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What this means is that cities are not just portfolios that emerge segmented for risk, but also social entities that respond positively to this differentiation with increased generativity.  Cities are not only portfolios, but also social entities where diverse individuals interacting results in additional benefits for the growth of that city, over and above the lower risk of economic failure.  In this way, a city might best be conceived a social portfolio.

What you have in a city like Detroit (or unfortunately, many mid-major Midwestern cities, St. Louis included) is a poor social portfolio- resulting from a significant lack of industry diversity, and a lack of concentrated interaction among any diversity. Taken together, these cities are both at higher risk of collapse given the right conditions, and a lower ‘risk’ of growth and innovation.

What this means is that cities are not just portfolios that emerge segmented for risk, but also social entities that respond positively to this differentiation with increased generativity.  Cities are not only portfolios, but also social entities where diverse individuals interacting results in additional benefits for the growth of that city, over and above the lower risk of economic failure.  In this way, a city might best be conceived a social portfolio.

What you have in a city like Detroit (or unfortunately, many mid-major Midwestern cities, St. Louis included) is a poor social portfolio- resulting from a significant lack of industry diversity, and a lack of concentrated interaction among any diversity. Taken together, these cities are both at higher risk of collapse given the right conditions, and a lower ‘risk’ of growth and innovation.

In his 2005 book, The World Is Flat, Thomas Friedman argues, essentially, that the global economic playing field has been leveled, and that anyone, anywhere, can now innovate, produce, and compete on a par with, say, workers in Seattle or entrepreneurs in Silicon Valley. But this argument isn’t quite right, and doesn’t accurately describe the evolution of the global economy in recent years.

In fact, as I described in an earlier article for this magazine (“The World Is Spiky,” October 2005 [link opens PDF]), place still matters in the modern economy—and the competitive advantage of the world’s most successful city-regions seems to be growing, not shrinking. To understand how the current crisis is likely to affect different places in the United States, it’s important to understand the forces that have been slowly remaking our economic landscape for a generation or more.

Still, as its population density dips further, the city’s struggle to provide services and prevent blight across an ever-emptier landscape will only intensify.

That’s the challenge that many Rust Belt cities share: managing population decline without becoming blighted. The task is doubly difficult because 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.”

Many second-tier midwestern cities have tried to reinvent themselves in different ways, with varying degrees of success. Pittsburgh, for instance, has sought to reimagine itself as a high-tech center, and has met with more success than just about anywhere else. Still, its population has declined from a high of almost 700,000 in the mid-20th century to roughly 300,000 today. There will be fewer manufacturing jobs on the other side of the crisis, and the U.S. economic landscape will be more uneven—“spikier”—as a result. Many of the old industrial centers will be further diminished, perhaps permanently so.

When people like Colin Powell say Mr. Obama is a “transformational figure,” they’re suggesting that an Obama administration can somehow heal the deep divisions within the American electorate and move the country forward, the way Franklin D. Roosevelt did during the Great Depression. And certainly projected Democratic majorities in Congress make that kind of transformation appear plausible.

<!-- end #inTP -->I wish that would happen. But I doubt it will, and the reason is simple: The divisions run too deep. The realignment that propelled and kept FDR in office is not happening today. American politics is distinguished today by shifting electoral coalitions, candidate-centered elections, and what some political scientists call de-alignment. America isn’t just suffering from political polarization, but a burgeoning economic divide and class war.

Republican strategists have exploited this shift to their party’s advantage, beginning with the ever-prescient Kevin Phillips’s identification of the “silent majority” of white working-class voters in 1968.

The rise of the creative economy generated a shift in social values. Tolerance, diversity, and self-expression became prized. Diversity and self-expression became necessary for the creative economy to flourish and function.

As it grew and became more concentrated in locations such as San Francisco, New York, Seattle, Boston, and Washington D.C. - what we now know as blue America - the working class fell further and further behind. Globalization shipped jobs overseas, while institutional supports that led to higher working-class incomes during the 1950s, 1960s, and 1970s - powerful U.S. companies and powerful unions - were simultaneously being undercut. The great genius of former Bush political strategist Karl Rove was to seize upon the church as the one remaining constant in the lives of working Americans and to use it to his political organizational advantage.

Most experts agree this is the worst financial meltdown since the Great Depression. The stock market is down almost 25 percent so far this year. Housing prices in the United States are off more than 20 per cent since their peak in 2006. Manufacturing output is falling and consumer confidence has slipped.

<!-- /Summary -->Martin Feldstein, former head of the National Bureau of Economic Research, past chairman of the Council of Economic Advisers and a Harvard economics professor - usually a voice of calming reassurance - wrote in The Wall Street Journal: “Sliding into recession, monetary policy already at maximum easing, and fiscal transfers impotent … an unenviable situation, to say the least, for any incoming president.”

While Fordism looks stable on the surface, it suffers from a fatal flaw: It’s impossible for consumption to keep up with the ever-growing pace and efficiency of production. This is particularly true of recent times, when a great deal of production has been sent to China, India and other places where labour is cheaper. It’s hard for the working and middle classes to consume more when their wages are essentially stagnant. Low-wage workers in emerging economies do not have the income to fill the gap. And while the ranks of the rich have grown, the wealthy are a relatively small group that can buy only so many luxury cars, designer products, homes and yachts.

That’s where credit comes in. Those new fancy mortgage instruments were meant to turn homes into veritable “piggy banks” that could be used to finance bigger and better cars and homes and toys.

As one leading blogger, Yves Smith at Naked Capitalism, recently put it: “Since consumption has come to depend on growth in indebtedness, a reversal, however painful, is necessary. Our excesses have been so great that there is no way out of this that does not lead to a general fall in living standards.”

There you have it. The financial crisis is in reality a much deeper crisis of our underlying economic model and our way of life. It’s a crisis of the way we have come to define ourselves.

High-school students here rarely get more than a
half-hour of homework a night. They have no school uniforms, no honor
societies, no valedictorians, no tardy bells and no classes for the
gifted. There is little standardized testing, few parents agonize over
college and kids don't start school until age 7.

Yet by one international measure, Finnish teenagers
are among the smartest in the world. They earned some of the top scores
by 15-year-old students who were tested in 57 countries. American teens
finished among the world's C students even as U.S. educators piled on
more homework, standards and rules. Finnish youth, like their U.S.
counterparts, also waste hours online. They dye their hair, love
sarcasm and listen to rap and heavy metal. But by ninth grade they're
way ahead in math, science and reading -- on track to keeping Finns
among the world's most productive ...

Posted by:
Michael Wells |
February 29, 2008 at 01:11 PM

Posted by:
Yule Heibel |
March 01, 2008 at 04:55 PM

You go so far as to call the spiky world "tricky and even treacherous."

Right. We can see it in this election. It's really giving rise to class
conflict. We are starting to see a backlash against cities, and a
backlash against people who live in them. Urban conglomerations are the
single most important thing to our competitiveness, yet people won't
talk about it. And the second thing that worries me is we're unable to
talk about those being left behind. We're stuck in a stalemate. I would
like to see everyone live better.

Do people realize their happiness is closely linked to place?

Absolutely not. People don't even think about it. But when you ask them
you begin to discover their place is a critical contributor to their
happiness. Generally speaking, place tends to the positive side of the
happiness ledger. That was surprising to us. When we asked people about
the source of stress in their life, place came in last. If you find a
place that fits you, it gives you more energy. People have always been
attracted to aesthetics. The other thing is infrastructure. Maybe you
like to go outside, or ride your bike. Those things are critically
important. What people are saying is they are not going to be fulfilled
in a place that just has a good pipe system. They want to live in a
place that gives them excitement and energy.

Appearing before the city's economic development committee to discuss its Agenda for Prosperity, released earlier this month, Florida challenged the common thinking that counter work in franchise outlets is somehow worthless.

Florida – director of the Prosperity Institute at the University of Toronto's Rotman School of Management – said this city could become a leader in rethinking the role of jobs in the hospitality, food and business services sectors.

In fact, he said, government, business, labour and academic leaders should consider holding a "service summit" to map just such a plan.

"The service economy has to be a centrepiece of our strategy going forward," he said, because so many service jobs are being created.

"Why not say, from a research and development standpoint, from an innovation standpoint, from a job security standpoint, from a flexible work environment standpoint: How do we make our service sector thrive?

If culture really is a driving force behind the economic development of Montreal, as Premier Jean Charest claimed yesterday, it is about time the city, province and federal government put real money into it.

The news that Montreal's Quartier des spectacles is to receive $120 million from the three levels of government should be applauded.