Tuesday, July 22nd, 2014
[ Kokomo, Indiana is a small industrial city about an hour north of Indianapolis. It is one of the rare ones whose industry remains largely intact, with two large auto-related plants. This makes them different from the type of community that really has deindustrialized. Yet they fret that those who earn decent incomes in their town too often decide to live in the Indianapolis suburbs. Hence a program to upgrade quality of life in the city. It should be noted that while they've managed to do this without incurring debt, Kokomo arguably benefited more than any city in America outside Detroit from the massive federal auto bailout. Their civic improvements have in a sense been financed by a unique external windfall unavailable to others. Nevertheless, lots of places have received windfalls and spent them poorly. Cities may not be able to control our circumstances, good and bad, but they at least have some control over how they respond to them. This piece from American Dirt takes a look at Kokomo's response. Keep in mind it ran in 2012 and there are likely some anachronisms by now - Aaron. ]
Across the country—but particularly in the heavily industrialized Northeast and Midwest—smaller cities have confronted the grim realities of the unflattering “Rust Belt” moniker, and all of its associated characteristics, with varying degrees of success. With an aging work force, difficulty in retaining college graduates, and a frequently decaying building stock, the challenges they face are formidable. Cites from between 30,000 and 80,000 inhabitants typically boomed due to the exponential growth of a single industry, and, in many cases, the bulwark of that industry left the municipality nearly a half century ago, for a location (possibly international) where the cost of doing business is much cheaper. Essentially, everything the smaller Rust Belt cities had to offer is completely tradable in a globalized market; the resources that provided the town’s life blood are either depleted or are simply to expensive to cultivate further.
Reinvention is the only condition likely to save many of these cities from persistent economic contraction, but, with an overabundance of retirees and older workers, these towns lack the collective civic will that could be expected in larger communities with more diversified economies. An absence of young people intensifies (and, to a certain extent, justifies) the low level of civic investment in one’s own community; after all, if a resident is six months from retirement, how likely is it that he or she would support public investments intended to improve quality of life for twenty or thirty years into the future? For that matter, how likely will a population of retirees remain engaged to encourage or challenge major private sector investments as well?
By no means am I intending to denigrate needs and ambitions of the senior population; I’m merely observing that a stagnant Rust Belt city with this demographic profile will demonstrate vastly different priorities from a city rife with young families. While every Rust Belt city large and small must avoid obsolescence that results from the spoils of globalization, the smaller cities—which have tended to be dominated in the past by a single thriving industry—are less likely to claim alternative sectors and labor pools if their primary manufacturing lifeblood fails. A dying city of 80,000 may not exert the same impact within a region (particularly in the densely populated Midwest and Northeast) that a city of 500,000 would, but it is far more of black eye for the state than a town of 2,000 that has lost its raison d’être. This conclusion is obvious. Many of these small cities must reordering of their economies comprehensively; while the state, the county, or private foundations may offer some outside help, the constituents of these cities themselves are typically the best equipped to understand how their city should evolve. Unfortunately, many of these communities aren’t yet even aware of the need for this reinvention, let alone which avenue to pursue in order to achieve it.
It is with no small amount of reassurance that I can assert that Kokomo, Indiana is not one of these latter cities.
No Rust Belt complacency on display here in the City of Firsts. Though as recently as 2008 it was on Forbes’ list of America’s Fastest Dying Towns, a recent visit shows much more evidence than I’ve seen of some comparably sized cities in the region that the civic culture is neither resting on its laurels nor wringing its hands about how much better things used to be. In fact, one of the Indianapolis Star’s leading editorialists, Erika Smith, recently visited the city, and, after receiving a tour from the Mayor, was pleasantly surprised by how proactive it has been in implementing precisely the type of quality-of-life initiatives largely perceived as necessary to help a historically blue-collar city stave off a brain drain or descend into irrelevancy.
I, too, recently received the Kokomo tour, followed by a meeting with Mayor Greg Goodnight, and I can also recognize some of the city’s most impressive achievements at shaking off the post-industrial malaise that saddled the city with double-digit unemployment rates as recently as a few years ago. Since then, the city has introduced a trolley system at no charge to users; prior to this initiative, the city had had no mass transit for decades. The Mayor pushed successfully to annex 11 square miles in the town’s periphery, therefore elevating the population by about 10,000 people. The Mayor’s team worked to convert all one-way streets in Kokomo’s downtown to two-ways, recognizing that accommodating high-speed automobile traffic in a pedestrian-oriented environment only detracts from the appeal. The team has restriped several miles of urban streets to incorporate bike lanes, and it has converted a segment of an abandoned rail line into a rail-with-trail path, branding it by linking it to the city’s industrial heritage. They have deflected graffiti from several bridges and buildings through an expansive and growing mural project. They have upgraded the riverfront park with an amphitheatre and recreational path. They have introduced several sculptural installations, the most prominent of which is the KokoMantis, a giant praying mantis made entirely of repurposed metal and funded privately. And my personal favorite: with the support of the City, the school superintendent has integrated a prestigious International Baccalaureate (IB) program to the public school system, including an international exchange program for young men from several foreign countries (a girls’ program should arrive in the next year or two) who live in a recently restored historic structure in Kokomo’s walkable downtown, attending demanding courses that bolster their chances of admittance in a coveted American university. Most impressively, the City of Kokomo has achieved all of this without incurring any public debt in the past year.
Obviously the individuals offering me this tour are going to make sure their Cinderella is fully dressed for the ball, and I recognize that not a small amount of the securing of certain infrastructural projects and transportation enhancement grants requires a political savvy that the current civic leadership has in abundance. And I don’t want to rehash Ms. Smith’s article, which more than effectively chronicles this approach at a macro level. In addition, Erika Smith recognizes, as do I, that very few of these initiatives (the IB foreign exchange program notwithstanding) are really particularly earth-shattering. But when most other similarly sized cities in the Midwest seem to be engaged in a race to the bottom, luring new industry through generous tax breaks (often initiated at the state level), Kokomo seems to recognize that a town lacking any amenities outside of low cost of living has to compete with dozens of other cities in Ohio and Michigan and Pennsylvania, and elsewhere in Indiana, that offer the exact same brand. Whether this investment yields a long-term return remains to be seen, but it certainly demonstrates the right gestures necessary to instill civic stewardship in a place whose decades of job loss have seriously scratched its mirror of self-examination.
What ultimately struck me about Kokomo—which Erika Smith only touched upon—was the level of design sophistication evident in some of these civic projects. I need only focus on a single location in the city, in which two particularly laudatory techniques are on display. At the intersection of Markland Avenue and Main Street, just south of downtown, the Industrial Heritage Trail begins its journey southward. Here’s a view as the trail terminates at its junction with those two streets, looking northwestward:
Here is a view in the other direction:
Continuing a bit further in this direction, one encounters this painted wall:
And, pivoting slightly to the left, another mural that is still in progress:
This photo series identifies two amenities that stand out for the astute decision-making that apparently took place during the implementation. The Industrial Heritage Trail clearly operates in a railway corridor, but it is not a rail-trail. Unlike the more common rail-trail conversion, this Kokomo trail did not incorporate the removal of the original rail infrastructure. The Rails to Trails Conservancy would label this approach a rail-with-trail, indicating that the trail shares the railway easement, typically separated by fencing. Rail-trails such as the Monon Trail in metro Indianapolis are still the more common practice. However, a growing number of communities are embracing rail-with-trails, not only because they obviate the need for costly removal of rails, ties, and ballast, but they reserve the rail infrastructure for the possibility that a railroad company may reactivate the line in the future. If the sponsors of Kokomo’s Industrial Heritage Trail had removed the infrastructure, the possibility of ever reintroducing rail along the corridor would be virtually nil. As it stands, the only conceivable disadvantage to rail-with-trails is that, in the event a rail company reintroduces train service, its close proximity to the path may prove hazardous to bicyclists or pedestrians. Otherwise, the decision to retain the railway not only helped to diversify options, it most likely saved a considerable amount of money.
The other smart decision was the site selection for those murals. The ones featured in the photos above are part of a growing mural campaign that the City of Kokomo introduced, and every one that I recall shows real foresight in the locational decisions. What makes them so good? The murals in the photos above front a public right-of-way, minimizing if not completely precluding the chance that later development will conceal them. I blogged a few years ago about an excellent mural in Indianapolis that showed wonderful care and craft in the entire implementation process…except where the conceivers chose to locate it. Not only did they paint on a cheap, cinder-block building that will likely tumble down if market pressures encourage new development in the neighborhood, but the mural also faces a vacant lot which is large enough to host a new structure that would block it completely, no doubt frustrating the community and pitting them against a developer.
Compare this to Kokomo’s murals. Here’s one a little further south on the Industrial Heritage Trail:
Again, it fronts the trail itself—not a chance that a developer will try to block it. And here’s another along a bridge underpass for the recently completed trail along the Wildcat Creek:
The original intention of the mural was to repel vandals at spot that previously suffered from it frequently; this approach has proven successful in locations across the country. But it also sits in a park along a new greenway, so it should remain in perpetuity. Granted, Indianapolis has plenty of murals along retaining walls and buildings that front the aforementioned Monon Trail. Those, too, should survive far into the future. But in recent years, the City of Indianapolis has encouraged countless murals on the side walls of commercial buildings—sites where a blank wall faces a parking lot, where a building once stood. While these bare walls often scream for some ornamentation to help distract from what used to be there (another adjoining building), in many instances the parking lots will likely fall under increasing development pressure in upcoming years. Will the locals thwart development in order to save the mural? This remains to be seen, and I don’t want to base too much of an analysis on speculation. But it’s hard to deny that these public art investments seem less astute than the once I witnessed in Kokomo.
One could argue that Kokomo is merely taking advantage of the fact that it is jumping into the game relatively late; it benefits by learning from the mistakes of others. But decisions that stand the test of time also contribute their fair share to foster civic goodwill. Taxpayers are rarely too forgiving of poorly conceived projects, and several successive blunders, no matter how small they may be, demonstrate poor accountability. Only time will determine the return on investment, but Kokomo certainly has a leg up on many of its competing small cities. My suspicion is, if these projects stimulate the discussion and enthusiasm for proactive leadership that they suggest (Mayor Goodnight was re-elected last year by a landslide), the citizens of Kokomo are only beginning to stoke the fire.
This post originally ran in American Dirt on November 16, 2012.
Thursday, July 17th, 2014
Der Spiegel had an interesting article this week called “Angry Germans: Big Projects Face Growing Resistance.” The article (linked version is English) talks about how it is increasingly difficult to get infrastructure projects built in Germany.
Wherever ambitious construction ventures loom on the horizon in Germany — from the cities to the countryside, from the coastlines in the north to the Black Forest in the south — opponents are taking to the streets…. As the public’s enthusiasm for constant innovation has lessened, so has the appeal of these sorts of projects, and, as a result, they now inevitably come accompanied by picketers. Germany’s graying society, it seems, is so cozy and settled that it resists anything threatening to upset the status quo. In the process, it has lost sight of the bigger picture.
There are a lot of key points in this article that immediately raised parallels to the United States, where infrastructure projects are also under increasing siege. In fact, some of this reminded me of elements of the Tea Party movement. The protestors are uninterested in compromise. They are devoted, full time activists who are unrelentingly opposed to the projects in question:
[Hartmut] Binner’s form of protest has a radical undercurrent: Well-informed, confrontational and devoid of respect for authority, he is typical of the new grassroots activism spreading across Germany.
Binner’s entire life revolves around the campaign. He monitors the routes of departing and landing planes. He plays his self-designed noise simulator on market squares. He kicks off his court appearances by singing the Bavarian national anthem. “If you want to be heard as a member of the public, you need to push the envelope,” he shrugs.
These days, he sees grassroots protests, activism and political responsibility from a different perspective. “The typical protesters are gray-haired, know-it-alls and very networked,” [Freiburg Mayor Dieter Salomon] says. “But they’re not remotely interested in consensus-building, political processes and pluralism.”
Grassroots groups have become so livid, intransigent and single-minded that even the most respected politician in the country, Angela Merkel, is feeling their sting. In early May, hundreds of furious residents had gathered in central Ingolstadt to protest against the construction of a power line from Bad Lauchstädt in Sachsen-Anhalt to Meitingen in Bavaria.
This certainly reminds me of the no-compromises view of the Tea Party. Also, a number of early American Tea Party activists were unemployed, and thus able to basically be full time activists. Even the singing of national anthem has echoes of the Tea Party and their tricorn hats. I don’t want to claim there’s a philosophical or other link between the Tea Partiers and Germany, however.
Not everything lines up with the Tea Party, however. In Germany it seems to be disproportionately retirees who are the most engaged and militant:
Germany’s graying society, it seems, is so cozy and settled that it resists anything threatening to upset the status quo. In the process, it has lost sight of the bigger picture.
Many of the protestors are pensioners with no vested interest in Germany’s future. “It’s striking that the leader of the protests against the Munich runway is a 75-year-old and not someone in the middle of his working life,” [Munich Airport CEO Michael Kerkloh] points out.
Salomon’s nemesis is Gerlinde Schrempp, a determined and argumentative 67-year-old retired teacher with attitude to spare. She’s the leader of the Freiburg Lebenswert movement, which translates roughly to “make Freiburg worth living in. The movement just got elected on to the district council and is first and foremost opposed to any new building in the city.
There’s a stereotype out there of the average Republican voter as an old white guy. But the average Tea Party activist I’ve seen tends to be working age. I look at this one a bit differently. We need to see these types of controversies against the substrate of an aging population. Aging populations are not noted for dynamism, and older people’s self-interest is better served by starving investment for the future in order to save money and avoid uncomfortable change in the present. As a country whose population is projected to decline into the future thanks to this demographic inversion, we are seeing in Germany what’s likely a preview of coming attractions elsewhere around the world.
Indeed, I’m reminded of what one analyst friend of mine in Indiana has said about the property tax caps there. He sees the push to cap property taxes as driven by an aging population in a stagnant state. Old people generally aren’t earning a lot of taxable income nor are they buying huge amounts of stuff, so they are disproportionately less affected by income and sales tax hikes, whereas they often own homes and are hit hard by property taxes. Thus property tax caps serve as another income transfer mechanism from young to old, holding revenue constant. They are in part an artifact of an aging society. Disinvestment in infrastructure can be seen in the same light.
But there’s another part of this that shines a light on yet another group of opponents, namely the intelligentsia.
The term “Wutbürger” (“enraged citizen”) was coined during the Stuttgart 21 fiasco to describe people like Hartmut Binner, and much has been written about them since. They often aren’t the “common man.” According to the Göttingen Institute for Democracy Studies, they tend to be highly educated people with steady incomes and white collar jobs. And while protests movements of the past were often steered by sociologists, today their leaders are more likely to stem from the technical professions, the researchers found.
When we look at opposition to infrastructure in the United States, at least certain types of infrastructure, we see a similar profile of people (though not necessarily technical) behind it. It’s the leftist intelligentsia that oppose the Keystone Pipeline, suburban highway projects, fracking, and many other types of things, often with a militant unwillingness to compromise similar to the Tea Party.
As with Germany, this opposition is enabled by environmental reviews and public participation laws that, while they serve important public purposes, make it easy to delay projects for years through repeated objections and scorched earth litigation. Traditionally environmental lawsuits were associated with the left, but conservatives have started saying, why not us too? Hence litigation against San Francisco’s regional plan. The Hollywood densification plan was recently overturned by lawsuits, and lawsuits have plagued California’s proposed high speed rail line as well.
Whatever the project, it’s sure that somebody on the left and/or the right hates it, and thus will do everything in their power to kill it, which probably means years of delays and untold millions in increased costs.
Also as with the United States, German governments have shot themselves in the foot with a series of financial debacles:
Political and bureaucratic bodies are partly to blame for their own diminished authority. Every major venture seems to entail spiraling costs. Berlin’s new airport was supposed to cost €1.7 billion, a price tag that has shot up to well over €5 billion. Meanwhile, the €187 million earmarked for the Elbphilharmonie concert hall under construction in Hamburg is expected to exceed €865 million by the time the project is completed. Albig is well aware how bad this looks. “People see us as financially incompetent,” he says.
Until politicians can convince the public they have a handle on this, the taxpayer will remain rightly skeptical of many major megaprojects. This is doubly true since it’s very clear, as has been documented by folks like Oxford professor Bent Flyvbjerg, that in many of these cases the politicians were simply lying all along about the real costs.
I’m not sure what all the takeaways are, but there are clearly many forces operating on a global basis to inhibit the development of infrastructure in the West.
Wednesday, July 16th, 2014
NYU Economist Paul Romer gave a great talk at last month’s New Cities conference in Dallas. Called “Urbanization as Opportunity,” it’s now online and I’ll embed below. The first 2-3 minutes are warm up then it really gets going. Great stuff around crime, public space, etc. If the embed doesn’t display for you, watch on You Tube.
There are large number of additional New Cities videos online should you wish to browse them.
Tuesday, July 15th, 2014
[ I've posted a number of pieces by Pete Saunders here in the past. He's not just a great analyst generally, he's particularly great on Detroit. His post laying out nine reasons why Detroit failed has more page views than any other article in Urbanophile history. (The top four posts are all about Detroit, showing the powerful hold that city has on the public consciousness). In his blog, Corner Side Yard, he's bee revisiting that post to go in depth on each of his nine points. Today I'm pleased to be able to repost his analysis of Detroit's housing stock, along with that of many other Midwest cities - Aaron. ]
A scene from the Grixdale neighborhood on Detroit’s northeast side. Source: Google Earth.
Last week, as part of my series on planning reasons behind Detroit’s decline, part 2 of the nine-part series was about the city’s poor housing stock. I started to play with some numbers to see if there was any validity to my opinions about the city’s housing, and I found some very intriguing things. Detroit’s housing stock is definitely unique among its Midwestern and Rust Belt peer cities, and perhaps among cities nationwide. Let’s examine.
Grouping the cities by population figures from the 2013 U.S. Census population estimates, and housing data from the 2008-2012 American Community Survey, I looked at housing age and single family detached housing data for 15 Midwest/Rust Belt cities with populations above 250,000. One city I typically include in an analysis like this, Louisville, was not included due to a lack of ACS data. Data for the Twin Cities of Minneapolis and St. Paul were aggregated into one (sorry, Minneapolis and St. Paul) because they jointly function as the core city for their region. Here’s the big table with all the data:
That’s a lot to digest, so I’ll take the data piece by piece. First, let’s look at the cities ranked by their percentage of housing units built in 1969 or earlier:
You’ll see here that, perhaps following the general national perception of Detroit housing, the Motor City has an older housing stock. Only Buffalo has a higher percentage of older housing. Generally speaking, the cities at the top half of this list have older housing because they lack redevelopment activity that replaces older housing, while cities at the bottom half consists of cities with decent levels of redevelopment activity, or more recently built housing that’s been annexed into the city in recent decades. Here, Detroit does seem to fit the pattern.
But does it really? If you look at the Census’ earliest category for age of structure, 1939 or earlier, Detroit drops considerably on the list:
Instead of ranking second as in the earlier table, Detroit falls to tenth. The rest generally hold the same spots they occupied from the previous table as well. The only ones ranking lower than Detroit here are smaller cities (Omaha, Ft. Wayne) and the cities that annexed large amounts of land post 1970 (Kansas City, Indianapolis, Columbus).
Next, let’s look at how the cities rank in terms of their concentrations of single family detached homes:
Detroit shows up here with the second highest percentage of single family detached homes, comprising nearly two-thirds of the city’s housing stock. Once again, the only comparable cities are the smaller cities and the big annexers.
Clearly, most observers believe Detroit has more in common with Buffalo, Cleveland and Pittsburgh than with Ft. Wayne, Kansas City and Indianapolis. What happened to Detroit’s housing stock that gave it such an odd profile?
To understand, let’s pull out a specific category on the age of structure table, the 1950-1959 category:
Here, we find that Detroit has, by far, the highest concentration of housing units built between 1950-59 of all its peer cities. Nearly one in four homes in Detroit were built during this period. In fact, Detroit, along with Milwaukee and Toledo, occupies a strange space among Midwestern/Rust Belt cities. (Side note: the more I study Detroit against other Midwestern cities, the more I find that Detroit and Milwaukee are virtually the same city. And it doesn’t surprise me that Toledo, just 75 miles from Detroit, would share its characteristics as well). Detroit, Milwaukee and Toledo all added their greatest numbers of housing at the outset of the modern suburban development period, what I’ve called the Levittown Period in my so-called Big Theory of American Urban Development. This supports my thinking that if anyone was ever interested in establishing a Levittown-style national historic district, Detroit would be a good candidate. The Motor City has perhaps more small Cape Cod-style, three-bedroom, one-bath single family homes than any city in the nation.
How did Detroit get this way? Housing demolition likely had some role in a city that lost so much. Detroit likely lost older single family homes and multifamily buildings over the last few decades, leading to skewed numbers. The same is also true of Indianapolis, Kansas City and Columbus, cities that annexed large undeveloped areas after 1970 and built new housing there. Keep in mind, though, that Milwaukee and Toledo, Detroit’s comparables, may not have had the same level of demolition loss that Detroit had, yet they still match the Motor City well.
That leads me to believe that a concentration of housing development at a unique time is a crucial piece in understanding Detroit’s housing stock.
Here’s another way of looking at this. I grouped the cities by age and single family home concentration and came up with interesting groupings:
Here it becomes clearer that Detroit and Toledo stand alone as locations for old or moderately old structures that are largely single family. Also, Milwaukee’s greater mix of single family and multifamily units begins to set it apart from Detroit and Toledo, even when it has a similar concentration of Levittown-style housing.
Finally, let’s consider housing adaptability as part of the housing stock analysis. Chicago, the region’s largest city and lone “global city” member of the group, comfortably rests in the middle of all tables except for the single family detached table, where it shows the lowest concentration of single family homes. My guess is that Chicago’s continued desirability means more newer housing has been built, and that its lower single family housing numbers mean that other housing types (lofts, condos and the ubiquitous 2-flat and 3-flat) created a more flexible and adaptable housing development landscape.
Assuming that younger structures are more often suitable to renovation for adaptability, moderately old structures require more intense rehabs, and older types are more often subject to demolition and rebuilding, I reorganized the previous table in terms of housing adaptability:
And if I put in the cities next to this adaptability scale, it’s easy to see the magnitude of Detroit’s housing challenges:
Detroit is such a unique city in so many ways. The Motor City needs more research and analysis that highlights its uniqueness and adds to our understanding of the what led to its downfall, and less of our ire and contempt.
The more I study Detroit, the more I see the seeds of a similar downfall in other cities nationwide.
This post originally appeared in Corner Side Yard on July 6, 2014.
Sunday, July 13th, 2014
Justin Katz, writing at a web site called the Ocean State Current that appears to be published by a libertarian think tank in the state, is unhappy with my proposals. In fact, he’s giving a point by point rebuttal to my six part toolkit, which you can read here, here, here, here, here and here. I think it’s fair to say he thinks Rhode Island needs much more radical change than I prescribe, and can’t rely on a gradual approach among many other complaints.
Right or wrong, here is my thesis. A free market agenda along the lines of a Tennessee or Texas is dead on a arrival in Rhode Island. It’s simply not possible to pass. Among other reasons, this is because the people of Rhode Island by and large have some degree of progressive orientation. That’s very different from say Indiana, where every other person you meet on the street has Tea Party sympathies, and it takes a lot of police possibilities off the table. I also believe that most progressives in Rhode Island genuinely want to see a better economy in the state. Hence my pitch is aimed at providing analysis and policy recommendations that might have a chance at appealing to the Rhode Island electorate, and thus have some hope of getting implemented or affecting how people think about the issues. If Katz & Co. prefer a different approach, I’m all in favor of the marketplace of ideas.
By the way, even if you go on Atkins or some other rapid change program of weight loss and are successful, the weight seldom stays off as we know. Slow and steady changes in lifestyle are the best way for sustainable change.
Today I want to give a starter set of policy ideas for changing the trajectory in Rhode Island. I won’t claim these are a panacea or represent a comprehensive to do list, but you have to start somewhere. This is an expanded list from my City Journal piece.
Taxes and Fees
1. Seek a “grand bargain” on revenue neutral tax reform. Here the idea is not necessarily to reduce tax revenue overall, but to adjust the levers to make the system less onerous on entrepreneurship and small business. One conceptual idea – and I stress this is a hypothetical – might be to raise the income tax on top earners making over say $500K/yr (a shibboleth of the left) to eliminate the 7% sales tax businesses pay on utility bills. I’ll be returning to the matter of utilities again as it’s an important issue.
2. Repeal the $500 minimum corporation tax. Rhode Island shouldn’t add insult to injury by making a business that loses money pay a tax on top of it just for the privilege of existing. I know at least one person who killed off a side business just for this reason. To be sure it was a hobby, but hobbies sometimes germinate into actual full time businesses.
3. Waive permit and other fees for the first year for new businesses. So many startup businesses don’t even last a year. Why not wait until we see until there’s at least baseline viability before socking them with a bunch of fees? You could easily implement this by charging in arrears. Obviously you’d have to be careful to avoid burdening the system with people getting “just in case” permits such as creating tons of shell companies, but I think this can be managed.
4. Reform unemployment insurance. Benefits are too high and ideally Rhode Island should be closer to the national median. But this would be hard to achieve and a start at reform can be achieved without it. The focus here would be eliminating market-distorting cross-subsidies that favor frequent users of the system, and revisiting business successor rules that punish people for buying and saving failing or bankrupt businesses.
Regulations and Mandates
5. Reform temporary disability insurance (TDI). This is one that wasn’t on my radar until I heard Republican gubernatorial candidate Ken Block call for reform. But when I looked into it this appears to be an even bigger problem than he suggests. Rhode Island is one of only five states with mandatory TDI. The others are California, New York, New Jersey, and Hawaii, all states with fortress industries and such that make them most definitely not Rhode Island’s peer group. It has the second highest benefit levels. It has a state run monopoly system. It allows employees to double dip. And I believe Rhode Island’s program is one of only two along with California that has a temporary caregiver leave component. I’d completely repeal mandatory TDI. But again, reform of some sort should be possible without triggering political nuclear war. Eliminate the state run system and tell businesses to buy coverage from the marketplace. Eliminate double-dipping. Make temporary caregiver leave a one time only or one per decade type benefit instead of annual recurring one. Put a lifetime cap on weeks of benefits and beyond that claimants should utilize long term disability coverage. Again, whatever we think about the idea of this system, Rhode Island is a huge outlier here and has little leverage to lead the way on this.
6. Perform a post-Obamamcare health insurance mandate review. Rhode Island has more items of mandated insurance coverage than any other state. Coming from Illinois – a blue state mind you – I was stunned at how much individual health insurance costs in Rhode Island. Obamacare seems to have largely standardized coverage and I would suggest defaulting to its coverage guidelines. If Rhode Island has items that go beyond this, it should eliminate any where at least ten other states (including at least MA and CT) don’t already mandate it.
7. Pass a clean semi-monthly payroll act. Until last year, Rhode Island was the only state in America that required companies to pay their employees weekly. That was changed to enable bi-weekly/semi-monthly payroll, but only for businesses whose average pay is twice the minimum wage and can post a surety bond, get the written permission of any unions affected, and recertify with the state every four years. You know what I call that? Progress. That’s good news. But in keeping with the continuous improvement theme, the legislature should follow-up with a clean semi-monthly payroll bill.
8. Create a “most favored nation” regulatory policy with regards to Massachusetts and Connecticut. It’s hard to argue that neighboring states have different core values. So their regulatory systems should be considered prima facie adequate for Rhode Island. Unlike California, a big and rich state, businesses are not going to jump through hoops for the privilege of serving small and economically challenged Rhode Island. So to make it easy, I suggest harmonizing regulations with Massachusetts (and if possible Connecticut) to create a mini type of EU style common market effect. This could be implemented via a most favored nation policy saying that “If it’s legal in MA or CT, it’s legal in Rhode Island. If you’re licensed to do it in MA or CT, you’re licensed to do it in Rhode Island.” Rhode Island is really subscale to be running its own regulatory system anyway, so outsource it.
This doesn’t even scratch the surface of what’s needed on the regulatory front. Many of you probably saw the recent Thumbtack survey that ranked Rhode Island the worst state in the country for its small business climate, as rated by small businesses themselves. Metro Providence was ranked the second worst metro. Fixing this is actually much more critical than taxes in my view, but also harder as many of the worst regulations around land use and such are at the local level. So this is where local reformers should focus.
When I spoke to the Rhode Island House of Representative earlier this year, the other speaker was a representative from CVS sharing his perspectives on what that company looks for in places to invest. One item he mentioned as important is utility costs. Hence my thought about utility taxes above. But beyond that, Rhode Island’s electric bills are among the highest in the country and gas prices are high too. There needs to be a focus on bringing those down. Lowering electric rates doesn’t deprive the treasury of much and actually saves money on government electricity purchases. Unfortunately, as someone pointed out to me, in Rhode Island it works just the opposite; because it doesn’t appear to be a tax, the legislature feels free to pass laws that send rates through the roof.
9. Kill Deepwater Wind by any means necessary. Deepwater Wind is a crony capitalism fiasco of epic proportions involving an offshore wind farm. Billed by some as the “next 38 Studios”, it’s actually even worse as the price tag will be hundreds of millions of dollars. IIRC, the increased cost to governments alone from purchasing inflated electricity will be $1.5 million a year. The environmentalists I know don’t even like the project. The only plus side to anybody other than cronies appears to be reduced electric rates on Block Island. Well, I may have cheaper electricity, but I don’t get to live on an amazing island. Nevertheless, if it’s important to bring those rates down, then direct subsidies would be cheaper.
10. Partner with other New England states on increasing gas pipeline capacity into New England. A while back City Lab ran a story talking about a new gas pipeline under the Hudson River into New York City. As you probably know, gas is dirt cheap right now because of plentiful supplies from fracking in places like Pennsylvania. But that doesn’t help if the gas can’t get there. The Northeast has been under-pipelined. But as you can see, New York City is seeing the infrastructure investment to bring this online. New England isn’t. Here’s the money chart showing the price spikes this produces:
I’m not sure why no new pipelines have come into New England, but I’d certainly make it my business to find out. By the way, some residents do heat their homes with natural gas. I did when I lived in the state. So beyond industrial customers, think about what that chart means to struggling Rhode Islanders’ winter heating bills.
Sadly, the state seems to be moving in the opposite direction as the legislature passed more laws this year that will at first glance raise rates still higher.
11. Cut to Invest With a Major Infrastructure Bond. Bruce Katz at the Brookings Institution likes to talk about a principle called “cut to invest.” That means making cuts in current spending in order to invest in critical items like infrastructure. Rhode Island’s infrastructure is in rough shape so that approach is needed here. Interest rates are rock bottom right now so there’s no better time to borrow. As the Fed dials back on quantitative easing, the window may start closing on this. Rhode Island needs to identify cuts in ongoing spending sufficient to finance payment on a major infrastructure bond targeting roads, bridges, and schools. I’m not talking about adding any new road capacity here, just doing things like rehabbing or replacing the existing crumbling bridges and obsolete school buildings.
As the Sakonnet River Bridge debacle shows, this money is going to be spent one way or another. Better to do it now on the state’s terms instead of later when it will cost a whole lot more to, for example, fully replace decayed structures that could have been saved if they’d only been properly maintained.
Under no circumstances should Rhode Island issue a bond without the full necessary funding stream for repayment allocated up front.
12. Investigate shared startup/co-working facilities. Instead of paying companies to set up shop in Rhode Island, invest the sales effort into luring operators like TechShop to create locations in Rhode Island. These types of co-working facilities can reduce the cost of capital and risk of entrepreneurship. I’m not a big fan of government building these directly, but they are a key part of the startup infrastructure of a community these days.
13. Build more Quonsets. NYU economist Paul Romer has advocated for a “charter city” concept in developing countries along the lines of a charter school as a way to bypass dysfunction. Rhode Island already basically applied that concept at the former Quonset naval base. Quonset is everything Rhode Island is not. They’ve invested in first class infrastructure. They have a single zoning classification, business friendly performance-based development standards, pre-permitted sites, a single point of contact for approvals, and a 90 days to groundbreaking pledge. Port users even have a tax advantage in that they are exempt from the Army Corps of Engineers import duty because the state instead of the feds paid for the port improvements. The result: 9,000 jobs, including 3,500 created in just the last few years.
Why not replace this model elsewhere by partnering with towns to create more Quonsets? When I pitched this idea at a RIPEC event, an economist with Beacon Hill Institute in Boston wasn’t a big fan. He critiqued it on two basic points. One is that the businesses who located there probably would have been elsewhere in Rhode Island. The other was that the $10,000 a job in infrastructure investment was too high.
I think the first criticism is fair and must be true to some extent. Additionally, some of the jobs are directly port related and there isn’t another deepwater port handy that I’m aware of. However, there’s no hard data on this and my assumption would be that at least some of the non-port jobs must represent a net gain to the state. In any case, Quonset is the best thing going in the state right now, so why not give the model another chance? Also, keep in mind that a state like Tennessee paid $250,000+ per job for a VW plant. $10K/job – not in subsidies, but infrastructure – is small potatoes as these things go, particularly in state where the infrastructure is decrepit. I’m pretty sure if I told the legislature they could create middle class jobs at $10K a pop in infrastructure, they’d sign checks all day long.
At Quonset, the state is the developer. For new sites, I’d look to partner with a private developer, with a state authority as infrastructure partner and approval provider a la Quonset.
I won’t suggest this list is anywhere near where the state needs to be. It doesn’t address key issues as the local level like regulations that hobble building, or the corruption/cronyism issues. But hopefully this provides at least some tangible first steps that could get the state pointing in the direction it needs to go.
As with my guiding principles list, some of these items were originally suggested by other people.
Thursday, July 10th, 2014
Sunday I described how Rhode Island’s fundamental economic problem is that it has been acting like it’s selling a premium product from a structurally advantaged position when in reality it’s selling a commodity product into a highly competitive global marketplace. Unsurprisingly, it hasn’t gotten a lot of takers.
Before giving my starter set of action items, I want to provide a brief decision toolkit in the form of a set of guiding principles or questions to help people evaluate any proposed solutions. I won’t pretend this is a totally comprehensive list, but clearly these ought to be front and center.
Here are six questions that should be asked in evaluating policy:
1. What does this proposed policy mean to us, considering our competitive context?. This is where Rhode Island has to swallow hard and recognize that it is not a premium location for business and has start behaving like and making decisions like it’s in a competitive market. That’s gonna be tough, but it’s imperative.
Another way to think of this is my question about how to best embody the values of Rhode Islanders into a contextually appropriate policy set. It may be that in some cases, economic development takes a back seat. For example, Rhode Island is a “must shelter” state for homeless families. That is, families have to be given a place to stay, even a hotel room, if they are homeless. I’m sure this costs a lot of money, but I don’t care. I’d personally be willing to sacrifice some economic growth for this purpose (assuming someone made the case that eliminating this mandate would affect that). On the other hand, is it really necessary for people on temporary disability to be able to double-dip from both their employer and the state administered benefits fund? I don’t think so.
Rhode Island has to ask what the results of a policy will be in the Ocean State, not just how well it worked out in New York, San Francisco, or Seattle. Again, like it or not, the state border is never more than a few miles away, and in today’s globalized economy, localities are at the mercy of the market. As progressive commentator Ramsin Canon put it regarding Chicago:
What we’re feeling viscerally, but seeing from too close to appreciate, is the logical end of decades of neoliberalization of government, which has transformed a managerial state into an entrepreneurial one. Our Mayors are now “entrepreneurs-in-chief,” and the result is that governance has been transformed from a participatory process of pooling resources and regulating behavior for the public good into one of government by private negotiation and enticement of capital through competition between states, cities, and even neighborhoods.
Why not raise property or luxury taxes, or institute a city income tax, to make up the deficit? Why not divert money from the TIF districts? See above; Chicago is no longer a political community, it is an economic entity that is in competition with other cities in the region, in the state, across the world. In that mental framework, tax is cost, or price. You raise prices, you drive away your clients.
Read the full piece for his prescription for change – again from a staunch progressive. Regardless of what we think of current conditions, anyone left or right has to start with an acknowledgement of reality.
In my view this means that in most cases Rhode Island needs to be a bandwagon jumper, not a bleeding edge innovator, on things like green energy and social service levels. Let California experiment with cap and trade or other things, succeed or fail as the case may be, and once there’s a proven model that’s economically efficient, jump on board. It’s like how flat panel TVs were originally the province of the rich, but eventually got perfected and prices collapsed down to where they became the norm. Similarly, when it comes to mandated benefits, if there’s one the state wants, rather than being one of the top five early adopters, wait till a tipping point gets hit (say 25 states) and join in then. Or think of it as a “pick your battles carefully” approach. But always be aware of the competitive context.
2. Is Rhode Island continuously improving at a rate faster than its competitors on a long term, sustainable basis? A second factor to consider is that it took a long time to get into this situation, and it will take a long time to get out. It’s just like losing weight. There is no silver bullet. There is no quick fix. There is no magic pill. We need to make lifestyle changes over the long term to get us where we want and need to be. As local consultant Kevin Hively once put it, “Rhode Island needs to change its diet, not take a shot of 5hr Energy.” And that’s dead on.
The guiding principle here should be: “Continuously improve at a rate faster than your competitors are improving over the long term.” And that’s the second way to evaluate policy proposals. Are they part of a sustainable program of change? Or are they just a flash the pan? Are they a gimmick? And are they improvements that are outpacing the improvements we know every other state is striving to make? Just because it’s better than the state’s past doesn’t mean it isn’t still falling further behind. Rhode Island needs to keep a finger on the pulse of the competition and what it’s doing. But it’s a journey and it’s lifestyle change.
And it needs to be maintained for the long term. Short term upticks can lull us into complacency. For example, as the national jobs picture improves, Rhode Island’s unemployment rate has fallen. But we’ve seen this movie before. Back in 1984 when the Greenhouse Compact failed, its opponent did a jig on its grave when Rhode Island’s economy had a moment in the sun. But it quickly faded and look where the state came to decades later. Rhode Island has to see evidence of improving strength across business cycles, not just following along in the footsteps of the national economy.
3. Is Rhode Island addressing the areas where it is worst in class or otherwise particularly disadvantaged? Since it is a long journey, Rhode Island has to know where to start and where to go next. The state should start where it’s worst in class or where it has things that are particularly causing competitive problems, the things that are directly a burden on job creation and economic growth.
For example, I hear about people wanting to eliminate the estate tax. I’m not a big fan estate taxes, and there were some particular problems with the so-called “cliff” that the legislature did something about this year. But is the estate tax the biggest thing discouraging people from starting a business in Rhode Island? I don’t think so. You have to have earn your estate first before you worry about paying taxes on it.
Similarly, the Republicans have really focused on the sales tax. Rhode Island’s sales tax isn’t low, but it’s not nearly the highest in the country either, especially when local taxes in other states are factored in. It’s almost 10% in Chicago, for example. In response to my City Journal piece, one local free market type said that his reason for advocating a sales tax cut was border arbitrage. But “beggar thy neighbor” policies and border wars are seldom positives over the longer term and generally indicative of “5Hr Energy” thinking. That’s doubly true in this case when Massachusetts has way more ammunition to fight with. The sales tax needs to be looked at competitively, but in a broader context and at a the right time.
On the other hand, Rhode Island has the worst rated unemployment insurance system in the country. That’s a direct burden on business. Places like that are where to start.
4. Is Rhode Island moving toward or away from the right balance between consumption vs. investment spending? Rhode Island government as a whole only spends 4.8% more per capita than the national average. But Rhode Island is well above average in spending on consumption items like social services and very below average in spending on investment items like infrastructure and higher education. Rhode Island spends 52% more per capita on human services than the national average. But it’s 47th in per capita higher education spending and has the 4th worst rated bridges in the nation.
I believe the state has to rebalance away from consumption towards investment. I’m not suggesting that Rhode Island gut its safety net. I’ve personally received government benefits and can attest to their importance. I won’t even say Rhode Island needs to have below average social services. But on a whole range of items it’s in the top five states in America. That’s simply not realistic given the competitive context, financial condition of the state, and the dire need for longer term investment.
But whatever your take, you should come up with a point of view on the right balance, and evaluate policies based on how they adjust the dials towards or away from that target balance.
5. Is Rhode Island promoting and de-risking entrepreneurship and the scaling of local businesses inside the state (vs. targeting large corporations and luring businesses from elsewhere)? Rhode Island needs to remember how it made its money in the first place. It did it through mostly through home grown businesses. It’s the same with other places. The Big Three were founded in Michigan. Most firms in the Bay Area started there – Google, Intel, Cisco, etc. Facebook may have moved, but it was tiny at the time.
So the state needs to adopt that mindset again. It’s going to have to grow its own success stories, and focus on creating an environment that’s conducive to that, not convincing fickle firms from elsewhere to pick it in a site selection. Post 38 Studios, I think that should almost go without saying. And again, the state doesn’t have enough financial ammo to get in bidding wars for business in any case.
CVS is an interesting case study here. It does get subsidies from the state, but fundamentally why is CVS in Rhode Island? Because, although it was originally started in Mass, the founders were from Woonsocket. So they grew it there and now the company has a huge headquarters in the state. Rhode Island needs to build more home grown success stories like that over the longer term.
6. Is Rhode Island setting policies and making investments like an integrated urban region (a city state)? Rhode Island is the city-state. People there say it a lot, but don’t act like it. Instead, all of its 39 cities and towns are treated similarly, and as completely autonomous independent entities, not part of overall urban or metropolitan region.
In the 21st century economy, it’s metropolitan areas, and particularly metropolitan areas of greater than a million people, that are the hubs of economic activity. That’s Rhode Island (aka Metropolitan Providence). That’s good news. That is a structural advantage, but the state isn’t taking advantage of it because it doesn’t make policies like it’s an urban region. Its policies today seem more like it thinks it’s collections of villages in the English countryside.
For example, when the state extends the T to Wickford Jct. and proposes to extend it all way the Westerly, that’s not investing like an urban region. When I hear people pounding the table for why agriculture is so key to the state’s future, that’s not thinking like an urban region. Clearly the tradition of New England towns isn’t going away and that limits what can be accomplished, but it’s important to ask what can be done to move the needle in the right direction.
So those are six questions to ask when assessing policy. In my final installment, I’ll give some specific suggestions for how to get started moving forward.
Full disclosure: I took a couple of these ideas from someone else who I’ll leave anonymous so he or she doesn’t end up guilty by association with me.
Sunday, July 6th, 2014
My latest article is online over at City Journal, and shows how Rhode Island has become an economic and demographic basket case, one not making headlines largely because the state is small enough to fly under the radar. I’ll give you a trigger warning on this one. While making clear that the Republicans of Rhode Island have hardly crowned themselves in glory, I focus on the follies of the Democrats who have had overwhelming control in the state since 1935. If you don’t want to read this one, try one my previous posts about the Tea Party instead. You can also read a response from the left at RI Future.
In my article, titled “The Bluest State,” I attribute the state’s failure to poor governance and corruption (bi-partisan), a complacent populace, and far left policies that have imposed top 5 or top 10 levels of high taxation, high service/low investment spending priorities, stifling regulations, and very powerful public sector unions on a state radically unsuited to them.
The response by some in Rhode Island was to say that while the legislature is controlled by Democrats, they are conservatives, not progressives. Or pointing out Republican failures like Gov. Don Carcieri. I have a very simple reply to that. If the policies of Rhode Island are indeed conservative, then progressives should have no problem rolling back the taxes and regulation, rebalancing spending, and curtailing union abuses there. Welcome aboard.
In any case, the macro problem is that this collection of policies was implemented in a place completely unsuited for them. The ideas were imported from elsewhere and implemented in a way that ignores the context. I plan to explore that in a three part series starting today. This post will be about the competitive context of Rhode Island. Thursday I’ll lay out a “decision toolkit” of questions that can be used to evaluate any proposed policies there. And next week I’ll give some very specific recommendations in the form of an expanded and more detailed list from my article.
Let’s start with the context. That’s something that’s really been missing from the Rhode Island discussion and is absolutely critical – because without the context, you can’t really property evaluate any proposed solutions to the economy.
I want to start by going back to the Slater Mill in Pawtucket 1793. Why did America’s industrial revolution begin in Rhode Island? There are a lot of reasons. We were a coastal country, and Rhode Island was on the coast. Rhode Island was right in the middle of that Northeast Corridor from Philadelphia to Boston that was far more dominant then than it is now. So Rhode Island was in the middle of the action – it was centrally located. It was an era of water transport and power, and Rhode Island had the seaport access, and numerous small rivers it could dam for power. It was in the intellectual center of America, and had a freethinking culture that was open to the new and the different. And once the first mill was built, Rhode Island had first mover advantage in the marketplace.
So in a sense where else in America other than New England could this have happened? Not too many places. You couldn’t have done textiles in North Carolina back then because their entire economy and culture was a slave based agricultural economy, for example. It would have been a non-starter.
So what we see is that Rhode Island and New England had major structural competitive advantages that let them initiate and then dominate the early stages of the industrial economy in America. It was like Detroit in cars, or Silicon Valley in tech today.
Fast forward a hundred years to the 1890s, and that’s when Rhode Island’s textile base began to erode. What happened in that hundred years that caused this change? Well America was a very different place in the 1893 than 1793. Instead of a coastal nation we were a continental nation. Rhode Island was no longer centrally located, it was on the periphery. The primary transport mechanism was no longer ship, it was rail. Power was no longer water, it was coal, steam, and electricity. Slavery was abolished in the South, and they had to find something else to do. Religious freedom and free thinking ways were no longer the exclusive possession of Rhode Island. And as a consequence of these changes, Rhode Island no longer had a structural competitive advantage or fortress position in the industrial marketplace. Instead, it was subject to something it didn’t have originally, and that was competition. This newly competitive environment posed – and still poses – particular challenges for Rhode Island because it is so geographically small and thus border arbitrage is easy.
What Rhode Island needed to do was to recognize that its circumstances had changed, and that it need to start acting like it was in a very competitive market instead of one in which it held all the cards. That would have been difficult in the best of circumstances candidly. But it didn’t do that. And I’d argue that’s true up to the present day. And it’s easy to understand why. Rhode Island had a 100 year run in a market dominant position. Keep in mind, Detroit only had 60 years of success and dominance in autos, max. Rhode Island had a hundred years of industrial dominance, and successful merchant trading and such industries before that. So clearly that stamps the thinking of a people. It has to. But nevertheless, the situation has changed.
And that, fundamentally, is the most important thing to understand about Rhode Island’s condition. It’s been acting like it’s still selling a premium product from a structurally advantaged position like it was at the beginning, when it’s actually selling a commodity product into a highly competitive global marketplace. It’s been trying to sell a commodity product at a premium price point in terms of costs, taxes, regulation, etc. and unsurprisingly hasn’t gotten a lot of takers. The stone cold reality is that with limited exceptions, Rhode Island has no marketplace leverage. One might blame this on federal level neoliberal policies, but that doesn’t make reality any less real for the Ocean State.
The state hasn’t recognized its problem of trying to sell a commodity at a premium price point. That’s for several reasons. First is that the policies that are intended to embody Rhode Island’s values were imported from other places that have radically different conditions. Rhode Island is a state with progressive values. There’s nothing wrong with those values and in fact I share many of them. But where do the policy ideas that instantiate progressive values come from?
To just pick an area that’s been a debate in the gubernatorial race, every Democratic candidate has pledged to raise the state minimum wage to $10.10/hr, which would be the highest statewide level in the country. Where did that idea come from? Did it originate in Rhode Island? I don’t think so. So the question we need to ask is where did it originate, and what are the conditions like there?
I’d argue most progressive policy ideas come from three primary places: San Francisco, New York, and Washington, DC. And if you look at those cities, or other progressive capitals like Boston, what you see is that they are like Rhode Island was back in 1793. They have a structural competitive advantage in the marketplace because they have captive, high value industries that are bound to the geography where they are located, operate at global scale, and spin off huge amounts of cash. Wall Street prints money and it isn’t going anywhere. Silicon Valley isn’t going anywhere. Speaking of printing money, the federal government literally prints it and is not pulling out of DC. Harvard and MIT aren’t moving out of Greater Boston. These places have cash registers that never stop ringing. So those cities can get away with doing things Rhode Island can’t because it no longer has those fortress industries like they still do today. So the state has been importing policy ideas from places that are nothing like Rhode Island.
That includes the rest of New England. If you pan back the lens, what you see is that there are really only two poles of wealth in New England. One radiating out of Boston. The other out of New York City into Connecticut. To the extent that you’re able to tap into Boston or New York money, you’re doing pretty well. To the extent that you’re not, you’re likely as bad off as Rhode Island. Most of Massachusetts, its so-called Gateway Cities and all that, are exactly like Rhode Island. Connecticut is chock full of struggling industrial cities like New Haven and Bridgeport. Even their white collar economy is in trouble.
The states of Massachusetts and Connecticut only are able to do what they do because of the high value they capture in Boston and places like Greenwich and Stamford. Even New Hampshire similarly is almost entirely dependent on access to Boston money. Rhode Island simply looks worse, because it has less access to New York and Boston money than those other states.
That’s where I’ll actually defend Rhode Island’s leadership. In a previous article, I argued that Rhode Island’s problem isn’t poor leadership. I’d like to qualify that. Rhode Island has indeed been poorly governed, and that’s a problem. But it hasn’t had uniquely bad leadership. Some people like to say that the problem is Rhode Island’s leaders are stupid whereas those in other states are smarter or less venal. I don’t think that’s the case. Three House speakers in a row got indicted in Massachusetts. But you can get away with things in Massachusetts that you can’t in Rhode Island because of the Boston area economy. It’s like Warren Buffett said: when the tide goes out we get to see who’s been swimming naked. The tide went out on Rhode Island a long time ago whereas some other places have been luckier in that regard.
This is a painful reality for the state because Rhode Island takes its cues from its neighbors. But they’re richer. It’s like three brothers, one’s a doctor, one’s a lawyer, and one’s a teacher. The teacher isn’t going to be able to live in as a nice a house as his brothers. That’s just financial reality. And that’s the situation Rhode Island is in. Because neighboring states have access to money from fortress industries. Rhode Island doesn’t. They’re market makers; Rhode Island is a market taker.
Another aspect of missed context is that Rhode Island has over-estimated its quality of life advantage. It really struck me when I was living there that the idea that Rhode Island has a markedly superior quality of life to other places is just sort of taken for granted. It’s a bedrock axiom. I think the quality of life is good in Rhode Island. I’m not going to criticize it. And I think that the assumption of superiority actually was true not that long ago.
But I visit a lot of places, and I can tell you, America has really raised its game in the last two decades. I live Indianapolis now, and when I first started spending time there back in the early 90s, to be honest, it was like Siberia. You wouldn’t want to live there unless you were from there. Today, it’s completely different. Indianapolis has more and better microbreweries than Rhode Island, better coffee, pretty good restaurants – not as good as Rhode Island’s but definitely serviceable – a big farm to table movement, their own local fashion magazine – I mean like a real print magazine – and a lot more. It’s night and day.
Rhode Island hasn’t fully woken up to how much better life has gotten in a lot of places you never would have considered living before. There’s a new level of competition out there that was never there before.
Add it up and Rhode Island needs to have a big mindset shift. My observation is that candidly, it’s had an entitlement mentality. I attribute that to three sources I talked about above:
One is Rhode Island’s rich historic legacy which is a justifiably proud history. Part of that legacy is its history as a highly competitively advantaged economy in the past. But that history can blind the state to the reality of today, which is very different.
Two is that Rhode Island feels entitled to live like its neighbors, its brothers if you will, in New England, when they’ve got better jobs.
Three is that Rhode Island hasn’t recognized the extent to which other places have improved their quality of life such that its advantage is much slimmer than it realizes.
Rhode Island has to realize that it is not entitled to live like it used to or like California lives today. And that’s tough to accept. In America especially, with this deep seated narrative of economic progress, regression is a bitter pill to swallow. We’ve seen the results of that in post-industrial America across the board.
That doesn’t mean rejecting every progressive idea. It does mean assessing what makes sense for the state in light of its weak marketplace position. The values of Rhode Islanders have to be embodied in a policy set that makes sense with its own economic competitive context, not somebody else’s.
The problem here is that there’s hasn’t been indigenous R&D to create locally appropriate policies. That’s actually one reason I started my site so many years ago when it was focused on smaller Midwest cities. Those cities were – and sadly still are for the most part – passive importers of ideas about what cities should be. I wanted to start a conversation about Midwest cities on their own terms. I’m all in favor of stealing good ideas from anybody, even NYC. But you have to ask whether it makes sense locally and how to do it. And also be developing your own “in-house” ideas as well. That’s what I set out to do with this site.
So if Rhode Island wants to perform differently, it needs to create an indigenous R&D capability, especially as most national progressive ideas emanate from elite citadels, which Rhode Island is not. This will be hard because to many of Rhode Island’s intellectual elite came from places like New York and Boston, and thus are steeped in that way of thinking.
But I have an idea. There are a lot of people in Rhode Island who are heavily involved in boosting the fortunes of developing counties. Would they go into a developing country and say that the leaders there should adopt California style taxes, services, and regulations? No way. They’d realize that these places need to start with where they are at. The immediate needs in many places are better governance (esp. less corruption), basic services like clean water and sanitation, education, upgrading infrastructure, and facilitating economic development. Rhode Island isn’t a developing country by any means, but it’s not California or New York either. No matter how much people in Rhode Island might be in agreement with the values or policies of those places, the state is simply in a completely different situation. It needs to focus on the basics. So maybe those Rhode Islanders who are involved in developing country work can try to think about Rhode Island through that lens to see what ideas can be generated. Again, Rhode Island is NOT a developing country, but there may be things that can be learned.
The good news is that change is possible. Though Rhode Island has huge problems and a long road back to recovery, I believe there’s certainly a lot of room to believe that it can be a lot more successful than it is. I’ll delve into the specifics of a starter program in the next two installments.
Thursday, July 3rd, 2014
My latest column is online in the July issue of Governing Magazine. It’s called “Do Cities Really Want Economic Development? My conclusion is that in all too many places, the answer is No. The status quo is actually preferred, no matter what people might say.
All we have to do see this is to apply Occam’s Razor to the condition of our cities. What’s the simplest explanation that explains the facts? In any number of places, if you just assume that civic leaders and maybe the broader community itself actually want the place to go down the tubes or at least stay the same, everything else falls into place.
Now it may be that this is really an emergent property of the social system rather than intentional. What’s that saying? “The system is producing precisely the results it is designed to produce.” Maybe Abilene Paradox style, no one really wants the city to fail but collectively everyone ends up choosing decline. But then you see so many examples of crookedness, cronyism, criminality, and self-dealing that pop through into the public view, and the benefit of the doubt starts to crumble.
In any case, here’s an excerpt:
Economist David Friedman once told this joke: “Two economists walk past a Porsche showroom. One of them points at a shiny car in the window and says, ‘I want that.’ ‘Obviously not,’ the other replies.” That is, if the first economist had really wanted the Porsche, he would have bought it. Our choices tell us more than our words about what it is we really want.
Problems are problems, but they are also sometimes solutions to certain sets of questions. One of these is how to mobilize, allocate, and deploy community resources and power. Fighting decline has become the central organizing principle in many places.
Jane Jacobs took it even further. As she noted in The Economy of Cities, “Economic development, whenever and wherever it occurs, is profoundly subversive of the status quo.” And it isn’t hard to figure out that even in cities and states with serious problems, many people inside the system are benefiting from the status quo.
They have political power, an inside track on government contracts, a nice gig at a civic organization or nonprofit, and so on. All of these people, who are disproportionately in the power broker class of most places, potentially stand to lose if economic decline is reversed. That’s not to say they are evil, but they all have an interest to protect.
Consider one simple thought experiment: If a struggling community starts booming, that would eliminate a big part of the rationale for subsidized real estate development, which constitutes the principal form of economic development in all too many places, and which benefits a clear interest group. It might also attract highly motivated, aggressive people from out of town, folks who are highly likely to agitate for better than the current inbred ways of doing business. This would inherently dilute the positions of the current powers that be.
Read the whole thing.
Wednesday, July 2nd, 2014
You’ve no doubt seen many posts already about the 80,000 vintage newsreel type videos uploaded to You Tube by British Pathé. The biggest challenge with these is that no human being can possible process that quantity of material. But it’s fascinating and you could probably spend many a day watching these things.
I’ll share a few highlights today focused on Chicago. First, one I found via Ben Schulman. It’s a 1963 video called “The Changing Face of Chicago” and can be viewed on You Tube if the embed doesn’t display.
Listening to the narrator brag about the “27 urban renewal projects under construction” can inspire perhaps horror or laughter. But what it should spark is humility. I’ve little doubt that 50 years from now, the many earnest urbanist videos and policies put forth with equally as much dogmatic fervor and certainty will be the subject of future generations’ puzzlement. My own blog may perhaps be an exhibit.
We need to have a sense of meta-narrative about progress. By that, I mean that we not only need to understand the ways in which we’ve changed or grown vs. the past, but also keep an awareness that we’re not done yet and that in the future we will have gone beyond where we are now. We should never commit the fallacy of believing we’ve reached the apex of our understanding in the present.
Whet Moser also put together a collection of Chicago entries over at Chicago Magazine.
Here’s a fun one of his from 1939 called “Chicago Cycles.”
Here’s one from 1922 (silent) of riots in Chicago with police arresting “anarchists.”
And from the some things never change file, video of a 1938 snowstorm.
There’s plenty more so search and enjoy.
Sunday, June 29th, 2014
This is the last of my entries prompted by my recent trip to Columbus. I’ve noted before that Columbus and Indianapolis are twin cities in many ways, though with some important differences.
One of those differences is that the civic discussion in Indianapolis today is heavily driven by the urgency of reversing the decline of Marion County as the city of Indianapolis increasingly loses out demographically and economically to its suburbs. In Columbus, by contrast, I didn’t sense nearly the same concern about suburban competition. While again I only have limited data points to go by, what conversations I did have if anything suggested to me that the city of Columbus thinks it’s holding most of the cards in the region. I suggest letting Indianapolis be a cautionary tale, and that Columbus should be much more focused on how to manage future suburban competition than it presently seems to be.
By the late 1960s Indianapolis had, like most cities, been steadily losing ground to suburban development. The response was a city-county merger called Unigov* that in effect annexed all important contemporary suburbs are well as most of the empty land that would be urbanized in the next two decades. This allowed Indianapolis to capture that suburban tax base and avoid many of the problems that plagued other older cities during the 1970s.
Fast forward to the present and it’s clear that the Unigov model is out of gas. Marion County is now largely full apart from some areas in the southern parts, and has a fairly flat growth curve in population. Most the growth is now in the collar counties. What’s more, there’s been a huge employment shift as well, with the city losing 41,000 jobs since 2000 and the suburbs gaining 78,000. I gave an overview of the dynamics in a previous post.
Today Indianapolis has a serious problem on its hand. How did this happen? It’s pretty simple. Unigov bought he city 40 years. But what did it do with that time? It built up its downtown to one of America’s best, a legitimately impressive and important accomplishment. But beyond that it was basically business as usual. Unfortunately, the 5.5 square miles of downtown can’t carry the rest of the city’s nearly 400. The city should have been aggressively preparing for the day when Unigov would reach exhaustion. But it did not.
Columbus utilized a similar technique to Unigov by aggressively annexing suburban development. And it had fairly similar results, doing well and avoiding the problems. But it seems to be widely accepted in Columbus that the city is nearing the end of its growth by annexation phase. While unlike in Indiana, Ohio makes it fairly easy to annex across county lines, and Columbus extends into multiple counties already, annexation has slowed to a crawl. In part I’m told that they are now reaching into territories that have other sources of water than the city of Columbus water utility, and thus the city has less leverage to annex than before. While technically not hemmed in, Columbus has less room for growth than before. This raises the question of when the dynamics of decline will set in within the newly stagnant city.
Columbus appears to be in better shape than Indy right now. I’d say this is for a few reasons. First, Franklin County, Columbus’ home base, is geographically bigger than Indy’s Marion County, giving Columbus a larger area of natural historic dominance. Columbus is also home to newer office/retail suburban development than Indianapolis. For example, Indy’s Keystone Crossing area is based on edge city and power center templates that are dated, while the corresponding Easton area in Columbus is newer and built to a lifestyle center type template that’s a bit more up to date. Columbus similarly has the relatively new Polaris area inside its borders.
What’s more, Columbus’ suburbs are comparatively underdeveloped and thus aren’t rivals as of yet. Indianapolis has five suburbs with more than 50,000 people – two of them with more than 80,000. Columbus has none. Only Dublin, which has 43,000 people, 9.5 million square feet of office space, and major downtown development ambitions, appears to be a full scale competitor at this point. Most other suburban municipalities are much smaller (e.g., New Albany has less than 10,000 people) and/or enclosed by the city of Columbus and thus limited in growth. Favored quarter suburban Delaware County has 185,000 people (some of which are in the city of Columbus) vs. nearly 300,000 for analogous Hamilton County, IN. What’s more, Hamilton County is far ahead in infrastructure vs. Delaware County. Delaware County has next to no upgraded east-west or “crosstown” arterials. Two reservoirs there make developing them difficult, with one of them separating I-71 from the developed parts of the county. Thus the county is even lacking in north-south “radial” movements.
These factors and others have essentially kept Columbus from facing any significant suburban competition. But unless the city wants to somehow double down on annexation and try to restart that engine, at some point these dynamics will change and the city of Columbus will find itself physically constrained and competitively disadvantaged vs. newer and now more powerfully developed suburban entities. Dublin is likely a preview of coming attractions.
I don’t have any particular policy suggestion in mind here, nor am I saying that anything the city is doing is necessarily wrong. But given what has happened in Indianapolis, I would certainly encourage the future prospect of suburban competition to be top of mind. The city of Columbus should be aggressively scenario planning for how this will play out, and use the runway that it has left to be preparing for the era of more intense intra-regional competition to come. Better to err on the side of paranoia, because the risks of waiting until you’ve got a serious problem on your hands are too high to ignore.
* Unigov also ensured a white majority in the city