How the Crash Will Reshape America

This article (Atlantic, March 2009) is so, so good.


Whither New York?
“A crucial contributory factor in the financial centres’ development over the last two centuries, and even longer,” writes Cassis, “is the arrival of new talent to replenish their energy and their capacity to innovate.” All in all, most places in Asia and the Middle East are still not as inviting to foreign professionals as New York or London. Tokyo is a wonderful city, but Japan remains among the least open of the advanced economies, and admits fewer immigrants than any other member of the Organization for Economic Cooperation and Development, a group of 30 market-oriented democracies. Singapore remains for the time being a top-down, socially engineered society. Dubai placed 44th in a recent ranking of global financial centers, near Edinburgh, Bangkok, Lisbon, and Prague. New York’s openness to talent and its critical mass of it—in and outside of finance and banking—will ensure that it remains a global financial center…

New York is much, much more than a financial center. It has been the nation’s largest city for roughly two centuries, and today sits in America’s largest metropolitan area, as the hub of the country’s largest mega-region. It is home to a diverse and innovative economy built around a broad range of creative industries, from media to design to arts and entertainment. It is home to high-tech companies like Bloomberg, and boasts a thriving Google outpost in its Chelsea neighborhood. Elizabeth Currid’s book, The Warhol Economy, provides detailed evidence of New York’s diversity. Currid measured the concentration of different types of jobs in New York relative to their incidence in the U.S. economy as a whole. By this measure, New York is more of a mecca for fashion designers, musicians, film directors, artists, and—yes—psychiatrists than for financial professionals.

The great urbanist Jane Jacobs was among the first to identify cities’ diverse economic and social structures as the true engines of growth. Although the specialization identified by Adam Smith creates powerful efficiency gains, Jacobs argued that the jostling of many different professions and different types of people, all in a dense environment, is an essential spur to innovation—to the creation of things that are truly new. And innovation, in the long run, is what keeps cities vital and relevant.

This reminds me of this trustafarian first cities concept. Growth requires that people are inspired, which requires that they’re not living to the very Nth degree of their ability. Simply put: If we all have to work 80 hours a week to eke out room and board, there’s no way we’re going to produce art, smarts, or business plans. So in DC, where a huge percent of folks are lawyers (of all things!) we’re just a hare’s breath away from a fight at all times, but not producing anything. It makes sense that growth requires some divine spark, which requires in turn the vitality and relevance Florida extracts from Jane Jacobs, all stemming–as vital, relevant economics is wont to do–from Adam Smith.

And on Suburbanization:

Suburbanization—and the sprawling growth it propelled—made sense for a time. The cities of the early and mid-20th century were dirty, sooty, smelly, and crowded, and commuting from the first, close-in suburbs was fast and easy. And as manufacturing became more technologically stable and product lines matured during the postwar boom, suburban growth dovetailed nicely with the pattern of industrial growth. Businesses began opening new plants in green-field locations that featured cheaper land and labor; management saw no reason to continue making now-standardized products in the expensive urban locations where they’d first been developed and sold. Work was outsourced to then-new suburbs and the emerging areas of the Sun Belt, whose connections to bigger cities by the highway system afforded rapid, low-cost distribution. This process brought the Sun Belt economies (which had lagged since the Civil War) into modern times, and sustained a long boom for the United States as a whole.

But that was then; the economy is different now. It no longer revolves around simply making and moving things. Instead, it depends on generating and transporting ideas. The places that thrive today are those with the highest velocity of ideas, the highest density of talented and creative people, the highest rate of metabolism. Velocity and density are not words that many people use when describing the suburbs. The economy is driven by key urban areas; a different geography is required.

Image from The Atlantic

Image from The Atlantic

And finally one of Florida’s brilliant suggestions:

As homeownership rates have risen, our society has become less nimble: in the 1950s and 1960s, Americans were nearly twice as likely to move in a given year as they are today. Last year fewer Americans moved, as a percentage of the population, than in any year since the Census Bureau started tracking address changes, in the late 1940s. This sort of creeping rigidity in the labor market is a bad sign for the economy, particularly in a time when businesses, industries, and regions are rising and falling quickly.

The foreclosure crisis creates a real opportunity here. Instead of resisting foreclosures, the government should seek to facilitate them in ways that can minimize pain and disruption. Banks that take back homes, for instance, could be required to offer to rent each home to the previous homeowner, at market rates—which are typically lower than mortgage payments—for some number of years. (At the end of that period, the former homeowner could be given the option to repurchase the home at the prevailing market price.) A bigger, healthier rental market, with more choices, would make renting a more attractive option for many people; it would also make the economy as a whole more flexible and responsive.

I will save my full comments until post distraction period, but I love Florida’s suggestion to change foreclosure procedures. It seems so obvious for the banks to keep raising capital through rental rather than hold empty, rapidly em-blight-ing homes empty just to spite the now-homeless previous owners. This would help the banks stay in business, and it would help homeowners pushed from the more-urban-than-the-next-marginal-alternative areas that the author stresses are key to economic (and social! and technological!) growth and expansion.

And let me take this opportunity to note that I’m doing my part to keep Americans nimble; I’ve single-handedly ratcheted up the “moves per year” average among my friends — to the extent, in fact, that I have been accused of having sand in my shoes.

Such a brilliant article!

NB: Omigawd, I didn’t realize that this was the same guy who wrote about the Creative Class…AND he taught at Mason!



Filed under Economics, Unkategorized

2 responses to “How the Crash Will Reshape America

  1. I have always found Richard Florida interesting, but I think he misses the mark in one very important sense (from my exam time scanning of your post…). The gap b/w the ‘velocity of ideas’ in dense vs less dense environments is rapidly closing and shows no sign of abating. Which is to say, if you were say a hipster in Williamsburg even ten years ago, you could have looked down on the fashion of the friends you left back home in Wichita for much longer than you can now. There is nothing about our economy that suggests to me that geographic proximity is getting more important.

  2. Pingback: Big Think: Richard Florida « Unkategorized

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