Creative Class

Were you - like me - ever amazed at how so many people could afford bigger and bigger homes, New England beach houses and Florida condos, expensive cars? The answer, according to a terrific article by Ben Funnell in the Financial Times, is simple: cheap, available credit.

Debt, he says, is “capitalism’s dirty little secret.” Cheap mortgages, cheap car leases, and the use of home as veritable ATM’s created fictitious living standards for the middle class and the bulk of the population at a time of low productivity and paltry growth in incomes, and where the bulk of the gains in wealth were scooped up by the top fraction of households.

A reader writes:

Another issue that is starting to arise outside of your writing is the future of food production. I would like you to consider how your view of future urban areas would interact with increasing commodity prices for basic food stuffs. Northern to central Virgina is an interesting case in point. There is a vibrant rural community, filled with local food-growing ex-urban dwellers. In the late 90’s up to this crash, they were competing with Mc-mansions for land. Can these extended regional urban/suburban/rural areas continue? Or will the increases in prices on food commodities further separate urban and rural as the need to increase productive yield becomes the only value of rural farm land?

I asked Betsy Donald, a geographer at Queens University who has done extensive research on the creative food economy, about this.

The creative food economy has profound implications for sustainable economic development because place and providence become central to quality food making, marketing and lifestyle. Food, unlike any other commodity on the planet, is intimate: we eat it and therefore how we eat it has implications for a host of policy related issues around job creation, health, hunger, ecosystem protection, carbon footprint, labor practices, cultural awareness and diversity.

There is a huge movement toward preserving prime farmland on the urban fringes through efforts to resolarize the farm, but also a budding trend toward urban gardening. Recall during World War II that 40 percent of produce consumed in America came from private “Victory Gardens.” Now these urban gardens are making a comeback - with more attention paid to organic and diverse food production (think Michelle Obama’s White House Garden) and San Francisco’s recent veggie planting on the grounds of City Hall. In Seattle, a local program offering public gardening plots has 6,000 plots assigned and a waiting list of 700 people - an aspect of the food economy that integrates local, organic and ethnic food production.

Some of this creative food production draws on more traditional farming practices, but much of it also challenges it by calling for more sustainable forms of food production that reduces the need for both fertilizers and pesticides and cleverly used polycultures to produce large amounts of food from little more than soil, water and sunlight (as is going on in Argentina and Brazil). It calls for a more holistic vision of the food economy that views food as a prism through which we can explore the scope and complexity of many of our most pressing economic, social and ecological issues.

She’s on to something. The demand for higher-quality food - both from individual consumers and from restaurants - is already leading to a tighter, more organic, higher-quality food supply chain. Adding creativity, so to speak, to food production will increase its value; we’ll pay more for it, and that will make this kind of food production economically more viable. Who knows? Perhaps the economics will someday enable the remaking and reuse of declining ex-urbs as centers of more vital, higher-end, creative farming communities.

Andrew Sullivan points to a new Ipsos/Reuters poll about how consumers in some two dozen countries are cutting back. Makes logical logical sense, on the face of it: Consumers are cutting back most on discretionary items like entertainment and vacations. But if we’re going to someday build a new kind of economy based less on durable goods - the old housing-auto, fordist industrial complex so to speak - and more around experiences, personal development, new technology-based and creative industries, the massive slashing of entertainment spending does not bode well for the longer-run. This may simply be an issue of wording: People likely see “entertainment” as a broad catch-all category. And the fact that education is holding up relatively well is a good sign.

This map from a new NBER study by UCLA economist Matthew Kahn and Michael Cragg of the Brattle Group (using data from Purdue’s Vulcan project) shows the geography of carbon emissions by U.S. states. The study finds carbon emissions are more concentrated in poorer, more conservative locations, posing significant political obstacles for policy to limit greenhouse gas emissions.

Stringent regulation for mitigating greenhouse gas emissions will impose different costs across geographical regions. Low-carbon, environmentalist states, such as California, would bear less of the incidence of such regulation than high-carbon Midwestern states. Such anticipated costs are likely to influence Congressional voting patterns. This paper uses several geographical data sets to document that conservative, poor areas have higher per-capita carbon emissions than liberal, richer areas. Representatives from such areas are shown to have much lower probabilities of voting in favor of anti-carbon legislation. In the 111th Congress, the Energy and Commerce Committee consists of members who represent high carbon districts. These geographical facts suggest that the Obama Administration and the Waxman Committee will face distributional challenges in building a majority voting coalition in favor of internalizing the carbon externality.

The study (which can be downloaded here) includes a series of maps on industrial emissions, residential emissions, and more. Some more great maps from Purdue’s Vulcan project are here.

• Bicycle - 90 sq. m for 71 people to park their bikes.
• Car - 1000 sq. m for 72 people to park their care (avg. occupancy of 1.2 people per car).
• Bus - 30 sq m for the bus.

Robert Frank notes some belt-tightening over at Richistan.

“Fire-sale auctions of mansions, yachts, sports cars and other trappings of wealth have become increasingly common as the rich become less rich… Whether unable to pay their bills or loath to appear lavish at a time of national thrift, many millionaires and billionaires are unloading their baubles. In a twist on the estate sales of deceased celebrities, “living estate sales” have become increasingly popular.”

Sure, some members of the nouveau riche are being forced to cut back. But a quick drive around the south Florida communes Frank writes about, or Beverly Hills and its environs, will turn up no shortage of high-end automobiles, designer hand-bags, and other markers of conspicuous consumption. And the growing popularity of the “Real Housewives” franchise illustrates that the haute gauche lifestyle continues to have mass appeal, however lurid. But the social zeitgeist is shifting away from such craven materialism. That’s a broader social liquidation whose time is long overdue.

U.S. household leverage, as measured by the ratio of debt to personal disposable income, increased modestly from 55% in 1960 to 65% by the mid-1980s. Then, over the next two decades, leverage proceeded to more than double, reaching an all-time high of 133% in 2007. That dramatic rise in debt was accompanied by a steady decline in the personal saving rate. The combination of higher debt and lower saving enabled personal consumption expenditures to grow faster than disposable income, providing a significant boost to U.S. economic growth over the period.

In the long-run, however, consumption cannot grow faster than income because there is an upper limit to how much debt households can service, based on their incomes.

Thoma believes this means recovery will be slow in coming because:

… unlike some recent recessions, this time the economy cannot go back to where it was prior to the recession, and the structural change that must occur to move resources out of housing and the financial sector and into other, productive uses will take time to bring about.

Calling all urbanists and sustainable environmentalists. The car-less German suburb story is the most e-mailed at the New York Times. 

MOST POPULAR

1. In German Suburb, Life Goes On Without Cars

Seems like the notion of living in a car-less suburb and living a car-free life has a bit of traction, at least with New York Times reading classes.

The Times follows with a nifty symposia on whether America can go car-free, with:

• Witold Rybczynski, professor of urbanism
• D.J. Waldie, author of “Holy Land”
• Dolores Hayden, professor of architecture
• Christopher B. Leinberger, real estate developer and author
• J.H. Crawford, author of “Carfree Cities”
• Marc Schlossberg, professor of public policy

Money quote from Leinberger:

“American families who are car-dependent spend 25 percent of their household income on their fleet of cars, compared with just 9 percent for transportation for those who live in walkable urban places. That potential 16 percent savings could go into improved housing (building household wealth), educating children or that most un-American of all activities, saving. “

Yowser. Now add in the housing costs at say 30-35 percent or more and what’s left over to grow the industries of the future?

Meanwhile, Planetizen links to this story on a really old car-less resort town in Michigan.

I confess to owning a car, but it’s pretty easy to go car-less in Toronto, and it’s close to America.

Source: New York Times

Countries where people eat faster have higher rates of economic growth. Floyd Norris discusses the findings of recent OECD research:

The fastest eaters were in North America; the United States, Canada and Mexico were the only three nations to report fewer than 75 minutes a day devoted to eating and drinking.

As the accompanying chart shows, the 10 countries where people spend less than 100 minutes eating and drinking each day have, as a group, consistently shown higher economic growth than those that took more than 100 minutes to savor their daily repasts …

The relationship persists within regions. All four of the Western European countries whose people eat relatively rapidly — Britain, Finland, Norway and Sweden — showed average economic growth of 2 percent or better over the eight years. Of the five Western European nations whose people ate more slowly, only Spain grew that rapidly. The others — Germany, France, Italy and Belgium — showed compound growth rates of 1.5 percent or less. Similarly, New Zealand, with slow eaters, grew at an average rate of 2.8 percent a year, while the faster eaters in Australia produced a 3.1 percent growth rate. South Korea, with faster eaters, grew at an average rate of 3.8 percent. Japan, which favors a more leisurely approach to dining, grew just 0.8 percent a year.

Makes sense, actually. A pioneering study by researchers affiliated with the Santa Fe Institute research team documents the role of “urban metabolism” in shaping city innovation and growth. As I wrote in The Atlantic:

The rate at which living things convert food into energy-their metabolic rate-tends to slow as organisms increase in size. But when the Santa Fe team examined trends in innovation, patent activity, wages, and GDP they found that successful cities, unlike biological organisms, actually get faster as they grow. In order to grow bigger and overcome diseconomies of scale like congestion and rising housing and business costs, cities must become more efficient, innovative, and productive. The researchers dubbed the extraordinarily rapid metabolic rate that successful cities are able to achieve “super-linear” scaling. “By almost any measure,” they wrote, “the larger a city’s population, the greater the innovation and wealth creation per person.”

The other day I showed Pew data on the things Americans consider necessities. I speculated that the economic crisis has brought us to an inflection point. We’re seeing the decline of the old auto-housing consumption bundle which powered post-war growth. And while certain new trends in consumption and lifestyle are emerging, nothing has yet come to form a “new normal.”

Writing in Esquire, the ever-insightful Nate Silver looks into whether or not America’s once-great car culture is coming to an end.

(Graph via Esquire)

To sort this out, I built a regression model that accounts for both gas prices and the unemployment rate in a given month and attempts to predict from this data how much the typical American will drive… [The results of the model are shown for the month of January in each year since 1980 in the graph above.]…

Americans should have driven slightly more in January 2009 than they had a year earlier. But instead, as we’ve described, they drove somewhat less. In fact, they drove about 8 percent less than the model predicted.

For people like me who live in big cities where one does not need a vehicle to get by, there is a certain romantic attraction to this story. Why, if only all those Bubbas could ditch their SUVs, take the monorail to work, and buy their families a bunch of Schwinns, life would be just grand!… In the real world, of course — outside perhaps a half dozen major metropolitan areas — American society has been built around the automobile.

Still, there is some evidence that more Americans are at least entertaining the idea of leading a more car-free existence. Between October 2004, when gas prices first hit two dollars a gallon, and December 2008, when they fell below this threshold, three cities with among the largest declines in housing prices were Las Vegas (-37 percent), Detroit (-34 percent), and Phoenix (-15 percent), each highly car-dependent cities. Conversely, the two markets with the largest gains in housing prices were Portland, Oregon (+19 percent), and Seattle (+18 percent), communities that are more friendly to alternate modes of transportation.

The exceptionally sluggish pace of new-vehicle sales, moreover, in the face of extremely attractive incentives being offered by the automakers might imply that Americans are considering making more-permanent adjustments to their lifestyles. And the denigration of the brand of the Big Three automakers in light of their financial difficulties — about one third of Americans have generally told pollsters they will buy only an American-made car — might reduce some of the patriotic associations with the activity of driving. Building a light-rail system might not persuade Bubba to get rid of his vehicle — but forcing him to buy foreign might.

If Silver is right (and his analysis looks good to me) that’s another nail in the coffin for old fordist consumption bundle.