Our 'New Way of Life' Will Depend a Whole Lot Less on Home and Automobile Ownership as People Move from Suburbs to Denser Urban Communities

The Path to Recovery

By Richard Florida, The Atlantic
May 7, 2010

Economic peaks and valleys are part of the life cycle of any society. They can be difficult, sometimes horribly painful, but just as trees shed their leaves in the fall to make room for the new growth of spring, economies reset themselves.

Times of crisis reveal what is and isn't working. These are the times when obsolete and dysfunctional systems and practices collapse or fall by the wayside. They are the times when the seeds of innovation and invention, of creativity and entrepreneurship, burst into full flower, enabling recovery by remaking both the economy and society.

Major periods of economic transformation, such as the Great Depression or the Long Depression of the 1870s before it, unfold over long stretches of time, like motion pictures rather than snapshots. Likewise, the path to recovery can be long and twisted--the better part of three decades in the case of those two previous crises. Seen in the greater context of history, economic crises inevitably give rise to critical periods in which an economy is remade in ways that allow it to recover and begin growing again.

These are periods I call Great Resets.

We're still very early on in the current economic Reset, so it's difficult to fully grasp how it will ultimately play out. But we can all sense that our way of life is changing and our economic landscape is too.

This emerging new way of life will be less oriented around cars, houses, and suburbs.

We'll be spending relatively less on the things that defined the old way of life. We'll have to, if we expect to have money left over to sustain the new industries that will emerge in the Great Reset and usher in an age of renewed prosperity.

Before we can nurture the new industries of the future, develop new forms of health care and biotechnologies, or even explore new forms of education or more experiential forms of entertainment and recreation, we first have to free up capital by producing the goods of the old industrial order more cheaply and efficiently.

We've reached the limits of what George W. Bush used to call the "ownership society."

Owning your own home made sense when people could hope to hold a job for most or all of their lives. But in an economy that revolves around mobility and flexibility, a house that can't be sold becomes an economic trap, preventing people from moving freely to economic opportunity.

Not only has that piece of the American Dream grown dark, but it's also clear that financial excess in the housing sector was one of the central causes of the economic crisis. Housing sucked up far too much of the nation's and the world's capital, and too many people--already overextended by the purchase of outsized houses--used those homes like virtual ATMs to finance carefree consumption.

Every Great Reset has seen our system of housing change, and this one is no different. The rate of home ownership has been on the decline for some time now. Many of those who still choose to buy homes will choose smaller ones, while many more will opt for rental housing.

Our new way of life is likely to depend a whole lot less on the car. 

In October 2009, The New York Times reported,

"The recession and a growing awareness of the environment are causing many people to reassess their automobile ownership. After more than a century in which an automobile represented the American dream, car enthusiasm may no longer be a part of Americans' DNA."

Car culture no longer exerts the powerful pull it once did. More and more families are deciding to share cars, and young people are putting off buying them and using public transit, bikes, their feet or Zipcars (membership-based, easy-access short-term car rentals) instead. It's not just that oil and gas have become expensive, it's that traffic and gridlock have become a deadweight time cost on us and our economy.

One constant in the history of capitalism is the ever-more-intensive use of land, as mercantile towns replaced agricultural villages, major industrial cities replaced those towns, and massive complexes of suburbs, exurbs, and edge cites expanded the boundaries of those cities.

The change we are living through is much more than a movement from suburbs to denser urban communities. What we are seeing is the rise of a new, bigger, and denser economic landscape than ever before--the rise of vast megaregions, such as the corridors stretching from Boston to New York and Washington, D.C., around greater London, and from Shanghai to Beijing. These concentrations of population, which encompass several cities and their surrounding suburban rings, have grown swiftly in recent years.

The largest megaregion in North America is the great "Bos-Wash" corridor, initially identified by the geographer Jean Gottmann. Stretching down the East Coast, it includes Boston, New York, Philadelphia, Baltimore, and Washington, D.C., and is home to more than 50 million people while producing more than $2 trillion in economic activity. Its economic output is greater than that of either the United Kingdom or France and more than double that of India or Canada.

The second biggest, which Gottman dubbed "Chi-Pitts," covers more than 100,000 square miles and is home to 46 million people, producing $1.6 trillion in economic output.

Other megaregions in North America include:

• Char-lanta: Atlanta, Charlotte, and Raleigh-Durham, 22 million people
• So-Cal: Around Los Angeles, 21 million people
• Tor-Mon-tawa: 22 million people
• Nor-Cal: Around San Francisco, 12.8 million people
• So-Flo: Miami, Orlando, and Tampa, 15 million people
• Dal-Austin: Dallas and Austin, 10 million people
• Hou-Orleans: Houston and New Orleans, 9.7 million people
• Cascadia: Seattle, Portland, and Vancouver, 9 million people
• Pho-Tus: Phoenix and Tucson, 4.7 million people
• Den-Bo: Denver and Boulder, 3.7 million people

Around the world, London, Amsterdam, Tokyo, Shanghai, and Mumbai are hubs of giant megaregions. Each of these is a financial and commercial center with tens of millions of people and hundreds of billions of dollars in output.

These megaregions, not nations, really power the global economy. Taken together, the world's 40 largest megaregions account for two-thirds of all global economic activity and 85 percent of the world's technological innovation while housing just 18 percent of its population. Megaregions are the strategic power centers of the economy, housing 85 percent of all corporate headquarters in the United States and Canada.

Though many analysts have predicted that the importance of cities--and that of location--would fade with globalization, the reality is that cities and megaregions have become more important economically than ever before.

Even as globalization has spread factories, businesses and laboratories to places such as India, China, Brazil, and beyond, these activities are being concentrated in the megaregions of those countries. 

Contrary to the notion that the world is flat, the most successful megaregions, in fact, are becoming economically stronger and spikier, not flatter.

Megaregions are to our time what suburbanization was to the postwar era. They provide the seeds of a new spatial fix. They expand and intensify our use of land and space the way that the industrial city did during the First Reset and suburbia did in the Second.

Source: Range Magazine, Fall 2005

As people pour into the world's great megaregions, inner cities and close-in suburbs are being reclaimed and rebuilt. Older suburbs, especially those on transit routes, are being reorganized and rebuilt into denser communities offering more condos and town houses as well as single-family homes. Suburban malls and office complexes are being retrofitted and turned into walkable areas with a mixture of housing, shops, and restaurants and in some cases even new parks. Subways and rail transit are being expanded as highways clog.

The location decisions made by new college grads have interested me for years. Their choices involve evaluating not just the company they'll work for but the labor market it's located in and what the surrounding area has to offer. Because they are both highly skilled and highly mobile--three to five times as likely to move than, say, a 45-year-old--the decisions they make about where to live are likely to leave a lasting imprint on our economic geography.

To get at the factors that attract and keep young Gen Y members, those born between the years 1979 and 1990, in certain places, my colleague Charlotta Mellander and I analyzed the results of a Gallup survey of some 28,000 Americans.

Jobs are clearly important. Gen Y members ranked the availability of jobs second when asked what would keep them in their current location and fourth in terms of their overall satisfaction with their community. From this perspective, big cities make sense for them, as they offer more robust labor markets with more and better job opportunities in a wide number of fields.

In an age in which corporate commitment has dwindled, job tenure has grown far shorter, and people switch jobs with much greater frequency, career success involves a great deal more than simply finding the right first job. In these highly mobile and economically tumultuous times, career success for young people depends on locating themselves in a thick labor market that offers diverse and abundant job opportunities. Picking an economically vibrant location is an important hedge against economic uncertainty and the risk of layoff.

But remember that jobs were not the highest-ranked factor. Across the board, the survey respondents said that the ability to meet people and make friends was of paramount importance.

These young people intuitively understand what economic sociologists have documented: that vibrant social networks are key to landing jobs, moving forward in your career, and securing personal happiness. They not only desire a thick labor market but also seek what I have come to call a thick mating market, where they can meet new people, go out on dates, and eventually find a life partner.

And whereas older Americans see high-quality schools and safe streets for their children as key, Gen Y understandably ranks the availability of outstanding colleges and universities higher. Many are likely to go back to graduate school and want to have good programs nearby. For all these reasons, big cities at the heart of megaregions top the list of their choices.

The auto-dependent transportation system has reached its limit in most major cities and megaregions. Commuting by car is among the least efficient of all our activities--not to mention among the least enjoyable, according to detailed research by the Nobel Prize-winning economist Daniel Kahneman and his colleagues.

Though one might think that the crisis would have reduced traffic (high unemployment means fewer workers traveling to and from work), the opposite has been true. Average commutes have lengthened, and congestion has gotten worse, if anything. The average commute rose in 2008 to 25.5 minutes, "erasing years of decreases to stand at the level of 2000, as people had to leave home earlier in the morning to pick up friends for their ride to work or to catch a bus or subway train," according to the U.S. Census Bureau, which collects the figures. And those are average figures. Commutes are far longer in the big West Coast cities of Los Angeles and San Francisco and the East Coast cities of New York, Philadelphia, Baltimore, and D.C. In many of these cities, gridlock has become the norm, not just at rush hour but all day, every day.

Just about the only remedy for traffic congestion anyone ever suggests is building more roads and highways, which of course only makes the problem worse. New roads generate higher levels of "induced traffic," that is, new roads just invite drivers to drive more and lure people who take mass transit back to their cars. Eventually, we end up with more clogged roads rather than a long-term improvement in traffic flow

More and more people are choosing to take the subway, train, or bus or even walk or bike to work and go about their daily business--providing they live in an environment that allows for such choices.

In Manhattan, 82 percent of workers get to work by public transit or bicycle or on foot. That's ten times the rate for Americans in general, eight times the rate for workers in Los Angeles County, and 16 times the rate for residents of metropolitan Atlanta. The New York City subway is a remarkably effective technology for moving masses of people around quickly and efficiently. Between 8 and 9 in the morning on a typical workday, more than 385,000 people use its subway system to commute into the central business district.

New York is not the only place where this kind of change in commuting and local traffic patterns is occurring.

In Washington, D.C., 57 percent of commuters get to work by means other than driving a car--more than a third take public transit, 12 percent walk to work, and 2 percent ride their bikes; just four in ten drive to work alone. 

In Boston and San Francisco, roughly half of workers get to work without their cars--roughly a third of commuters take transit, and 10 to 15 percent walk to work. 

In Philadelphia, 41 percent commute without cars and 27 percent take transit.

These numbers may seem like a drop in the bucket. But 60 percent of Americans surveyed in 2005 said they want to live in walkable communities with shops, restaurants, movie theaters, schools, and churches nearby. We're already seeing the shift as increasing numbers of people move to walkable communities closer to where they work. That will clearly expand in coming decades.

For the time being, most Americans remain behind the wheel. Today, more than three-quarters of Americans drive to work alone. They have no other choice. There are, however, other things we can do to ease congestion and take more cars off the road. Employers can offer more flexible schedules and the ability to work from home or telecommute. But as we've already seen, in many cities traffic is not just a rush-hour problem.

The only alternative left is to price the roads. We pay for everything else: we pay to take the subway, ride the bus, or take the train, we pay to drive through the Lincoln and Holland Tunnels or over the George Washington Bridge. Why should the roads be essentially free? If we want to make traffic better, we have little choice other than to make people pay for the roads they drive on.

Richard Florida is director of the Martin Prosperity Institute at the University of Toronto. Adapted from THE GREAT RESET: How New Ways of Living and Working Drive Post-Crash Prosperity by Richard Florida.

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