let’s put aside the merits of such a fee. I’m not categorically opposed to it as it regularizes and in a sense institutionalizes and officializes bicycles as a transport mode on par with the car, one able to stand on its own two feet. However, it’s also very clear that most of these proposals are simply gratuitous provocations designed to annoy bicyclists and cause them pain. I would probably say this is just trying to nickle and dime bike owners and would by unlikely to push one myself.
In this case, knowing bicycles are a priority of Rahm, the proposal is appears to be intended to force Rahm to reject it, while continuing to move forward with a raft of other fee increases he wants, including a $0.75/pack cigarette tax hike.
What I want you to consider is Rahm’s own stated rationale for why he rejects the bike tax:
Two years ago the city of Chicago was ranked 10th in protected bike lanes and 15th for startups. IBM did a survey. We moved to 5th in protected bike lanes – and are making more progress – and we moved from 15th to 10th, according to IBM, worldwide on startups. Now the two are not correlated, but it’s not an accident that Google and Motorola chose to move their headquarters to where the first protected bike lane went, and where there’s a mass transit stop. This is why transportation is so essential, not just to move people, but recruiting companies. So as it relates to her tax, she can propose it. It’s her idea. But I argue that’s not the right way to go [slight cleanup for flow]
A high school buddy of mine once said ZZ Top would never be a band accused of hidden sexual lyrics, because they’re not hidden. Similarly, it doesn’t take any parsing or inference to understand Rahm’s strategy to cater to the high end. He’s very transparent about it. It’s how he publicly justifies his decisions. Again, the point I want to make here is that, actual impacts on rich and poor and the wisdom of the tax aside, Rahm Emanuel defends his position by explicit appeals to its impact on the elite.
Here we have a guy who’s basically saying that if the city imposes a $25/year fee on the well-paid employees of one of the world’s largest and most profitable tech companies, firms like that might not choose Chicago. What does that say about how attractive he thinks Chicago is as a place to do business that companies might be so easily discouraged from choosing it?
Apparently high end residents and businesses can’t even have the most minor of inconveniences imposed, while the city piles on regressive “sin taxes” on a population that is addicted to tobacco and disproportionately low income. That’s Chicago’s policy in a nutshell.
Tuesday, October 22nd, 2013
The current era of 21st century urban revolutions began in early 2011, with scores of cities during the Arab Spring. The uprisings have now taken on a newer, darker hue, with São Paulo’s protest over bus fares that has already spread to other cities in Brazil. A few uprisings have resulted in the deposing of hated Middle Eastern dictators, and many leaders have reached uneasy truces with their citizens, but observers sense that this conflict is far from over. Some see these as isolated incidents. It seems more like a global web of urban unrest searching for a voice.
Much of today’s social unrest was predicted by French philosopher Henri Lefebvre, writing in the mid-1970s about social space in the city, and how it has been constructed to favor capitalism. The separation of work and home, for example, is a relatively modern spatial arrangement favoring wealth, and for no better example of this, one can see the hike in São Paulo bus fares acting as the straw that broke the camel’s back for the Brazilian poor. Lefebvre’s evaluation of the currents of the late twentieth century can now be updated, and it points to a looming social crisis.
Western states – Chinese, Syrian, or what-have-you – have the tools to utterly crush any alternatives to their power. The state is universally promoted as the “stable center” without which, we are assured, we would descend into chaos. It enables both a spatial flatness and instantaneous communication, collapsing space and time.
The working class, instead of rising up in Marxist-style class struggle, has continually been pacified by consumerism. Anyone interviewing a modern Chinese young adult would, if they got a candid response, hear the anger of this generation over the Tiananmen Square generation’s sell-out; economic freedom was offered by the state, and the people, starved for so long, chose it, rather than political freedom. Today, they pay the price. Placating the lower classes has become expensive, and the state has become overextended in doing so, but cannot stop at the risk of seeding a genuine revolt.
As housing, transportation, food and living costs rise to newly unaffordable levels, a larger and larger segment of the population is left behind. An example of this is the phenomenon of food trucks, which has swept many cities in a few short years, creating a niche that is neither vending cart nor restaurant, but something new in between. Government regulation was swift in coming, notable not for its concern about health, but its concern about the economic protection of vested interests. In olden days, food vendors could just duke it out for the customer. Today, the government, anxious to keep the finely tuned economic hierarchy of the city in balance, rushes in to create order and regulate the problem away.
Struggles in Egypt, Syria, and now Brazil have nothing to do with traditional Marxist concerns about the rise of the industrial worker. With impoverished credibility, evidenced by the multiple failures of the socialist state, leftists have little to offer when considering the urban landscape that lies before us in cities like Aleppo, Damascus, Tunis, Cairo, and many others.
While the right cries “Marxist” at anyone protesting the greed and corruption of the global economic system, this smear is neither accurate nor serious. Old labels are used for lack of anything better, but the confrontations on the streets have neither a red flag nor a red book. Instead, the new mob – refusing to be pacified by the usual pop culture escapism – is searching for a new voice that is neither communist nor capitalist.
The American Occupy movement faded before it could contribute anything meaningful to the last election, but perhaps by consensus it decided that the election was already lost, regardless of which party won. Disbanded, the protest against the “one percent” was an inarticulate voice not ready for prime time. What is the opposite of globalism?
It is a new localism that will arise, refuting the power of the state and finding a yet unnamed ethic that rejects our flattened, instantaneous space-time for something hilly and slower. In the coming months and years these urban voices will continue to protest the state’s authoritarianism, as well as the high price of the global economic system. Eventually, these voices will likely converge into a newer socio-economic philosophy, yet to be defined. Lefebvre died in 1991 without ever seeing the protests at global trade talks at the turn of the millennium, but he would have approved of the dialectic. He would also have predicted that they would be crushed by the state, as happened. He would see today’s world as ripe for confrontation.
Flickr photo by Phillip Pessar, Frita Man Food Truck at Walgreens, Miami, Florida. “Food trucks in the Walgreens parking lot have become a regular thing.”
Richard Reep is an architect and artist who lives in Winter Park, Florida. His practice has centered around hospitality-driven mixed use, and he has contributed in various capacities to urban mixed-use projects, both nationally and internationally, for the last 25 years.
This post originally appeared in New Geography on July 12, 2013.
Thursday, October 17th, 2013
A couple weeks ago, noting the apparently immunity of global city Chicago to problems elsewhere in the city, I asked the question: What happens when global city Chicago realizes there’s a good chance it can simply let the rest of the city fail and get on with its business?
I’d argue we’re seeing the results right before our eyes.
At the same time murders in significant parts of the city are even higher than during the peak of the crack epidemic, when the city says its too poor to hire more cops, when 54 schools are closed and a 1000 teachers laid off, half the mental health clinics closed, libraries cut back, etc., Chicago has found a nearly limitless stream of money for elite amenities, most recently – and appallingly – $50+ million in TIF subsidies for a new DePaul arena. There’s also been hundreds of millions of dollars more in corporate welfare under Daley and Rahm.
Investing in success is a great idea – if you plan to harvest a return on that investment to fund city services and your safety net. It’s clear there’s no intention of doing this in Chicago. I discuss this in my most recent City Journal piece, “Well-Heeled in the Windy City.” Here’s an excerpt:
Clearly, cities like Chicago must retain a substantial portion of upscale residents and businesses. Detroit and other cities show the results of failure on this front. Yet the moral case for elite amenities has always rested on the assumption of a broader public good: what benefited the wealthy would also make life better for the rest of the city….Under Emanuel’s leadership, though, Chicago has made peace with a two-tier society and broken the social contract. Rather than trying to expand opportunity, Chicago has bet its future on its already successful residents—leading some on the left to call Emanuel Mayor 1 Percent. The Windy City isn’t alone in following this strategy. Detroit has gone bankrupt, but that hasn’t stopped city government from lavishing $450 million in subsidies on a new Red Wings arena.
Since I critique bike infrastructure as part of Chicago’s splurge for the elite, I want to clarify that point here where there are lots of bike advocates. I strongly support bike infrastructure. In fact, I once gave a presentation where I said protected bike lanes and bike share should be Rahm’s top two transport priorities on taking office because they are cost-effective and can leverage outside funds. However, even the most passionate advocates must admit that the optics are bad on making a full court press on bike lanes when cutting core services elsewhere. More importantly, Rahm’s explicit rationale on bike infrastructure has been luring talent for the tech economy, thus it is an elite focused venture. For example, the Sun-Times reported:
Emanuel called protected bike lanes central to the city’s sustainability plan and his efforts to make Chicago the high-tech hub of the Midwest. Chicago “moved up dramatically” in the list of major cities whose employees bike to work, he said.
“It’s part of my effort to recruit entrepreneurs and start-up businesses because a lot of those employees like to bike to work,” he said.
“It is not an accident that, where we put our first protected bike lane is also where we have the most concentration of digital companies and digital employees. Every time you speak to entrepreneurs and people in the start-up economy and high-tech industry, one of the key things they talk about in recruiting workers is, can they have more bike lanes.”
Wednesday, October 16th, 2013
[ Quality of place improvements tend to be targeted at high end demographics downtown and such. In this piece Rod Stevens and Gregory Tung talk about how the needs of industry for better quality places should not be overlooked - Aaron. ]
In a recent posting on “The Promise and Peril of Rust Belt Chic” Aaron Renn contrasts the goals of self-affirmation with the Richard Florida approach of hipster havens. There is a division here between creating jobs and place-making, a gulf that has never been bridged between economic gardening and New Urbanism. Recently, we may have found a way of uniting these approaches, by focusing on the work districts themselves and the place-making needs of the firms already located there. We did this as part of a strategy for a 21st Century workplace district in San Leandro, California.
San Leandro is located just south of Oakland, in the San Francisco East Bay, and in recent years the city has seen most of the good new jobs go north to Berkeley and Emeryville. At one time San Leandro was an industrial powerhouse, a suburban center where factories were moving into farm fields. As California grew after WW II, this became a lunch bucket paradise where Portuguese and Italian families moving out of Oakland could earn a good middle class income working at the Caterpillar plant, the Dodge factory or one of a hundred other companies. By 1970, more than 20,000 people worked there in manufacturing. With its focus on making ordinary, everyday things, San Leandro was more like Muncie, Indiana than Mountain View, another Portuguese farm town to the south that was going electronic in what would become Silicon Valley.
Then, in the mid 1970s, the factories started to close and the jobs move away. The factory buildings stayed, but instead of being used to make things, they became places to store things. Today there are only about a third as many people working in manufacturing as there were 40 years ago.
Today the vacancy rate for this industrial space is just 5%, a rate brokers point to with pride, but their value is far less than in Berkeley, just 15 miles away, where there has been a renaissance of small, urban manufacturing. Like Brooklyn and San Francisco, Berkeley has become a center for making niche goods, not only food and apparel but also very technical items like scientific glassware. Those specialty skills have, in turn, drawn in companies that need them as part of their supply chain.
This realization that, effectively, many of the local buildings in San Leandro are barren of people led us to our first strategic goal: “IQ per acre”. This means raising the value-added in each building, whether by man or machine. This doesn’t have to require a masters degree. A lot of people are smart with their hands, and advanced manufacturing is all about combining technical skill with computer-controlled machinery that leverages this skill.
As we looked around the area and began compiling lists of interesting companies that worked there, we realized that much of the original DNA of making things is still there—but these companies had been forgotten or gone unrecognized by the city. We found companies still working in food processing, metals and machining, and instruments and process control. We also found vestiges of older companies that had moved away to cheaper places where it was easier to pollute, but in which the orphaned child had grown up and found success. INX Digital, founded as the subsidiary of a local paint company, now serves as the worldwide R&D center for a company that makes the inks that go in wide-bed printers. People working there wear lab coats.
As we talked with the managers of these companies, many of whom simply commuted into work there and felt no particular attachment to the place, we realized that some of their business needs were going unmet. They told us that they had no place to go to lunch and that local hotels were so tired that they put customers and suppliers up in other cities. They said that the curbs needed to be restriped to create more on-street parking, so that women coming off the night shift would not have to walk so far to their cars. They told us that the younger generation of tech talent coming from San Francisco and the North Bay could not take the BART trains, because the shuttle connections were too slow and infrequent. And they told us that their workers would like to have a nice place to walk to at lunch, someplace green that would be an alternative to the drab, industrial landscape.
This led us to our second strategic goal, “Serve existing customers first”.
Why? Because not only are these firms already there and producing jobs, but they are the best source of referrals for new business. You want them talking up the place at their next industry conference. You want them telling other companies in their supply chain that this is a good place to do business. But how to get them involved? A manager running a computerized chocolate factory probably is not going to take two hours off in the middle of the day to attend a planning meeting. You have to make it worth their while to get involved, to take care of that parking problem today. Only then will they get interested in the longer-term planning issues.
As we drove around the area, we realized that we ourselves were lost within it, despite many trips there. Key roads do not connect, most of the buildings are sun-bleached, and there are few landmarks. Nearby there is a Kinkos and there is a Starbucks, but they are buried in an outlet mall, across the freeway. In all, it reminded us of the movie “The Sheltering Sky”, in which Debra Winger wanders through the Sahara with nomads. How and where to create some oases that people could actually attach themselves to?
This led us to our third strategic goal, “Humanize the place”. With more than 2,000 acres to deal with, however, you cannot spread the peanut butter too thin. You have to concentrate the investment.
Our first tactic, then, became a “backstreets strategy” of attracting smaller companies to the cul-de-sacs and lanes with smaller buildings that are easier to change and upgrade, where changing a few facades, adding a parklet and improving parking will improve the overall place. The city has a façade program, but this has always been targeted at Main Street merchants, not factory managers.
A new, $1 billion Kaiser hospital is opening in the area, one that will bring more than 2,000 workers as well as countless patients, and so we encouraged putting a pod of food carts on its front door. Not food trucks but food carts. These are stationary and are far less costly to buy and operate than trucks. With more than 500 of these, Portland has proven that these can operate in a variety of places. Why not an industrial district barren of eating opportunities, next to a hospital where thousands of workers will want an alternative to the cafeteria?
And we recommended other bargain-basement ways to humanize this area. Things like pedestrian-level street lights that can be attached to the base of existing cobra-heads. Filling in the missing links on the bike routes, so that people can ride to work without fear of being side-swiped by a semi. Or, very simply, reversing the direction of the BART shuttle so that it does not have to make so many left-turns across traffic.
The fact is, we have over-looked the place-needs of industry for a very long time, simply taking the tax revenue from these places without reinvesting in them. A place like Detroit is proud of its Campus Martius Park, where Quicken workers can eat their lunch outside, but where is the equivalent investment for the machinist who makes jet engine parts, or the brewer who makes your local micro brew? More often than not, these people are sitting outside at a rough picnic table eating under razor wire.
Using place-making for economic development means taking care of the basic, day-to-day needs of business by providing safer, easier ways to get to work, service and amenities, and a nicer setting right outside the front door. It is no accident that there has been a kind of revenge of the cities in Millennials wanting to work in urban centers. These places are more convenient and interesting, in part because we have spent the last 15 years making them better places to live and shop. Now it is time to turn to the “productive” side of urban life- work, and in particular to making things, especially with advanced manufacturing.
In planning for these places, if we do it at all, there is a tendency to treat them as white spaces on the map, like “Indian Territory” to be settled by new white people. Yet there are successful businesses in these places, and the trick is to figure out how the place itself can make them more successful and draw in other companies in their supply chain. This requires the ability to talk to business, to tour the operations on the plant floor, what makes a given worker so good, and to listen for the opportunities to make the work district around the company better. This is the next frontier in place-making. The communities that do it well will be the economic winners.
Rod Stevens is a management consultant on Bainbridge Island, WA.
Gregory Tung is an urban designer with Freedman Tung + Sasaki (FTS), based in San Francisco.