Will the Crash Reshape America?
Posted by Carol Coletta on February 24, 2009
Rich Florida says it will. Citing research from a number of sources, he makes a case in the current Atlantic Monthly that can be summarized as follows:
+ The current crisis makes the end of a whole way of life in America.
+ The recession will accelerate the rise and fall of specific places within the U.S. and reverse the fortunes of others.
+ NYC is much less concentrated in the financial industries than is Des Moines, Hartford, Charlotte, or Omaha. NYC benefits from having different professions and different types of people in a dense environment -- the essential spurs for innovation. And innovation is what keeps cities vital and relevant.
+ The ability of different cities to attract highly educated people has diverged. Unlike 30 years ago, educational attainment is not spread evenly across America. The geographic sorting of people by educational attainment is unprecedented. (Ed Glaeser, Chris Berry)
+ Spillovers in knowledge that result from talent clustering are the main cause of economic growth. In other words, well educated people living together in desne ecosystems, interacting directly, generate ideas and turn them into products and services faster than talented people in other places can. (Robert Lucas, University of Chicago)
+ Talent-rich ecosystems are not easy to replicate, and to realize their full economic value, talented and ambitious people increasingly need to live within them.
+ Big, talent-attracting places benefit from accelerated rates of "urban metabolism." By almost any measure, the larger a city's population, the greater the innovation and wealth creation per person. (Santa Fe Institute)
+ Talent-attracting places are better able to overcome business failures, reabsorb their talented workers, grow new businesses.
+ There is a "spatial fix" for every epoch of capitalism. The physical character of the economy shapes consumption, production and innovation. As the economy evolves, so must the landscape.
+ Positioning the economy to grow strongly will require a new kind of geography. America's tendency to overconsume and under-save has been intimately intertwined with our postwar spatial fix -- housing and suburbanization -- and that has distorted the shape of the economy.
+ Unless we make fundamental policy changes to eliminate these distortions, the economy is likely to face worsening handicaps in the years ahead.
+ While suburbanization made sense for a time, the places that thrive today are those with the highest velocity of ideas, the highest density of talented people and the highest rate of metabolism.
+ The housing bubble encouraged massive, unsustainable growth and low density sprawl, which is not suited to and economy dependent on density and veolocity.
Florida recommends effecting the new spatial fix with these policy changes:
+ Remove homeownership from its long-privileged public policy position. Incentives for homeownership mean less spending on sectors and products that could drive U.S. growth and exports.
+ Encourage renting not buying to make Americans more nimble in adjusting to economic changes in local markets.
+ Facilitate foreclosures, converting homes to rental units.
+ Improve mobility.
+ Make elite cities more attractive and affordable. Pack in more people while improving their quality of life.
+ Allow some cities to shrink but work to make them vibrant by redeveloping their cores.
+ Let demand for the key products and lifestyles of the old order fall and begin building the new economy.
I especially appreciate his willingness to champion rentals vs. homeownership. Ed Glaeser did the same thing in the Housing Policy Conference in New York a couple of weeks ago. It may take years to lay the groundwork for renting to replace the American Dream of homeownership, but, perhaps this is an opportune moment.