Sunday, October 02, 2011

Food for thought, and occasional light rations, in Richard Florida's The Great Reset

Credit Richard Florida putting forward a satisfying -- and I think mainly sound -- conceptual framework for understanding our current economic woes in The Great Reset: How the Post-Crash Economy Will Change the Way We Live and Work.  Florida argues that major economic slumps correspond with major economic 'resets', in which new ways of generating wealth demand -- and ultimately shape -- new organizations of community, workspace and living space -- and new means of transportation that tie the new "spatial fix."  From this perspective, to extrapolate a point that Florida leaves implicit, the bubbles that precede major economic contractions are more symptom than cause -- a kind of giddy last fling at priming the legacy infrastructure that's reached a kind of natural limit.

According to Florida, the two main examples of "reset" in U.S. history are 1)  the urbanization of the late nineteenth and early twentieth century, which developed during and followed the "long depression" of 1873-1896; and 2) suburbanization, for which the way was "literally paved" by the New Deal and postwar infrastructure investments. Florida argues that we are in a third reset now -- an accelerating shift from a manufacturing to a service economy, demanding an "infrastructure fix" centered largely on high-speed rail tying together "megaregions" - clusters of large cities that strengthen their economic links and so pool resources.
From this big picture come several proposals well supported by data. First is that rather than bemoaning the decades-long loss of manufacturing jobs, we need to upgrade the millions of relatively low-skill service jobs that the economy does produce.   One of Florida's key insights, put forward in articles as well as here, is that there is nothing inherently "good" about manufacturing jobs -- they were made good by decades of political struggle.  The same can and should be done for service jobs":
Take janitorial work, for example...[it] can be broadened and the necessary skill level raised so that it becomes a source of important innovations. Why not supplement sweeping floors and washing windows with charging custodial staff to bring about process improvements that make buildings more energy-efficient or most cost-effective to run? Surely the people who maintain a building's furnace or air conditioning equipment can work on a team that investigates alternatives for systems modernization. Once we recognize service work as a source of innovation and productivity improvement, we can begin to raise wages in sync with the productivity gains these workers generate (p. 123).
These recommendations are grounded in a statistical snapshot of our workforce: routine service jobs now account for 45% of jobs; creative jobs for another 31%. According to Bureau of Labor statistics, nearly all future job growth "will occur in creative and professional jobs on the one hand, and service, administrative and clerical jobs on the other" (p. 116).

Another strong thesis is that homeownership has to a large degree become a drag on economic development. At  time in which people change jobs rapidly while the pace of economic change is ever accelerating, people need mobility.

A third is a set of proposal for fostering development of economic megaregions that in turn foster innovation and productivity among members of the "creative class" that drive economic growth. These include creating an improved home rental market; more liberal zoning within cities that allows for more residential development within the urban core; and transportation networks that smooth travel of suburb to city and from city to city within a megaregion. "The places that thrive today," writes Florida, "are those with the highest velocity of ideas, the highest density of talented and creative people, and the highest rate of metabolism."  His thinking is directed in large part toward fostering development of megaregions embodying those virtues, in large part by tying languishing cities, such as Buffalo or Milwaukee, into the economic orbit of thriving megaregional hubs, such as Toronto or Chicago.

At the same time, some of Florida's projections and recommendations are more lightly sketched in -- and sometimes thinly supported. Some questions:

1) Florida wants the federal government to spend trillions on infrastructure and to provide social services superior to Denmark's.  Yet he also wants a country in which policy devolves to local communities, which know their own needs best.

2) Re those local communities: Florida also envisions a highly mobile populace, e.g. one in which people sign on with a multi-city landlord offering turn-key dwellings wherever a mobile worker might happen to land.   While such living arrangements are intriguing, they're hardly conducive to the kind of community commitment that would make use of the decentralized power structure he advocates.

3) Florida makes some interesting claims about the misallocation of capital during the noughts: 
    Instead of reinforcing the economy, the financial system started to undermine it--funneling capital that could have been used to create new technologies and industries into real estate or shaky financial instruments, sucking up scads of talent, and ultimately generating the series of bubbles that got us into this mess in the first place (p. 111.
    The bursting of the high-tech bubble in 2001 held back the emergence of the new order. Scaring investors out of technology, the Internet, and emerging economic sectors, it sent capital flowing out of the creative economy and back into the safety of housing and real estate --from "clicks" back to "bricks," to turn a phrase (p. 132).

    Florida provides no data to support these claims, however. No one doubts that far too much capital was sunk into real estate in the past decade.  But is there any evidence that the venture capital industry was underfunded or that viable tech or biotech startups were starved for cash?  They were for a period, after the tech bubble burst in 2000. But what about after, say, 2003?  Some statistical backup would be useful here.

    4) At times, Florida cheer-leads for alleged steps toward the spatial fix he favors without offering any proof that it's happening.  For example, he implies that since the bubble burst, New Yorkers have increased their subway usage, but provides no numbers.  Nor does he provide evidence that high-speed rail has contributed to the formation of high-functioning megaregions in Japan, Europe or China. One little detail I wondered about: high speed rail can be expensive, sometimes comparable to air travel between cities within a "megaregion." To what extent would it  generate closer economic ties between those cities. On the other hand, at viable commuter prices, it's quite true that high speed rail could bring Philadelphia on one end and Albany on the other within viable commuting distance of New York.

    5) Florida on the one hand laments suburban sprawl, and on the other touts "infill" within megaregions, tying sburbs within the megaregion more tightly to their respective urban cores. What's the difference between sprawl out of the cities and "infill" of the megaregions in which those cities are located?  I can begin to sketch out answers to this question, but the details get short shrift in this book.

    In short, I think that the provocative, mostly credible, and genuinely exciting ideas animating The Great Reset deserve about twice as much development as they get in this challenging little outline.

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