Creative Class

A new book by a team of urbanists from the London School of Economics examines how seven older industrial cities in Europe have worked to reinvent themselves. Here’s one recent summary (h/t: Karen King).

The cities – Sheffield and Belfast in the U.K., Bremen and Leipzig in Germany, Turin in Italy, Bilbao in Spain, and Saint-Etienne in France – were all industrial behemoths of the 19th century… Each of the seven subject cities used differing combinations of strong local leaders, businesses, universities and community groups, to invest in downtown neighborhoods and housing and reposition their towns for the high-tech age. Saint-Etienne’s derelict former arms factory became home to a cluster of clever new engineering companies. An advanced technology park with 6,000 new jobs helped recast Bremen as a hub for science. Crucially, the cities developed local initiatives to raise workers skills and provide access to new jobs. Mass transit systems got an upgrade, too. Saint-Etienne, for instance, laid on a new downtown tram line for locals. Officials also polished their cities’ cultural and public spaces. Local government funding in Bilbao, for one, helped transform a derelict patch of riverside into a cultural landmark, with the voluptuous-looking Guggenheim Museum at its center. The returns have been eye-catching. Unemployment dropped in all but one of the towns between 1990 and 2005. After dropping since the 1970s, the populations of five of the cities began recovering between 2000 and 2005.

Whether you ultimately agree or disagree with his conclusions, this essay by John Gray of the London School of Economics in today’s Globe and Mail is a succinct statement of the deep issues confronting the American political economy.

The fate of empires is very often sealed by the interaction of war and debt. That was true of the British empire, whose finances deteriorated from the First World War onward, and of the Soviet Union … Despite its insistent exceptionalism, the United States is no different. The Iraq war and the credit bubble have fatally undermined U.S. economic primacy. The United States will continue to be the world’s largest economy for a while longer, but it will be the new rising powers that, once the crisis is over, buy up what remains intact in the wreckage of the U.S. financial system …

The irony of the post-Cold War period is that the fall of communism was followed by the rise of another utopian ideology. In the United States and Britain, and to a lesser extent other Western countries, a type of market fundamentalism became the guiding philosophy. The collapse of U.S. power that is under way is the predictable upshot. Like the Soviet collapse, it will have large geopolitical repercussions. An enfeebled economy cannot support the United States’ overextended military commitments for much longer. Retrenchment is inevitable and it is unlikely to be gradual or well planned.

Meltdowns on the scale we are seeing are not slow-motion events. They are swift and chaotic, with rapidly spreading side effects … A U.S. retreat from Iraq will leave Iran the regional victor. How will Saudi Arabia respond? Will military action to forestall Iran acquiring nuclear weapons be less or more likely? China’s rulers have so far been silent during the unfolding crisis. Will U.S. weakness embolden them to assert China’s power, or will China continue its cautious policy of “peaceful rise”? At present, none of these questions can be answered with any confidence. What is evident is that power is leaking from the United States at an accelerating rate. Georgia showed Russia redrawing the geopolitical map, with the United States an impotent spectator.

Outside the United States, most people have long accepted that the development of new economies that goes with globalization will undermine the country’s central position in the world. They imagined that this would be a change in the United States’ comparative standing, taking place incrementally over several decades or generations. Today, that looks an increasingly unrealistic assumption.

Having created the conditions that produced history’s biggest bubble, U.S. political leaders appear unable to grasp the magnitude of the dangers the country now faces. Mired in their rancorous culture wars and squabbling among themselves, they seem oblivious to the fact that U.S. global leadership is fast ebbing away. A new world is coming into being almost unnoticed, where the United States is only one of several great powers, facing an uncertain future it can no longer shape.

The ultimate outcome of this ongoing financial crisis will be a new and different geography of capitalism – within nations and across them.