Back to Basics: After the Bubble and BeyondBack to Basics:

After the Bubble and Beyond

Presentation by Joel KotkinPresidential Fellow, Chapman University

National Conference on Corporate Community Investment Business Civic Leadership Center, US Chamber of Commerce.Anaheim, CAApril 29, 2009 

Rise and Fall of Cities and RegionsRise and Fall of Cities and Regions

“Human prosperity

does not abide long in

one place”

Herodotus Greek Historian 5th Century BC

Key Factors for DeclineKey Factors for Decline

• Inability to absorb newcomers• Lack of upward mobility• Inattention to basic infrastructure• Decline of Family• Loss of Moral Compass

• Inability to absorb newcomers• Lack of upward mobility• Inattention to basic infrastructure• Decline of Family• Loss of Moral Compass

Families as History’s Bedrock

“…the good news from the recovered history of the family: This smallest and seemingly most fragile of institutions is proving itself to be mankind’s bedrock as well as its fault line .” --- historian Steven Ozment

The miracle of toleration was to be found, “wherever the community of trade convened.”

The Cosmopolitan CityThe Cosmopolitan City

French historian Fernand Braudel on Venice, Antwerp, Amsterdam and

London in the early Modern Period

Ibn Khaldun14th Century Arab historian

“Attacks on people’s property remove the incentive to acquire and gain property”

Beyond elitism: Jane Jacobs on the

proper role of an urban economy

Beyond elitism: Jane Jacobs on the

proper role of an urban economy

“A metropolitan economy, if it is working well, is constantly

transforming many poor people into middle class

people ...greenhorns into competent citizens... Cities

don’t lure the middle class, they create it”

Arts and Culture: Arts and Culture: A Look Back in TimeA Look Back in Time

• Great Cultural Centers generally rest upon commercial success

• Venice, Florence, Amsterdam, London, New York, Los Angeles all became cultural centers after developing an expanding economy and strong middle class

• Patrons of arts, not the public, key to development of cultural institutions from Macenas to the Medici, Carnegie and the Rockefellers of the 20th Century to today’s multi-billionaires

The Key to the first Great CityThe Key to the first Great City

“The Greeks boasted of their ‘useless’ art and Egypt’s legacy lay in idle pyramids, but what were these compared to the fourteen aqueducts that brought water to Rome?”

A Roman Historian

America’s Talent: Laying Foundation

of the Future

America’s Talent: Laying Foundation

of the Future• National Road proposed by

Jefferson (1806)• Period of Canal Building (1800-1850)• Construction of Railroads (1840-

1900)• Carnegie Libraries• New Deal infrastructure program• Interstate Highways (1930-1970)• Airports, Telecommunications

US : Forgetting the Basics US : Forgetting the Basics Average Public Capital Value and U.S. Population Growth

0%

10%

20%

30%

40%

50%

60%

70%

1960 1970 1980 1990 19990

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

Percent "Core Infrastructure" Capital Value

Growth (scale left)

US Population (scale right)

Sources: Demographia (2006) and Calvert-Henderson (2006)

20%

25%

30%

35%

40%

45%

50%

1917

1927

1937

1947

1957

1967

1977

1987

1997

Class Inequality: One result of fading infrastructure spending

Class Inequality: One result of fading infrastructure spending

The top decile income share, 1917 - 2002

Identifying Key Trends for the 21st Century

Identifying Key Trends for the 21st Century

• No simple formula for success and there are almost always exceptions to every rule

• Youthful population :America’s opportunity and challenge

• Many cities in danger of becoming less relevant to economy, middle class

• Need to focus on sustainable and family friendly environment

• A renewed commitment to long-term competitiveness rather than addiction to bubble economics

• Class, not race the key issue for the next decade

Long Term Demographics—The Recent Past

Long Term Demographics—The Recent Past

Annual Average Population Growth, 1997-2007

Source: U.S. Census International Database

Long Term Demographics—The Advanced Countries

Long Term Demographics—The Advanced Countries

Projected Population Growth, 2007-2050

Source: U.S. Census International Database

Getting Older SlowerGetting Older Slower

Population Over 65

Source: U.S. Census International Database

Limits of Hip UrbanismLimits of Hip Urbanism

• Difficult city administration forces businesses to periphery

• Inattention to basic urban infrastructure• Lack of focus on expanding middle class

• Difficult city administration forces businesses to periphery

• Inattention to basic urban infrastructure• Lack of focus on expanding middle class

The Ephemeral City: The Future of

the Core?

The Ephemeral City: The Future of

the Core?

“a bazaar, a great gallery of shops and places of

concourse and rendezvous.”

H.G. Wells — description of urban centers in the future

Thoughts on Ephemeral Cities: A Model for America’s cities?

Thoughts on Ephemeral Cities: A Model for America’s cities?

Mayor Klaus Wowereit on Berlin

Kevin Starr on San Francisco

“Poor but sexy."

“A cross between Carmel and Calcutta”

0% 5% 10% 15% 20% 25% 30%

San Francisco

Seattle

Boston

Washington

Denver

New York

Los Angeles

Houston

Phoenix

United States

2000 1990

Cities without ChildrenCities without ChildrenPercent Less than 18 Years, Select Major U.S. Cities

Charlotte, NC-SC

Portland, OR-WA

Denver, CO

Minneapolis, MN-WI

Seattle, WA

Phoenix, AZ

Riverside, CA

San Francisco, CA

Boston, MA-NH

Detroit, MI

Atlanta, GA

Washington, DC-VA-MD-WV

Houston, TX

Miami, FL

Dallas, TX

Philadelphia, PA-NJ-DE-MD Chicago,IL-IN-WI

Los Angeles, CA

New York, NY-NJ-PA-10%

-6%

-2%

2%

6%

10%

14%

1% 2% 3% 4% 5% 6% 7%

Immigration rate 2000-2005

Do

me

stic

Mig

ratio

n R

ate

20

00

-20

05

Average Domestic Migration: -.17%

Average Immigration Rate: 3.55%

Bubble size indicates total population

Domestic Migration Rate vs. Immigration RateDomestic Migration Rate vs. Immigration Rate2000-2005

Source: U.S. Census Population Estimates Program

Net Domestic MigrationNet Domestic MigrationAverage Annual Rate, 1990-1999 & 2000-2007

Source: Praxis Strategy Group Analysis of U.S. Census American CommunitySurvey Public Use Micro data Files

Source: U.S. Census Population Estimates compiled by Demographia.com

Growth in Nation’s Employment CentersGrowth in Nation’s Employment CentersGrowth in Total Employment, 2000-2007

Source: Praxis Strategy Group analysis of BLS CES Data, Top 10 Largest Locations

Growth in Nation’s Employment CentersGrowth in Nation’s Employment CentersGrowth in Professional & Business Service Employment, 2000-2007

Source: Michael Shires analysis of BLS CES Data, Top 10 Largest Locations

Bubble Trouble

Affordability Index Between Leading Dynamic Regions

Affordability Index Between Leading Dynamic Regions

Source: National Association of Homebuilders

Housing Opportunity Index, Q2 2007

(Share of homes affordable for median family income)

Home Prices vs. PayHome Prices vs. PayRatio of Home Price Growth vs. Annual Average Pay Growth, 2001 - 2005

The Archipelago of Villages: Towards “Smart Sprawl”The Archipelago of Villages: Towards “Smart Sprawl”

• Housing near jobs• Emphasis on families • Strong role for village shopping streets and markets• Provision of open space around the village core and

housing estates- • Solving the problem of “sprawl” within the Sprawl

• Housing near jobs• Emphasis on families • Strong role for village shopping streets and markets• Provision of open space around the village core and

housing estates- • Solving the problem of “sprawl” within the Sprawl

U.S. Population in Urban, Suburban, & Rural Areas U.S. Population in Urban, Suburban, & Rural Areas

Peo

ple

(mill

ions

)

0

20

40

60

80

100

120

140

160

1950 1960 1970 1980 1990 1999

Suburban Urban Rural

1950-1999Millions

Growth to the PeripheryGrowth to the PeripheryShare of total Population growthShare of total Population growth

Metro regions of more than 1,000,000 population, 2000 - 2006Metro regions of more than 1,000,000 population, 2000 - 2006

Source: U.S. Census Population Estimates Program, Compiled by Demographia.com

Where Americans Would Like To Live Where Americans Would Like To Live

0% 5% 10% 15% 20% 25% 30%

Small town notnear a city

Rural area

Not sure

Large city

Suburb nearlarge city

Fannie Mae, 1998

What People Want: There are small specialized niches and larger ones

What People Want: There are small specialized niches and larger ones

• 83 percent want this kind of dwelling (National Association of Home Builders)

• 86 percent in California (PPIC)• 70% or more of downshifting

boomers “retiring in place” or staying suburban study

• About as many empty nesters heading to countryside as headed to city

• 40% expect kids to move back at some point

• Latinos highest percentage ethnicity to prefer single family home: most immigrants now in suburbs

• Focus: suburbs,exurbs, safe “neighborhoods” in closer, attractive areas

0%

10%

20%

30%

40%

50%

60%

70%

Northeast Midwest West South

Mean three -mile share Mean 10-mile share

Jobs Head outJobs Head out

Source: Edward Glaeser, Matthew Kahn and Chenghuan Chu, “Job Sprawl: Employment in US Metropolitan Areas”, Brookings Center on Urban and Metropolitan Policy, May 2001

Percentage of Metropolitan area employment

0

1

2

3

4

5

6

7

8

9

10

02Q3 02Q4 03Q1 03Q2 03Q3 03Q4 04Q1 04Q2 04Q3 04Q4 05Q1 05Q2 05Q3

Downtown Suburbs

National Office ConstructionNational Office ConstructionSq. Ft. x Millions

Source: cbre

Portland Job Growth in Periphery

Source: Demographia.com, Derived from US Bureau of Labor Statistics and Portland Alliance data

• Walkable environments with shopping and work opportunities

• A sense of neighborhood and place• Greater access to public transit• A way to be within a great metropolitan

area but with the ambience, amenity of a small town

• A partner to single family homes, not a threat

(Sub)Urban Villages: A New Vision to

encourage economic growth

(Sub)Urban Villages: A New Vision to

encourage economic growth

Examples of New Suburban Villages Examples of New

Suburban Villages

• Downtown Fullerton

• Naperville, Illinois

• Woodlands, TX

Towards GreenurbiaTowards Greenurbia

• Create greenways for wildlife as well as separation of communities• Use multi-polar structure to keep jobs closer to where people live• Promote home-based full time part time work for both environmental

and social reasons

Rethinking Density Rethinking Density

• Low/mid-density using proper design and landscaping may use less water and energy

• Reducing “heat islands” — overdense development in London and Los Angeles can lead to urban centers being 3°C higher than outlying areas

• Learning from ancient cities like Shiraz in how to design largely low-rise housing to maximize natural cooling and reduce evaporation

• Following employment growth, using telecom may be far more effective than imposing a draconian, market-unfriendly planning regime

Total Annual Greenhouse Emissions By Dwelling Type

Total Annual Greenhouse Emissions By Dwelling Type

0

2

4

6

8

10

12

High-Rise Mid-Rise Low -Rise Tow nhouse &Villas

Detached Average

Per Person Per Dwelling

Tonnes CO2/Person/Year Tonnes CO2/Dwelling/Year

Institute of Public Affairs

1960 - 2000 Decennial Census, 2006 American Community Survey

Working at HomeWorking at HomeNumber working from home, 1970 - 2006Number working from home, 1970 - 2006

Would you take a pay cut to work in the immediate area where you live?

50% of workers said they would take a20% pay cut to a take a job in their local area.

Source: The Newhall Land Company

The Valencia, California, Survey 2001The Valencia, California, Survey 2001

What We Lost: the Pre-industrial CityWhat We Lost: the Pre-industrial City

“The biggest jolt the Industrial Revolution administered to the Western family was the progressive removal of work from the home.”

— Dr. Peter N. Stearns, historian

Back to the Future: The Post-Industrial CityBack to the Future: The Post-Industrial City

If the electronic cottage was to spread, a chain of consequences of great importance would flow through society. Many of these consequences would please the most ardent environmentalist or techno-rebel, while at the same time opening up new options for business entrepreneurship

— Alvin Toffler,The Third Wave

The Biggest Challenge: The Issue of Class

The Biggest Challenge: The Issue of Class

• Growth of poorly educated newcomers and youngsters poses a unique problem, particularly with the end of the property boom

• High drop-out rates in high schools can guarantee the rise of an underclass

• Economic development needs to focus on upward mobility — not “luring” the middle class, but creating one”

Education Is a Key Part of the Education Is a Key Part of the Upward Mobility EngineUpward Mobility Engine

Education attainedMedian weekly

earnings in 2005

Unemployment rate in 2005

  (Dollars) (Percent)

Some high-school, no diploma 409 7.6

High-school graduate 583 4.7

Some college, no degree 653 4.2

Associate degree 699 3.3

Bachelor's degree 937 2.6

Master's degree 1,129 2.1

Professional degree 1,370 1.1

Doctoral degree $1,421 1.6

Source: Bureau of Labor Statistics, U.S. Department of Labor

Manufacturing Employment by Skill Manufacturing Employment by Skill Group, 1983 - 2002Group, 1983 - 2002

Source: U.S. Bureau of Census, Current Population SurveyAnalysis by Richard Deitz, New York Federal Reserve Bank

“We need more machinists and less poets”…Delore Zimmerman,

Praxis Strategy Group

Strategies for the 21st Century• Build housing that encourages families

• Focus on diverse industries including specialized manufacturing

• Build infrastructure for competitiveness

• Stay Green, but remember humans matter too

Questions and CommentQuestions and Comment