Joel Kotkin After The Bubble And Beyond

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Presentation by Joel Kotkin
Presidential Fellow, Chapman University, Senior Consultant Praxis Strategy Group

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

April 29, 2009

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  • Joel Kotkin After The Bubble And Beyond

    1. 1. Back to Basics: After the Bubble and Beyond Presentation by Joel Kotkin Presidential Fellow, Chapman University National Conference on Corporate Community Investment Business Civic Leadership Center, US Chamber of Commerce. Anaheim, CA April 29, 2009  
    2. 2. Rise and Fall of Cities and Regions <ul><li>“Human prosperity does not abide long in one place” </li></ul>Herodotus Greek Historian 5 th Century BC
    3. 3. Key Factors for Decline <ul><li>Inability to absorb newcomers </li></ul><ul><li>Lack of upward mobility </li></ul><ul><li>Inattention to basic infrastructure </li></ul><ul><li>Decline of Family </li></ul><ul><li>Loss of Moral Compass </li></ul>
    4. 4. 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
    5. 5. The Cosmopolitan City The miracle of toleration was to be found, “wherever the community of trade convened.” French historian Fernand Braudel on Venice, Antwerp, Amsterdam and London in the early Modern Period
    6. 6. “ Attacks on people’s property remove the incentive to acquire and gain property” Ibn Khaldun 14 th Century Arab historian
    7. 7. 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”
    8. 8. Arts and Culture: A Look Back in Time <ul><li>Great Cultural Centers generally rest upon commercial success </li></ul><ul><li>Venice, Florence, Amsterdam, London, New York, Los Angeles all became cultural centers after developing an expanding economy and strong middle class </li></ul><ul><li>Patrons of arts, not the public, key to development of cultural institutions from Macenas to the Medici, Carnegie and the Rockefellers of the 20 th Century to today’s multi-billionaires </li></ul>
    9. 9. The Key to the first Great City <ul><li>“ 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?” </li></ul><ul><li>A Roman Historian </li></ul>
    10. 10. America’s Talent: Laying Foundation of the Future <ul><li>National Road proposed by Jefferson (1806) </li></ul><ul><li>Period of Canal Building (1800-1850) </li></ul><ul><li>Construction of Railroads (1840-1900) </li></ul><ul><li>Carnegie Libraries </li></ul><ul><li>New Deal infrastructure program </li></ul><ul><li>Interstate Highways (1930-1970) </li></ul><ul><li>Airports, Telecommunications </li></ul>
    11. 11. 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 1999 0 50,000,000 100,000,000 150,000,000 200,000,000 250,000,000 300,000,000 Percent &quot;Core Infrastructure&quot; Capital Value Growth (scale left) US Population (scale right) Sources: Demographia (2006) and Calvert-Henderson (2006)
    12. 12. Class Inequality: One result of fading infrastructure spending The top decile income share, 1917 - 2002
    13. 13. Identifying Key Trends for the 21 st Century <ul><li>No simple formula for success and there are almost always exceptions to every rule </li></ul><ul><li>Youthful population :America’s opportunity and challenge </li></ul><ul><li>Many cities in danger of becoming less relevant to economy, middle class </li></ul><ul><li>Need to focus on sustainable and family friendly environment </li></ul><ul><li>A renewed commitment to long-term competitiveness rather than addiction to bubble economics </li></ul><ul><li>Class, not race the key issue for the next decade </li></ul>
    14. 14. Long Term Demographics— The Recent Past Annual Average Population Growth, 1997-2007 Source: U.S. Census International Database
    15. 15. Long Term Demographics— The Advanced Countries Projected Population Growth, 2007-2050 Source: U.S. Census International Database
    16. 16. Getting Older Slower Population Over 65 Source: U.S. Census International Database
    17. 17. Limits of Hip Urbanism <ul><li>Difficult city administration forces businesses to periphery </li></ul><ul><li>Inattention to basic urban infrastructure </li></ul><ul><li>Lack of focus on expanding middle class </li></ul>
    18. 18. 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
    19. 19. Thoughts on Ephemeral Cities: A Model for America’s cities? <ul><li>Mayor Klaus Wowereit on Berlin </li></ul>Kevin Starr on San Francisco “ Poor but sexy.&quot; “ A cross between Carmel and Calcutta”
    20. 20. Cities without Children Percent Less than 18 Years, Select Major U.S. Cities
    21. 21. Domestic Migration Rate vs. Immigration Rate 2000-2005 Source: U.S. Census Population Estimates Program
    22. 22. Net Domestic Migration Average Annual Rate, 1990-1999 & 2000-2007
    23. 23. Source: Praxis Strategy Group Analysis of U.S. Census American Community Survey Public Use Micro data Files
    24. 24. Source: U.S. Census Population Estimates compiled by Demographia.com
    25. 25. Growth in Nation’s Employment Centers Growth in Total Employment, 2000-2007 Source: Praxis Strategy Group analysis of BLS CES Data, Top 10 Largest Locations
    26. 26. Growth in Nation’s Employment Centers Growth in Professional & Business Service Employment, 2000-2007 Source: Michael Shires analysis of BLS CES Data, Top 10 Largest Locations
    27. 27. Bubble Trouble
    28. 28. Affordability Index Between Leading Dynamic Regions Source: National Association of Homebuilders Housing Opportunity Index, Q2 2007 (Share of homes affordable for median family income)
    29. 29. Home Prices vs. Pay Ratio of Home Price Growth vs. Annual Average Pay Growth, 2001 - 2005
    30. 30. The Archipelago of Villages: Towards “Smart Sprawl” <ul><li>Housing near jobs </li></ul><ul><li>Emphasis on families </li></ul><ul><li>Strong role for village shopping streets and markets </li></ul><ul><li>Provision of open space around the village core and housing estates- </li></ul><ul><li>Solving the problem of “sprawl” within the Sprawl </li></ul>
    31. 31. U.S. Population in Urban, Suburban, & Rural Areas People (millions) 1950-1999 Millions
    32. 32. Growth to the Periphery Share of total Population growth Metro regions of more than 1,000,000 population, 2000 - 2006 Source: U.S. Census Population Estimates Program, Compiled by Demographia.com
    33. 33. Where Americans Would Like To Live Fannie Mae, 1998
    34. 34. What People Want : There are small specialized niches and larger ones <ul><li>83 percent want this kind of dwelling (National Association of Home Builders) </li></ul><ul><li>86 percent in California (PPIC) </li></ul><ul><li>70% or more of downshifting boomers “retiring in place” or staying suburban study </li></ul><ul><li>About as many empty nesters heading to countryside as headed to city </li></ul><ul><li>40% expect kids to move back at some point </li></ul><ul><li>Latinos highest percentage ethnicity to prefer single family home: most immigrants now in suburbs </li></ul><ul><li>Focus: suburbs,exurbs, safe “neighborhoods” in closer, attractive areas </li></ul>
    35. 35. Jobs 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
    36. 36. National Office Construction Sq. Ft. x Millions Source: cbre
    37. 37. Portland Job Growth in Periphery Source: Demographia.com, Derived from US Bureau of Labor Statistics and Portland Alliance data
    38. 38. (Sub)Urban Villages: A New Vision to encourage economic growth <ul><li>Walkable environments with shopping and work opportunities </li></ul><ul><li>A sense of neighborhood and place </li></ul><ul><li>Greater access to public transit </li></ul><ul><li>A way to be within a great metropolitan area but with the ambience, amenity of a small town </li></ul><ul><li>A partner to single family homes, not a threat </li></ul>
    39. 39. Examples of New Suburban Villages <ul><li>Downtown Fullerton </li></ul><ul><li>Naperville, Illinois </li></ul><ul><li>Woodlands, TX </li></ul>
    40. 40. Towards Greenurbia <ul><li>Create greenways for wildlife as well as separation of communities </li></ul><ul><li>Use multi-polar structure to keep jobs closer to where people live </li></ul><ul><li>Promote home-based full time part time work for both environmental and social reasons </li></ul>
    41. 41. Rethinking Density <ul><li>Low/mid-density using proper design and landscaping may use less water and energy </li></ul><ul><li>Reducing “heat islands” — overdense development in London and Los Angeles can lead to urban centers being 3°C higher than outlying areas </li></ul><ul><li>Learning from ancient cities like Shiraz in how to design largely low-rise housing to maximize natural cooling and reduce evaporation </li></ul><ul><li>Following employment growth, using telecom may be far more effective than imposing a draconian, market-unfriendly planning regime </li></ul>
    42. 42. Total Annual Greenhouse Emissions By Dwelling Type Tonnes CO2/Person/Year Tonnes CO2/Dwelling/Year Institute of Public Affairs
    43. 43. 1960 - 2000 Decennial Census, 2006 American Community Survey Working at Home Number working from home, 1970 - 2006
    44. 44. The Valencia, California, Survey 2001 Would you take a pay cut to work in the immediate area where you live? 50% of workers said they would take a 20% pay cut to a take a job in their local area. Source: The Newhall Land Company
    45. 45. What We Lost: the Pre-industrial City <ul><li>“ The biggest jolt the Industrial Revolution administered to the Western family was the progressive removal of work from the home.” </li></ul>— Dr. Peter N. Stearns, historian
    46. 46. Back to the Future: The Post-Industrial City <ul><li>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 </li></ul>— Alvin Toffler, The Third Wave
    47. 47. The Biggest Challenge: The Issue of Class <ul><li>Growth of poorly educated newcomers and youngsters poses a unique problem, particularly with the end of the property boom </li></ul><ul><li>High drop-out rates in high schools can guarantee the rise of an underclass </li></ul><ul><li>Economic development needs to focus on upward mobility — not “luring” the middle class, but creating one” </li></ul>
    48. 48. Education Is a Key Part of the Upward Mobility Engine Source: Bureau of Labor Statistics, U.S. Department of Labor Education attained Median 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
    49. 49. Manufacturing Employment by Skill Group, 1983 - 2002 Source: U.S. Bureau of Census, Current Population Survey Analysis by Richard Deitz, New York Federal Reserve Bank
    50. 50. “ We need more machinists and less poets”…Delore Zimmerman, Praxis Strategy Group
    51. 51. <ul><li>Strategies for the 21 st Century </li></ul><ul><li>Build housing that encourages families </li></ul><ul><li>Focus on diverse industries including specialized manufacturing </li></ul><ul><li>Build infrastructure for competitiveness </li></ul><ul><li>Stay Green, but remember humans matter too </li></ul>
    52. 52. Questions and Comment

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