I really like being a member of the Commonwealth Club of California but sometimes the people who attend lectures there need to be smacked upside their stupid little heads. Today I attended a noontime panel on the danger facing America from a skewed allocation of wealth. I'm pretty sure there was more collective intelligence among the three panelists than among everyone in the audience (minus me, of course, because my intellect reigns supreme).
The panelists correctly identified the risk of social instability from the erosion of the middle class, which in many societies throughout history has prevented open class conflict between the proletariat and plutocratic classes. They noted that a majority of the US's GDP growth is now generated in a minority of its metropolitan statistical areas. They also noted that the gap between rich and poor cities is increasing and persistent, with some cities becoming permanent enclaves of wealth and innovation. It should go without saying that high-tech sectors generate a wealth multiplier effect that supports skilled service trades but the idiots protesting outside Twitter will never figure that out.
One economist on the panel was kind enough to identify some key factors that drive commercial real estate investment. We've all heard the mantra about location, location, location for retail outlets. Large commercial projects take it further into six factors: income levels in a region; types of jobs available (especially high-skill, high-income); quality and availability of skilled labor; education; civic infrastructure; and the regulatory environment for business. She noted that the US is falling behind other countries in middle-class job creation, infrastructure investment, and economic mobility.
It pays well to have expert panelists correctly diagnose a problem only if the audience members can absorb the lessons. Sadly, that may be asking too much of the average San Franciscan. The audience's questions expressed desires to redistribute wealth and raise taxes to spend more on public education. That is the kind of failed statist thinking that has contributed to the destruction of the middle class. Centrally planned redistribution has brought middle class entitlement programs to the brink of insolvency. The public education model no longer delivers increased value for marginal increases in spending. Putting more money into either of these failed paradigms will only exacerbate the middle class's woes with more taxes and less benefit.
The panelists knew the way ahead but the audience could see neither the forest nor the trees. One panelist cited San Francisco's restrictive housing ordinances and "inclusive zoning" as a hindrance to development. Competitive housing markets allow development and attract affordable housing. The difficulty I see with getting from problem to solution was right there in the room. The audience members from San Francisco love rent control and the quaint character of neighborhoods frozen in time. No way are they ever going to vote for politicians who can give The City the policy reform it needs to make affordable development happen. Just look at the anti-Twitter loudmouths on the street. Try telling them that gentrification moves lower-income renters into areas where developers will meet their demand for low-income housing. They won't understand and neither will most educated San Franciscans.
The cognitive dissonance the audience members expressed was amusing. One guy asked what it would take to fill the high vacancy rate among East Bay and South Bay commercial properties with "high-paying jobs" (I think he meant business tenants, but he was an idiot). A panelist later said that many urban areas would have to undergo a prolonged period of contraction to a sustainable level of concentration, starting with Detroit. I may have been one of a few people in the room who saw the connection. Read my own blog posts on Detroit. Those vacant offices and stores in the Bay Area will remain vacant because their regions were overbuilt, and now they must be unbuilt. No amount of job training will fix it until unused office space becomes farmland.
I would have started laughing in people's faces if this seminar had lasted one minute longer. None of these idiots have a clue about why society is falling apart. They need to read the panelists' works (specifically Dr. Enrico Moretti's The New Geography of Jobs, Dr. Claude Gruen's New Urban Development, and Dr. Asieh Mansour's research) but I'm pretty sure they won't. If they do, they won't learn anything that will change their minds. I know exactly how to solve the middle class crisis and it won't be pretty. Here it comes. Entrepreneurs spawning MOOCs will cut the cost of education and eliminate the debt burden preventing young college graduates from saving for a home or starting a family. The public education establishment and its union drones will fight that tooth and nail until they earn the public's wrath. Smart urban growth will favor multi-use urban infill development that civic infrastructure can serve efficiently. The enemies of common sense will close ranks to defend rent control and inclusionary zoning until municipalities that do favor those reforms attract all of the wealth creators away from San Francisco. Only then, when all looks lost, will common sense return to the city by the bay after all of our current foolishness has been discredited.
I've always liked one of the quotes from T.R. Fehrenbach's This Kind of War that says something about how most human beings abhor competition, and that is why most people are acted upon by history instead of being the actors. I will act upon these audience members as much as my will to power will allow and they will like it. I took as many chocolate chip cookies as I could on the way out of the Gold Room because I didn't want them going to waste among anti-development fools. Much of the knowledge available at the Commonwealth Club is similarly wasted on people who won't use it.
The panelists correctly identified the risk of social instability from the erosion of the middle class, which in many societies throughout history has prevented open class conflict between the proletariat and plutocratic classes. They noted that a majority of the US's GDP growth is now generated in a minority of its metropolitan statistical areas. They also noted that the gap between rich and poor cities is increasing and persistent, with some cities becoming permanent enclaves of wealth and innovation. It should go without saying that high-tech sectors generate a wealth multiplier effect that supports skilled service trades but the idiots protesting outside Twitter will never figure that out.
One economist on the panel was kind enough to identify some key factors that drive commercial real estate investment. We've all heard the mantra about location, location, location for retail outlets. Large commercial projects take it further into six factors: income levels in a region; types of jobs available (especially high-skill, high-income); quality and availability of skilled labor; education; civic infrastructure; and the regulatory environment for business. She noted that the US is falling behind other countries in middle-class job creation, infrastructure investment, and economic mobility.
It pays well to have expert panelists correctly diagnose a problem only if the audience members can absorb the lessons. Sadly, that may be asking too much of the average San Franciscan. The audience's questions expressed desires to redistribute wealth and raise taxes to spend more on public education. That is the kind of failed statist thinking that has contributed to the destruction of the middle class. Centrally planned redistribution has brought middle class entitlement programs to the brink of insolvency. The public education model no longer delivers increased value for marginal increases in spending. Putting more money into either of these failed paradigms will only exacerbate the middle class's woes with more taxes and less benefit.
The panelists knew the way ahead but the audience could see neither the forest nor the trees. One panelist cited San Francisco's restrictive housing ordinances and "inclusive zoning" as a hindrance to development. Competitive housing markets allow development and attract affordable housing. The difficulty I see with getting from problem to solution was right there in the room. The audience members from San Francisco love rent control and the quaint character of neighborhoods frozen in time. No way are they ever going to vote for politicians who can give The City the policy reform it needs to make affordable development happen. Just look at the anti-Twitter loudmouths on the street. Try telling them that gentrification moves lower-income renters into areas where developers will meet their demand for low-income housing. They won't understand and neither will most educated San Franciscans.
The cognitive dissonance the audience members expressed was amusing. One guy asked what it would take to fill the high vacancy rate among East Bay and South Bay commercial properties with "high-paying jobs" (I think he meant business tenants, but he was an idiot). A panelist later said that many urban areas would have to undergo a prolonged period of contraction to a sustainable level of concentration, starting with Detroit. I may have been one of a few people in the room who saw the connection. Read my own blog posts on Detroit. Those vacant offices and stores in the Bay Area will remain vacant because their regions were overbuilt, and now they must be unbuilt. No amount of job training will fix it until unused office space becomes farmland.
I would have started laughing in people's faces if this seminar had lasted one minute longer. None of these idiots have a clue about why society is falling apart. They need to read the panelists' works (specifically Dr. Enrico Moretti's The New Geography of Jobs, Dr. Claude Gruen's New Urban Development, and Dr. Asieh Mansour's research) but I'm pretty sure they won't. If they do, they won't learn anything that will change their minds. I know exactly how to solve the middle class crisis and it won't be pretty. Here it comes. Entrepreneurs spawning MOOCs will cut the cost of education and eliminate the debt burden preventing young college graduates from saving for a home or starting a family. The public education establishment and its union drones will fight that tooth and nail until they earn the public's wrath. Smart urban growth will favor multi-use urban infill development that civic infrastructure can serve efficiently. The enemies of common sense will close ranks to defend rent control and inclusionary zoning until municipalities that do favor those reforms attract all of the wealth creators away from San Francisco. Only then, when all looks lost, will common sense return to the city by the bay after all of our current foolishness has been discredited.
I've always liked one of the quotes from T.R. Fehrenbach's This Kind of War that says something about how most human beings abhor competition, and that is why most people are acted upon by history instead of being the actors. I will act upon these audience members as much as my will to power will allow and they will like it. I took as many chocolate chip cookies as I could on the way out of the Gold Room because I didn't want them going to waste among anti-development fools. Much of the knowledge available at the Commonwealth Club is similarly wasted on people who won't use it.
