Felix Salmon has an interesting post today about how China has managed to keep it together depsite very trying economic times. The bottom line? Healthy investment in urban infrastructure. Which has fueled a boom in the creation of service-related jobs — just what you want if you need to think long-term about moving your economy away from agriculture and manufacturing.
Cities, therefore, are good. Of course, China can do fine with a mix of agricultural and manufacturing labor at its core, with services a distant dream. The U.S., on the other hand, needs to push for service employment, as that's where the high incomes are. And we need high-income jobs to define America's future. Felix offers his formulation for how to get them:
How do you create service-industry jobs? By investing in cities and inter-city infrastructure like smart grids and high-speed rail. Services flourish where people are close together and can interact easily with the maximum number of people. If we want to create jobs in America, we should look to services, rather than the manufacturing sector. And while it’s hard to create those jobs directly, you can definitely try to do it indirectly, by building the platforms on which those jobs are built. They’re called cities. And America is, sadly, very bad at keeping its cities modern and flourishing. 1950s-era suburbia won’t cut it any more. But who in government is going to embrace our urban future?
I think Felix is both right and wrong on this front. When Americans form households, they think about forming them in...houses. This is just practical: It can be virtually impossible to contain two parents, 2.5 children, and enough pets and gear to keep everyone occupied in the typical urban apartment (although in a lot of cities, it takes child number two to push the family out of Dodge). Cities are also more expensive than suburbs.
If you talk to housing economists, they'll tell you that eventually the pace of household formation in the U.S. has to pick up — perhaps by the 2015-2017 period. Some of these economists, particularly the ones who follow building-trades industries like lumber and forest products, figure this will translate in a new housing boom and resume the process of American suburbanization. This is the Joel Kotkin argument (sort of), which stands in opposition to the ideas of Richard Florida, who I think would agree with Felix that the city is the ideal platform for engendering a thriving "creative class" of service workers.
That said, Felix is absolutely correct — and his view is bolstered by Chinese data — that urbanization drives service growth and creates the best possible environment for high-end economic success: packing smart people together and providing them with the infrastructure they need to excel. This amounts to a large bet on human nature. Or, put another way, built it an they will come and create things that are insanely great and try to get rich. In Los Angeles, mayoral candidate Austin Beutner has made exactly the kind of urban upgrades Felix is talking about one of his campaign messages.
Soooo...How do you mash these two things up? Well, we have experience with this, both good and bad. First the bad: Los Angeles Country and urban-suburban sprawl. It could be worse. L.A. at least has several centers of economics activity, so unlike, say, Atlanta, you don't have thousands of people pouring in and out of the city center every day and then retreating to ring suburbs at night.
That said, You still have an enormous number of people stuck in traffic as they inch their way into L.A. from the Valley through the Sepulveda pass. Or up the Harbor Freeway. Or on Interstate 5 coming up to L.A. from Orange Country and the Inland Empire — which is of course like the Valley is where the nice neighborhoods and good schools are.
Now the good. The bedroom communities of upstate New York, as anyone who has watched "Mad Men" knows, have long been home to a vast supply of American salarymen and women who are funneled into Manhattan every day by train. Likewise, Nassau County, the region just east of New York City on Long Island. These are suburban communities where the working population in the urban service industries rolls into work by rail.
They all have cars, of course. They just don't drive them to their jobs.
Just to continue with my tale of two cities, L.A. is trying to fix its problem, however haltingly. The city's Metro lines are being extended and there's an debate building about whether the Angelenos should contribute funding to a high-speed rail project connecting San Diego to San Francisco — or keep the money to themselves and continue to build up rail lines closer to home.
New York isn't a paradise, by the way. As Ryan Avent has observed, when it becomes inordinately expensive to live somewhere, talent may choose to move away. He figures that this has made the Silicon Valley less economically productive during the first tech boom, simply because the kind of extreme talent concentration Felix endorses cost to darn much for those being concentrated. Rather that moving to "heart of the boom," as Avent puts it, the talent was ironically fleeing from the boom.
New York is in this pickle, too. When I lived there in the 1990s and 2000s, is wasn't unheard of for people to commute from Philadelphia. Philadelphia! But that was where the affordable housing was.
Talent density is also a limiter when it comes to household formation. When we moved our family to L.A., we spent three years living Downtown, in a concentrated urban area well-served by mass-transit. There wasn't enough room for two adults and two kids to live comfortably, however — and developers weren't building a lot of affordable three-bedroom lofts.
China has a one-child policy. I'm no expert, but I'm assuming it's observed more strictly in cities than in the countryside. Families of three are much easier to pack into urban environments than families of five. This sets up China for rapid urbanization. But it also sets up China to have a demographic challenge down the road, when there aren't enough young people working to support an aging population.
At any rate, there's no question that America needs service-sector jobs and more of them. If the aggressive development of cities is a way to get there, that the investment is worth it. The American Way can't consider cities an afterthought. But with cities comes a certain degree of inflexibility. And that's something that Americans don't like.