The 21st Century can’t handle Babies in Space

From NAC:

For all his passion in Roger and Me, I never thought Michael Moore really grasped the true problem of his hometown of Flint, Michigan. In the film, Moore portrays a greedy, bottom-line-obsessed General Motors CEO Roger Smith, who moved G.M.’s longstanding manufacturing plant from Flint to Mexico, leaving his company’s loyalty at the town border. A barrage of shots of foreclosed homes and unemployed workers were meant to galvanize viewers to point their fingers at the screen and shout, “Shame on you, G.M.”

I saw an economy beholden to a fickle source of employment and income, whose entire welfare rested on the whims of one industry, which maybe made sense 50 years ago but in hindsight sort of looks like a bad idea. The problem with Flint is the problem of an undiversified stock portfolio: Put all your money in U.S. Steel and you’ll do great when the company booms, but you’re setting yourself up for a hard retirement when the company goes bust.

Economists have come up with various names to describe the binomial nature of urban areas, the ones that place their whole bet on red 42 and the ones that spread their money across the table more evenly. Most differentiate between localization economies – places like Flint that are more reliant on a single industry for employment and growth – and urbanization economies – larger cities that have an assortment of industries. Jane Jacobs respectively refers to them as supply regions and demand regions, hearkening a slightly more neo-Marxist perspective of the core and periphery. Unlike others, though, Jacobs seems to see these supply regions as destined for failure, and there’s no shortage of examples: Think of any Third World country whose economy was based entirely on a few commodities and what happened when another country found a way to produce them more cheaply, or when those commodities were no longer in demand.

In his recent press conference outlining new steps to save the auto industry and justify the $25 billion already loaned out to the Big Three auto manufacturers, President Obama called carmakers a “pillar of our economy” and said that allowing their failure would be unacceptable. But tucked into his 18-minute-long speech was a brief acknowledgment of tackling a larger issue: “[Newly appointed Auto Recovery Director Ed Montgomery] will direct a comprehensive effort to
lift up the hardest hit areas…to create new manufacturing jobs and new businesses where they’re needed most, and he will also lead an effort to identify new initiatives we may need to help support your community going forward.”

The statement remains ignored, for the most part, but this is what really needs to be done. Perhaps we should just let Japan declare victory in the auto market and work on rebuilding auto towns instead of propping up an industry so many economists view as beyond repair. Many might see revitalizing small economies like Flint, in which the populace remains mostly uneducated and hundreds of small businesses have been displaced with the swift placement of a single Wal-Mart, as impossible without bringing back auto plants. But as long as stimulus strategies remain the preferred solution for our nation’s woes, we can look to them to save smaller towns, too. Here’s how we might do it:

• Encourage borrowers to use the already expanded lines of small business credit to start core businesses in auto towns. This means focusing on businesses that have a high per-capita usage, like cheap restaurants and small farms, instead of a low per-capita usage, like opera houses and wax museums.

• Those businesses won’t survive without customers, so give consumers credit to shop at these small businesses. Injecting plain cash into the accounts of residents might encourage them to further patronize the companies that won’t create local jobs, like Wal-Marts and Safeways.

• Use stimulus funds to renovate the factories into manufacturing plants for new goods bought by the government. Have them build trains or windmills or widgets. I don’t want to advocate a command economy that leads to the production of undesired goods, but there is certainly still a use for these plants.

I’m ignorant of any legal hurdles that would prevent the government from favoring one business over a larger corporation, or whether or not all this is even possible. But it seems like a better strategy to renew dozens of economies than a single industry, and it might by the best way to keep the nation’s Flints from remaining Flints.

From Next American City:

After 9/11, you could practically hear the wails coming from regional tourism offices across the country. Fliers’ fears of being on the next hijacked plane ground air travel to a halt, left hotels vacant, and short-circuited the tourism agenda of nearly every city in the country. You’d be hard pressed to find a time when vacationing was so unappealing to everyone.

That is, everyone except gays. While the majority of American travelers remained stationed in their hometowns, gays and lesbians continued to travel in full force, taking advantage of cheap airfare and hotel rooms and spending about $70 billion annually, according to the research firm Community Marketing Inc. It took a terrorist attack for cities to realize that gays have more disposable income and fewer domestic balls-and-chains keeping them at home, and that if you invite them to your city they’ll probably pay you a visit.

“As a group, gays and lesbians experienced very much day-to-day challenge of their own lives, so the thought was, ‘Hey, I’m more afraid of being gay-bashed walking home from a bar late at night then I am of an outside terrorist attack,’” Jeff Guaracino, author of Gay and Lesbian Tourism: The Essential Guide for Marketing, said in a phone conversation.

The discovery of a demographic with $800 billion in buying power (everything left after taxes) that spends significantly more while traveling than its straight counterpart has spurred a new inter-city competition to make cities as gay-friendly as possible. Since the 9/11 attacks, the number of cities in the world with active gay-marketing campaigns has jumped from six to 67. Not all cities have jumped on board, of course. But for the ones that have, it’s meant massive efforts targeting the gay population and a cultivation of cities’ gay districts. In perhaps the most interesting marriage of marketing and progressive policy-making I’ve ever seen, Bloomington, Ind., actually legalized same-sex unions in 2006 as part of an effort to make the city more appealing to gay travelers. While Bloomington hasn’t listed the exact payback from that investment, they did note that the city was a more crowded around the time of their gay and lesbian film festival.

Even now, when the threat is more financial than bodily, gay travelers haven’t pulled back, and some cities are looking towards the gay traveler to help import money into their budgets. While a few cities like my own Philadelphia have axed some of their assistance to gay tourism marketing as part of larger budget cuts, others are taking advantage of the industry’s potentially salutary effects. Last month, for example, Massachusetts launched an LGBT travel website highlighting Boston as an epicenter of tolerance and diversity.

Maybe more cities will take Bloomington’s lead and, in an effort to cash in on their own piece of the gay tourism industry, roll out progressive civil rights policies to invite gays to their cities. That doesn’t mean that cities traditionally less tolerant of gays and lesbians will be able to slap a domestic partnership law on the books and watch as gays come in droves – after all, Bloomington already had the fifth highest number of same-sex partnerships in the country. But it does mean that cities already teetering towards more progressive civil-union rights might be tempted to go through with them, as their own piece of that $70 billion relief dangles in front of their faces.

My first installment of Metronomics, an urban economics column for Next American City:

The past few months have showered us with news about cities taking hatchets to their budgets and chopping away at services. In my own Philadelphia, the plan to shutter 11 libraries was notorious enough to be reported in the Economist magazine. Unfortunately, one doesn’t have to think too hard to come up with dozens of similar instances.

What’s received less news nationally is how the scramble for funds has reopened discussions on public-private partnerships that allow companies to replace services that are currently tax funded. To shore up budget holes and get quick injections of cash, Pittsburgh is trying to sell off its parking garages, Chicago is auctioning its parking meters and its airport, and many other major cities’ five-year budget plans likely reveal similar strategies.

The dire economic situation has forced cities to re-evaluate which services really deserve to be under the public’s auspices. “It’s really pretty interesting how it’s evolving,” says Alan Wohlstetter, a public-private partnership specialist at Philadelphia law firm Fox Rothschild LLP. “There’s not enough money to pay for everything the way we used to.”

“This is looking in a sophisticated basis at what the business for historical or other reasons the government is involved in where there’s no real public policy principles that they serve,” he adds.

So far, cities seem to be going about it responsibly – no one is trying to sell police services or tax auditing. But selling something as seemingly innocuous as a parking meter can have unintended consequences. Some cities have hiked rates on their meters to deter driving and clear up congested streets and polluted air. If a city finds a sold service to be an important step in a policy goal, it may later find itself unable to address that problem until the end of a lease, which typically are between 50 and 99 years long.

These decisions also have to take into consideration how badly the revenue from the item up for sale could be needed down the road. The price of a service is calculated based on a projected discount rate – how much the value of that good will decrease over time. Calculating the discount rate is never more than scientific fortune-telling, and a turn of economic events would make a city wish it hadn’t been so quick to get rid of a money-making service for a quick, one-time shot of cash.

Orange County provides a good example of the unforeseen side-effects privatization can cause. It sold oversight of the San Joaquin Hill toll road to a private company in 1993. Less than 10 years later, Orange County decided the non-compete clause in the contract prevented the county from adding additional lanes to alleviate congested traffic. It actually had to buy the rights back early into the 75-year contract.

Of course, the financial climate has rendered these partnerships less achievable. Chicago has had trouble finding a bidder for its airport, says Wohlstetter, and there’s no telling how many other cities will have trouble closing multimillion (or billion) dollar deals when so many companies’ cash flows have dried up.

Still, I have to laud cities for getting creative. The impulse in these situations is often to hike taxes, cut services, or find a way to push debt onto future generations. As long as cities perform thorough cost-benefit analysis before they put things on the auction block and don’t unwittingly sell a service they’ll be crying for later on, these types of partnerships can be a healthy antidote to a rapidly metastasizing illness.