The Future of American Cities
Looking around the country, it might seem like Edward Glaeser was wrong to declare the “Triumph of the City” in his 2011 bestseller of the same name.
COVID-19 revealed the fragility of urban areas like New York City, as millions of inhabitants who could afford to flee have done so — leaving behind struggling unemployed workers and cash-strapped governments.
Brent Orrell of the American Enterprise Institute notes that we are seeing the acceleration of many existing trends — like remote working — which threaten to eviscerate the downtown commercial real estate market, taking city budgets down with them. Brent’s recent Law & Liberty article, Pandemics, Elites, and the Future of the Cities, mirrors many of my thoughts on the future of cities. He will join me this Sunday to explore the themes of his article in more depth.
Back in April, I was one of the first to speculate on the fate of skyscraper office buildings in my webinar on “the Future of Lending: Post-COVID.” My verdict is that office space — like the financial services sector that has occupied it in places like NYC — has failed its final exam. To borrow Warren Buffett’s analogy, it took the low tide of Coronavirus to reveal who was swimming naked.
Yet in spite of the inevitable shift towards working-from-home, there are other reasons to be optimistic about cities in general. Glaeser’s main point in The Triumph of Cities was that density enables the in-person meeting-of-minds that drives innovation and creativity. Urban sprawl is a direct result of people’s growing desire to be close to the action while still having enough space to move around. Density is even more environmentally-friendly, since it eliminates the need to drive.
But the same density that drives innovation can also lead to pandemics, rioting, and other forms of social unrest. While the upwardly-mobile have been able to escape to the exurbs or the suburbs, the same low-income people being infected with COVID have no options outside the crowded urban areas in which they reside. I will ask Brent, host of the Hardly Working podcast, how the hit to commercial real estate will affect service workers. We will also discuss the need for visionary leadership by urban elites, who can implement timely zoning reforms and lighten the regulatory load on struggling small businesses.
Don’t miss the conversation as we dissect the latest turmoil in cities across the country and how 2020 will be the year that makes or breaks cities.
Perhaps now is the perfect moment for the New Urbanists, school choice advocates, and civil societarians to bring a free-market revolution to America’s battered cities.
Follow Brent on Twitter — @Orrell_b.
Listen now:
Transcript
Bob Zadek: Welcome to The Bob Zadek Show.
The pandemic virus profoundly affected our largest and great cities: New York, Chicago, Seattle, etc. The cities took the brunt of the adverse economic, social, and health effects of the virus.
Lots of people started working from home. The media started to look under the hood of what working from home meant to the workers, to the employers and to the cities where the workers were no longer going in order to earn a living.
That immediately led to a more serious inquiry into the concept of cities.
Has the virus forced upon us a profound change in something we have taken for granted — our relationship to where we live and where we work?
Has the virus forced us to make decisions that ultimately we will be thankful for and would not have made absent the virus?
Will the results of the virus, putting aside the health effects on city life, be positive, negative, or will they just disappear and we’ll go back to the somewhat good old days of working and living in the same place?
This morning’s inquiry is into cities. Do we need them? Is this the end of city life to paraphrase Bill Clinton?
I’m delighted to welcome to the show this morning Brent Orrell — resident fellow at the American Enterprise Institute.
He has worked in the Bush administration. He has been involved in the legislative and executive branch of our government. He has studied work in America for most of his life. He is the host of a wonderful blog and podcast that I recommend to you called Hardly Working.
Brent has studied this issue and has written thoughtfully on the future of cities. Who better to help us sort through this issue. Brent, welcome to the show this morning.
Brent Orrell: Hi Bob. It’s great being with you. Thanks so much for having me on.
What Makes a City a City?
Bob Zadek: Let’s start with some basics. What is a city? Is it simply a geographic boundary with a form of government and a police force? Is it any place where a whole lot of people work, does that make it a city? In other words, what makes a city a city?
Brent Orrell: I think that’s a really important starting point for this conversation when we think about the impact of the coronavirus on the future of cities – to ask, what is it? wWhat are we talking about when we refer to a city?
I think about it in four related domains.
Cities are social. Human beings are really built to develop lives within communities. This nature is quite literally in our DNA. Cities are just human instinct for community expressed on a massive scale.
The second characteristic is that cities are like circuses. Each city has thousands, tens of thousands, even millions of performances that are being enacted simultaneously. The whole project works not because it’s planned, but because it is the product of an uncountable number of individual actions that spontaneously emerge into order. The urban systems that we see — the government, police, transit, education, health — they don’t create cities, rather they are created in response to this spontaneous order.
The third thing is that cities are self-compounding. What I mean by that is that they build upon themselves. They create and they depend upon density and they grow more complex and productive over time. Right now, the largest 300 cities in the world account for about 50% of global GDP. Americans who live in large urban areas are 50% more productive than those who live in smaller Metro areas.
“The urban systems that we see — the government, police, transit, education, health — they don’t create cities, rather they are created in response to this spontaneous order.”
This is what happens when you pull together a bunch of smart, ambitious hustlers, and get them to both cooperate with one another and compete with one another. They innovate, they build, and they produce.
And then finally cities are both delicate and resilient. Their scale or complexity and dynamism means that cities are easily disrupted by catastrophe, but it’s very rare to find an example of a city that has failed and disappeared. Disasters tend to breed adaptations and circumstances rather than the abandonment of the settlement itself.
Cities tend to emerge stronger after disasters than they were before. So those are the four big buckets of ideas that I think about when I think about cities. I think that that gives us a sense for both why they are so important to us and how they shape us, how we shape them, and how dependent we are on them. Ultimately, I think that is a reason for hope for cities. They’ll stay with us and they’ll evolve. They aren’t going to disappear.
Bob Zadek: So cities are good. We’ll start with that as a premise. Everything you described is a positive good.
Brent Orell: Cities are us. They exist because we exist. They are an outgrowth of our nature. We have to be together and that’s why cities and urban areas exist.
The Creation of a City: Organic is Best
Bob Zadek: If we start with that premise, why isn’t it a soft governmental policy to build or encourage or create more cities? From what you say, the more cities you have, the better the collective economic, social, entertainment, intellectual life is.
Therefore if cities are good, can there be a governmental policy that just makes more cities? Or are cities created somehow, like a seed is dropped into the earth, and some take root and others do not? To what extent, if they are good, can we create more of them?
Brent Orell: The idea that stands behind your question is this idea that somebody is in charge of cities or the creation of cities and of their development and their management. Cities take root on their own. I think the plant analogy that you just used makes sense. The idea of a seed that takes root for its own reasons — not because somebody plans it.
For instance, in the case of New York, it was natural attributes of that area and the coastline that made it logical for that place to begin. The resources then fed its development and was self-compounding.
They can grow over time and become more complex and more productive as they go along. Government can recognize cities and does recognize cities, but planned urban cities don’t actually seem to work out that well. When you think of planned urban communities you don’t think of a positive image.
Consider the Soviet social planners [and their cities]. They are mostly not attractive and people don’t want to live there. They want to be in those organically-sprouted cities. The texture and vibrancy, and the life cities created is natural and again comes from this basic instinct we have to be together.
Bob Zadek: Cities have to be organic, they cannot be planned. When we do the mind game ourselves and think of a city, we think generally of high rise buildings, lots of workers, commuting to work, and density.
Does the city require density? It seems like they almost can’t exist without density. What is the relationship of density to a vibrant city? Do the two go hand in hand?
Brent Orell: They are really synonymous. Cities both create density and depend on it. You can’t create a city out of nothing, and they depend on geographic locations, for example rivers and mountain passes, etc. These natural assets have a magnetic quality that creates density. If there’s a sudden drop in the density in population the city can’t continue to function very well. It is an integrated web of interdependent people, organizations, and businesses that cooperate with one another to create a functioning urban environment. So you start pulling out the pieces and begin closing down the pieces of the city — pretty soon the city itself is unable to function.
Telecommuting Post-Covid: The Effects on Cities
Bob Zadek: Cities are clearly places where lots and lots of people work. When you think of it, it seems to require physical proximity. So we start with the fact that many workers simply work in offices because that is the way it’s always been. Some work collaboratively, that is in-person, in close proximity because that’s part of the process itself.
Now, focusing on the former, the virus has force fed the whole concept of working from home, which means severing the relationship between where you live and where you work to some degree. Does that open somewhat of a Pandora’s box? I don’t mean that working from home is a negative per se but looking into the future helps us understand how you see the effect of working from home.
It seems like people are discovering that it is pretty pleasant and that they are as, or more, productive. It is cheaper for the employer. So it seems to be win-win for the employer and the employee, but tell us how you think this will affect cities and your observation of what cities will be like in the future.
Brent Orrell: It’s important to note at the outset that COVID did not create telecommuting. Telecommuting was a rising trend in American business and economic life for the last 10 to 15 years. COVID has provided an accelerant to drive that change much faster and to open up possibilities for people. I think that goes to a couple issues that employers have long had regarding telecommuting. Suspicion of it is that if you are working from home, you’re not working. One of the reasons they want people in the office is that they can keep an eye on and make sure that people are being productive.
“What we’re finding in the midst of this crisis is that people can be as or more productive working from home.”
That is going to be a big factor in employers minds moving forward. I think especially for those kinds of tasks that don’t require daily face-to-face interaction with either coworkers or clients. There’s some complexity underneath that. It’s very difficult to build a corporate culture if people aren’t actually working in the same place and acclimating. There’s a difference between acclimating new employees and working with the ones that you already have. The ones you already have know what the business is about and know the values and priorities of the business, and they operate accordingly. New people, especially younger workers coming into the system haven’t had the benefit of that experience or that close interpersonal contact that we get out of working in the same location.
The second factor is that is going to drive some channels in the degree to which we move and stay with telecommuting – the economics of it. There are three major banks operating: Barclays, JP Morgan Chase, and Citibank. These businesses employ 20,000 people. These people have to be put into office space, which amounts to about 10 million square feet of office space –some of the most expensive real estate in the world.
Employers are going to say, “Look, I can get better productivity out of my staff, I can reduce risk to those staff regarding their health and wellbeing, and I can cut back on the costs associated with operating those offices.”
Those are enormous economic incentives for businesses to support and sustain the move to telecommuting. As that happens, the removal of some of those employees from the central business district has huge implications for all the smaller businesses that operate underneath those businesses to support their operations. The potential downstream effects of telecommuting are really significant for the life and health of cities.
A Gain of Freedom, at What Cost?
Bob Zadek: Since this is a libertarian radio show, libertarianism and individual freedom and responsibility are never far from the topic of the day.
I’m going to venture into the psychology of work and the relationship between the worker and the employer – an area where you have enormous expertise. It would seem to me that working from home outside of the direct control of the employee gives the employee the sense that they are independent – kind of an entrepreneur and less of an employee.
They dictate exactly when they work to some degree.
They have control over the environment.
Isn’t there kind of a freeing to the worker aspect to the relationship with the job? And isn’t that healthy for the employer and the employee? After all productivity can be objectively measured. There should not be a loss of productivity. At the freedom level isn’t it a gain for the employee and employer?
Brent Orrell: I am really of two minds. Obviously, at one level you’re probably right. I have seen court proceedings proceeding virtually and judges getting irked at the fact that sometimes these attorneys are sometimes lying in bed or haven’t dressed for the day. So there is a potential erosion of work-standards and decorum. For a long time we have moved away from formal working arrangements and working behaviors. Men no longer routinely wear neckties.
Bob Zadek: Men no longer own neck ties.
Brent Orrell: You will see some people celebrate these times of informality in work. At another level though, it’s problematic.
Cities are social, right? Well, why are they social? Why do human beings need to be together? Because that’s how we developed. While we have high regard for the independence of the individual and their needs we also recognize that human beings require other human beings in order to become full human beings. I think there’s kind of a false libertarianism, kind of a Randian version of libertarianism, that doesn’t adequately account for the inherently social nature of human beings and why we need to be together.
“Human beings require other human beings in order to become full human beings.”
Bob Zadek: I don’t deny it – all the social aspects — but the question is why can’t humans get their social life from where they live and why do they have to get it from their work life? Why can’t there simply be a separation between those parts of the human experience that you get from your home and those parts that you get from work?
You analogized cities to a circus with lots of stuff going on all over the place. You have described cities as being self-compounding. They internally grow all of the positive qualities of cities and invite more people to want to be part of the action. Therefore they internally grow just because they are cities.
You also have pointed out that cities have the somewhat contradictory characteristics that they are delicate – the virus shows that – but they are also resilient. That’s a wonderful summary, Brent, that you gave us on what makes a city a city.
Even though the cities offer those positive qualities, there are many workers in cities who are forced to commute because that’s where the job is. Take the metropolitan area of New York City where I grew up and spent half my life. There are lots of folks who live in the suburbs, with leafy, manicured lawns, townhouses, and the like, because they like that environment and they like the social life of living in the suburbs.
Why do they commute? Because that is where the jobs are, but they certainly don’t choose to live in the city. They choose to use the city for one aspect of their life, to provide income and the suburbs for their social life and for the quality of life the suburbs provide.
Now, once we start more telecommuting people get to pick where they want to live. They no longer have to commute. The city remains the circus and the place for entertainment and culture, but not a place to live. Isn’t that simply a furtherance of what you have said?
As people no longer have to commute, what happens to the cities?
Short-Term Reconfigurations and Downstream Economic Impacts
Brent Orrell: It’s all speculation, right? We should restrict our speculations to what the immediate looks like in the next two to five years. Cities are going to have to be reconfigured.
I talked earlier about the banks and how they are thinking about their staff in the city. Some of them are arguing that they are going to maintain the same physical blueprint to make space inside offices to prevent infection in the workplace.
That’s only true if you think of the footprint as just being buildings and, and square footage. What I’m thinking is the human footprint. The number of people that could potentially find themselves no longer coming in on a daily basis or coming in at all and just working from home using Zoom.
Maybe we will get better technology in telecommunications that makes us feel like we are able to be present with one another , even though it’s just a hologram rather than our physical bodies. In the short term there’s going to be a lot of reconfiguring of urban life to make it safer, not to make it safe because you can’t make it safe. That means more distance and fewer people in the cities.
I just don’t see in that scenario, in the next two to five years, how that doesn’t have a significant impact on the way that cities operate. Fewer people means less economic activity, not inside those corporate headquarters necessarily, but for all the businesses that surround them, which means lower employment for people who live in Queens or Brooklyn or the Bronx. They’re dependent upon the jobs that are created.
Those secondary job effects that are created by these larger operations in central business districts – That’s one effect. There could be a significant revenue [shortfall] for the City of New York as tax bases are under pressure from lower density in cities, as well as things like income tax and sales taxes as people do more of their business and live more of their lives outside of the city.
If you reduce the city’s tax base in NYC – an $85 billion budget, where about $10 billion of that year is commercial real estate taxes — if you figure they lose a third of that, it puts a lot of pressure on city services like schools, libraries, police, forces, fire, all of the, all of the infrastructure and amenities that helped to make urban life sustainable and attractive. You could wind up in kind of a vicious downward spiral at least for a while, as cities go through this reconfiguration.
Bob Zadek: You use the phrase “vicious downward cycle.” I would not use the word vicious. You and I one hundred percent agree on what you have just said. However, I see, as my imagination takes off, profound effects upon not just New York and other major metropolitan areas, but on the country. Taking what you have just said, Brent, and extending it just a tiny bit. Once the link between where you live and where you work is severed, you can choose to live anywhere. There is no difference between living in New Jersey versus Boise, Idaho.
Now humans are free to live wherever they want. I did a show a couple of weeks ago on voting with your feet with Ilya Solmin. Now people can really pick where they want to live without any regard to where they work. That is freeing. We like freedom. And then Brent, I’ll add one more component. As people no longer work and live in the same place, as you pointed out, the economic base declines, which means both population and economic power decline in the cities, which means it increases in the rest of the country, thereby spreading more evenly economic and voting power and diluting the intense economic and voting power of the major metropolitan areas.
Once that happens, then the power of the public service unions, which derive their power from large cities, that power is diluted, which means pressures on pensions decline, pressures on city budgets, decline, and political power of the teachers union, the transfer workers union, the prison guards union, the policemen’s union, very much in the news, the power of all those large public service national unions declines, which means power gets dispersed throughout the country.
The country becomes, compliments of the virus, small-d “democratic” with power spread throughout the country. In short, I find the virus is a gift from God in the long run in terms of economic and political power being dispersed in the country. That’s my overly rosy view on what might happen to cities as a result of the virus. You are free now to rain on my parade.
Brent Orrell: Well that is a compelling analysis of a potential future. I would say you’ve got the weight of history behind you. There are those who will argue that cities will always be there and this is a lot of fear mongering or crisis mongering. The reality is that this has been a process we have been going through in the United States since the end of the second World War with the suburbanization of American life. It has continued apace and I think very little could reverse that. I share your estimation and strong preference for people to be free to choose where they live and that we shouldn’t be mandating or coercing people in where to live.
People need to be free. That is what makes America what it is. What I would temper the comments is that first, cities have traditionally formed a really vital function in terms of pulling together disparate people from disparate backgrounds and dispersed skill sets that helped to drive innovation. Now we may in fact be able to do that better and better without being physically proximate to one another.
“People need to be free. That is what makes America what it is.”
But I tend to believe that there’s something very special and important about face-to-face communication since 90% of human communication isn’t verbal, it is nonverbal, and just because we aren’t thinking about it doesn’t mean that it isn’t happening all the time. Just looking at the business community — but you could apply this to all other fields as well — it isn’t just a matter of transferring information from one person to another, but about deeper levels of communication that occur and kind of bring our faults into life. I don’t think we can virtualize everything even in business.
Maybe people would be better off if they didn’t get so much of their social life from their work. I agree with that. But there are other factors at play here that I think we have to pay attention to. One of them is that not everybody can leave. That’s one that was made in the Law & Liberty piece that you picked up on about pandemics and elites in society, which is that elites always have the ability to opt out a bad situation.
They generally exercise that option. But the middle and lower income groups do not have that option and when the city goes to pot, the worst effects of that are going to be felt by the most vulnerable people and could drive a lot of very unfortunate outcomes for them and for the broader society. We can’t even see the second-order effects of what the changes are. It is going to happen. Some of the effects will be very positive and others are going to be very bad for others.
Bob Zadek: There’s no doubt that certain occupations and certain professions who require interaction — face-to-face time — particularly to the extent that creativity is involved, the results of collaboration cannot be replicated by telephone calls and the like on Zoom meetings and stuff like that. But the point is what the virus is accelerating: the virus is providing the petri dish for severing the mandated connection between where you live and where you work. That means that one does not force the other.
You pick where you want to live and what social life you will have, where you’re going to live. You are free to do that. That has nothing to do with where you work. Indeed, the concept of where you work disappears, you don’t work anywhere. You work for somebody. You add value to some enterprise by your brain and your skill and your labors, and you’re paid for that, but the value can be added from anywhere where it works.
There’s no doubt that this will provide enormous freedom that doesn’t now exist among workers who right now have to live in one place maybe where they didn’t want to live simply because the job was there. The virus will make the job be where you are not where the head office or regional office of your employer is. That was my only point.
Once we understand that the link is broken, that opens up all kinds of freedom to choose. That gives me goosebumps – compliments of the virus –and the cities will always provide a cultural base and social base and the circus aspects and collaboration where needed, but the choice will be yours. The message to me is that it is freeing. The virus will free us from the link between where we live and where we work.
Brent Orrell: I largely agree with what you’re saying. We have to separate the normative discussion of what should be with what actually is. I have a deep concern for those who may be left behind in this nirvana that you described. I think we’ve seen some of the effects of that in the last several years in our politics of what happens to communities that end up being radicalized by these kinds of abrupt social and economic shifts that we are experiencing.
Not saying whether it should, or it shouldn’t happen, it is happening. It will happen. There will be a lot of benefits and there also be some costs. We just need to be ready to accept and experience those costs and decide what to do about them.
Bob Zadek: Tell us about your podcast Hardly Working.
Brent Orrell: Well, thank you, Bob. My work at AEI falls under the heading of “career and work” and that gives me a pretty broad mandate to look at a wide variety of topics that touch on the tangible aspects of work, like what kinds of jobs do you want. You can look at aei.org or look under multimedia. All of our podcasts are listed there – a number of excellent ones.
Links:
- Hardly Working podcast, hosted by Brent Orrell
- Pandemics, Elites, and the Future of the Cities — Law & Liberty by Brent Orrell
- Brent Orrell on Twitter
- The coronavirus pandemic may forever change the world’s cities — The Washington Post May 19, 2020
- The Future of Lending after COVID-19 — Bob Zadek — Medium
