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Outlook: Crash Globally, Grow Locally

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Joel Kotkin
Presidential Fellow, Chapman University; Executive Editor, NewGeography.com
Monday, October 20, 2008; 12:00 PM

"As the financial crisis takes down Wall Street, the regular folks on Main Street are biting their nails, watching the toxic tsunami head their way. But for all our nightmares of drowning in a sea of bad mortgages, foreclosed homes and shrunken retirement plans, the truth is that the effects of this meltdown won't be all bad in the long run. In one regard, it could offer our society a net positive: Forced into belt-tightening, Americans are likely to strengthen our family and community ties and to center our lives more closely on the places where we live."

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NewGeography.com executive editor Joel Kotkin, co-author of an upcoming book about America's future, was online Monday, Oct. 20 at noon ET to look at some of the upsides of the problems facing our nation.

The transcript follows.

Archive: Transcripts of discussions with Outlook article authors

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Laurel, Md.: If one didn't participate in the stock market or job losses associated with it, the tech bubble was a tremendous boon, as it opened up a world of personal computing to the average Joe and Jane. Where I live, a lot of greenery was cut down or plowed under in the past five years to build houses and condos no one wants at asking prices. Before this bubble, lack of affordable housing was a key issue in many parts of the Washington area. So, the obvious question becomes, how are we going to get (low-to-middle-income) people into all those houses that were built for a high-income market?

Joel Kotkin: That is a great question. we have published one piece on our Web site, www.newgeography.com by a professor at Arizona State on precisely this topic. It's called "The Next Public Housing." One hope, for example is that cities may fill up condos with middle-class people who never could afford the bubble prices; same for houses in suburbs. There could be a good side in the overbuilding, if the assets can be transferred to potential owners or responsible renters.

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Gaithersburg, Md.: What does a savings economy look like? A conventional wisdom has developed that our economy for at least a couple of decades has been driven by consumption and debt, as seen by the size of the retailing and finance sectors of the economy. For a long time I've wondered whether it improved my quality of life that I can go to four different malls with ten different stores all selling virtually identical clothing. If the real estate bubble does nothing else, I hope it slows the pace of new commercial construction. But if we put our money into the bank or stock market instead of spending it, what new jobs will be created to replace the store employees who get downsized?

Joel Kotkin: Very good question -- we are trying to figure this out ourselves. It seems to me we need to move to a more productive economy that exports more, and imports less when possible. Some key ideas would be to invest in productive infrastructure (not ball stadia or convention centers) and also to encourage firms to invest in their workers.

We have started to discuss this on our Web site.

Thanks.

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Camrose, Canada: Every economic crisis has been preceded by rampant speculation. The current crisis is worse because it was not limited to one sector of the economy, as was the tech bubble. Rather, housing speculation, energy speculation, commodity speculation, currency speculation and a switch from investing in companies to daily speculation on stock prices were occurring simultaneously, and were being practiced by everyone through mutual funds and pension plans. Will the current crisis change the greed mentality and prompt regulators to put some controls on speculation?

Joel Kotkin: I think this depends on the signals from the government. I spent some time with Obama's economic adviser the other day, and to be frank, the answers were not very specific. There has been too much focus on how to stop the bleeding without treating what caused the wounds -- not only here but across the advanced industrial world.

The sad thing is that I do not know any country that has the "answer" or whether any one answer can be applied to differing realities, even between the U.S. and Canada.

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Rockville, Md.: It turns out that what most call "sprawl" is really a good way to live, if work and shopping also can be local or "telecommuted." I expect that with more energy choices, telecommunications and even recycled water, a house could be located anywhere one wanted to live. Solar cells, windmills and even geothermal assistance can make a house independent of location in a grid. How will that change our idea of community?

Joel Kotkin: I agree with you -- attempts to force people to live in density will backfire, although Al Gore et al will try to force us to live a way we never would accept.

My stress is on choice, where people select the kind of community they want. Not everyone wants to be isolated, and costs -- particularly land -- will drive people to make less-than-optimal choices for economic reasons.

But all the factors you cite could be very important in shaping future communities.

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ripvanwinkleincollege: When people live in multigenerational families instead of striking out on their own, while at the same time buying smaller motor vehicles and having less disposable income because of high food and fuel costs, there is less income spent on the types of things which fueled economic expansion in the 1980s and 1990s. We could have adjusted to this a lot easier if we had made changes in the late 1970s to policies that encouraged suburban sprawl.

Instead, we are now stuck with a public infrastructure that puts us at a competitive disadvantage against countries that do not have to spend as much energy to feed, clothe, house and supply their people. We are unlikely to recover to the same level of prosperity that we had during the 1990s. If we are lucky, we will continue to have relatively full employment. Most developing countries now consider themselves lucky if they can keep unemployment below 15 percent. We may be in the same boat with them.

Joel Kotkin: I am not so pessimistic. America is a remarkably wealthy country -- and unlike Europe, South Korea or Japan, it will not face a disastrous demographic decline. But we need to move aggressively to build an infrastructure and adopt policies that encourage less commuting and more community.

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orray: Kotkin, noun: a new type of reactionary, a new form of social Luddism, courtesy of mass impoverishment. Give some people a higher education and they get downright silly.

Joel Kotkin: I am not at all in favor of lower standards of living. I do think changing conditions will make us adjust how we live. But somehow, stronger families and communities do not seem like negatives to me.

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Bukkonen: Yes, and when masses of people begin to slowly starve because they can't afford enough food, that will do wonders for America's obesity problem! Seriously, mate, isn't this called "whistling past the graveyard"? I've noticed a trend in the corporate media: First they denied there was a crisis, then they started printing stories about how good things actually were. You know the situation is bad when newspapers have to write that things are good. Now that it's apparent that the collapse is upon us, I predict we'll see more pieces about how hard times will make us better. Welcome to the Bush Depression. Let's hope it doesn't last for as long as the Chimp's Reign of Error did.

Joel Kotkin: If you re-read the article, I already was stating many reasons before the downturn for this. Actually, most of what I wrote already was researched before the meltdown. I think there are many reasons for localism that extend beyond economics.

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Clifton, Va.: Sorry, greed and speculation are good. The problem was that banks lost their common sense and made loans to anyone, and investors, such as big pension plans looking for returns, invested in vehicles they failed to understand. No new regulations are needed, just a return to common sense! Long live greed! It works the best!

Joel Kotkin: I am not against greed but against stupidity. I'm not sure the bailout will be viewed as a good thing over time.

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Rockville, Md.: Sure, a lot of people are consuming less and relying on their families and communities more, but it's not necessarily because they suddenly have become "enlightened" -- as you discussed, it's because they don't have many other options. Are any policies being developed on the regional or local levels to to sustain some of the benefits you discuss in the article after the economy goes back into the boom cycle (hopefully soon)? For example, encouraging telecommuting, discouraging rampant development in outer suburbs without artificially multiplying demand, encouraging more dense redevelopment of sprawling inner suburbs, etc.?

Joel Kotkin: I think the policies you suggest are quite good, but I would focus much less on the anti-sprawl mantra. The market will have a lot to say about this. in Houston, planned developments seem to be working well on this basis.

The key would be to encourage work close to home, perhaps giving tax credits for this (right now here in Los Angeles where I live, I pay $500-$700 a year to work at home!).

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GeorgeSeals: At best, this article is an exercise in looking at the glass as half full instead of half empty. People are doing what they must to survive, and generally will not choose to give up and die. We will attempt to put the best face on any circumstance. In this way, the Iraq War mistakenly was characterized as a success. People survive under very trying circumstances there as well. Let us hope that the never writer has to look for an elusive silver lining in a similar hardship within American borders. Real job and wage growth will eliminate the need for puffery such as this article.

Joel Kotkin: Well, I am not sure you understood what I was saying.

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jheubusch: Interesting piece. There's another name for this "new localism" when viewed from a different angle: It's "the Europeanization of America." For more on this topic, see Writing Frontier's piece.

washingtonpost.com: The Europeanization of America (Writing Frontier, July 27)

Joel Kotkin: I would be hard-pressed to see Europe as a model for a decentralized, family friendly environment -- after all, they are not having kids very much, and in many countries decision-making is heavily concentrated at the central-government and, increasingly, EU level

I like many things about Europe, but do not think they represent a particularly great role model, or that there is a fit between places with stagnant or negative demographics and the U.S., which is growing

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discreet_chaos: I'm really not sure what all of these long-term trends have to do with a recent crisis. Of course, other than some tightening of borrowing standards to be closer to what they were 10 years ago, I'm also not sure how far down this "crisis" is supposed to reach. After all, the majority of the nation's banks are solid, and thus far those with good credit and with down payments seem to be doing fine. Nonetheless, whether or not the predicted devastation were to become real, trends that have been taking place for years and even decades really don't have a lot to do with the current situation.

Joel Kotkin: I could not agree more. As I stated, many of these trends well pre-date the financial crisis

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Boston, Ga.: The capabilities of localized bottom-up economic intensity creates innovation variables allowing for incremental stimulus supplying small businesses with capacity for job growth. Money in the hands of employees, spending locally into a hub of four city-state cities or communities of ciy-states connected within a economic hub. Manufacturing goods and services locally, trading with each city-state hub. Thousands of hub city-states begin to trade with each other, creating competition and economic growth within the United States, building economic strength to be competitive in the global economy.

Joel Kotkin: I think this is a very apt comment. The economic aspect of this is very important. For example, here in the eastern San Fernando Valley where I live, the entertainment complex hires many local firms and individuals. They work together and keep creating new value, and then they spend the money locally. It has kept this part of Los Angeles in reasonably good shape.

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Melina1: What's most remarkable about this piece is the way it reshapes falling living standards around "choice." I thought that where we live was determined by things like whether we can pay our mortgage or afford the rent. But no, that materialistic idea was so very irrelevant, we learn. Rather, we live in the places we "choose to live." Moreover, this recession is going to rub our noses in the things that really make us happy. Whew, what a relief -- there I was thinking "choice" was a function of our ability to have money in our wallets to pay for choices like living and entertaining ourselves in the suburbs.

Joel Kotkin: I get your sarcasm (used it myself a lot), but actually people make choices based on a lot of factors. Suburbanites, for example, choose where they live based on many things, like proximity to family, jobs and churches, all factored in with what they can afford.

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ScottinNC: This is all a wonderful pipe dream, until you consider that: People are being forced out of their homes and must often either leave their communities or become dependent on already-stretched social services; those vacant homes are targets of vandalism and bring now property values for everyone, compounding the problem; as homes go vacant, the property taxes that support the schools and municipal services in most communities are tanking; local businesses are closing or shrinking because of an inability to get credit, putting people out of work; with people out of work, they can't support any businesses (local or otherwise), increasing the financial pressure on these businesses; people are having to take on two or three jobs that don't pay as well in order to cover their bills -- kinda cuts into leisure time and makes it harder to support local community services that we need to support the growing rolls of the needy. So, it's a lovely dream. Too bad it's so disconnected from reality.

Joel Kotkin: Actually, I think this is one way back to a strong economy. If people live as families, they can save more, and if they commute less, they also can save. We have been wasting a lot of money on extraneous things like part-time condos, long commutes that have reduced our productivity, and now that the credit crunch is here, the butcher's bill is due.

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jameschirico: It is only when Americans produce the goods and services that Americans buy that Main Street will be alright. The good news is that communities always have been there for each other. Ethnic groups tend to live together, reinforcing this function. Destructive tariffs are not the answer, but certainly we should require something more than a subsistence wage, safe workplaces and respect for the environment from our competition. Canada fits the bill to a tee; Mexico does not. Subtract fossil fuels, and guess which county we have a trade surplus with? It is not the country that has illegals flowing over the border.

Joel Kotkin: I am a big advocate of closer U.S.-Canada relations -- my wife is from Montreal. More local spending has many nice impacts, particularly on local budgets for government.

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Princeton, N.J.: Is it possible that family life is vastly overrated? If it is so great, why is the divorce rate above 50 percent?

Joel Kotkin: Well, the divorce rate seems to have topped off, and many people get remarried.

As a father of two girls and a husband, I know the negatives of family life -- but without it, humanity would be a pretty sad.

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dotellen : Let's get real. Our local radio station is getting 25 percent fewer ads from the local car dealers because fewer people are buying cars. The station employee I was talking to while I bought an ad obviously fears he will lose his job.

Joel Kotkin: Well of course this is happening -- even without high gas prices, the credit and financial situation would hit big-ticket items. That is why Detroit historically has been a boom/bust economy

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Old Lyme, Conn.: When my high school classmates graduated, most of them went as far away from Connecticut as they could get. Is there now a returning to roots, especially as generations find a need to keep closer to each other as our parents and grandparents age and need help from younger generations?

Joel Kotkin: This is an excellent question. We do see this phenomena in several ways. In the Great Plains, where I do a lot of work, this is definitely happening. People in their 30s and 40s are going home to be with their parents and raise kids after raising hell in their 20s and 30s. Also, we see families following each other to Florida, Charlotte and other less-expensive places.

The big problem for large parts of the Northeast and California is that moving is too expensive, unless parents give up the house and move to smaller place or they build a granny flat.

There should be more research done on this.

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Virginia Co-housing: I wonder if you've heard of co-housing, a Danish concept that has come to America. It basically tries to create small, close-knit communities that are pedestrian oriented. I live in one now and find that it's very helpful -- neighbors know each other and swap cars, babysitting, entertainment (house concerts and parties that require no walking). I feel we are well-positioned to help with the financial crisis, as our neighborly relations keep our costs low. Plus it's a heck of a lot of fun.

washingtonpost.com: Cohousing (Wikipedia)

Joel Kotkin: I think this is interesting and would like to learn more about it. If you would like to write about this for our Web site, that would be terrific. You can reach me at joel@newgeography.com.

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More local spending has many nice impacts, particularly on local budgets for government.: Yeah, local control of education has put us in front of the rest of the world in education -- not.

Joel Kotkin: And why are the biggest districts generally the worst? Would you propose federalization of schools?

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Bowie, Md.: Not sure if this relates, but it is fairly obvious that government involvement (e.g. Fannie and Freddie) created an overemphasis on home ownership, so that even people who expected to remain in place only five years would buy a house. In business, staying in one place for five years is called a lease, but residences seldom are rented in that increment.

So this helps lead to the residence-sticky problem -- empty-nesters still living in the house they raised a family in. Shouldn't we be trying to come up with more ways to move people into life-phase appropriate housing, and de-emphasizing ownership (or perhaps coming up with a new type of ownership that allows a change of residence)?

Joel Kotkin: I think ownership is good for lots of reasons, particularly as it disperses property and creates the basis for a healthy democracy. But certainly, policies that allow aging people to sell their homes without confiscatory taxes so that it opens the market for younger families is an excellent idea.

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And why are the biggest districts generally the worse. Would you propose federalization of schools?: The biggest cities have severe economic problems. And federalization seems to work quite well in the rest of the world (Europe, Asia).

Joel Kotkin: I think you may want to revisit some of your assumptions of education in other countries, notably the U.K. and increasingly Canada. Also, these countries have fewer young people (except for immigrants from third-world countries who are not performing well).

The best schooling in America, broadly spoken, takes place is quasi-rural areas like the Great Plains where local control is pretty strong.

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And why are the biggest districts generally the worse: Some of the best schools are in big districts -- Bronx Science, Boston Latin, Philly Central, etc.

Joel Kotkin: Yes, but they are exceptions in terrible districts that also are losing students.

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Editor's Note: washingtonpost.com moderators retain editorial control over Discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions. washingtonpost.com is not responsible for any content posted by third parties.


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