Monday, July 18, 2016

A Plea For Economic Vitality

No economy or general equilibrium state can be considered vital or truly dynamic, if it is faltering at the margins. Why do policy makers and others turn a blind eye to local examples of economic abandonment, particularly in places which had extensive investment - in some instances - only decades earlier? Has everyone given up on long term growth?

It's one thing if existing structures clearly need to be torn down, for some reason. Is this what we are to expect when so much expense is poured into buildings and locations that are mostly intended to be usable for fifteen years, as has occurred in recent decades? Why not either build with the hope of greater permanence, or else design for greater flexibility at the outset via yearly spatial adjustments? In some instances, "permanent" new buildings are constructed with the promise of new business tenants, only to end up underutilized as extra storage space and the like, such as occurred recently on a nearby Main Street. What a waste!

The fact that neither public or private interests have addressed what can only be considered a wide array of economic abandonment, contributes to the kinds of social unrest which many of us who are older, never expected to see again in the course of our lifetimes. Faltering Main Streets were the first indication of trouble. Presently, abandoned businesses and homes in suburban areas are continuing the cycle.

Is it possible that shifts in middle class income patterns (less "middle", more "high" and "low") affect the dearth of local investment? After all, those with lower income levels have long taken advantage of existing real estate opportunities, when higher income levels shifted to new options elsewhere. A lack of investment along a full (diverse) income spectrum, contributes to an economic "deepening" of investment (instead of widening), as David Glasner noted in a recent post. His example highlighted capital deepening in relation to hiring decisions and efficiency in scale on the part of major companies, but these processes doubtless affect small business formation as well.

What is at stake in all this, is whether today's economic constructs remain vital to a point of being able to replicate themselves. Thus far it's been too easy to be fooled, when replication does takes place in developing nations (or more recent arrivals), but not in developed nations. What's the difference? A cellular organism has to divide (i.e. new wealth source) to generate new life. Not just stretch! In other words, economic vitality is not just a matter of expanding or bringing more entrants into already prosperous areas, but starting anew.

Meanwhile, cities and nations tell potential newcomers in no uncertain terms that they are basically full. Only so much augmentation is possible in the reigning circumstance of the present. And no one wants to hear it, because it is still too difficult to contemplate starting over. If today's economic conditions are to remain amenable to long term growth, this is no time to give up on places which have experienced less prosperity. Yet one reason it has been difficult to start the process - at least in the U.S. - is the lack of a national dialogue as to how citizens would like to live, work, and economically engage with one another in the 21st century. Instead, legislators and special interests are busily enacting laws to make many options in this regard off limits, across an entire realm of possibility.

Perhaps my outlook is even more "Malthusian" than usual (about economic vitality), due to a telling set of pictures and story line which provided a much needed warning. While prosperous regions and their residents mostly remain convinced all is well, economic stagnation continues apace at the periphery. From Johnny Sanphilippo at Market Urbanism, in "Your Town is a Financial Timebomb":
I keep up with the reports and journalists proclaiming that America's suburbs are thriving and will continue to do so forever. Yet I keep scratching my head since these depictions are  in conflict with what I keep seeing on the ground as I travel around the country.   
Many citizens don't have the current option of living where service formation and tradable sector production both exist in abundance. The above linked article also alludes to the fact that extensive government infrastructure is questionable, when much of it appears to encourage abandonment sooner, rather then later. Are we using the wrong kinds of infrastructure, if these forms of government investment end up being treated disrespectfully? How can governments contemplate further investment spending along the same lines, if too much ends up being squandered? It's time to recreate not just the environments that some of us live in, but also the ways in which we wish to interact with, and assist one another.

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