Sunday, February 15, 2009

Grampa, where did you live during the "Long Depression" that started in 2008?

Richard Florida's article How the Crash Will Reshape America captures a lot of what has been on my mind (and occasionally blogged about) since we left Skokie last June. 

From the packing up and leaving what my son called "best house ever" (the shaky footage is his) without a sold sign out front to some motel thoughts on the trip to premonitions of the impending collapse back to July (more specifically the non-sustainability of suburban sprawl) to the "discussions" my wife share on how long we should rent and when and where we should buy a common thread is that where you live matters.

It matters a lot. A hell of a lot. Your future may depend on it.

In October, less than a month after the financial markets began to melt down, Moody’s Investor Services published an assessment of recent economic activity within 381 U.S. metropolitan areas. Three hundred and two were already in deep recession, and 64 more were at risk. Only 15 areas were still expanding. Notable among them were the oil- and natural-resource-rich regions of Texas and Oklahoma, buoyed by energy prices that have since fallen; and the Greater Washington, D.C., region, where government bailouts, the nationalization of financial companies, and fiscal expansion are creating work for lawyers, lobbyists, political scientists, and government contractors.
Back in September, in the early days of the of the financial crisis, I thought about it a lot as I would look out into the Catoctins from the little park in our subdivision while my kids played (oblivous to what was on the radio) and I started to feel the first hint of Fall, that reminded me of 1987, my first Fall back in the states after living in Malaysia for 2 years. 

It was scary. With dozens of showings since our house went on the market on April 15th, 2008 yet not a single offer the constant talk of the forelosure crisis on the NPR, to say that it was stressful, it was an understatement.

Why did we buy in Chicago when we did? Why did we buy in one of the most overpriced suburbs on the Chicago North side? Well, because we couldn't afford Evanston or Winnetka and because of Skokie's diversity. We did not want our adopted Chinese daughter to be "the Chinese girl" in her pre-school class. Yes the schools were full of industrious recent immigrants. Immigrants that didn't care for the red brick Cape Code with the master bedroom where I sometimes bumped my head on the ceiling or the hardwood floors. All they wanted was space.

Multiple generations would fill the ugliest split level boxes you can imagine adjacent Crawford or Dempster. We heard from our realtor only the split levels were selling and how the demographics of the visitors were "different" (she was trying to abide by some regulations)  between our house and the those on nearby streets. Yes, so much was different between Austin and Skokie. Our first house two blocks from North Lamar (and where you could hear the music from Threadgills) sold on the first day. Those were different times and different places. 

Mostly white folks in their late 20s and early 30s. The hint of pot when you walked down the streets, some which had sidewalks some that did not. Certainly a larger percentage of Gay/Lesbian couples than in our previous neighborhood in San Antonio. Small three bedroom houses (if you were lucky) built in the late 40s and early 50s during the postwar boom. Aging water mains under streets and periodic electric outages. DSL was just starting to roll out. 

I remember seeing the street literally explode in front of our house on Brentwood: the last affordable neighborhood south of Anderson lane. Stay at home moms with graduate degrees. At the Elementary School meetings I felt out of place because I was sans tattoo. If I recall, our first night in Austin was on Halloween of 1999. The dotcom boom was in still in full swing and still held prime real estate overlooking MOPAC. 

We sat in the swings in Pease park that Thanksgiving, childless, awaiting what would be our final referral from Russia that would arrive in a matter of weeks and we would discuss it at the Little Deli on my lunchbreak, short 5 minute drive from the Southwestern Bell office on Huntland, adjacent to I-35. 

And all that we now know was still ahead of us: the letdown of Y2K, the NASDAQ crash in the Spring (I remember a day-trading colleague who had just joined from Dell) losing a lot that spring. I joined Cisco right after the last stock split in May 20o0 and I remember someone from SBC saying something about how I "was set" and could "retire." 

Yes, Austin is/was one of Florida's poster children for these new creative cities.
Thirty years ago, educational attainment was spread relatively uniformly throughout the country, but that’s no longer the case. Cities like Seattle, San Francisco, Austin, Raleigh, and Boston now have two or three times the concentration of college graduates of Akron or Buffalo. Among people with postgraduate degrees, the disparities are wider still. The geographic sorting of people by ability and educational attainment, on this scale, is unprecedented.
The University of Chicago economist and Nobel laureate Robert Lucas declared that the spillovers in knowledge that result from talent-clustering are the main cause of economic growth. Well-educated professionals and creative workers who live together in dense ecosystems, interacting directly, generate ideas and turn them into products and services faster than talented people in other places can. There is no evidence that globalization or the Internet has changed that. Indeed, as globalization has increased the financial return on innovation by widening the consumer market, the pull of innovative places, already dense with highly talented workers, has only grown stronger, creating a snowball effect. 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
Returning home right before noon on that fateful blue September morning in 2001 after we watched both towers Fall live in the conference room. Watching the Reserve and National Guard Intelligence units gradually get activated and a getting a call from my XO down in San Antonio saying my name was on the list to deploy to Fort Belvoir. Packing my duffel bag, sitting around the table of our retro kitchen table and trying to explain to a toddler that Dada was going to go away for a while. Of course the orders were rescinded but my son and I were baptised in the Episcopal church anyway that Fall. There was more to it than that of course, but that was Austin. 

Years later I would grow restless and leave Cisco and work (virtually) from coffee shops on Lamar, Burnet, and Anderson and from my hot home office that used to be a kitchen and where supposedly a previous resident had died.  From the heat and the solitude I would slowly go crazy and would start looking to find a new job where I could work in an office again. I would strike out in Seattle (yeah I wrote that after bombing my AMZN interview, badly) but cool clarity would come soon. 

Giving up on big West coast software companies, I dug into the SCADA Plugins and a recruiter from Hewitt called, offering crazy money, a chance to run/develop Open Source security boxes in a large company and not do vuln work which I'd grown, a sweet relocation package,  and a way to escape the Texas heat. 

* * *

We will see if it is true but one of the more important (and troubling) charactization of our current malaise, elswhere Florida says our depression has more in common with the "Long Depression" of the late 19th century than the Great Depression:
Economic crises tend to reinforce and accelerate the underlying, long-term trends within an economy. Our economy is in the midst of a fundamental long-term transformation—similar to that of the late 19th century, when people streamed off farms and into new and rising industrial cities. In this case, the economy is shifting away from manufacturing and toward idea-driven creative industries—and that, too, favors America’s talent-rich, fast-metabolizing places.
And on the importance of geography:

To a surprising degree, the causes of this crash are geographic in nature, and they point out a whole system of economic organization and growth that has reached its limit. Positioning the economy to grow strongly in the coming decades will require not just fiscal stimulus or industrial reform; it will require a new kind of geography as well, a new spatial fix for the next chapter of American economic history.

Suburbanization was the spatial fix for the industrial age—the geographic expression of mass production and the early credit economy. Henry Ford’s automobiles had been rolling off assembly lines since 1913, but “Fordism,” the combination of mass production and mass consumption to create national prosperity, didn’t emerge as a full-blown economic and social model until the 1930s and the advent of Roosevelt’s New Deal programs. 

And, among other things, the foolishness of the American Dream of owning your own house. Thank God we're still renting.

On one level, the crisis has demonstrated what everyone has known for a long time: Americans have been living beyond their means, using illusory housing wealth and huge slugs of foreign capital to consume far more than we’ve produced. The crash surely signals the end to that; the adjustment, while painful, is necessary.

But another crucial aspect of the crisis has been largely overlooked, and it might ultimately prove more important. Because America’s tendency to overconsume and under-save has been intimately intertwined with our postwar spatial fix—that is, with housing and suburbanization—the shape of the economy has been badly distorted, from where people live, to where investment flows, to what’s produced. Unless we make fundamental policy changes to eliminate these distortions, the economy is likely to face worsening handicaps in the years ahead.

Suburbanization—and the sprawling growth it propelled—made sense for a time. The cities of the early and mid-20th century were dirty, sooty, smelly, and crowded, and commuting from the first, close-in suburbs was fast and easy. And as manufacturing became more technologically stable and product lines matured during the postwar boom, suburban growth dovetailed nicely with the pattern of industrial growth. Businesses began opening new plants in green-field locations that featured cheaper land and labor; management saw no reason to continue making now-standardized products in the expensive urban locations where they’d first been developed and sold. Work was outsourced to then-new suburbs and the emerging areas of the Sun Belt, whose connections to bigger cities by the highway system afforded rapid, low-cost distribution. This process brought the Sun Belt economies (which had lagged since the Civil War) into modern times, and sustained a long boom for the United States as a whole.

But that was then; the economy is different now. It no longer revolves around simply making and moving things. Instead, it depends on generating and transporting ideas. The places that thrive today are those with the highest velocity of ideas, the highest density of talented and creative people, the highest rate of metabolism. Velocity and density are not words that many people use when describing the suburbs. The economy is driven by key urban areas; a different geography is required

Of course a lot of this (as well as the stimulus package) hinges on whether or not the era of manufacturing jobs is truly gone.

1 comment:

Ron Burk said...

Geography is an interesting spin on the situation. But I can't help but suspect that age will be the whiplash on the end of this economic contraction that jerks us hard in a new direction. After years of telling the Boomers they could become financial experts (despite the dismal retirement planning abilities exhibited by Nobel-winning economists), the stock market drop has neatly decimated the investments of whatever percentage of Boomers really had a shot at retirement.

Where will the mass of aging Boomers who can't retire live? Given how many of their kids/grandkids are having their homes foreclosed, it seems likely some impressive number of families will be forced back into multi-generational homes of yesteryear. I see these forces at work already in my own small circle of family/friends. Got to take in a boarder to make the mortgage? Well, you might (or might not!) rather take in a relative than a stranger.

Will your choice of where to live come down to which relatives will take you in? Are we moving towards a time when "family values" of some sort or another (mainly the living arrangement sort) will be mass-induced by the economy? The Chinese curse has come true: we live in interesting times.