Aug 29 2010

What Now? Resetting the Economy for the Next 50 Years

Published by at 1:10 pm under book review,economics,lifestyle design

In The Great Reset, Richard Florida asks the question that all policy makers should be asking: what happens after a Depression?

This shockingly simple question opens the door to look at history as a guide for what is to come for the U.S. economy. Florida reviews two different  economic slowdowns in American history, the Long Recession of the 1870s, and the Great Depression of the 1930s, and compares those to our most recent financial meltdown of 2007-present.

While there are a number of accounts of what went wrong, and whose fault it was that the economy tanked (Big greedy banks! The dollar-hungry, exchange-rate fixing Chinese! Government’s insatiable quest for higher levels of home ownership! Homeowners’ binge-spending, house-as-ATM profligacy!), Florida largely leaves the causes of the crisis aside. This is really for the better. Florida is a metropolitan sociologist – primarily concerned with what makes cities, and what makes them better.

But, Florida hits on a larger theme that has so far been ignored by most Great Recession books: what now?

We’re on the back side of the crisis. Even as the recession grinds on, the causes are in the rearview mirror. So, what should we do to move the U.S. forward into the next wave of growth? How can we set the stage for the next era of the U.S. economy?

His answer is somewhat surprising, given much of the conversation about the economy. But, it is also in line with Florida’s decade-long crusade to understand fundamental truths about economic development. Florida recommends a sensible course of public works projects designed to promote the country’s strongest assets: our megalopolises.

To make the case, Florida looks back at his breakout book, The Rise of the Creative Class. Much hay has been made trying to tear holes in Florida’s metrosexual approach to city development. Critics oversimplify his ideas, and claim that he boldly declares that cities just need to throw open the doors for gays and artists, and magically, their meatpacking districts will turn from areas where actual sides of beef are carved, to the trendiest nightclubs – fueling the city’s growth (granted, Florida stoked these conversations in introducing this concept originally).

Of course, what critics confuse is cause and effect. Cities aren’t successful because they attract gays. They attract gays because they are successful. You don’t build a nightlife in order to grow. A nightlife comes out of having a dynamic cityscape.

When I studied under Florida at George Mason, in 2006, Thomas Friedman’s The World Is Flat came out, in which Friedman boldly declared that it would be better to be an A student in India, than a C student in America. This, of course, was in direct contrast to the world order for several generations previously.

Florida responded with an important clarification. The world wasn’t flat, he said. Instead, the world was spiky. When we look at where economic development is most advanced, the trend is clear: economies are more focused on cities (all over the world) than in any time in history. The C student in Shanghai has more in common with the C student in London than the A student in a rural Chinese town.

Florida looks at spikiness in more detail in The Great Reset. And the results are striking. 85% of the economic output of the U.S. is focused in just 7 “megaregions.” These 7 regions have names that only a sociologist could love: Char-lanta (Charlotte, NC to Atlanta, GA), Chi-Pitts (Minneapolis, Chicago, Pittsburg, Cleveland), and Bos-Wash (Boston, New York, Washington, DC). But the implications are clear: if you live in one of these regions, you have a reasonable chance of being successful. If you don’t, you won’t.

But, of course, all of these regions face some challenges. Mostly, Florida looks at these challenges from the standpoint of restricting economic activity. His logic is sound: if economic activity is now primarily driven by ideas, and propagated by personal networks, then giving people the ability to access their networks is the best way to spur ideas, and therefore growth. This brings in the strongest recommendation of Florida’s: improve transportation options for these regions. His answer? High speed rail that interlinks these megaregion corridors.

Train policy has always been anachronistic in this country. It seems anathema to spend millions of dollars on resources that, until now, basically no one has used. Even the Acela line is a money-loser. But, within the context of recovery after recession, the notion is a logical conclusion. After the Long Recession of the 1870s, cities grew, driven in part by streetcars that pulled disparate neighborhoods into a central downtown for commercial activity. After the Depression, the suburbs were a convenient live/work alternative because of the new highway systems. Older suburbs were about 10 minutes from the city center in the 1950s (Can you imagine a 10-minute commute from Arlington, VA into Dupont Circle?! Wonder of wonders!) . So, the original suburbs were a natural outgrowth for construction to fuel the economy out of the Depression in the 40s and 50s.

The transportation infrastructure has twice set the foundation for economic recovery to accrue to cities. There is no reason to think that it won’t work a third time. And, with Florida’s more expansive view of megaregions, he sets a new framework for defining what a successful regional transportation policy would look like.

He doesn’t spend much time talking through how to get these projects done. The Washington DC “purple line” – the ephemeral second ring subway line that would connect the outer-lying suburbs of Maryland – has been in the planning stages for more than 20 years. In Portland, OR, the outcries from discussions of expanding the I-5 bridge between Oregon and Washington is over 15 years old, and no closer to resolution. Regional, county, city, and municipal governments must work together to make an integrated transportation system happen. But, with the carrot of federal transportation dollars coming forward in a new round of economic stimulus, now is the right time for regions to come together.

The other conclusion that Florida does not spell out, but is very obvious, is that the concept of living near your work is not a new idea, but instead a return to tradition. The suburbs were an anomaly in human history. Separating your home location from your work location was a result of having increased access to transportation – this artificially introduced a false incentive to split up these activities.

Now, the costs outweigh the benefits for many urbanites. More and more, it makes sense to work from home, to put your office on the first floor, and have an apartment on the second floor, or commute in to a shared office space only occasionally. In previous eras, people both worked and lived on the farm, or had their merchant shop directly below the bedroom.

It’s also clear that separating our work life from our personal life was also an anachronism in human history. Historically, people are defined by their work – after all, many last names are actually professions; the Smiths came from a family of blacksmiths or silversmiths somewhere; the Goldbergs came from bankers at some point.

So, the 120 years of the industrial era was one long anomaly. Leaving your work on the factory line at 5 PM, and not thinking about it again until 9 AM the next morning was the result of needing lots bodies, and not many brains. Now we need the brains way more than the bodies.

Which brings us to Florida’s final point: we have an obligation to use all of those brains better. Harnessing the great ideas from the janitor and the lunch lady are the way to bring those people forward from this economic shift. And systematizing that process is the way to reset our economy for a new wave of growth.

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