Sunday, February 15th, 2015

Creating Fertile Soil For Innovation

I was privileged to give the opening keynote at Governing Magazine’s Summit on Performance and Innovation in Louisville last week. Not only was it great to get to speak there in its own right, it’s particularly special for me because Louisville is my hometown.

My talk was on innovation, the imperative for innovation today, the barriers to innovation, and how to create fertile soil for innovation to flourish. The video is embedded below, but if it doesn’t display for you, click over to watch on You Tube.

Monday, February 9th, 2015

Why (Some) Downtowns Are Back by Mario Polèse

[ I’m going to be giving a keynote at Governing Magazine’s Summit on Performance and Innovation in Louisville this Wed. The entire conference is live streaming at Governing’s web site. My session is Wed at 1:30pm, but looks like a lot of great stuff you won’t want to miss, such as the mayor’s roundtable immediately following me.

As you know, I recently joined the Manhattan Institute and its quarterly magazine City Journal. So obviously I’m interested in promoting our work. I think it’s fair to say that for those of you with a strong left orientation, you’re not going to agree with some of what’s published in City Journal. On the other hand, I think that regardless of what your political philosophy is, you’ll find some things that you do resonate with – but more importantly things to engage you. I want to share a couple of pieces from the magazine to give you a sample of what you might find. Here’s one by Mario Polèse from the Winter 2014 issue talking about how (some) downtowns have come back – Aaron. ]

Not so long ago, most urbanists were predicting the demise of downtowns. The data, after all, pointed unambiguously to declining central-city populations and expanding suburban ones in nearly every American metropolitan area between 1950 and 1980. Manhattan lost a quarter of its residents, for example, and Boston nearly a third. The exodus wasn’t confined to the United States. The population of inner London fell by more than a million residents during the same period, and my hometown, Montreal, watched the central borough of Ville-Marie hemorrhage half its population between 1966 and 1991. Businesses were fleeing, the urbanists noted. Central business districts were becoming vestigial organs, legacies of a bygone era before the automobile and the truck liberated us from the tyranny of proximity and brought us the suburban shopping mall.

But downtowns didn’t go the way of the dinosaur. In fact, most of them have begun to grow again. Of the 50 largest central cities in America, all but five saw their populations grow between the 2000 and 2010 censuses, and only two exhibited declines after 2010. For some, the turnaround came in the 1980s; for others, in the 1990s; and for still others, more recently. The title of Alan Ehrenhalt’s recent book, The Great Inversion and the Future of the American City, reflects the nature of this shift—which, again, isn’t limited to the United States. But why are downtowns coming back? And how can we account for the holdouts?

The modern history of the central city is a story of three consecutive waves. The first began during the decades following World War II, though its full impact on urban economies became apparent only later. It involved a structural change sometimes called “deindustrialization” or “tertiarization”: a massive shift from manufacturing to services. The principal beneficiary of this shift was the “business services” sector, which includes finance, insurance, real estate, engineering, management consulting, advertising, publishing, and legal services.

All these business services sought out locations offering a high potential for personal interaction. The objects of exchange weren’t goods but information; human relations were the glue that held the sector together. Unlike manufacturing, business services required little floor space to generate income. Office towers allowed numerous firms to inhabit small spaces, producing correspondingly high property values. In the downtowns of large cities, such industries as manufacturing and warehousing, which demanded a lot of space, were unable to afford the rising cost. They began to decamp for less expensive locales. Meantime, the development of standardized containerization meant that trucks could now carry cargo from ships directly to factories and warehouses. Manufacturers and wholesalers no longer needed to be adjacent to ports and railheads in cities like New York and Montreal, giving these businesses more flexibility in choosing their locations.

So over time, business services replaced manufacturing as the principal economic base of large cities. You might define the tipping point as the moment when combined employment in the three main industry classes that constituted business services—finance, insurance, and real estate; professional, scientific, and technical services; and administrative support services—surpassed employment in manufacturing. In New York, that moment arrived in 1980. Manufacturing still accounted for a quarter of the city’s employment in 1970; today, it has fallen to well below 10 percent. The tipping point came in 1988 in Toronto, Canada’s largest metropolis, and some 15 years later in runner-up Montreal.

Until the late 1980s (or later, depending on the city), business services hadn’t grown enough to undo employment and land-use patterns that downtowns had inherited from the industrial era. Heavily polluted brownfields were left vacant, as were unused docks, empty warehouses, and factory shells. But many of these industrial sites have since been transformed. In Montreal’s old port, for instance, one abandoned dock now houses a science museum; a second has become a popular entertainment venue.

The growth of business services irreversibly altered not only the appearance of most big-city central neighborhoods but also their employment profile. This brings me to the second wave, which we might think of as the residential counterpart of the first. It was a turnaround in the population decline of central neighborhoods.

To see why it happened, we need to understand the forces that had previously been driving households away from the center: rising incomes, growing ownership of cars, the postwar baby boom, and high crime. A general rule of housing economics is that as incomes rise, households demand more floor space per person. As they prospered during the postwar years, families aspired to better, bigger homes, perhaps with a garden and even a pool. They found the space they sought in the suburbs, where land was cheap and plentiful. Automobile ownership also rises systematically with incomes, and it enabled numerous households to move to those spacious suburbs. And the baby boom, of course, meant more households with children, which demand more space than childless households do. Over the four decades following World War II, these trends produced ideal conditions for urban flight and suburban growth, especially when combined with the growing urban crime and disorder that marked the era.

But eventually, the lure of the suburban dream began to diminish. Starting in the 1990s, incomes rose less rapidly than in the past, slowing the demand for housing space. Automobile ownership stopped rising, stabilizing at about 800 cars per 1,000 people, according to the World Bank. Single-person and childless households accounted for an increasing share of the American population. The suburbs kept growing, but the great era of rapid suburban expansion seemed to have ended.

It can be argued, too, that tastes and preferences changed. The car is no longer the status symbol that it once was, having been replaced, among today’s youth, by concert tickets or the latest smartphone. As America’s infatuation with the car wanes, owning a two-garage split-level house becomes less glamorous. In an article published in Urban Studies in 2006, City Journal contributing editor Edward Glaeser and Joshua Gottlieb convincingly demonstrated Americans’ change in preferences toward urban living. Before 1990, the larger the city, the higher the average wages paid there, even after accounting for cost of living. After 1990, that relationship reversed itself, meaning that workers now accept lower wages for the privilege of living in big cities. They must be receiving something in return, the authors argue—specifically, access to the amenities and pleasures that central big-city living offers, from restaurants and museums to concerts and learning institutions. I’m inclined to agree with Glaeser and Gottlieb that the fall in urban crime rates since the 1980s explains only part of the new taste for urban living, but it, too, was important.

But the most powerful reason for the second wave was the first wave, which produced well-paying jobs downtown. That is, the main reason households began to return to the center was that the best jobs were there. New Yorkers have long since grown familiar with gentrification, the replacement of poorer, generally blue-collar, populations by wealthier, professional ones. But the phenomenon took place in downtowns all over North America.

The two waves that I’ve just described reshaped central neighborhoods, making them magnets for rising cohorts of entrepreneurs in digital firms. This is the third wave, currently in full motion: high-tech start-ups seeking out central neighborhoods. Downtowns are the new battlegrounds of the digital economy.

True, Silicon Valley remains the top player in that economy, whether you’re measuring the number of high-tech start-ups per year or the amount of venture capital invested. That isn’t about to change; few places can match the Valley’s buzz, its location near two top engineering schools, its superb scenery, and its local supply of risk-tolerant venture capitalists—not to mention the entrepreneurial spirit that California, despite its dysfunction, seems to bring out in people. Nevertheless, smaller clusters of high-tech start-ups are springing up in many central cities. New York’s cluster has (predictably) been dubbed Silicon Alley (see “Net Gains,”); London’s, Silicon Roundabout. San Francisco’s South of Market area, or SOMA, is an emerging hub of high-tech activity. Following a multibillion-dollar cleanup, the South Boston waterfront area, a short walk from the financial district, is also becoming a high-tech hub, attracting firms from nearby Route 128 and Cambridge.

To understand what’s happening, take a closer look at the neighborhoods being colonized. New York’s tech cluster is located chiefly in lower Manhattan—specifically, the Flatiron district, Tribeca, Chelsea, and nearby neighborhoods that have completed the transition from warehousing and manufacturing to residential and nonmanufacturing commercial uses. In London, the heart of the cluster is Shoreditch, an old blue-collar neighborhood to the northeast of the financial district. South Boston is also an old warehousing district with recycled rail yards and docks. These areas’ distinguishing feature is that each is within walking distance of the central business district. If the second wave took place because of housing, the primary factor here is proximity to other firms.

And not just other digital firms: as the tech industry moves away from simply making hardware and software and begins producing computer-accessible content—from music and video games to news and broadcasts—it finds value in being located near the entertainment, publishing, and broadcasting industries, traditional foundations of large-city downtown economies. Proximity to financial institutions, another traditional downtown pillar, is also helpful: meeting a rich banker or an eager venture capitalist is easier in lower Manhattan than in the New Jersey suburbs.

There are cultural reasons for the third wave as well. Asked on TV why his large computer-animation firm, Ubisoft, decided to locate in downtown Montreal, a founding shareholder pointed out that the company’s employees worked at all hours. They wanted to be able to walk across the street for coffee or a sandwich at midnight—or, alternately, to visit a bar at noon. Few wanted to commute, he added, and of those who did, many biked. Is it any surprise that such firms want to be in 24-hour cities, rather than in suburban districts that empty out after 5 PM? And that such employees are choosing to repopulate center-city neighborhoods, rather than drive in from afar? The symbiosis of workplace and residence is further strengthened by a growing construction trend in which condos occupy upper floors, offices occupy lower ones, and retail stores occupy the ground floor, creating a new generation of mixed-used neighborhoods.

It’s also the case that high-tech companies, like the business services of the postwar years, require relatively little floor space. Many need nothing more than a few laptops and desks and can consequently pay those downtown rents. And in some downtowns, third-wave firms can recruit graduates of nearby engineering or tech schools, such as Montreal’s McGill University and École de Technologie Supérieure. New York mayor Michael Bloomberg was hoping to accelerate just this kind of symbiosis when he announced plans for an ultramodern technological campus on Roosevelt Island, across from Manhattan, to be run by Cornell University and the Technion–Israel Institute of Technology.

In several big American cities, though, the downtown resurgence hasn’t taken place; the areas continue to struggle and deteriorate. In most cities, the average office rent per square foot is higher downtown than in the suburbs—in New York, downtown rents are twice as high. But in Cleveland, according to data from the major real-estate firm Cushman & Wakefield, office space is no more expensive downtown than in the suburbs, and in St. Louis, it’s actually cheaper. Office-based firms in those cities don’t see downtown as a valued location and aren’t willing to pay more to locate there. Data for downtown Detroit are unavailable from Cushman, probably because demand from prospective clients is so tiny that there aren’t enough properties on the market for information to be produced.

An economic geographer would call this phenomenon a loss of “centrality,” which refers to the geographic point with the highest market potential for firms. It’s highly unusual for a big city to lose centrality. Even during the height of the population exodus—the 1960s and 1970s—the central business districts of New York, Boston, San Francisco, and most other cities never lost it. Why have Detroit, Cleveland, and St. Louis?

No simple answer exists to that question, though part of the explanation involves successive badly run city administrations, white middle-class flight, and a shrinking tax base, things that create a downward spiral of deteriorating services and rising taxes. And just as the reasons that some big-city downtowns have failed to revive are various, so are the solutions. No magic pill—be it a sports stadium, a convention center, or a shopping mall—can single-handedly bring back a moribund big-city downtown (see “Urban-Development Legends,” Autumn 2011).

Still, these troubled areas could learn a few lessons from the success of many of their peers across the nation. For one thing, the key to downtown resurgence is jobs—chiefly, jobs in business services. If finance firms, consultancies, head offices, advertising companies, and so on flee to the suburbs, the task of reviving a downtown will prove far more difficult.

Also, successful downtowns are mixed-use centers that are busy around the clock, not just from nine to five. A 24-hour downtown isn’t built overnight, so to speak. But it’s true that teaching institutions can sometimes bring in clienteles with a taste for 24-hour living. It wasn’t a coincidence that New York’s first gentrified neighborhood—long before the word “gentrification” came into fashion—was Greenwich Village, near New York University.

Another lesson is that you can’t separate the health of a downtown from that of the wider metropolitan area. Cities with resurgent central neighborhoods also have strong metropolitan economies. This means, for one thing, that strong national or regional corporate centers will find it easier to maintain strong downtowns; by contrast, smaller cities whose downtowns are largely dependent on retail have a harder row to hoe. It also means that revitalization initiatives can’t be limited to the central city. Some level of cooperation between city and metropolitan area is necessary—if only to ensure that they effectively share the cost of metro-wide infrastructure, such as public transit.

A related lesson: strong downtowns and suburbanization are not mutually exclusive, as anyone who has driven through the sprawling suburbs of Washington, D.C., or New York can testify. An exodus from the center can occur for two diametrically opposed reasons. Suburban office parks can spring up because a downtown is too strong (and therefore expensive) or because it’s too weak. Firms leaving Manhattan for cheaper office rents in New Jersey are the sign of a growing downtown; firms leaving central Detroit for the safer, cleaner suburbs are the sign of a dying one.

Finally, the many current policies that restrict real-estate supply downtown—rent control, restrictions on building heights, and so forth—are a luxury that only cities with solid, growing downtowns can afford because they drive up prices in the center and discourage people and businesses from settling there. How far we’ve come since the 1970s, when downtowns seemed doomed and governments were concerned with revitalizing them! Today, those governments are doing the opposite, restricting growth in downtown areas and, in too many cases, turning them into coveted prizes occupied by a lucky few. Abandoning these misguided policies would reinforce the gratifying shift that cities all over the country and the world are witnessing: a return to the center.

This article originally appeared in the Winter 2014 edition of City Journal.

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Topics: Economic Development, Globalization
Cities: Montreal, New York

Sunday, December 21st, 2014

Global City Framework

I’m going to be away until after the New Year. If you haven’t finished your shopping yet, a great way to support the Urbanophile without it costing you an extra dime is to do your last minute shopping through this affiliate link to Amazon.com.

This is a concept in development, so I’m going to open this post up to comments.

Global cities are like that famous quip on obscenity: we know one when we see it. But the definitions of global cities are incredibly varied and there doesn’t seem to be a consensus or well-defined way to think about. I looked at the criteria used in various prominent studies back in 2012 and found them highly divergent. Only the Sassen based one appeared to have a robust definition and theoretical basis, but it’s a pretty narrow definition. While it’s very important and useful, I don’t think it fully captures what the average person or urbanist thinks of on the topic.

In wrestling with the global city idea while working on the global city study I did some research for, I put together this framework to help organize our thinking.

Global City Framework

This framework seeks to capture in a structured manner all the ways people talk about global cities that I’m aware of.

There are three basic categories of criteria people use in defining global cities: economic function, non-economic function, and size.

Economic Function

Some, like Sassen, define global cities by economic function. In her case, just being a financial center isn’t enough. You need to be producing financial services products specifically related to the global economy, not just making mortgages domestically. I list “Financial and Producer Services Center” as a shorthand for this. In all of these definitions, when I say a “center” I’m referring to a center of global or regional (e.g., European or Latin American) significance, not simply a domestic center.

If I have a contribution to the global city definition genre, it’s my contention that places like the Bay Area (tech) or Paris (fashion and luxury) that are important global or regional epicenters of an important 21st century macroindustry are also global cities in a powerful sense by virtue of that.

The idea of being a transport hub for goods or services is self-explanatory, though I’ll note that simply being a goods distribution hub (such as a global air freight hub like Memphis) doesn’t necessarily imply a high value, high wage economy.

Lastly, and perhaps this is one I made some contributions to as well, is the idea of a “safe zone” for investing or parking capital. Much of the world is volatile economically and only has a dubious attachment to the rule of law and property rights. Hence wealthy people in those countries like to stash their cash in places where they consider it safe. Where I would distinguish this from a simple offshore account as in the Caymans is that this investment often includes real estate, and the rich folks in question often establish a personal base there. New York and London as the paradigmatic global cities obviously fall into this category, but I’m more thinking of regional hubs like Dubai, Miami, and Singapore. These places have established themselves as premier business (and in some cases cultural) hubs for their regions.

Non-Economic Functions

These are other aspects of a city’s function that I see as not directly economic, though obviously there are economic impacts. Most of these perhaps could be subsumed under being in an industry epicenter, but since global city surveys often call them out separately, I will as well.

The first item is being an important global political capital like Washington, Moscow or Beijing. Enough said.

Another important dimension is being a cultural and media center. Los Angeles profoundly affects the world because of its entertainment machine and the media that goes along with it. (By contrast, Mumbai may be a huge film center, but serves largely a domestic and Indian ethnic audience). Obviously the English language cities have a big advantage here in terms of media, though cities like Paris have a powerful cultural role.

Lastly, being a global tourism center is another dimension. Which places draw foreign visitors? You might want to read Nicole Gelinas’ recent taken on international tourism’s affect on New York. NYC attracts a third of all foreign visitors to the United States.

Size

Lastly, many surveys include measures that are purely about size, such as total GDP. The rhetoric about megacities (those with more than 10 million people) shows a fascination with size as well.

Success and Performance Indicators

Beyond the categories that define what global cities are, I include a horizontal layer talking about how to think about whether they are successful. I think there’s a big debate that can be had about whether these are performance indicators or selection criteria. Obviously more global city surveys want to pick highly performing cities, so these are part of their evaluation matrix. I myself originally included diversity and educational attainment (talent hub) on the non-economic function list.

I won’t go through these as they are pretty self-explanatory. I’d be interested to see where you all would put these, and what you’d add to or drop from the list.

By the way, in that global city survey I worked on, we decided to look purely at economic function, though pulling across media hub and treating that as an industry. We felt that taking this sort of view was a gap in the existing inventory of ratings, and also perhaps the most important way to think about global cities.

Again, comments are open on this one, so please share your thoughts.

Tuesday, December 9th, 2014

Divergent Demographic and Economic Trends in Chicago by Bill Sander and Bill Testa

[ This week a post from Bill Sander and Bill Testa from the Chicago Fed’s Midwest Economy site, looking at the various trends affecting the city of Chicago – Aaron. ]

The fortunes of the city of Chicago have become clouded in recent years as concerns over its weakening finances and heavy debt obligations have grown. The tally for the unfunded public employee debt obligations of Chicago’s overlapping units of local governments (including those for public schools, parks, and county services) is now approaching $30 billion. Moreover, the city government has been criticized for its practices of funding current public services with proceeds from the issuance of long-term debt and the long-term leases of public assets (such as its parking meter system). However, faith in Chicago’s ability to address its debts has not fallen so far as that in Detroit’s, chiefly because the Windy City’s economic trends display more vibrancy.

Population change is a prominent indicator of the health of an urban economy because it reflects a city’s ability to hold on to its residents (as opposed to losing them to the suburbs or other locales). Over the past few decades, similar to other central cities, Chicago has experienced an erosion in its population share of the broader metropolitan statistical area (MSA);[1] in contrast, the surrounding suburbs have seen their share climb. According to the U.S. Census, Chicago held 38% of the MSA’s population in 1980, with this share falling to 35% by 1990; in the subsequent 20 years, Chicago’s population share of the MSA decreased another 3 percentage points per decade, reaching 29% by 2010 (see table below). During the 1980–2010 period, Chicago lost a total of over 300,000 residents. At the same time, suburban Chicago gained close to 2 million in population. Since 2010, the city of Chicago’s population and population share of the MSA have strengthened somewhat, though the (off-Census year) estimates are probably not as reliable.

While population trends can be telling for a city’s prospects, they can also belie changes in its residents’ wealth and income. Despite the city of Chicago’s population loss over the past few decades, its economic trends have been generally more encouraging.[2] Household income is an important indicator of Chicago’s fortunes relative to those of its suburbs. In 1990, median household income in the city was just 67% of the median household income in suburban Chicago. By 2010, this income ratio had climbed to 73% (see table below). Decomposing household income statistics by (self-reported) racial/ethnic group reveals that this trend was pervasive for the three largest groups: non-Hispanic white, black, and Hispanic. The ratio of city median income to suburban median income among white households experienced the greatest change; it rose from 77% in 1990 to 98% (near parity) in 2010.

These robust trends are echoed by Chicago’s rising share of adults aged 25 and older who have attained at least a bachelor’s degree. In 1990, among adults aged 25 and older, 19% of those residing in the city had attained a four-year college degree versus 28% of those residing in the suburbs (see table below). By 2010, Chicagoans in this age demographic had almost reached the same share in this regard as their suburban counterparts (33% for city residents versus 35% for suburban residents). The non-Hispanic whites again experienced the greatest change among the three largest racial/ethnic groups. In 1990, 29% of the white city population aged 25 and older had a four-year college degree—the same percentage as the white suburban population in this age demographic; however, by 2010, 55% of such white city dwellers had a bachelor’s degree, while 39% of their white suburbanite counterparts did. Between 1990 and 2010, the city’s black population also made substantial gains in education, as evidenced by the share of black adults aged 25 and older with a bachelor’s degree having risen from 11% to 17%.

By “drilling down” through the data to examine specific neighborhoods, we can see how geographically concentrated the city’s gains in college-educated adults aged 25 and older have been. These gains have been highly concentrated in Chicago’s central business district (“the Loop”) and the surrounding areas, as well as the neighborhoods west of Chicago’s northern lakeshore. As shown in the table below, dramatic gains in the college-educated population were seen in the Loop and the neighborhoods just south, west, and north of it. For example, the Near South Side saw an increase in the share of adults with a four-year college degree climb from 9% in 1980 to 68% in 2010. No less dramatic were such gains in Chicago’s neighborhoods west of its northern lakeshore: The shares of the college-educated population there typically doubled or tripled between 1980 and 2010 (in the case of the North Center neighborhood, this share increased sixfold—from 11% in 1980 to 66% in 2010).

As one might expect, many college-educated Chicago residents work in proximity to their residence. Of those living in the Central Area and Mid-North Lakefront, an estimated 57% work in the Central Area of Chicago and 79% work somewhere in the city.[3] Of those who do work in the Central Area, an estimated 19% travel to work by driving alone (as opposed to walking, public transit, bike, and carpooling); this percentage is much smaller than the nearly 70% of metropolitan Chicago workers who travel to work by driving alone.[4] The trends highlighted thus far point to the fact that the city of Chicago draws and retains many jobs. By one count, the city of Chicago’s Central Area is the domicile of over half a million jobs. As seen below, job counts in the Central Area have remained fairly constant over the past 13 years, even while job levels in the remainder of the city and in the remainder of Cook County have been falling.

Meanwhile, compensation levels per job have continued to climb in Chicago’s Central Area, reflecting a work force with greater skills and education. Annual compensation per worker on the payroll in Chicago’s Central Area exceeds that of the overall MSA by 50%.

Many of the trends shown here bode well for the city of Chicago, despite the fiscal challenges it currently faces. To be sure, many large central cities in the Midwest, including Detroit, are experiencing strong growth of both jobs and households centered around their central areas and downtowns. In this, the central Chicago area enjoys a strong start. ________________________________________

[1] Current and historical delineations of MSAs are available at www.census.gov/population/metro/. (Return to text)

[2] This is not to say that all parts of the city have been on the economic upswing. Several Chicago neighborhoods have seen severe deterioration in wealth and income, as well as in living conditions, as evidenced by increasing incidences of homelessness and crime in certain areas in the past few decades; see, e.g., http://danielkayhertz.com/2013/08/05/weve-talked-about-homicide-in-chicago-at-least-one-million-times-but-i-dont-think-this-has-come-up/. (Return to text)

[3] This statement covers 113,000 workers living in these areas as of the year 2000. Estimates were pulled from www.rtams.org and are based on the Census Transportation Planning Package (CTPP), “which is a special tabulation of the decennial U.S. Census for transportation planners” and “contains detailed tabulations on the characteristics of workers at their place of residence (‘part 1’), at their place of work (‘part 2’), and on work trip flows between home and work (‘part 3’)” (see www.rtams.org/rtams/ctppHome.jsp). Workers who work at home are excluded. See also http://definingdowntown.org/wp-content/uploads/docs/Defining_DowntownReport.pdf; this report ranks Chicago second among major U.S. cities in terms of the percentage of residents living within one mile of downtown who work downtown (figure 3 in the report), and ranks Chicago first in terms of population growth in the downtown area over the period 2000–10 (figure 4 in the report). (Return to text)

[4] Estimates are from www.rtams.org and are based on the Census Transportation Planning Package (CTPP). (Return to text)

This post originally appeared in Chicago Fed Midwest Economy on December 3, 2014.

Monday, December 8th, 2014

London’s Global City Royal Flush

A recent article in the Economist about the Rosetta space probe reminded me again of the uniqueness of London on the global stage. The piece notes:

In a clean room at the Airbus Defence & Space (ADS) factory north of London, scientists are working on LISA Pathfinder (pictured), a hexagon-shaped satellite due to be launched next year. The aim of the ambitious space mission is to try, for the first time, to find and measure gravitational waves—ripples in space-time predicted by Einstein’s general theory of relativity.

About one-quarter of the world’s commercial communication satellites are built in Britain and 40% of the world’s small satellites…The whole space sector directly employs 35,000 people, and the supply-chain accounts for thousands more jobs. London-based Inmarsat is one of the world’s largest satellite operators, specialising in mobile telephony.

When you think of London, finance, media and creative industries tend to be top of mind. Aerospace and defense may not immediately register, but greater London is a key node in that global industry. Beyond the space related industries noted above, there’s also companies like defense contractor BAE Systems, and events such as the globally significant Farnborough Airshow.

In fact, in some of the research I contributed to a recent global cities survey found that London uniquely has some strength is every single globally important macroindustry I looked at. No other city – not even New York – was as simultaneously broad and deep.

London’s status as a global financial center is of course well known. It’s also hugely influential in global culture and entertainment. It is a global center of the music industry, with British acts predominantly from or drawn to London routinely becoming best sellers around the world. Warner Brothers has a major production studio there, creating such films as Harry Potter. The BBC, Economist, and Financial Times are news outlets of global reach and influence, even outside the English speaking world. The Daily Mail and the Guardian are the two largest newspaper web sites in the world. London is a major advertising and marketing hub, a major fashion hub, a major tourist destination, and is home to world-renowned cultural institutions.

London has also emerged as Europe’s stop tech hub. Not only are there tons of startups – it has the top ranked startup ecosystem that outranked any European city according to analysis of Startup Genome project data – companies like Google have opened huge offices there.

But there’s more to it than that. London is a center of the global pharmaceutical industry and is headquarters to GlaxoSmithKline and Astra Zeneca, plus is home to foreign HQ’d operations as well. BP is an energy major there and other big firms like Chevron maintain operations and regional HQs in the area. Oil services firm Petrofac is based there and its home to the European HQ Baker Hughes. Its weakest industry I found was automotive, but even here it’s home to Honda’s European HQ.

Not all of these companies are located in central London. But the Greater London area is home to a simply huge number of firms in all sorts of industries, making it a top to bottom global powerhouse. This isn’t just a global city built on finance and other services. It’s a global city built on everything.

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Topics: Economic Development, Globalization, Urban Culture
Cities: London

Tuesday, November 18th, 2014

Two Chicagos, Defined by Pete Saunders

[ Here’s another nice piece of analysis about Chicago from Pete Saunders. He originally did this earlier this year – Aaron. ]


Chicago skyline.  Source: wikipedia.org

Years ago, when I first started working as a planner for the City of Chicago, my primary responsibility was working with community organizations that received Community Development Block Grant (CDBG) funding for commercial revitalization activities.  This being CDBG funding, our work was constrained to areas of the city where 51% or more of households earned less than the median household income for the Chicago metro area.  In the early 1990’s, this hardly interfered with our work — outside of the Gold Coast, the Near North Side, Lincoln Park, Lakeview and a few parts of the Northwest and Southwest sides, we were able to grant CDBG funding to virtually the entire city.

Fast forward twenty years.  Chicago’s transition from Rust Belt Capital to Global City has been unparalleled.  Where there once had been large swaths of middle-class, working-class and impoverished neighborhoods, with high-income enclaves, there are now nearly as many high-income neighborhoods as there are of the other three.  Perhaps someone who moved to Chicago post-1995 and lives in one of the up-and-coming areas is vaguely aware of this, but anyone who was here before then is quite right to be astounded.

Despite Chicago’s transformation, it’s been pretty well-documented that not all parts of the city have benefited.  The battle over the closing of nearly 50 schools, mostly located in the city’s poorer South and West side neighborhoods, brought this to light, as did Chicago’s high-profile murder and violent crime rates through 2013 (which, to date in 2014, have gone down dramatically).  Inequalities and disparities became evident in both areas; University of Chicago graduate student and blogger Daniel Kay Hertz brought the disparities to light with his analysis of violent crime in Chicago.  As he said in his piece:

Over the last twenty years, at the same time as overall crime has declined, the inequality of violence in Chicago has skyrocketed. There have always been safer and more dangerous areas here, as there are everywhere; but the gap between them is way, way bigger now than it used to be.

Over the last two decades a new but undefined paradigm has emerged, the one of “Two Chicagos”.  This is probably best explained once again by Dan Hertz, who recounted an overheard conversation on the L:

I was on the train earlier this week, and two white men got on and asked their neighbors, who were two black women, how to get to a hotel. The women told them. And then began a sort of stock conversation that Chicagoans have with tourists: How do you like the weather, ha ha? The men, who were from Atlanta, did not like it. Have you been on a subway before? Yes, but not often. Would you come back? Oh, yes. We love Chicago, the men said.

The men reached their station, and left.

One woman said to the other: I hate it when people say that – I love Chicago. No, you don’t. You love downtown and the North Side. The other woman said, Uh huh. 

That is a frequent sentiment of those who live on the other side of the invisible divide in Chicago.  But what, exactly, is that divide?  Where are the boundaries?  Exactly how deep are the difference?

I took a stab at trying to figure this out.

I compared some socio-economic statistics for the 56 zip codes in Chicago against medians and averages for the entire Chicago metro area (Indiana and Wisconsin excluded).  The differences are stark.

Let’s start by looking at maps of the areas of examination.  Here is the seven-county Illinois portion of Chicago’s metro area, with Chicago etched in:

I gathered data for all suburban municipalities and all City of Chicago zip codes within this area, for five variables — population, non-white population percentage, median household income, and median home value, and bachelor’s degree or more for persons 25+.  The data comes from the 2011 U.S. Census American Community Survey.  After collecting that data, I established an “average of medians” or “average of averages” to get a baseline for the metro area, and an understanding of how jurisdictions or zip codes would compare to one another.  One fairly big caveat — an average of medians or average of averages weighs all jurisdictions equally, skewing the numbers higher due to the number of small but well-to-do suburban municipalities.  So while the 2011 actual median household income for the seven-county area overall was $61,491, the average of medians was $74,731.  But since all data is expressed this way, differences are negated.

Next, I looked for Chicago zip codes that were above the metro area average in at least one of three categories — median household income, median home value, and bachelor’s degree or more for persons 25+.  These are the higher income neighborhoods that can be called “Global Chicago”.  Within the city, they look like this, in yellow:

Most Chicagoans would recognize this as the wealthier parts of the city.  It stretches from the far Northwest Side eastward to the lake, south to downtown and continuing south before ending in the Hyde Park neighborhood on the South Side.  Again, I included all zip codes that were above the metro average for at least one of the three categories I examined, so not all communities are the same.  Hyde Park, for example, is here because it has high educational attainment, but is below the average for income and home value.  The same applies to Rogers Park and Edgewater on the city’s northern border with Evanston.  Jefferson Park, Norwood Park and Sauganash, on the other hand, located on the Northwest Side, rank highly in home value but lower for income and educational attainment.

Taken together, you can see how “Global Chicago” compares with the Illinois portion of the metro area, the metro area excluding Chicago to give you Suburban Chicago, and the balance of the city beyond “Global Chicago” that I’ve called “Rust Belt Chicago”:

The differences are indeed stark.  “Global Chicago” is on par with the Chicago suburbs and the metro area overall in terms of income, and has a lower percentage of minority residents compared to the metro area.  Interestingly, “Global Chicago” has a much higher home value and educational attainment when compared to the metro area overall or the ‘burbs.  Meanwhile, “Rust Belt Chicago” lags far behind.  “Rust Belt Chicago” has a large majority-minority population, has an income nearly one-half as much as the suburban households, and has only one-third as many college graduates as “Global Chicago”.

I decided to take this analysis a little further and determine if there is a core to “Global Chicago”, and how it would compare to the rest of the city.  I collected data for zip codes that exceeded the metro average in two or more of the three categories.  That produced this map:

And this table:

Here, a “Super Global Chicago” compares favorably with the ‘burbs in terms of income, but far exceeds it in terms of home value and educational attainment.  Including some of the peripheral areas of the previous “Global Chicago” with the previous “Rust Belt Chicago” to produce an “Average Chicago” leads to some gains, but it still lags far behind the other slices of the metro area.

Right now, the CNN series “Chicagoland” is doing its best to illustrate the “Two Chicagos” meme, highlighting blues festivals and Stanley Cup championship celebrations on one end of town and school closures and endless crime on another.  However, these maps and tables may do a far better job of demonstrating the impact of past and current practices and policies on the city’s landscape.  In fact, I think Chicago’s example is one that will serve as a model, for better or worse, for other cities across the nation.

In reality I see the “Two Chicagos” meme as overplayed.  Chicago may be better understood in thirds — one-third San Francisco, two-thirds Detroit.

This post originally appeared at Corner Side Yard on March 18, 2014.

Sunday, November 9th, 2014

Replay: Global Cities Don’t Just Take, They Give

This post originally ran on April 28, 2013.

Creativity for the world or for your city gives something back – Charles Landry

I had an interesting conversation about Washington, DC with Richard Layman a few months back. One of his observations, rooted in Charles Landry’s, was that great global cities don’t just take, they give. To the extent that Washington wants to be a truly great city, it needs to contribute things to the world, not just rake in prosperity from it.

Affecting the world, often for good but unfortunately sometimes for bad, is a unique capability that global cities have because they are the culture shaping hubs of nations and world. When an ordinary city does something, it can have an effect to be sure. But things that happen in the global city are much more likely to launch movements.

For example, Chicago did not invent the idea of doing a public art exhibit out of painted cow statues. I believe they copied it from a town in Switzerland. But when Chicago did it, it inspired other cities in a way that Swiss town did not. In effect, ordinary cities influence the world usually by influencing a global city, which then influences the world. Often it is the global city that gets the credit although the actual idea originated elsewhere. Thus the role of the global city is critical. But we shouldn’t assume that all ideas originate there or that other cities can’t profoundly influence the world.

We might also think of bicycle sharing, which was around in various forms for quite a while. But it was the launch of the massive Paris Vélib’ system in 2007 (which according to Wikipedia was inspired by a system in Lyon) that made bicycle sharing a must have urban item the world over.

Similarly it was the High Line in New York that has every city wanting to convert elevated rail lines into showcase trails. New York is really the city that made protected bike lanes the new standard in the United States as well.

Beyond simple urban amenity type items, global cities can also launch profound cultural and social transformations. A few examples.

The first is from Seattle, a sort of semi-global city. It was in such a depressed state in the 1970s that someone put up a billboard that’s still pretty famous: “Will the last one leaving Seattle please turn out the lights?” Yet in Seattle there was a coffeehouse culture that spawned a movement out of which came Starbucks which literally revolutionized coffee drinking in America and event pioneered the entirely new concept of the “third place.”

A lot of people like to attribute the emergence of Seattle as a player to Microsoft moving there from Albuquerque in the late 1970s. However, I think the coffee example shows that there were interesting things already happening in Seattle long before that. It was a proto-global city waiting for a catalyst.

Another example would be the emergence of rap music out of New York City. Or house music from Chicago.

Or consider the 1963 demolition of Penn Station in New York in 1963. The wanton destruction of this signature structure horrified the city and led to the adoption of its historic preservation ordinance. This was not the birthplace of historic preservation in the United States, but this demolition played a key role in bringing historic preservation to the fore, not just locally but nationally.

Lastly, the Stonewall Riots in 1969 clearly played a signature role in the gay rights movement in America. Many pride parades today are scheduled to fall on the anniversary of the event.

Who knows what might have happened with coffee in America without Seattle. But I think it’s clear that both the historic preservation and gay rights movements would have emerged at some point anyway regardless of what happened in New York. However, the events in New York clearly provided a sort of ignition and acceleration.

How many historic buildings in America were saved because Penn Station was lost? (Think about how many might have been destroyed had the historic preservation movement emerged later).

Think about a state like Iowa where gay marriage is legal. How many people in Iowa 40+ years ago had any idea that an obscure incident in New York City would ultimately transform the social conventions of the rural heartland?

I think this shows the power of the global city. I’m sure that there are things happening underground in New York and elsewhere that right now that we don’t know anything about yet that will ultimately transform our world 10, 20, or 30 years down the road. It’s crazy to think about.

Sunday, October 5th, 2014

The Decline of the Midwest, the Rise of the South

The New York Times ran an article last week that’s nominally about football, but really gives insight into the decline of the Midwest and the rise of the South. Called “As Big Ten Declines, Homegrown Talent Flees,” this piece ties in perfectly with my recent essay on the differing social states of the Midwest and South. The NYT’s money quote says it all:

The SEC sold excellence. The Big Ten sold tradition.

Ironically, it is the formerly stigmatized “backwoods” South that has embraced excellence while the former industrial champion of the Midwest has spurned it. I don’t think that Midwesterners understand how much things have changed in the South. I hear the same stereotypical view of the South that might have had a lot of truth decades ago but have changes substantially. For example, those who think it is both a good thing and bad have quipped that Indiana is like an extension of the South into the Midwest. I don’t think so.

For example, Charlotte built a light rail system. Dallas has poured a billion dollars into a downtown arts district. Atlanta has a multi-billion infill strategy around its former Belt Line railroad. Nashville eliminated downtown parking minimums and implemented a form based code. South Carolina has its German style apprenticeship program. North Carolina built Research Triangle Park – in 1959. Southern cities like Atlanta have proudly claimed and built success around their black heritage. And Charlotte’s Chamber of Commerce CEO said, “To understand Charlotte, you have to understand our ambition. We have a serious chip on our shoulder. We don’t want to be No. 2 to anybody.” Outside of Chicago, does anybody in the Midwest talk like that?

Sure, there are bits and pieces here and there in the Midwest that speak to excellence. But they are the anomalies in a region that has retrogressed. Whereas in the South they’ve massively elevated their game in the last 40 years and are working hard to keep getting better. Sure, low costs and taxes play a role in their success. Climate and the universality of air conditioning as well. But they aren’t content to rest on just that. They want to get better. Meanwhile the Midwest is regressing towards what the South used to be such as, for example, by turning paved roads back to gravel because they can’t afford the maintenance.

The NYT piece brings up an interesting factor driving the rise of the SEC vs. the Big Ten, namely the shift in underlying population ratios over time: “An instructive comparison is Michigan and Georgia. In 1960, Michigan had twice Georgia’s population; in 1990, it was nearly one and a half times as big; today, their populations are roughly equivalent.”

The decline in Midwest population and economic heft brings with it a price that has to be paid. It’s showing up in the football world today. But it’s sure to hit the academic prowess of the Midwest’s major state schools as well. How long can these places maintain their relative rankings of excellence without the financial firepower to play in the big leagues? There’s more inertia on the academic side, but don’t think it won’t eventually happen here as well. The same is true in many other aspects of civic life. Even mighty Chicago has nearly bankrupted itself in its efforts to keep up with other global cities.

The Big Ten obviously saw the writing on the wall and decided to expand outside the region. I dislike this for reasons of, naturally, tradition. But it’s a rational response to a declining marketplace. Similarly, the Cleveland Orchestra established a Miami residency in the pursuit of cash to keep its artistic excellence intact. Might some of these institutions at some point become Midwest in name only? Time will tell.

Wednesday, September 17th, 2014

The World City

Last week’s episode of the Monocle 24 show the Urbanist was an interesting look at the “world city” or “global city.” They take a bit of a skeptical look, showing how, for example, many residents of Istanbul are at odds with the construction boom designed to turn the city into what one critic dubbed a low-grade Dubai. And also how smaller cities like Lisbon and Wellington, New Zealand are following their own path without trying to aspire to compete as peers with the big boys. They also take on Vancouver, though fail to note its extremely high housing prices (it’s not livable if you can’t live there), and also its gang wars and other issues that belie the kumbaya vision the mayor is pitching. And there’s a conversation with an analyst from the Economist Intelligence Unit who talks about that organization’s ratings. It’s a bit eyebrow raising that Monocle, a publication that has done a lot to promote the whole global city idea and transnational norms, values and amenities to which all cities are called on to aspire to (in addition to publishing its own league table), would be critiquing the global city, but it’s a good listen regardless.

If the audio embed doesn’t display for you, click over to listen on Soundcloud.

Thursday, August 21st, 2014

The Changing Face of the Global City

I want to highlight a couple of recent studies by Joel Kotkin for which I provided some research support. The first is a report on global cities from the Singapore Civil Service College called “Size Is Not the Answer: The Changing Face of the Global City.” As the name implies, it suggests that size is not necessarily correlated with global heft.

There are a lot of different ways of looking at cities. For example, the Economist just released its 2014 Global Liveability Index. But this study tries to focus in on specifically global economic power and influence. Thus it is somewhat like Loughborough University’s well-known survey, but looks at more than just producer services.

In particular, it looks significantly at industrial influence, or being a “necessary city” in the global economy that you just can’t help but deal with. For example, the San Francisco Bay Area often gets short shrift in most global city surveys even though it is the overwhelmingly dominant location of the technology industry, a key enabler of globalization and arguably the most powerful economic force at work today. By contrast, some traditional measures like total GDP that may indicate more domestic rather than global influence were not included.

Maybe the biggest surprise to me was the stability of the top ranks of cities, despite using different criteria from other studies. London and New York easily crushed everyone else. I’d expected that cities I thought of as more “domestic champions” like Tokyo, Paris, and Chicago might not fare as well. As it turns out, while Chicago is a bit lower in this survey, Paris is actually #3 and Tokyo #5. Both cities’ rankings are actually slightly higher than in Loughborough’s survey.

The Problem With Megacities

You also know that I’ve written skeptically of megacities in the developing world in terms of their ability to fulfill the aspirations of their citizens.

The second study I contributed to is called The Problem of Megacities and takes a look at the growth of megacities – a very new phenomenon in human history – and the problems that face them. An excerpt:

The megacity is increasingly a phenomena of countries that are struggling to find their way in the modern world economy. Size used to be more correlated with economic and political success and dominance on a global scale. Today, some of the largest cities are disproportionately poor, and seem likely to remain that way for the foreseeable future. Such problems are often ignored or minimized by those who inhabit what commentator Rajiv Desai has described as “the VIP zone of cities”, where there is “reliable electric power, adequate water supply and any sanitation at all”. Outside the zone, Mr. Desai notes, even much of the middle class have to “endure inhuman conditions” of congested, cratered roads, unreliable energy and undrinkable water.

These conditions reflect the inabil- ity of such megacities to handle rapid growth. Places like Dhaka, which gains as many as 400,000 new migrants from the villages annually, grows mainly in its slum, whose residents move to the megacity not for the bright lights, but to escape hopeless poverty, and even the threat of starvation, in their village.

The Urban State of Mind: Meditations on the City is the first Urbanophile e-book, featuring provocative essays on the key issues facing our cities, including innovation, talent attraction and brain drain, global soft power, sustainability, economic development, and localism. Included are 28 carefully curated essays out of nearly 1,200 posts in the first seven years of the Urbanophile, plus 9 original pieces. It's great for anyone who cares about our cities.

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Aaron M. Renn is an opinion-leading urban analyst, consultant, speaker, and writer on a mission to help America’s cities thrive and find sustainable success in the 21st century.

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