Creative Class

There’s a great post by Edward Glaeser (in the Economix blog of the New York Times), titled “New York, New York: America’s Resilient City.”

In it, he describes how New York has managed to avoid the decay that has afflicted many large older cities, and, after a brief downturn in the 1970’s, came roaring back as arguably the most influential single city in the world.

His explanation? In a word - “smart people.”

“New York still has an amazing concentration of talent. That talent is more effective because all those smart people are connected because of the city’s extreme population density levels. Historically, human capital — the education and skills of a work force — predicts which cities are able to reinvent themselves and which ones are not. Those people who are continuing to pay high prices for Manhattan real estate are implicitly betting that New York’s human capital will continue to come up with new ways of reinventing the city. “

Glaeser continues, describing why dense cities succeed…

“They thrive by enabling us to connect with each other, which then promotes learning and innovation. The current downturn will only increase the returns to being smart, and you get smart by hanging around smart people. As long as New York continues to attract and connect those people, the city will continue to thrive.”

Now here’s what every city planner wants to know. Is this replicable? Can this success be engineered or encouraged, and are the effects measurable in 10 years, 20 years, a lifetime?

Does anyone have successful examples of campaigns and projects to replicate this resilient infrastructure? Or perhaps, examples of some cautionary unsuccessful attempts?

Best wishes to everyone for a creative and fruitful New Year!

Rich has already written about how 1930s New Deal stimuli projects will not help this country prepare for the 21^st century global economy. Bloomberg has an incredibly insightful article on the Obama stimulus package. In effect, all the funds that will be appropriated for infrastructure will go for fixing old roads and building new ones to open new open spaces to crackpot development. Whatever one believes about global warming, this is certainly environmentally irresponsible and a step in the wrong direction. Moreover, it will cost cities, which, as Rich, Ed Glaeser, and many others have shown, have subsidized suburban development in the past. Now, U.S. “leaders” want to give us another dollop of past solutions. Optimistically applying old solutions (like ever greater indebtedness) for a debt and insolvency crisis is definitionally “crackpot.”

Can Obama translate his vague promises of change into a real change of direction for this country? To those that responded to my posting about taxation decisions, thanks.

I hope you all have great holidays. Rest, have fun, and prepare to put your thinking caps on because next year will be the most important for the global economy since 1933. We need to be there with alternative solutions and open the space for debate. Otherwise, the economists with old failed theories, some of whom claim to understand the Great Depression, will continue to provide crackpot solutions… to be discussed in the next posting.

If you own a home, chances are you are racing to refinance and mortgage brokers are calling you. Lots of folks are taking advantage of record low rates on vanilla-flavored 30-year loans. Cash in your pocket! Some are wondering, is it time to pick up a second home? Invest in a downtown condo?

Moreover, oil has crashed and there is little that OPEC or traders on global and virtual exchanges can do about demand reality. Is it time to pull that SUV back out and drive it around town? Maybe take a weekend trip with the kids? (There are lots of hotel deals!)

Is this how its gonna play out? Are we gonna stumble out of this recession and back into our old habits?  Remember in about two months the Fed will be writing out a lot of checks. Record spending + cheap money + cheap commodities = ?  What do you think? Happy Holidays to all!

Some members of San Francisco’s creative class are taking advantages of bargain prices being produced by the crisis, according to this San Francisco Chronicle report.

For the younger employed set who lack crushing debt, mortgages or families to support, the recession has a silver lining: Previously out-of-reach items are suddenly affordable. As consumer prices fell 1.7 percent in November, the biggest monthly drop on record, some have decided to take advantage of the deals - though not without caution …

“In a year where we would have expected the consumer to say ‘no’ to spending, this younger generation - the young adults who have not had to divert all of their discretionary spending to other family members - continues to self-indulge,” said NPD Market Research Chief Analyst Marshal Cohen. “It’s not a new concept,” Cohen added, noting that “mobile young adult consumers” have always wielded buying power. “It’s just a surprise that people are doing it when they are told not to.”

Cynthia Jaspar, a consumer spending expert at the University of Wisconsin-Madison, said that although young people are vulnerable to job loss in a recession, they will continue to be an important retail sector. Indeed, both the Wall Street Journal and Forbes magazine have reported on the youth-driven bright spots in retail: American Apparel, Urban Outfitters and Buckle stores are some of the only clothing companies to see sales rise in November. Analyst Cohen points to the video game industry as a sign that young adult buying power remains strong …

But just because young consumers may be able to afford holiday sales doesn’t mean they are spending with abandon. Certainly, the culture of excessive spending itself has been called into question by the current recession. Many report a newfound sense of guilt or unease about buying things. “But I’m young, single and don’t have the burden of property. This sounds really sad, but maybe we’re like the carpetbaggers of the horrible economic situation.”

USA Today’s Haya El Nasser and Paul Overberg report on how the combination of the crisis alongside longer-run economic and demographic trends are reshaping America’s economic landscape. The once booming Sun Belt is taking it on the chin.

The housing collapse and economic crisis are dramatically transforming the population and political landscape of the nation by ending the Sun Belt boom that dominated growth for a generation, according to Census Bureau estimates released Monday.

For the first time since the early 1970s, more people left Florida for other states than moved in during the 12 months ending July 1. Nevada, among the four fastest-growing states for 23 years in a row, slipped from No. 1 to No. 8. Michigan lost people for the third straight year.

The housing meltdown has turned migration flows on their heads. Of the top 20 fastest-growing states, all but four showed slower growth this year compared with last year and only one of the top 10 (Colorado) grew faster, according to an analysis by William Frey, demographer at the Brookings Institution.

“A giant share of it is housing,” says Robert Lang, co-director of the Metropolitan Institute at Virginia Tech. “One, you can’t sell a house. You’re stuck. Two, there’s no job growth attracting people to those states.” Lang says every previous recession had one thriving state or region that lured people. This time, no place is immune.

Warning: If you’re over 30, please proceed with caution. I mean it. This may upset you.  I just caught wind of a 28-year-old musician who goes by the name of ‘Girl Talk’ who is ‘sampling’ The Band, The ‘Stones, R.E.M, AC/DC, and Aretha Franklin, and mixing their iconic sounds with the likes of 50 Cent, T-Payne, Gwen Stefani, and Bubba Sparxx (who!?)

Listen here.

Because he (Girl Talk is a he) started his own ‘independent label’ he thinks he can basically do whatever he wants! No royalties, no fees. And his album is basically free! His website says, “Pay whatever you want.� And he encourages YOU, the listener, to use and sample his music. This internet-driven model threatens to bury the whole record industry!

Here’s another way to look at Girl Talk: as an artist and as an MC, but not in the traditional sense of the word. He has no records, no turn-tables, and no CDs. He has a laptop. That’s it. Girl Talk is commonly described as a mash-up artist: someone who takes the vocals from one song and the instrumentals from another and mixes them together into a new, unique sound. Think The Beatles’ The White Album meets Jay Z’s The Black Album to create Danger Mouse’s The Grey Album. But Girl Talk takes the style to a whole new level. 50+ samples in one four-minute song are not uncommon, and he mixes his massive database of music at live shows in real time on a plastic wrapped computer. Because his samples are so short, nothing he does is illegal according to “fair useâ€� copyright law in the U.S.

I believe Girl Talk’s music is a metaphor for my generation. His songs, which sample from Roy Orbison, Queen, Nirvana, and T.I., to name a few, require a very broad musical knowledge to be fully appreciated. N-Geners today listen to a lot of music and can give a wink and a nod to the clever way older songs are used. Even if they don’t know those songs, odds are many kids will go online and discover them afterward.  OK, kids listening to and/or learning the greatest rock/pop songs of all time. That’s a good thing.

On the other hand, his music can be construed as the ultimate symbol of our short attention spans and our obsession with short, easy-to-digest sights and sounds (think Sneezing Panda on YouTube). One could argue that digital technology has left us incapable of focusing on a good song for more than a few minutes (so let’s jam 50 samples into one track instead!), and Girl Talk is my generation’s answer. OK, that’s a Bad thing.

Girl Talk understands his target audience. He knows his music will be widely disseminated online, for free, before he has the opportunity to release a CD. So he embraces an open, online platform for his music where payment is optional:

“I think what we went for seems like an obvious game plan now, just because as soon as it hits the internet, anyone…can get it for free if they want to. So why not tap in and let them actually take a step back and think about it, and maybe offer some money?�

Get the whole interview with Pitchfork Media Here.

In this open and collaborative model, more money goes directly to the artist (and not a major label), he fosters good will with his fan base, more people get to hear his sound, and as a result he attracts a wider audience to live shows. I think this is a good thing.

This last question depends on your perspective. Some of his mash-ups take important songs out of context and use them only as a means to an end. How would you feel if he mixed Sam Cooke’s powerful and spiritual ‘A Change is Gonna Come’ with the vacuous and asinine ‘My Humps’ by the Black Eyed Peas just to get a ‘cool’ sound? In this regard, his music can be construed as not respecting the wholeness and message of his songs. I’m not a music critic, so I’ll stop there before I start sounding foolish, but I encourage you to share your thoughts.

The new issue of BusinessWeek (December 22) finds economist, Michael Mandel digging into the jobs data. What he finds is very interesting: jobs in manufacturing, transportation, construction, and extraction are tanking - what he calls the “tangible sector” and we call the “working class” have cratered, but jobs in professional fields, management, and science and technology - he calls them the “intangible sector,”we say “creative class” - continue to grow. The U.S. economy has lost nearly two million jobs in the past year, close to the 2.2 million jobs lost in the 1973-75 recession (we’ll go past that benchmark soon if we haven’t already), and unemployment (as officially defined) stands at 6.7 percent. But unemployment in manufacturing is 9.4 percent and even higher, 12.1 percent in construction and extraction. Here’s the rub. Of nearly all the 1.9 million jobs lost, 1.8 million of them  were tangible sector jobs. The intangible sector actually added 515,000 jobs. The economic effects of the crisis remain very uneven for socio-economic classes and for regions.

The latest issue of Martin Prosperity Insights is out. Read it here.

Kevin Drum thinks maybe the rush to stimulus ignores the deeper problems facing the U.S. economy.

I continue to wonder if a massive stimulus package that spurs domestic consumption means that just as we propped up the economy in 2002 by replacing the dotcom bubble with a housing bubble, we’re now propping up the economy in 2008 by replacing the housing bubble with continuing support for our ever-ballooning trade deficit bubble …. See Tim Duy for more on this. I don’t know if he’s right, but I don’t feel too bad for bringing this up since no one else really seems to know either.

In any case, I do know that pretty much every economist in the country agrees, in general, that eventually U.S. consumption has to go down, savings have to go up, and we have to start exporting more than we import. It’s just a question of whether we can afford to worry about that with the economy collapsing around our heads. Still, here’s a thought: if this is a serious long-term concern, shouldn’t we at least try to construct a stimulus package that stimulates export industries more than other sectors of the economy? If so, how would we go about doing that? And what else should we be doing to prepare for the day when the current panic subsides, the great T-bill bubble bursts, and the rest of the world decides that 0% yields on treasuries suck and they don’t want to buy any more of them? And what they’d really like instead are some tangible goods and services…?

I don’t know. Maybe we really can’t worry too much about this at the moment. But the trade deficit bubble is going to pop eventually just like the dotcom bubble and the housing bubble. We at least ought to be thinking about this a little bit.

Yeppers. And here he is on the bailout “prepackaged bankruptcy” option.

It actually sounds like a decent compromise to me: it keeps the companies from imploding in the middle of a huge recession, but at the same time it gives a bankruptcy court considerable leeway to impose serious restructuring of the kind that a political process probably can’t. The end result — if it’s done right — is a pair of companies that will end up smaller but still viable in the long term, and an economy that takes only a moderate hit instead of a killing blow.

I mainly agree, but am much less optimistic on their long-term prospects. The key will be how to minimize such “incumbent claims” politically and shift investments to the new idea-driven economy.

Economists have long argued that wages are sticky. I think it was the late John Dunlop who first discovered this. He told me once that Keynes actually sent him a letter congratulating him on that. Fed Ex has just announced big wage cuts. Felix Salmon says it may be class warfare time.

There’s been a huge shift in power in recent years from labor to capital: corporate profits have been rising much faster than wages for some time now. It makes sense that capital would make use of its newfound power to reduce labor costs in a deflationary environment of rising unemployment. During the boom, companies laid off workers because those workers demanded, and cost, too much money. Now that workers have lost their negotiating leverage, we might start seeing more across-the-board pay cuts.

Hmmm… cutting wages in a downturn when folks say there’s a need to stimulate demand and consumption. And double hmmmm… locked up credit markets where people can’t get loans. Try it for yourself, go out there and try to get yourself a mortgage on the buy-of-a-lifetime house. Boy oh boy, quite a vicious set of collective action problems we’re confronting. Not to worry: we have the stimulus and the auto bailout coming (ahem …).