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Tuesday, August 26th, 2014

Cleveland, LeBron, and the Evolution of Collective Shame by Richey Piiparinen

[ I'm delighted to be able to present another great piece on Rust Belt culture and Cleveland by Richey Piiparinen - Aaron. ]

“Shame is fear of humiliation at one’s inferior status in the estimation of others.” — Lao Tzu

Sitting with fellow Clevelanders at a since-demolished bar, July 8th, 2010, LeBron James, local boy, uttered the words that hurt: “I am taking my talents to South Beach.” It was a shot heard around the world, but felt sharply inside the Rust Belt city’s heart.

“He had before invoked all the connotations of home, only to leave it,” wrote Cleveland sports columnist Bill Livingston the next day, in a piece entitled “By rejecting his hometown team, LeBron James earns his slot on the [Art] Modell list of shame.” Livingston upbraided LeBron for scheduling a cable event to “exploit this city’s suffering.” His words were intent on shaming LeBron for leaving, yet in doing so reared Cleveland’s collective shame for having again been left.

Collective shame is an underappreciated subject. But it, like other collective emotions — think fear and pride — run our societies more than we care to look. “What holds a society together — the “glue” of solidarity — and what mobilizes conflict — the energy of mobilized groups — are emotions,” acknowledged the great sociologist Emile Durkheim.

For decades, Cleveland has been held together by a solidarity in loss, especially the collective shame that came with it. Unlike guilt, which is about what one did, shame is an affront on the self, or what one is. And what was blue-collar Cleveland without a wealth of blue-collar jobs? It was a city of losses — be it of income, population, and a way of life.

2014-07-28-betough.jpg
Photo by Michael Lapidakis

Walk down many Cleveland streets and you can see how this loss has played out in disinvestment. Often, the effect on the viewer is the same: status was here, but no longer. The constant reminders of loss give shame currency. Cleveland is not alone here. Cities the world over are afflicted with the hangovers of history. From the “Geography of Melancholy” in the American Reader, the author writes:

Nearly every historic city has its brand of melancholy indelibly associated with it — each variety linked to the scars the city bears. Lisbon has its saudade: a feeling of aimless loss tied to the city’s legacy of vanishing seafarers, explorers shipwrecked in search of Western horizons. Istanbul has huzun: a religiously-tinged brand of melancholy rooted in the city’s nostalgia for its glorious past.

Instead of seafarers, Cleveland had steelworkers, and others who’ve had their working-class status stripped. Yet while the loss was personal, it was the result of macro forces, leaving many feeling powerless and alone. This aloneness was tied up in the feeling of shared suffering.

“The very fact that shame is an isolating experience,” notes the author of Shame and the Social Bond, “also means that if one can find ways of sharing and communicating it this communication can bring about particular closeness with other persons.”

There are many ways collective emotions are shared. Much of the vessels are informal. Think oral tradition and rumors. Fashion is another channel, like a city’s t-shirts. In fact perhaps nothing says implicit understanding between natives like city mottos emblazoned chest level. Cleveland’s most famous t-shirt said simply: “Cleveland — you’ve got to be tough”. It was made in 1977, in the heyday of the city’s decline. So the symbolism wasn’t. You had to be tough in the face of a post-industrial headwind. Today, iterations remain on this “the world is against us” mentality. “Defend Cleveland” and “Cleveland VS Everybody” t-shirts are worn liberally. Another favorite that tips more toward shame than to a defensiveness against judgment says: “Cleveland Low Life” — a play on “Miller High Life.”

2014-07-28-Clevelandloser.jpg
Courtesy of BCTZ Cleveland

Is all this productive? No doubt, collective shame, according to scholars, can strengthen the bonds between members of a group which, in turn, can lead to a process of self-exploration and restoration of a social identity. Or it can be chronic. Here, you get a city with a persistent inferiority complex — or a city going from seeking esteem in the face of perceived shame to finding esteem in self-shame. Cleveland is well-known for its self-flagellation. It’s especially obvious to folks who aren’t native Clevelanders.

“I have, in fact, never lived in a place whose proud residents so consistently and gleefully disrespect their hometown as Cleveland,” notes legendary Jeopardy champ Arthur Cho in his recent Daily Beast piece “Cleveland Comes Crawling Back to LeBron: The Masochism of Rust Belt Chic.” Cho, a Cleveland newcomer, goes on to write that though he hates to “engage in victim-blaming,” the reason “everyone dogs on Cleveland is that we ask for it.” Why? Cho concludes: “If we weren’t suffering, we wouldn’t be Cleveland anymore.”

But this Cleveland mindset does little for opening the region up to new ideas. Just as the messages become defensive, so do the policies and politics. Nativist culture reigns. Nepotism and patronage become the grease that runs the status quo. And so the communal shrouding effectively disables the possibility of possibility. Hence, the region’s struggles in its economic restructuring in the era of global connectivity.

In that sense, Cleveland’s collective shame can be a source of bad policies which ensure the collective shame. But why would a city want to do that, albeit implicitly, subconsciously?

“Economic struggle can be a cultural unifier in a community that people tacitly want to hold onto in order to preserve civic cohesion,” writes urban theorist Aaron Renn in Governing. Beyond that, those with power can lose it with community change. Continues Renn:

…[I]t isn’t hard to figure out that even in cities and states with serious problems, many people inside the system are benefiting from the status quo.

They have political power, an inside track on government contracts, a nice gig at a civic organization or nonprofit, and so on. All of these people, who are disproportionately in the power broker class of most places, potentially stand to lose if economic decline is reversed. That’s not to say they are evil, but they all have an interest to protect.

Does this mean Cleveland is doomed? Hardly. The region is experiencing a brain gain. The city has incredible assets — namely, its educational, hospital, and cultural institutions — that have been dragging it along toward a point of turning the page. But more is needed. Specifically, more perspective — a perspective that the city’s inferiority complex isn’t about what others think of Cleveland, but about what Clevelanders are compelled to think about themselves.

2014-07-28-lebronmural.jpg
Courtesy of Graney and the Pig

Which brings us back to LeBron. Soon after his announcement that he was leaving, The Onion wrote a satirical piece called “Despite Repeated Attempts To Tear It Down, Massive LeBron James Mural Keeps Reappearing.” In it, the iconic “We are All Witnesses” banner keeps hauntingly resurfacing. At one point in the piece, city workers removed it panel by panel, “only to find an identical mural hanging directly behind it.” The article ends, “As of press time, nobody outside the Cleveland area had seen the mural once since it was originally taken down…”

The takeaway, then: When suffering has become your identity, you have clearly suffered long enough.

The beauty of cities and societies is that they are constantly evolving. Some get stuck in their identity, like Cleveland. Cleveland’s path to progress, then, means letting go of that which has stubbornly remained. There’s hope that the change is coming, largely due to the presence of the new generation.

In many ways LeBron is an embodiment of the next generation of Cleveland and the Rust Belt. His return epitomizes possibility. No, I am not talking about championships, nor the collective Prozac-effects that a parade down E. 9th St. would have on the region’s psyche. Nor the game day economics. I am talking about perspective.

The day LeBron announced his decision he was leaving Cleveland, he was in Akron. According to an ESPN piece, he knew the decision would hurt people, and that nothing would ever be the same for him. “Somehow he got through the final day of his annual basketball camp in Akron without confessing,” the authors write. “By the time [former teammate] Damon Jones drove him to the airport, where he would fly to Connecticut and reveal his infamous decision to the world, there was a lump in his throat.”

LeBron, like all sons and daughters of the Rust Belt, are a product of collective shame, and so his self-battle with leaving is no surprise. But sometimes leaving is the answer. No person should ever self-sacrifice out of a loyalty to place. And sometimes coming home is the next answer. If only because intermittent personal aspiration will often take a backseat to that evolutionary and endearingly human value of needing to belong.

The secret sauce, here, is the perspective gained in the journey. And then bringing it back to a community that could use more than its fair share.

This post originally appeared in The Huffington Post on July 29, 2014. Reprinted by permission of the author.

Sunday, August 24th, 2014

Fixing Corrupt Cities

This is the second installment in my series on corruption. You can also see last week’s post on the city as a decline machine.

This week I’m taking a look at a book Richard Layman turned me onto. It’s called “Corrupt Cities: A Practical Guide to Cure and Prevention.” Written by Robert Klitgaard with assistance from former La Paz Mayor Rondal Maclean-Abaroa and H. Lindsey Parris, and published under the auspices of the World Bank, this book is a must-read on the topic of corruption even if, sadly, many of the recommendations are not directly applicable to the type of corruption many US cities experience today. It’s only 150 pages and highly readable.

The book talks about the nature of corruption and how and why it is often so resistant to efforts at reform. We can easily see this in the US, where, for example, despite former federal prosecutor Patrick Fitzgerald sending Illinois politicians in prison at a fearsome rate (including the previous two governors), the drumbeat of scandals in the state continues unabated.

The authors’ basic formula for corruption is simple: C = M + D – A. That is Corruption = Monopoly power + Discretion by officials – Accountability. Resultingly, as they put it:

A strategy against corruption, therefore, should not begin or end with fulmination about ethics or the need for a new set of attitudes. Instead, it should look cold-bloodedly at ways to reduce monopoly power, limit and clarify discretion, and increase transparency, all the while taking account of the costs, both direct and indirect, of these ways.

There is another crucial point in designing an anti-corruption strategy: Corruption is a crime of calculation, not of passion. People will tend to engage in corruption when the risks are low, the penalties mild, and the rewards great. This insight overlaps the formula just mentioned because the rewards will be greater as monopoly power increases. But it adds the idea that incentives at the margin are what determine the calculations of corrupt and potentially corrupt official and citizens. Change information and incentives, and you change corruption.

Much of the book consists of practical steps cities can take in this direction, using two principal case studies: La Paz, Bolivia, and Hong Kong. They also briefly discuss New York City’s successful efforts to root corruption out of a school construction program. Some of this gets quite detailed, such as their description of anti-corruption workshops the authors have run.

The book is also notable for being against what would appear to be one of the most popular responses to incidents of corruption, namely adding more rules. This often just makes it easier for corruption to flourish. As they put it, “Corruption loves multiple and complex regulations.” We also see in the US that more regulation increase the rent seeking returns to corruption and leads to regulatory capture, either by regulated industries or activists (or some combination of both).

They also say that corruption shouldn’t be looked at in isolation or as the sole aim, but rather that anti-corruption efforts should be seen as a tool for reinventing and improving the delivery of public services:

We do not recommend an approach to corruption that emphasizes more controls, more rules, and more bureaucracy. These can simply paralyze administration, and in some cases they can foster new and more deeply embedded varieties of corruption. Instead, especially in cases of systematic corruption, we advocate both restructuring city services and making institutional reforms that improve information and create new and more power incentives and disincentives. A major theme of this book is that fighting corruption in the right ways can become a lever to achieve much broader ends, not only financial survival but also remaking the relationship between the citizen and local government….Fighting corruption should not be considered an end in itself but an orienting principle for reforming urban administration. [emphasis in original]

Among their recommended approaches in the fight against corruption are having a point person with a high profile and public accountability for delivering results, creating an independent anti-corruption office (such as an inspector general type organization), starting by picking low-hanging fruit, eliminating the perception of impunity by “frying big fish” via prosecuting senior officials , working with and not against the bureaucracy, and many other things. They also spend time talking about the downsides of potential reforms.

As one example, they talk about how in some cases a single bidder taking over a contract can obtain so much proprietary information as a result of running a service that they de facto have a lock on future rebids since no one else has enough information to effective compete. Dual source contracting is one possible approach to maintaining long term competition, but has its own limitations such as potential added costs as well as incentives to collusion.

I’d be remiss if I didn’t highlight a few weaknesses. One is that because they used largely foreign examples, some of the solutions aren’t applicable to the US. For example, some countries have so-called “unjust enrichment” statutes by which public officials who appear to have wealth far beyond what their salary would enable them to have obtained legitimately have to prove that they obtained it legally. This doesn’t appear to be a big problem in the US, and that sort of “prove you are innocent” approach wouldn’t fly here in any case.

In another case, La Paz actually implemented a property tax reform with a lot of superficial appeal: self-assessment. My old boss in Indy has long been an advocate for this. The idea is that you declare the value of your own property for tax purposes, but that value constitutes a binding offer to sell at a premium of 10-15%. I get the appeal of this, but it’s easy to see the problems it introduces. La Paz used the soft threat of the state acquiring the property, but never actually followed through, and the courts declared the scheme illegal in any case.

The more important problem is that the book focuses on traditional type corruption of the bureaucracy. It assumes that in fighting corruption there’s a senior leader such as a mayor or governor who is motivated to eliminate it, and their recommendations are pitched at that person. For example, the mayor of La Paz obviously had a passion for ending corruption in his city. The governor of Hong Kong was motivated to clean up corruption in the police department by unfavorable press causing embarrassment back in the UK.

In America today I’d argue that situation is inverted. Local level government employees are by and large honest – you can’t easily bribe your way out of a speeding ticket these days, for example – but the political leadership is corrupt. And the corruption is right out in the open and takes the form of transactions that aren’t illegal.

For example, a transaction to shove millions of dollars into the pockets of a crony is often done completely in the open. It’s championed by the political leadership and often the press as well. (Molotch showed how local newspapers and such were part of the growth machine, and in general these days daily papers often continue to give off the impression of being corrupt institutions themselves who are in cahoots with the politicians). It’s duly voted on by the city council. There was no quid pro quo transaction involved, only campaign contributions, hope for future employment, or various personal connections, thus nothing illegal was done. It’s the same with some (though certainly not all) privatization contracts, various laws and ordinances prompted by lobbyists, etc.

Francis Fukuyama describes this very phenomenon at the federal level in an article in the current issue of Foreign Affairs called “America In Decay:”

The trading of political influence for money has come in through the backdoor, in a form that is perfectly legal and much harder to eradicate. Criminalized bribery is narrowly defined in U.S. law as a transaction in which a politician and a private party explicitly agree on a specific quid pro quo. What is not covered by the law is what biologists call reciprocal altruism, or what an anthropologist might label a gift exchange. In a relationship of reciprocal altruism, one person confers a benefit on another with no explicit expectation that it will buy a return favor. Indeed, if one gives someone a gift and then immediately demands a gift in return, the recipient is likely to feel offended and refuse what is offered. In a gift exchange, the receiver incurs not a legal obligation to provide some specific good or service but rather a moral obligation to return the favor in some way later on. It is this sort of transaction that the U.S. lobbying industry is built around.

Reciprocal altruism, meanwhile, is rampant in Washington and is the primary channel through which interest groups have succeeded in corrupting government. As the legal scholar Lawrence Lessig points out, interest groups are able to influence members of Congress legally simply by making donations and waiting for unspecified return favors. And sometimes, the legislator is the one initiating the gift exchange, favoring an interest group in the expectation that he will get some sort of benefit from it after leaving office.

Rules blocking nepotism are still strong enough to prevent overt favoritism from being a common political feature in contemporary U.S. politics (although it is interesting to note how strong the urge to form political dynasties is, with all of the Kennedys, Bushes, Clintons, and the like). Politicians do not typically reward family members with jobs; what they do is engage in bad behavior on behalf of their families, taking money from interest groups and favors from lobbyists in order to make sure that their children are able to attend elite schools and colleges, for example.

We see the same at the local level. In fact, today you almost have to be an idiot to engage in old school bribery. (It’s a mystery to me why it seems to remain so popular in places like Illinois and Rhode Island). You simply write campaign checks and at the appropriate time taxpayer money will come your way. Or you’re a journalist carrying water for the power brokers (or a candidate) who expects to be taken care of later. Or you’re on the government side of a privatization deal and later on take a job with the contractor via the revolving door. Or you run a non-profit that collects bigtime government grants with the unstated expectation that you won’t cause trouble. (I know multiple personal examples of non-profits who had grants revoked or threatened to be revoked by governments in retaliation for having the temerity to tell the truth about some boondoggle). None of these are illegal. They are generally done right out in the open. And the top power brokers and politicians are generally involved and hence have zero interest in reform.

This produces a much more challenging environment for change to say the least. I won’t pretend I’ve cracked the code on it, but will post further thoughts next week on how I might approach the problem.

Thursday, August 21st, 2014

A Look At College Degree Migration


Net domestic migration of adults age 25+ with a bachelor’s degree or higher by metropolitan area. Source: 2007-2011 ACS with rollups and mapping via Telestrian

Many of you know I’ve got the best place to place migration data from the IRS in my Telestrian system. Well, the Census Bureau also releases migration data as part of its American Community Survey. This has a lot of limitations and quirks, but one thing it lets you do is track migration, both overall and place to place, by demographic characteristics such as age, sex, race, educational attainment, and income.

I’ve now added this data to Telestrian. As with the IRS data, I’ve aggregated it to the metro area level (not just county) so you can look at things like where you are getting college grads from and where you are sending them to. As with the IRS data, this is so painful to work with, I’ve seen next to nothing done with it. I’ve solved that problem for you, so be sure to check it out.

I’m just starting to explore this data myself, but it’s a gold mine of information. I just took a first quick look at net migration of people with college degrees over at New Geography.

You won’t be surprised to hear that fast-growing Austin, Texas is #1 in attracting migrants. Or that the 90s dreamland of Portland is #5. But not everything is exactly what you’d expect, so click over to see how your city fares.

Thursday, August 21st, 2014

The Changing Face of the Global City

I want to highlight a couple of recent studies by Joel Kotkin for which I provided some research support. The first is a report on global cities from the Singapore Civil Service College called “Size Is Not the Answer: The Changing Face of the Global City.” As the name implies, it suggests that size is not necessarily correlated with global heft.

There are a lot of different ways of looking at cities. For example, the Economist just released its 2014 Global Liveability Index. But this study tries to focus in on specifically global economic power and influence. Thus it is somewhat like Loughborough University’s well-known survey, but looks at more than just producer services.

In particular, it looks significantly at industrial influence, or being a “necessary city” in the global economy that you just can’t help but deal with. For example, the San Francisco Bay Area often gets short shrift in most global city surveys even though it is the overwhelmingly dominant location of the technology industry, a key enabler of globalization and arguably the most powerful economic force at work today. By contrast, some traditional measures like total GDP that may indicate more domestic rather than global influence were not included.

Maybe the biggest surprise to me was the stability of the top ranks of cities, despite using different criteria from other studies. London and New York easily crushed everyone else. I’d expected that cities I thought of as more “domestic champions” like Tokyo, Paris, and Chicago might not fare as well. As it turns out, while Chicago is a bit lower in this survey, Paris is actually #3 and Tokyo #5. Both cities’ rankings are actually slightly higher than in Loughborough’s survey.

The Problem With Megacities

You also know that I’ve written skeptically of megacities in the developing world in terms of their ability to fulfill the aspirations of their citizens.

The second study I contributed to is called The Problem of Megacities and takes a look at the growth of megacities – a very new phenomenon in human history – and the problems that face them. An excerpt:

The megacity is increasingly a phenomena of countries that are struggling to find their way in the modern world economy. Size used to be more correlated with economic and political success and dominance on a global scale. Today, some of the largest cities are disproportionately poor, and seem likely to remain that way for the foreseeable future. Such problems are often ignored or minimized by those who inhabit what commentator Rajiv Desai has described as “the VIP zone of cities”, where there is “reliable electric power, adequate water supply and any sanitation at all”. Outside the zone, Mr. Desai notes, even much of the middle class have to “endure inhuman conditions” of congested, cratered roads, unreliable energy and undrinkable water.

These conditions reflect the inabil- ity of such megacities to handle rapid growth. Places like Dhaka, which gains as many as 400,000 new migrants from the villages annually, grows mainly in its slum, whose residents move to the megacity not for the bright lights, but to escape hopeless poverty, and even the threat of starvation, in their village.

Wednesday, August 20th, 2014

J’adore Paris

This week back to a time lapse one can actually enjoy, this a new one of Paris by Paul Richardson, which seems to be everyone’s favorite city for time lapses. One thing I like about this one is that it actually includes some scenes from La Défense, which is usually not included in Paris timelapses. This is great for full screen high definition. If the video doesn’t display for you, click over to Vimeo.

As a bonus this week, the Urban Cincy podcast recently took at look at Seoul. Site founder Randy Simes is currently on assignment there, and he and a Korean-American friend share some thoughts about that city and it’s development. If the embedded player doesn’t display for you, click over to UrbanCincy to listen.

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Tuesday, August 19th, 2014

A Typology of Gentrification by Pete Saunders

[ Pete Saunders has been on fire lately. His latest is a framework for examining gentrification. A couple of informative comments on the original post on Pete's blog are worth clicking over to read - Aaron. ]


Cities by gentrification type. Special thanks to Adam Carstens for producing this map.

Patterns of gentrification vary by city, and the spread of gentrified areas is partly determined by the city’s predominant development form and the historic levels of African-American populations within them. Gentrification is a nuanced phenomenon along these characteristics, but most people engaged in any gentrification fail to acknowledge the nuances.

Spurred on by the recent debate on the impact of limited housing supply on home prices and rents, thereby “capping” gentrification, (taken on fantastically by geographer Jim Russell in posts like this), I decided to do a quick analysis of large cities and see how things added up. The analysis was premised on a couple observations of gentrification, one often spoken and one not. One, gentrification seems to be occurring most and most quickly in cities that have an older development form, offering the walkable orientation that is growing in favor. Two, gentrification seems to be occurring most and most quickly in areas that have lower levels of historic black populations. This less noted observation was the thrust of a study by Harvard sociology professor Robert Sampson and doctoral student Jackelyn Hwang, recently described here. Here’s what they said, after conducting an exhaustive study of gentrification patterns in Chicago:

After controlling for a host of other factors, they found that neighborhoods an earlier study had identified as showing early signs of gentrification continued the process only if they were at least 35 percent white. In neighborhoods that were 40 percent or more black, the process slowed or stopped altogether.

That prompted my quick study. I wanted to categorize cities by old and new development forms, and low and high historic levels of black population. To do that I came up with an arbitrary proxy for the age of development form. Using decennial Census data, if a city reached 50 percent of its peak population by 1940, it was deemed to have an old development form; if a city reached 50 percent of its peak population in 1950 or later, it was deemed to have a new development form. Here’s a quick example of how this works. Baltimore, currently with a population of a little over 600,000, reached its peak of 949,000 in 1950. Baltimore reached half its peak, or about 475,000, by 1890, a time at which it could be said that Baltimore’s form as a city had been firmly established. Similarly, Austin reached its peak of 790,000 in 2010. The fast-growing Texas city was half that size in only 1990, a year in which it could be said that its development form was established and the city began to see itself as a major city. Imprecise, yes, but a decent proxy for examining old and new city development forms.

The second piece of analysis was gathering Census data on central city black populations in 1970. This decade was chosen largely because it represents the end of the Great Migration, when millions of African-Americans left the rural South for cities across the nation. By that time the cities which are generally recognized as having large black populations had already been identified, and it’s possible to explore the impact of the migration on them. I arbitrarily said cities with black populations lower than 25 percent of the total in 1970 had a low black population, and those above 25 percent had a high black population.

Using those two factors, I put together this table of the 64 primary cities over 250,000 in the U.S.:

There are more than a few cities that are exceptions, largely because recent consolidations or large-scale annexations have boosted them into more unfamiliar boxes. But some patterns are evident, and if you think of these in terms of gentrification, you might be able to make the following general assumptions:

Old Form + Low Black Population = Expansive Gentrification (OFLB)
Old Form + High Black Population = Concentrated Gentrification (OFHB)
New Form + Low Black Population = Limited Gentrification (NFLB)
New Form + High Black Population = Nascent Gentrification (NFHB)

Identifying the examples might be the best way to explain what I mean. New York, San Francisco and Boston are the prototypical OFLB cities, and gentrification has made its widest impact in these three cities. Chicago, Washington and Atlanta are the classic OFHB cities, where gentrification is concentrated in certain areas of the city (or region), and eludes the heavily African-American parts of the city. Phoenix, San Diego and Las Vegas might be the prototypical NFLB cities, all of which came of age with the car as the dominant mode of transport and with few African-Americans. NFLB cities may also be the leaders and innovators in seeking ways to catalyze their inner cities, with greater tangible investments in public transit and mixed use development. The relatively few NFHB cities are a distinctly Southern phenomenon, and by all appearances gentrification activity lags behind other cities, with sprawl still the dominant development engine.

Why would any of this matter? Nationally, the gentrification debate is defined by the experiences of the OFLB types like New York, San Francisco and Boston. There, the issues are rapidly growing unaffordability, concerns with displacement and growing inequality. But the gentrification debate is quite different in OFHB cities like Philadelphia and Atlanta, where seeking ways to more equitably spread the positive benefits of revitalization might lead such discussions.

In other words, it’s not exactly correct to look at what’s happening in Los Angeles or San Diego, or Baltimore or St. Louis, in the New York-San Francisco-Boston context. Different forces and different experiences are creating different outcomes in each city, and if we want to understand how to look at gentrification’s impact, we need to understand its foundations.

This post originally appeared in Corner Side Yard on August 15, 2014.

Sunday, August 17th, 2014

The City As a Decline Machine, or How the Loss of Hometown Banks Paved the Way For Corruption

Today I’m kicking off what’s probably a three part mini-series on corruption. In my view, whatever the structural problems resulting from suburbanization or globalization or whatnot, an overwhelming and under-examined barrier to success in our cities, and especially to reviving the fortunes of the urban cores of post-industrial cities, is corruption.

When we think of corruption we tend to think of a shady character passing an envelope full of cash under the table to a crooked politician in exchange for a a zoning variance or something. But that’s just one form of corruption, and arguably one of the least important. Much more important is systemic corruption, including many practices that are actually legal.

The book Corrupt Cities, which I’ll look at in depth in a future installment, defines corruption this way:

Corruption means the misuse of office for personal gain…Corruption means charging an illicit price for a service or using the power of office to further illicit aims. Corruption can entail acts of omission or commission. It can involve legal activities or illegal ones. It can be internal to the organization (for example, embezzlement) or external to it (for example, extortion). The effects of various kinds of corruption vary widely. Although corrupt acts may sometimes result in net social benefit, corruption usually leads to inefficiency, injustice, and inequity.

And regarding systemic corruption, the authors say:

Systematic corruption generates economic costs by distorting incentives, political costs by undermining institutions, and social costs by redistributing wealth and power towards the undeserving. When corruption undermines property rights, the rule of law, and incentives to invest, economic and political development are crippled. Corruption exists in all countries. But corruption tends to be more damaging to poor countries.

And, one might add, poor or struggling cities.

America has been experiencing problems with corruption at all levels of government. I want to focus on the local level, however.

Cities have long been known as hotbeds of corruption and political machines. They were certainly much more corrupt in the past than they are now. However, because the scope and control of government was so much less in those days – for example, there was no zoning in Gilded Age America – the impact was arguably less than now where the impact of government is pervasive. The Progressive Era brought reforms that cleaned up government to a certain extent, but we’ve seen in the contemporary era an uptick in government corruption. This is not necessarily in the form of petty corruption, but rather the corruption of the instrumentality and aims of government itself.

Even in my own lifetime I’ve seen a tremendous increase in corrupt activities. Sure, cities were always “growth machines” and had “urban regimes”. Some level of corruption may even be necessary for political life to function. It’s generally necessary to build coalitions to get things done, and the types of horsetrading that enables this is often distasteful. I don’t want to pretend that we can ever have squeaky clean politics. And of course cronies of the party in power have long benefited from patronage.

But there’s a big difference between logrolling, or even some crony getting his beak wet through a somewhat inflated price tag for something that more or less needed to be done anyway, and the types of things we see today, in which the levers of powers are used in ways that are often obviously manifestly contrary to the public interest.

I won’t fully support it in this post, but my belief is that increasingly the urban power structures have exchanged traditional growth machine policies for a system of extraction in which crooks, cronies, and criminals are enriched under the guise of the “revitalization” of a community in decline. The principal vehicles for this are a) publicly subsidized real estate boondoggles, b) corrupt privatization and professional services contracts, and c) public employee union featherbedding.*

This looting of our cities in the name of revitalization has been made possible by a severing of the historic link between the economic fortunes of a community’s elite and broader community prosperity. I’m going to show today how that link got severed, and why that has led to subsidized real estate boondoggles as the preferred form of civic “revitalization”, by revisiting and updating a post I originally ran in 2009.

Ed Morrison once wrote that “Cleveland’s leadership has no apparent theory of change. Overwhelmingly, the strategy is now driven by individual projects. These projects, pushed by the real estate interests that dominate the board of the Greater Cleveland Partnership, confuse real estate development with economic development. This leads to the ‘Big Thing Theory’ of economic development: Prosperity results from building one more big thing.”

Morrison could have been describing any number of other cities here. Why is it that so many cities have turned to large subsidized real estate projects to attempt to restart growth, , turning away from strategies that previously made them successful?

The answer lies in structural economic changes resulting from the nationalization and globalization of industry. Up until the 1990′s, many businesses, such as retailing, utilities, some manufacturing, and especially banking operated on a regional or local basis. The meant that the civic leadership of a community was heavily dominated by businessmen, again, especially bankers, whose success was dependent on the overall macroeconomic health of the particular city or region they were located in.

For example, up until the 1980s or so, most states severely restricted banking such that every city pretty much had its three major locally owned banks whose CEOs were the major power players in town.

Because these banks were limited to their own region, often only their home county, they could only increase their profits by seeing their hometown grow with more people and businesses, and thus more depositors and borrowers. If the CEOs of those banks decided to loot the city at the expense of overall civic prosperity – or let anyone else get away with so looting it – it would undermine their own businesses. Hence they had an alignment between corporate (and thus personal interest) and the civic interest. They could only prosper to the extent that the community prospered.

It was the same in many industries. The Public Utility Holding Company Act more or less led to every major city having its own electric utility. That utility could only make more money to the extent that more people and businesses moved to town and thus generated new demand for power. The interests of the company and its CEO were aligned with that of the city as a whole. If the city sickened, the company’s business would sicken with it. Many if not most cities also had their own department stores, drugstores and other retail establishments.

This created what Harvey Molotch called a “land based elite” and underpinned a model he called “The City As a Growth Machine.” He saw the “land” in question as physical land and thus also talked to the primacy of real restate development, but I see “land” as much more representing the constrained operating geography of a wide variety of industries that are not necessarily related to land per se. While growth as a strategy has its problems, you can certainly be stuck with worse.

With banking and utility deregulation, we saw large numbers of hometown banks merged out of existence. Industry after industry has been subjected to national or international level roll-ups as changes in the economy and regulatory environment gave increasing returns to scale. So today we have a handful of major national banks like JP Morgan Chase, major utility conglomerates like Duke Energy, and dominant national retailers like Macy’s, Walgreens, Wal-Mart, and Home Depot, often part of a “two towers” type rollup.

Why is it that “real estate interests” dominate in a local economy like Cleveland? Because, to a great extent, they are among the only ones left. Consider the local industries that have not been as subject to roll-ups. Principal among these are real estate development, construction, and law (though we are starting to see rollups in these industries too).

This means the local leadership of a community is now made up of executives in those industries, and they bring a very different world view versus the previous generation. There are two major differences between these types of firms and the previous types of firms that generated community leaders: the nature of the businesses themselves, and the fact that their profits are not dependent on the success of the community.

Consider the difference between a banker and a lawyer. Banks make money on the spread between what they pay for deposits or wholesale funding, and what they charge for loans. This means the CEO of a bank is making money while he plays golf at 3. He’s got a cash register back at the office that never stops ringing.

By contrast, lawyers get paid by the hour for work on specific matters and transactions. The law partner is only making money on the golf course if he is closing a deal. It’s similar between many other “operational” businesses that were previously prominent in communities, and the “transactional” businesses that are now often dominant.

Not only has the drying up of local and regional operating businesses led to a business leadership community unbalanced in favor of transactionally oriented firms, the loss of those local and regional operating businesses robbed many of the transactional companies such as law and architecture firms of their principal local client base. Large national businesses employ national firms for advertising, law, architecture, etc. If they use local firms, it is in a subsidiary role. (Or, if a smaller firm is fortunate enough to land a contract, it is servicing a client on a national, not local basis).

Richard Florida described this in his Atlantic Monthly article on the financial crash:

As the manufacturing industry has shrunk, the local high-end services—finance, law, consulting—that it once supported have diminished as well, absorbed by bigger regional hubs and globally connected cities. In Chicago, for instance, the country’s 50 biggest law firms grew by 2,130 lawyers from 1984 to 2006, according to William Henderson and Arthur Alderson of Indiana University. Throughout the rest of the Midwest, these firms added a total of just 169 attorneys. Jones Day, founded in 1893 and today one of the country’s largest law firms, no longer considers its Cleveland office ‘headquarters’—that’s in Washington, D.C.—but rather its ‘founding office.’

Where then is the source of transactions these firms can turn to in order to sustain their business? The public sector, of course.

I would hypothesize that many local transactionally oriented services companies have seen the public sector take on a greater share of billings than in the past. With the old school bankers and industrialists mostly out of the picture, the leadership in our communities consists increasingly of the political class and a business community dominated by transactional interests.

When you look at the composition of this group, it should come as no surprise that the publicly subsidized real estate development is the preferred civic strategy. Politicians get to cut ribbons. Cranes always look good on the skyline. Local architects, engineers, developers, and construction companies love it. And there is plenty of legal work to go around.

This is not to say these people are necessarily acting nefariously. And nor were old school bankers and industrialists always acting purely altruistically. But there’s a very different world view between people steeped in operational businesses and those in transactionally oriented one.

On the other hand, that’s not to say that they aren’t acting nefariously, either. Which brings us to the second difference. These newly dominant firms and their leaders no longer have fortunes tied to the overall health of the community. Unlike an old-school banker or utility executive, these transactional companies like law firms can exist on a narrow client base. Thus they can continue to thrive if the community is struggling or even impoverished. If the driving force of the business is government, which can extract significant tax revenues during both good times and bad, this can go on indefinitely, so we see that even in bankrupt Detroit the state stepped in to pump $400 million in subsidies into a new hockey arena for a development backed by a local billionaire.

In fact, what we see is that these firms and their hangers on can even profit from community decline. Why is this? Well, when the community is struggling, that means Something Must Be Done. And it just so happens that this group of people has Something in mind – namely shoving taxpayer cash into their pockets so that they can “invest” in “saving” the city. Somewhat perversely, to the extent that a community is thriving and doing well, the justifications for all those subsidies become harder to make. Thus The Powers That Be actually have a stake in civic failure.

Call this the “City As a Decline Machine” model, as our once-proud urban cores have been strip-mined for subsidies by cronies as population and job levels have collapsed in the greater urban core.

This helps explain why, despite the endless talk about “talent, talent, talent” not many places actually do much that suggests they are serious about attracting it. Why might that be? Because, as I’ve noted before, outsiders are the natural constituency for the new and an inherently disruptive force. That’s the last thing cronies want. Instead what they actually want is to use the pretense of talent as a Christmas tree ornament to decorate arguments in favor of their latest subsidized boondoggle.

But regardless of intent, the personal interest and long term community health of the community elite are no longer strongly linked. Which is why where once local business/civic leaders put money into the community – such as when Melvin and Herb Simon bought the failing and money-losing Indiana Pacers back in the 1983 – today they are more likely to be taking it out via these types of projects.

You might object that some cities kept their banks or have other large companies that are still present. Perhaps. But even where the hometown bank or company did not get bought out, it likely escaped that fate by getting big itself and making large numbers of acquisitions or otherwise expanding. This means those institutions are less dependent on the health of the particular local market they happen to be headquartered in than they are overall macroeconomic conditions. While no doubt they want the headquarters town to be successful, they can afford to take a portfolio view of local markets.

It’s similar for many other companies, such as the tech startups every city seems to be focusing on. These are attractive to a great extent because they can thrive in downtowns of cities where the majority of the urban fabric is struggling because they don’t consume much in the way of services, have a live and let live ethos that has historically been disconnected from and indifferent to government (and so won’t upset the cronies’ apple cart), and sell to a national or global marketplace in most cases.

Interestingly, one place where it seems like the structure of local real estate helps the city is New York City. My understanding is that there are still quite a few local power players whose personal fortunes are deeply tied to the value of Manhattan real estate. Certainly local developers sometimes receive eminent domain assists and such, but the volume of activity necessary to support the real estate industry that is still very key to the city’s viability can only come from genuine market demand. When you combine this with the fact that there aren’t good substitutes for New York, this suggests at least a significant segment of its elite will be highly motivated to see it navigate the formidable fiscal and other challenges it faces.

Most other places aren’t so lucky. Once this type of system gets established it is difficult to uproot, and it acts like kryptonite to outside investors who know they will be operating at a severe disadvantage versus the cronies. That’s why out of town bidders have been taking a pass on bidding on the I-195 land in Providence, for example.

Commercial real-estate developer Richard Miller, of The Pegasus Group, visited Rhode Island in 2011 and again this spring; he liked what he saw enough to pick a potential parcel on the western side of the river near Chestnut Street. But in the end, his team chose not to submit a proposal to the Route 195 Redevelopment District Commission, which controls about 40 acres in the heart of the city, 20 of which are available for development … “I don’t want to get snookered in here where all of a sudden they start hitting you up with fees and you put a bid in and you start meeting with politicians, and the more you invest in the town, the more you’re in the game, and I didn’t get the sense that they want you to make a fair return in the town.” … In other cities, such as New York, he says that there “is a very clear policy about new development. And it’s not subject to a political process in order for you to make a project work. Either you abide by the rules and make a buck or you don’t.”

I’m sure you could tell a similar tale in many cities. As someone once told me, “Political risk is the only risk in real estate development, if you know what you are doing.” Many cities today are nothing but political risk for anybody but cronies, which is one why there’s so little market interest in developing there. But don’t worry. Your friendly local campaign donors and insiders will be there to help “prime the pump” – with a little assist from the taxpayer of course.

Pete Saunders once recounted his family’s prescient observation about Detroit that it “would not rebound until all value was extracted out of it.” This is the process we sadly see unfolding in many post-industrial cities.

* If you require evidence just ask how many urban core real estate projects in your city have been done without subsidies to political donors.

Thursday, August 14th, 2014

Metro Size and Job Growth

I’ve previously argued that it’s larger metro areas of greater than a million people that are competitively advantaged in the modern economy. Conveniently, someone from the Oregon Office of Economic Analysis took at look at job growth performance of metro areas by metro area size.

Here’s their chart of the Great Recession:

As you can see, large metro areas have outperformed coming out of the downturn. But it’s small < 250K metros that took less of a hit in the first place.

Over the longer term, things are less clear:

I’d like to see this plotted as an index so that we can see what this adds up to cumulatively over that time, but from eyeballing it I get the impression that larger metros are more prone to bigger swings up and down. In any event, it’s another set of data to consider. Thanks to Kyle Jackson for sending this my way.

Thursday, August 14th, 2014

Why Contemporary Protestant Church Architecture Is So Poor


New Life Church Worship Center, Colorado Springs, Colorado. Photo: myamericanodyssey.com

Visit a city in Europe or even an older American town and see that the church building is often one of the most prominent and architecturally distinguished buildings there. Yet today your typical new Protestant church building, say a suburban mega-church, is dreadful. Why is that?

When speaking at the conference where I talked about suburban sacred space, I ran into architect Duncan Stroik, a professor of architecture of Notre Dame and someone you turn to when you want to build a church that looks like a church. His book on the subject of church architecture is “The Church Building as a Sacred Place: Beauty, Transcendence, and the Eternal,” which you can learn more about in the review of it in City Journal.

Stroik is also the editor of a semi-annual magazine called Sacred Architecture. Unsurprisingly, its emphasis is on Roman Catholic architecture, but other traditions are included as well. After an invigorating discussion on the topic, I agreed to write an article about the Protestant church architecture question, which is now online in the most recent issue. Called “Erasing Distinctions,” it looks at eight theological trends in contemporary Evangelical Protestantism that tend towards placing a low value on architecture. Here is an excerpt:

1. Low view of the church and place. The Roman Catholic tradition emphasizes the big-C Church—the one, holy, catholic, and apostolic Church of the creeds—with the local church as a mostly standardized operating subsidiary. By contrast, most Protestants emphasize the small-c church, their local congregation. This is truer than ever, as demonstrated by the rise of non-denominational churches.

This produces a system with no theology of place. Protestants feel a sense of duty to the place and community where they personally live. But if the majority of church members move, say, from the city to the suburbs, then a new church building can be constructed, the old building sold, and the duty transferred to the new place where the members now reside. The original building only served a pragmatic purpose as meetinghouse for the members.

The Roman Catholic Church views its remit as covering the entire globe. So when there is population change in a locale, the church is not relieved of responsibility for it. The church building is an outpost of Christianity in a particular place (the parish concept), not just to a group of people. In short, Protestants see place as ephemeral, while Roman Catholics see it as permanent.

You can click through to read the whole thing.

Wednesday, August 13th, 2014

Enter Pyongyang: The Timelapse As Communist Propaganda Video

It’s pretty clear that, in a sense, all of the time lapse videos I’ve featured here are marketing tools. They market both the film makers who created them, and the cities featured. Clearly the genre is all about making places just seem jaw-droppingly cool.

But at what point does marketing become propaganda? That is, at what point does the sales job cross the line from legitimate to illegitimate activity? I’m not sure where that line is, but a recent time lapse video of Pyongyang, North Korea by JT Singh and Rob Whitworth (who have produced other videos I’ve featured here) is on the wrong side of it.

I’m not going to embed this video on my site, but if you want to watch it you can click to Vimeo.

As you can see if you watch it, this video treats Pyongyang as just another cool emerging world global city, complete with lavish reclaimed waterfront parks, subway commuters, neon lit skyscrapers, a thriving bike culture, smiling happy kids, international brands (DHL), and more. It’s a consciously normalizing portrayal. But beyond that note elements designed deliberately to humanize the world’s most barbaric regime, ranging from using the official name of “Democratic People’s Republic of Korea” instead of North Korea in the title and splash screen to eliminate negative associations, to a preponderance of very non-threatening looking female (or androgynous) police officers who help mothers with strollers cross the street and such.

For the record, North Korea is a brutal communist dictatorship that’s likely the world’s most evil regime. You’ve no doubt seen the widely circulated satellite imagery of a completely dark North Korea at night:


Image via NBC News

Oddly enough, Singh and Whitlock didn’t show us any pictures of Pyongyang’s thriving nightlife scene…. (The lack of nighttime scenes is telling given they are a standard part of the genre and feature heavily in Singh and Whitlock’s previous work such as their Shanghai video that actually playfully shows all the lights of Shanghai going out! Apparently the real deal is too much for them).

But that doesn’t even scratch surface of the inhumanity of the North Korean regime. Famine is a recurring reality in the country in which an estimated million people died during the 1990s alone. The country also runs a network of concentration camps in which even children are brutalized. Consider this report from a former guard:

Children were savaged to death by guard dogs in a North Korea concentration camp, it was revealed today. Three youngsters died straight away under the snarling jaws of the prison camp dogs, defector and former prison guard Ahn Myong-Chol said. But two others were still breathing when guards buried them alive.

Myong-Chol,45, spent eight years as a prison guard in the gulag camps before he fled to South Korea in 1994. But he is still haunted by the dog-attack on the children as they left the camp school. “There were three dogs and they killed five children,” he recalled at a Geneva human rights hearing. “They killed three of the children right away. The two others were barely breathing and the guards buried them alive.”

But instead of the dogs being put down, their handlers petted them and gave them special food “as some kind of reward.”

A recent United Nations report described the horrors that exist in the country. As CNN reported:

A stunning catalog of torture and the widespread abuse of even the weakest of North Koreans reveal a portrait of a brutal state “that does not have any parallel in the contemporary world,” a United Nations panel reported Monday…North Korea is a state, it concluded, “that does not content itself with ensuring the authoritarian rule of a small group of people, but seeks to dominate every aspect of its citizens’ lives and terrorizes them from within.”

Why in the world would anyone want to have anything to do with making the North Korean regime look good? It isn’t like the filmmakers simply provided a portrayal that attempted to be nuanced and acknowledging complexities or something. Rather, this is a pure play work of propaganda.

They claim not to have been paid for their work. So what? That doesn’t change the reality of what it is. But even their own accompanying text raises troubling questions about the financing behind this. Their expenses were paid by a tour company that they claim is the market leader in North Korean tourism. Certainly at a minimum this company can’t be in that business without staying on Kim Jong-un’s good side, much less help the filmmakers “gain special access to locations.”

But that’s not even worth investigating since regardless of where the money came from, they created a video that serves the propaganda aims of the North Korean dictatorship. Without a doubt it’s “cool,” but that only makes their decision worse, not better. If in fact “Amazingly, we were given complete editorial control in the making of this piece,” that only adds to their shame in giving propaganda assistance to North Korea’s dictatorship of their own free will.

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