How the Crash Will Reshape America

How the Crash Will Reshape America

March 2, 2009 11:24 pm 2 comments

I was skeptical about this essay. After all it is Richard Florida and it is the Atlantic. But this is definitely worth reading:

Before the Great Depression, only a minority of Americans owned a home. But in the 1930s and ’40s, government policies brought about longer-term mortgages, which lowered payments and enabled more people to buy a house. Fannie Mae was created to purchase those mortgages and lubricate the system. And of course the tax deduction on mortgage-interest payments (which had existed since 1913, when the federal income-tax system was created) privileged house purchases over other types of spending. Between 1940 and 1960, the homeownership rate rose from 44 percent to 62 percent. [...]

If anything, our government policies should encourage renting, not buying. Homeownership occupies a central place in the American Dream primarily because decades of policy have put it there. A recent study by Grace Wong, an economist at the Wharton School of Business, shows that, controlling for income and demographics, homeowners are no happier than renters, nor do they report lower levels of stress or higher levels of self-esteem.

And while homeownership has some social benefits—a higher level of civic engagement is one—it is costly to the economy. The economist Andrew Oswald has demonstrated that in both the United States and Europe, those places with higher homeownership rates also suffer from higher unemployment. Homeownership, Oswald found, is a more important predictor of unemployment than rates of unionization or the generosity of welfare benefits. Too often, it ties people to declining or blighted locations, and forces them into work—if they can find it—that is a poor match for their interests and abilities. [...]

Finally, we need to be clear that ultimately, we can’t stop the decline of some places, and that we would be foolish to try. Places like Pittsburgh have shown that a city can stay vibrant as it shrinks, by redeveloping its core to attract young professionals and creative types, and by cultivating high-growth services and industries. And in limited ways, we can help faltering cities to manage their decline better, and to sustain better lives for the people who stay in them.

Full Story: the Atlantic

I remain skeptical of the idea that the key to American economic prosperity will be a continued reliance on “innovation” and “ideas.” In more concrete terms, Florida is arguing that the States will remain globally competitive by exporting designs and allowing the products and services continue to be made and supported elsewhere. But China and India are catching up to the US in the product and software design markets.

Renegade futurism is decidedly not about making predictions, but the future of the American economy I imagine is more local. It’s maker faires and farmer’s markets. It’s repairing stuff or making new clothes out of old ones. It’s neo-artisans bartering with each other. It’s co-ops, credit unions, and local currency.

Sure, there will still be imports and exports – but with increasing costs of shipping and more makers unemployed local production could make a big comeback.

(Thanks Nick)

2 Comments

  • Klint Finley

    I should clarify: I don’t think that the “idea economy” (re: product design and marketing economy) will go away or is unimportant. But I think it would be unwise for any economy to put all its eggs in one basket – especially with more and competition coming from other countries.

    I also don’t think that, barring a “black swan” mega-spike in oil prices (as opposed to a steady long term increase in prices) we’re heading towards some the complete end of imports or the establishment of a new hyper-strict localism.

    But a combination of high unemployment almost everywhere and rising costs of imports (due to a likely increase in oil costs and decreased purchasing power of the dollar) local trade will make a comeback. There’s mounds of detritus waiting to me made into cool stuff – and a thriving subculture of people already doing it. More and more people across the nation are growing their own food, and neo-artisan food production operations are sprouting up everywhere. This is worth paying attention to.

  • Klint Finley

    This is being featured on Brazen Careerist. The comments there are worth reading: http://www.brazencareerist.com/2009/03/02/how-the-crash-will-reshape-america

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