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Why the Economic Fates of America’s Cities Diverged - The Atlantic
"What accounts for these anomalous and unpredicted trends? The first explanation many people cite is the decline of the Rust Belt, and certainly that played a role."



"Another conventional explanation is that the decline of Heartland cities reflects the growing importance of high-end services and rarified consumption."



"Another explanation for the increase in regional inequality is that it reflects the growing demand for “innovation.” A prominent example of this line of thinking comes from the Berkeley economist Enrico Moretti, whose 2012 book, The New Geography of Jobs, explains the increase in regional inequality as the result of two new supposed mega-trends: markets offering far higher rewards to “innovation,” and innovative people increasingly needing and preferring each other’s company."



"What, then, is the missing piece? A major factor that has not received sufficient attention is the role of public policy. Throughout most of the country’s history, American government at all levels has pursued policies designed to preserve local control of businesses and to check the tendency of a few dominant cities to monopolize power over the rest of the country. These efforts moved to the federal level beginning in the late 19th century and reached a climax of enforcement in the 1960s and ’70s. Yet starting shortly thereafter, each of these policy levers were flipped, one after the other, in the opposite direction, usually in the guise of “deregulation.” Understanding this history, largely forgotten today, is essential to turning the problem of inequality around.

Starting with the country’s founding, government policy worked to ensure that specific towns, cities, and regions would not gain an unwarranted competitive advantage. The very structure of the U.S. Senate reflects a compromise among the Founders meant to balance the power of densely and sparsely populated states. Similarly, the Founders, understanding that private enterprise would not by itself provide broadly distributed postal service (because of the high cost of delivering mail to smaller towns and far-flung cities), wrote into the Constitution that a government monopoly would take on the challenge of providing the necessary cross-subsidization.

Throughout most of the 19th century and much of the 20th, generations of Americans similarly struggled with how to keep railroads from engaging in price discrimination against specific areas or otherwise favoring one town or region over another. Many states set up their own bureaucracies to regulate railroad fares—“to the end,” as the head of the Texas Railroad Commission put it, “that our producers, manufacturers, and merchants may be placed on an equal footing with their rivals in other states.” In 1887, the federal government took over the task of regulating railroad rates with the creation of the Interstate Commerce Commission. Railroads came to be regulated much as telegraph, telephone, and power companies would be—as natural monopolies that were allowed to remain in private hands and earn a profit, but only if they did not engage in pricing or service patterns that would add significantly to the competitive advantage of some regions over others.

Passage of the Sherman Antitrust Act in 1890 was another watershed moment in the use of public policy to limit regional inequality. The antitrust movement that sprung up during the Populist and Progressive era was very much about checking regional concentrations of wealth and power. Across the Midwest, hard-pressed farmers formed the “Granger” movement and demanded protection from eastern monopolists controlling railroads, wholesale-grain distribution, and the country’s manufacturing base. The South in this era was also, in the words of the historian C. Vann Woodward, in a “revolt against the East” and its attempts to impose a “colonial economy.”"



"By the 1960s, antitrust enforcement grew to proportions never seen before, while at the same time the broad middle class grew and prospered, overall levels of inequality fell dramatically, and midsize metro areas across the South, the Midwest, and the West Coast achieved a standard of living that converged with that of America’s historically richest cites in the East. Of course, antitrust was not the only cause of the increase in regional equality, but it played a much larger role than most people realize today.

To get a flavor of how thoroughly the federal government managed competition throughout the economy in the 1960s, consider the case of Brown Shoe Co., Inc. v. United States, in which the Supreme Court blocked a merger that would have given a single distributor a mere 2 percent share of the national shoe market.

Writing for the majority, Supreme Court Chief Justice Earl Warren explained that the Court was following a clear and long-established desire by Congress to keep many forms of business small and local: “We cannot fail to recognize Congress’ desire to promote competition through the protection of viable, small, locally owned business. Congress appreciated that occasional higher costs and prices might result from the maintenance of fragmented industries and markets. It resolved these competing considerations in favor of decentralization. We must give effect to that decision.”

In 1964, the historian and public intellectual Richard Hofstadter would observe that an “antitrust movement” no longer existed, but only because regulators were managing competition with such effectiveness that monopoly no longer appeared to be a realistic threat. “Today, anybody who knows anything about the conduct of American business,” Hofstadter observed, “knows that the managers of the large corporations do their business with one eye constantly cast over their shoulders at the antitrust division.”

In 1966, the Supreme Court blocked a merger of two supermarket chains in Los Angeles that, had they been allowed to combine, would have controlled just 7.5 percent of the local market. (Today, by contrast there are nearly 40 metro areas in the U.S where Walmart controls half or more of all grocery sales.) Writing for the majority, Justice Harry Blackmun noted the long opposition of Congress and the Court to business combinations that restrained competition “by driving out of business the small dealers and worthy men.”

During this era, other policy levers, large and small, were also pulled in the same direction—such as bank regulation, for example. Since the Great Recession, America has relearned the history of how New Deal legislation such as the Glass-Steagall Act served to contain the risks of financial contagion. Less well remembered is how New Deal-era and subsequent banking regulation long served to contain the growth of banks that were “too big to fail” by pushing power in the banking system out to the hinterland. Into the early 1990s, federal laws severely limited banks headquartered in one state from setting up branches in any other state. State and federal law fostered a dense web of small-scale community banks and locally operated thrifts and credit unions.

Meanwhile, bank mergers, along with mergers of all kinds, faced tough regulatory barriers that included close scrutiny of their effects on the social fabric and political economy of local communities. Lawmakers realized that levels of civic engagement and community trust tended to decline in towns that came under the control of outside ownership, and they resolved not to let that happen in their time.

In other realms, too, federal policy during the New Deal and for several decades afterward pushed strongly to spread regional equality. For example, New Deal programs such as the Tennessee Valley Authority, the Bonneville Power Administration, and the Rural Electrification Administration dramatically improved the infrastructure of the South and West. During and after World War II, federal spending on the military and the space program also tilted heavily in the Sunbelt’s favor.

The government’s role in regulating prices and levels of service in transportation was also a huge factor in promoting regional equality. In 1952, the Interstate Commerce Commission ordered a 10-percent reduction in railroad freight rates for southern shippers, a political decision that played a substantial role in enabling the South’s economic ascent after the war. The ICC and state governments also ordered railroads to run money-losing long-distance and commuter passenger trains to ensure that far-flung towns and villages remained connected to the national economy.

Into the 1970s, the ICC also closely regulated trucking routes and prices so they did not tilt in favor of any one region. Similarly, the Civil Aeronautics Board made sure that passengers flying to and from small and midsize cities paid roughly the same price per mile as those flying to and from the largest cities. It also required airlines to offer service to less populous areas even when such routes were unprofitable.

Meanwhile, massive public investments in the interstate-highway system and other arterial roads added enormously to regional equality. First, it vastly increased the connectivity of rural areas to major population centers. Second, it facilitated the growth of reasonably priced suburban housing around high-wage metro areas such as New York and Los Angeles, thus making it much more possible than it is now for working-class people to move to or remain in those areas.

Beginning in the late 1970s, however, nearly all the policy levers that had been used to push for greater regional income equality suddenly reversed direction. The first major changes came during Jimmy Carter’s administration. Fearful of inflation, and under the spell of policy entrepreneurs such as Alfred Kahn, Carter signed the Airline Deregulation Act in 1978. This abolished the Civil Aeronautics Board, which had worked to offer rough regional parity in airfares and levels of service since 1938… [more]
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march 2016 by robertogreco
Los Angeles' Moral Failing | California Planning & Development Report
"Whereas a Berkeley resident can cross from exuberance of Telegraph Avenue into the heart of the Cal campus in a few steps, UCLA is an auto-oriented campus surrounded by a moat of driveways, green space, and city streets. Its neighbors are some of the wealthiest and orneriest an institution could ever have the misfortune to live next to. The university, for all its academic heft, retreats from the city, and the city from it.

UCLA was an ironically illustrative venue for a talk by Michael Storper, lead author of "The Rise and Fall of Urban Economies," that I attended recently. Contrary to its expansive title, Storper’s study concerns only Los Angeles and San Francisco. Given that both are booming Pacific Rim metropolises, it may be hard to figure out which is the “rise” and which is the “fall.”

Until you consider this: In 1970, the San Francisco Bay and Los Angeles areas ranked, respectively, numbers three and one in per capita income in the United States. In 2009, after both areas grew by more than 50 percent in population, they were, respectively, numbers 1 and 25.

You don’t have to have a Ph.D. to wonder: What happened?

Some of the reasons for the divergence of Los Angeles and San Francisco, which he defines by their multi-county metro regions, are obvious. L.A.’s aerospace industry crumbled along with the Berlin Wall. Steve Jobs happened to grow up in Cupertino. Et cetera. Hollywood is Los Angeles’ superstar, except that it represents only 2.6 percent of the area’s economy, compared with tech’s 11 percent in the Bay Area

Those factors are just the start. For virtually any given job function, and controlling for all sorts of variables, Storper, who teaches at UCLA’s Luskin School of Public Affairs, finds that a worker in the Bay Area makes more money and does more complex work than her counterpart in Los Angeles does. In other words, they’re not just making more in the Bay Area. They’re making better. This patterns holds for educated and uneducated, immigrants and non-immigrants, and it trickles down even to unskilled workers.

These are the statistics that back up San Francisco’s smugness. Riveting as they are, they describe the only effect but not the cause.

The Intangibles

L.A.’s and the Bay Area’s divergence depends largely on what Storper referred to as the “dark matter” of public policy. Lurking behind every data point and every policy are forces like curiosity, relationships, open-ness, diversity, civic self-image, and values. These factors are often disregarded by short-sighted wonks and bureaucrats not because they’re not crucial but because they aren’t easily quantified.

Storper argues that people in Los Angeles are lousy collaborators. Scholars in L.A. cite each other less often. Patents made in L.A. refer less frequently to other L.A.-based innovations. Los Angeles’ great universities – UCLA, USC, and Caltech – are not nearly as entrepreneurial as Stanford, Berkeley, and UCSF. He cites L.A.’s Amgen as a successful, once-innovative biotech company but says that it’s nothing compared to the Bay Area’s biotech cluster. And it's in Thousand Oaks -- nowhere near a major university.

Storper’s analysis indicates that networks of civic leaders in Los Angeles are often mutually ignorant of each other. The Bay Area Council, the region’s preeminent civic organization, is three times more “connected” than its closest equivalent in Southern California, the L.A. Area Chamber of Commerce. I know what Storper means. I’ve been to events at the Chamber, presided over by civic leaders of a certain generation.

Storper said the phrase “new economy” appears in none of L.A.’s economic development literature in the 1980s. At the same time, San Franciscans were shouting it from the rooftops.

Poverty & Pavement

These attitudes are fatal in an era when ideas, and not Fordist production, are the order of the day.

Echoing Enrico Moretti’s theories about innovation economies, high-wage jobs generate a multiplier that tends to take care of the workers at the bottom. "If you play to weakness (i.e. poverty) you get a weak economy,” Storper said. Interestingly, he said that there’s essentially zero good data on the efficacy of any public-sector economic development programs of the last 45 years. He chided Los Angeles’ leadership for its obsession with the low-paying logistics industry. A rising tide lifts all boats. Unless the boat is a container ship.

If an individual, firm, or government doesn’t have the knowledge or the capital to realize their dreams, so be it. But if they fail because they’re not open to the wisdom, energy, diversity, ambition, and creativity of other human beings, well, that’s something else.

Los Angeles’ economic failing is not just a business failing or a policy failing. It is a moral failing.

What else do you call it when 25.7 percent of residents in the biggest county in the richest state in the richest country in the world live in poverty?

Storper didn’t say so explicitly, but L.A.’s economics sins arise, in part, from our built environment. The two regions have plenty in common, especially in their outlying counties. But insofar as the center cities set the tone for their regions, the differences are striking. We have dingbats, setbacks, curb cuts, mini-malls, chain stores, McMansions, Pershing Square, streets like freeways, freeways like parking lots, and other elements of our landscape that push Angelenos away from each other.

How can you collaborate with someone when they’re in your way, making your drive longer, pouring pollution into your face? How can you feel as optimistic atop an asphalt sheet as you can strolling down a sidewalk lined with Victorians? How can you make friends when you can’t walk to a watering hole? Los Angeles is like a party full of beautiful people who have nothing interesting to say to each other.

Atonement

Atoning for our economic sins must include being a better Los Angeles.

We might not be able to trade Facebook (headquartered in Menlo Park, with 10,000 employees) for Snapchat (headquartered in Venice, with 200 employees). Nor can we can we trade Google for Disney, or the Transbay Tube for the Sepulveda Pass. But we can emulate some of the Bay Area’s urban sensibilities. We can use transit more often. We can build more mixed-use projects. We can embrace public space. We can build to the property line. We can plant trees. We can take advantage of our space rather than squander it. As our city changes, so can its culture.

The great news is that improvement is afoot, with downtown development, new transit, new types of development, and an optimistic corps of young planners. By the time Los Angeles comes into its own, today’s tech titans might be old news, just as Northrup Grumman and McDonnell Douglas are today. Something will have to replace them, and maybe they’ll reside in Los Angeles. We just need to give them a better home.

Postscript: Fortress Westwood

UCLA being what it is, many people who should have attended Storper’s talk – captains of industry, thought leaders, and everyday citizens interested in L.A.’s prosperity – are the ones who are least likely to actually have made the trip. Storper was preaching to a choir, mostly of fellow academics and urban nerds.

After the talk there was a reception. Hors d’oeuvres, wine, the usual. It provided a chance to do some of that mixing and mingling that elude us in L.A.

I would love to have stayed. Maybe I’d have developed new ideas or made new connections. But I had to go. My meter was running out."
losangeles  sanfrancisco  bayarea  ucla  ucberkeley  isolation  collaboration  urban  urbanism  2016  economics  poverty  wealth  janejacobs  cities  accessibilty  caltech  usc  policy  diversity  openness  values  relationships  westwood  california  publicspace  urbanplanning  enricomoretti  michaelstorper  joshstephens 
february 2016 by robertogreco

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