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Most New Jobs Created in Opportunistic Newcomer Cities

Over the past 15 years, it has been opportunistic newcomers — Houston, Charlotte, Las Vegas, Phoenix, Dallas, Riverside — that have created the most new jobs and gained the most net domestic migration. In contrast there has been virtually negligible long-term net growth in jobs or positive domestic migration to places like New York, Los Angeles, Boston or the San Francisco Bay Area.

. . .

Fortunately the jobs are headed in the same direction. After all, companies depend not only on elite MBAs but upon on the collective skills of middle managers, technicians and skilled laborers. Most companies also tend to be more mindful of basic costs, taxes and regulations than the average hedge-fund manager or trustafarian.

This perhaps explains why the largest companies — with the notable exception of Silicon Valley — have continued to move toward the more opportunistic cities. New York and its environs, for example, had 140 such firms in 1960; in 2006 the number had dropped to less than half that, some of those running with only skeleton top management. Houston, in contrast, had only one Fortune 500 company in 1960; today it is home to over 20. Houston companies tend to staff heavily locally; this is one reason the city was able to replace New York and other high-cost locales as the nation’s unchallenged energy capital. Another example of this trend is Charlotte’s rise as the nation’s second-ranked banking center in terms of assets, surpassing San Francisco, Chicago and Los Angeles, indeed all superstar cities except New York.

For the full commentary, see:

JOEL KOTKIN. "The Myth of ‘Superstar Cities’." The Wall Street Journal (Tues., February 13, 2007): A25.

(Note: ellipsis added.)

Immigrant Entrepreneurs Thrive in New York City

Manuel and mother Mercedes of the entrepreneurial Miranda family, inspect the corn flatbread called "arepa." Source of photo: online version of the NYT article cited below.

Immigrant entrepreneurship contributes to the vitality and dynamism of New York and the nation. Note the graphic at the bottom of this entry shows that employment increases in the same areas of the city in which immigrant entrepreneurship is thriving.

Manuel A. Miranda was 8 when his family immigrated to New York from Bogotá. His parents, who had been lawyers, turned to selling home-cooked food from the trunk of their car. Manuel pitched in after school, grinding corn by hand for traditional Colombian flatbreads called arepas.

Today Mr. Miranda, 32, runs a family business with 16 employees, producing 10 million arepas a year in the Maspeth section of Queens. But the burst of Colombian immigration to the city has slowed; arepas customers are spreading through the suburbs, and competition for them is fierce. Now, he says, his eye is on a vast, untapped market: the rest of the country.

. . .

“Immigrants have been the entrepreneurial spark plugs of cities from New York to Los Angeles,” said Jonathan Bowles, the director of the Center for an Urban Future, a private, nonprofit research organization that has studied the dynamics of immigrant businesses that turned decaying neighborhoods into vibrant commercial hubs in recent decades. “These are precious and important economic generators for New York City, and there’s a risk that we might lose them over the next decade.”

A report to be issued by the center today highlights both the potential and the challenge for cities full of immigrant entrepreneurs, who often face language barriers, difficulties getting credit, and problems connecting with mainstream agencies that help businesses grow. The report identifies a generation of immigrant-founded enterprises poised to break into the big time — or already there, like the Lams Group, one of the city’s most aggressive hotel developers, or Delgado Travel, which reaps roughly $1 billion in annual revenues.

In Los Angeles, at least 22 of the 100 fastest-growing companies in 2005 were created by first-generation immigrants. In Houston, a telecommunications company started by a Pakistani man topped the 2006 list of the city’s most successful small businesses.

But even in those cities and New York, where immigrant-friendly mayors have promoted programs to help small business, the report contends that immigrant entrepreneurs have been overlooked in long-term strategies for economic development.

. . .

Now, some children of the early influx are trying to build on their parents’ success — success that itself has increased the cost of doing business, by driving up rents and creating congestion.

One example is Jay Joshua, a Manhattan company that designs souvenirs and then has them manufactured in Asia and imported. Jay Chung, who arrived from South Korea in 1981 as a graduate student in design, started printing his computer-graphic designs for New York logos and peddling them to local T-shirt shops. His company is now one of the city’s leading suppliers of tourist items, from New York-loving coffee mugs to taxicab Christmas ornaments.

Mr. Chung’s son Joshua, 26, who was 3 when he immigrated, joined the company after studying business management in college, and recently helped land orders for a new line of Chicago souvenirs. But frustration mixes with pride when the Chungs, both American citizens now, discuss the company’s growth.

“It’s really hard to conduct a business over here as a wholesaler,” Mr. Chung said in the company’s West 27th Street showroom, chockablock with samples. “We get a ticket every 20 minutes, no matter what. We need more convenient places with less rent, less traffic.”

Thirty years ago their wholesale district was desolate. Now hundreds of Korean-American importers are there, said Jay Chung, who is a leader of the local Korean-American business association. They face a blizzard of parking tickets and high commercial rents — nearly $20,000 a month for 1,400 square feet, he said.

For the full story, see:

NINA BERNSTEIN. "Immigrant Entrepreneurs Shape a New Economy." The New York Times (Tues., February 6, 2007): C13.

(Note: the ellipses are added.)

The author of the New York Times article has contributed to a New York Times digital video clip that is based on the article and is entitled "Immigrant Entrepreneurs: A Tour of One Bustling Ethnic Enclave."

Entrepreneur father Jay and son Joshua own a firm that supplies New York City souveniers. Source of photo: online version of the NYT article cited above.

Source of graph: online version of the NYT article cited above.

Guns Deter Crime

Knoxville, Tenn.

IT’S a phenomenon that gives the term “gun control” a whole new meaning: community ordinances that encourage citizens to own guns.

Last month, Greenleaf, Idaho, adopted Ordinance 208, calling for its citizens to own guns and keep them ready in their homes in case of emergency. It’s not a response to high crime rates. As The Associated Press reported, “Greenleaf doesn’t really have crime … the most violent offense reported in the past two years was a fist fight.” Rather, it’s a statement about preparedness in the event of an emergency, and an effort to promote a culture of self-reliance.

. . .

Criminals, unsurprisingly, would rather break into a house where they aren’t at risk of being shot. As David Kopel noted in a 2001 article in The Arizona Law Review, burglars report that they try to avoid homes where armed residents are likely to be present. We see this phenomenon internationally, too, with the United States having a lower proportion of “hot” burglaries — break-ins where the burglars know the home to be occupied — than countries with restrictive gun laws.

Likewise, in the event of disasters that leave law enforcement overwhelmed, armed citizens can play an important role in stanching crime. Armed neighborhood watches deterred looting in parts of Houston and New Orleans in the aftermath of Hurricanes Katrina and Rita.

For the full commentary, see:

GLENN REYNOLDS. "A Rifle in Every Pot." The New York Times (Tues., January 16, 2007): A31.

Glenn Reynolds is a professor of law at the University of Tennessee, and is the blogger of Instapundit.com. In 2006, he published:

Reynolds, Glenn. An Army of Davids: How Markets and Technology Empower Ordinary People to Beat Big Media, Big Government, and Other Goliaths. Nashville, TN: Nelson Current, 2006.

Source of book image: http://ec1.images-amazon.com/images/P/1595550542.01._SS500_SCLZZZZZZZ_V1136930360_.jpg

Tech Bubble Caused Much of 1990s Inequality Increase

Source of graphic: online version of the NYT article cited below.

It is widely recognized that income inequality increased in the 1990’s, but nobody knows quite why. Despite the lack of hard evidence, there are plenty of theories.

. . .

Two University of Texas researchers, James K. Galbraith and Travis Hale, added an interesting twist to this debate in a paper, “Income Distribution and the Information Technology Bubble” (utip.gov.utexas.edu/abstract.html#UTIP27).

According to Mr. Galbraith and Mr. Hale, much of the increase in income inequality in the late 1990’s resulted from large income changes in just a handful of locations around the country — precisely those areas that were heavily involved in the information technology boom.

. . .

A big advantage of looking at county data is that it is possible to identify counties that contributed the most to the increase in income inequality from 1994 to 2000. It turns out that the five biggest winners in this period were New York; King County, Wash. (with both Seattle and Redmond); and Santa Clara, San Mateo and San Francisco, Calif., the counties that make up Silicon Valley. The five biggest losers were Los Angeles; Queens; Honolulu; Broward, Fla.; and Cuyahoga, Ohio.

What do the counties in the first list have in common? Their economies were all heavily driven by information technology in the late 90’s. This is true for the rest of the list of winners as well. Harris, Tex. (home to Houston and Enron); Middlesex, Mass. (home to Harvard and M.I.T.); Fairfield, Conn.; Alameda, Calif.; and Westchester, N.Y., were also among the top 10 income gainers in this period.

The authors point out that half the 80 American companies in the CNET Tech Index are in those top 10 counties. Furthermore, when income inequality decreased after 2000, the income drop in the high-tech counties contributed most to the decline.

For the full commentary, see:

HAL R. VARIAN. "ECONOMIC SCENE; Many Theories on Income Inequality, but One Answer Lies in Just a Few Places." The New York Times (Thurs., September 21, 2006): C3.

“Free to Choose” Turns Estonia into “Boomtown”

Source of book image: http://search.barnesandnoble.com/booksearch/imageviewer.asp?ean=9780156334600

If, like Mr. Laar, you are only going to read one book in economics, Milton Friedman’s Free to Choose, is not too bad a choice:

(p. A23) Philippe Benoit du Rey is not one of those gloomy Frenchmen who frets about the threat to Gallic civilization from McDonald’s and Microsoft. He thinks international competition is good for his countrymen. He’s confident France will flourish in a global economy — eventually.

But for now, he has left the Loire Valley for Tallinn, the capital of Estonia and the economic model for New Europe. It’s a boomtown with a beautifully preserved medieval quarter along with new skyscrapers, gleaming malls and sprawling housing developments: Prague meets Houston, except that Houston’s economy is cool by comparison.

Economists call Estonia the Baltic tiger, the sequel to the Celtic tiger as Europe’s success story, and its policies are more radical than Ireland’s. On this year’s State of World Liberty Index, a ranking of countries by their economic and political freedom, Estonia is in first place, just ahead of Ireland and seven places ahead of the U.S. (North Korea comes in last at 159th.)

It transformed itself from an isolated, impoverished part of the Soviet Union thanks to a former prime minister, Mart Laar, a history teacher who took office not long after Estonia was liberated. He was 32 years old and had read just one book on economics: ”Free to Choose,” by Milton Friedman, which he liked especially because he knew Friedman was despised by the Soviets.

Laar was politically naïve enough to put the theories into practice. Instead of worrying about winning trade wars, he unilaterally disarmed by abolishing almost all tariffs. He welcomed foreign investors and privatized most government functions (with the help of a privatization czar who had formerly been the manager of the Swedish pop group Abba). He drastically cut taxes on businesses and individuals, instituting a simple flat income tax of 26 percent.

For the full commentary, see:

JOHN TIERNEY. "New Europe’s Boomtown." The New York Times (Tues., September 5, 2006): A23.

Wildcatters Find 80% of Oil in U.S.

Source of image: WSJ article cited below.

(p. A1) David F. Morehouse, senior geologist with the U.S. Department of Energy’s Energy Information Administration, contends there is more new oil to be found in the continental U.S. Finding it, he says, will “depend on people doing the data analysis and, quite frankly, people going in and drilling enough in the right places.”
Mr. Findley, who is 54 years old, did just that. Now production in this part of eastern Montana is growing, and new investors are arriving to explore the potential. At least one midsized firm, Marathon Oil Co., has begun buying leases. Halliburton Co., the big Houston-based oil-services company, has invested with Mr. Findley. The state says the proven oil find in the area will likely be in the range of 150 million barrels, hardly what oil-patch hands call an “elephant,” but nevertheless boosting the nation’s proven oil reserves by about 1%.
. . .
(p. A14) While many people associate big oil finds with big companies, over the years about 80% of the oil found in the U.S. has been brought in by wildcatters such as Mr. Findley, says Larry Nation, spokesman for the American Association of Petroleum Geologists. Wildcatters search for oil, nail down drilling rights, then seek money from banks or bigger companies to extract it.
Mr. Findley grew up in Corpus Christi, Texas, the son of an accountant for a chain of grocery stores. A brother-in-law, a geologist, hired him as a field assistant to hunt for oil in west Texas. “I just fell in love with geology,” he recalls. He graduated from Texas A&M University in 1975 and got a job as a geologist with Tenneco Oil Co. In 1983 he left to found his own Montana-based consulting and exploration company, a one-man operation.
Three years later, world oil prices crashed, and fluctuating prices dogged Mr. Findley as he tried to stay in the business. In the 1990s, the majors left the area in the belief that it was played out. Mr. Findley felt there was more oil to be found and began putting together small exploration deals.
His income had dropped by more than half to $45,000 a year, and he wasn’t sure how much longer that would last. “Many times, my wife and I sat down at the kitchen table and said, ‘What are we going to do next?’ We always came to the same conclusion. [Geology] is what I know. This is what I love. So we just kept going.”

For the full story, see:
JOHN J. FIALKA. “Second Look; Wildcat Producer Sparks Oil Boom On Montana Plains After Majors Pulled Out, Mr. Findley Drilled Anew; Size of Find Still Unclear; A Rival Counts Tanker Trucks.” The Wall Street Journal (Weds., April 5, 2006): A1 & A14.
Source of map: WSJ article cited above.

Enron’s Kenneth Rice in Omaha on 9/11/01

Kenneth Rice exiting a Houston federal courthouse on Thursday, Feb. 16, 2006. Source of image: the online version of the Omaha World-Herald article cited below.
A lot of people remember what they were doing when the first jet crashed into the twin towers on 9/11/01. I was listening to a presentation on the potential of broadband given by Kenneth Rice, at a forum sponsored by Creighton University. A day or two earlier, Creighton had presented Rice with a distinguished alumnus award. I don’t remember much detail about Rice’s presentation, but remember thinking that he gave a clear and informative analysis of the potential and risks of the broadband business.

(p. 1D) HOUSTON (AP) – Kenneth Rice, former chief of Enron Corp.’s struggling broadband unit, testified Thursday that his boss, Jeffrey Skilling, directed him to paint a rosy, misleading picture for the Enron board of directors that was in line with false statements Rice said he already made to financial analysts in 2001.
But Rice, the former CEO of Enron Broadband Services, said in his third day on the stand at the fraud and conspiracy trial of Skilling and founder Kenneth Lay that he had no documents and “only my recollection” to back up a conversation he had with Skilling, Enron’s chief executive, as he prepared for a May 2001 meeting of the company’s board.
“What I took from meeting with Mr. Skilling was he wanted me to put a presentation together that was more consistent with the analyst conference and less direct on some of the challenges we were facing at EBS,” Rice said.
In January 2001, Rice told Wall Street analysts who influenced the company’s stock price that the business was well positioned for strong long-term financial performance. In reality, however, Enron’s broadband unit was spending $100 million per quarter and generating little revenue and business, he said.

For the full story, see:
“Skilling said paint rosy picture, Rice says.” Omaha World-Herald (Friday, February 17, 2006): 1D.

In Defense of Suburban Sprawl

Image source: web version of WSJ article quoted and cited below.

(p. P16) For at least half a century, academics, aesthetes and all-purpose agonizers have looked at our ever-sprawling cities with disdain and even horror. The spectacle of rings and rings of humankind nested in single-family homes has inspired in them all sorts of revulsion and, relatedly, a whole discipline of blame: Suburban sprawl has been faulted for exacerbating racial tension, contributing to energy shortages, worsening pollution and heating up the globe — even expanding waistlines.

Largely missing from this debate has been a sound and reasoned history of this pattern of living. With Robert Bruegmann’s “Sprawl: A Compact History,” we now have one. What a pleasure it is: well-written, accessible and eager to challenge the current cant about sprawl.
No, Mr. Bruegmann says, don’t go blaming the Federal Highway Administration for sprawl or the executives at General Motors and Exxon or racist developers fleeing urban environments. Don’t even blame Karl Rove. You really don’t need to blame anyone. Mr. Bruegmann notes that contemporary sprawl — best defined by places like Los Angeles, Phoenix and Houston — is nothing new. It represents “merely the latest chapter in a long and curious history.”
What propels that curious history is something often overlooked by the makers of grand theories — the particular choices of individual human beings. Mr. Bruegmann places the urge to sprawl squarely where it belongs: on people’s logical desire to escape the high costs, crime, pollution, congestion and lack of privacy that accompanies life in dense cities.

For the full review, read:
JOEL KOTKIN. “In Praise of ‘Burbs. Academics, planners and tastemakers may vilify suburbia as an American blight. But even the Romans knew: It can be nice to get out of the city.” The Wall Street Journal (Sat., December 10, 2005): P16.

The book that Kotkin’s review is praising:
Robert Bruegmann. Sprawl: A Compact History. Chicago: University of Chicago Press, 2005. (264 pages, $27.50)

Rioting Caused by Economy Closed to Creative Destruction

Source of photo: WSJ online version of article quoted and cited below.

The French rioters face very high unemployment. French restrictions on the labor market, and the economy more generally, cause the high unemployment. For example, the French make it hard for firms to fire employees, so as a result, firms are more reluctant to hire workers in the first place, resulting in higher unemployment. Although they do not know it, the rioters are rioting because France is closed to creative destruction. The following commentary is on point:

(p. A16) Like other Americans, immigrants often dramatically improve their quality of life and economic prospects by moving out to less dense, faster growing areas. They can also take advantage of more business-friendly government. Perhaps the most extreme case is Houston, a low-cost, low-tax haven where immigrant entrepreneurship has exploded in recent decades. Much of this has taken place in the city itself. Looser regulations and a lack of zoning lower land and rental costs, providing opportunities to build businesses and acquire property.

It is almost inconceivable to see such flowerings of ethnic entrepreneurship in Continental Europe. Economic and regulatory policy plays a central role in stifling enterprise. Heavy-handed central planning tends to make property markets expensive and difficult to penetrate. Add to this an overall regulatory regime that makes it hard for small business to start or expand, and you have a recipe for economic stagnation and social turmoil. What would help France most now would be to stimulate economic growth and lessen onerous regulation. Most critically, this would also open up entrepreneurial and employment opportunity for those now suffering more of a nightmare of closed options than anything resembling a European dream.

For the full commentary, see:
Joel Kotkin. “Our Immigrants, Their Immigrants.” The Wall Street Journal (November 8, 2005): A16.