Friday, February 20, 2009

Geography of a Crash.

Fascinating article at The Atlantic on how the economy shapes the map (and vice versa)...
But different eras favor different places, along with the industries and lifestyles those places embody. Band-Aids and bailouts cannot change that. Neither auto-company rescue packages nor policies designed to artificially prop up housing prices will position the country for renewed growth, at least not of the sustainable variety. We need to let demand for the key products and lifestyles of the old order fall, and begin building a new economy, based on a new geography.

(H/T to SurvivalBlog)


DirtCrashr said...

My first thought - that the wall California has built around itself with high taxes, higher costs of living, and highly insane people demanding more and more has driven *other* people to higher-ground (and out of the State).
What connects them by a thin thread, geographically speaking, are the trucks.
The entire area around Reno, one of the fastest growing metro's in the US, is vastly less regulated than CA by multi-agency overreach and restrictive municipal zoning laws - and so up in the mountains across the CA border has grown a huge conglomeration of warehouses, stockpiled with goods ready for just-in-time delivery of consumer materials ordered on the Interenet.
The "Maginot Line" of weakness is the thin ribbon of worn Highway that snakes through the peaks and over icy passes to deliver the goods.
But still, next-day or the day-after delivery from the HUGE Cabelas now situated there (among other stuff), is pretty frequent and decent.

Old Grouch said...

Interesting article, but IMO there's a fair amount of hooey therein.

Author totally neglects the role of government as related to the changing American economy: Manufacturing didn't decline just because of "foreign competition" and "replacement of man by machines," there were little things like OSHA and onerous environmental regulations that made it more attractive to sit at a desk and move money around rather than actually get involved with building something.

And his "remedy" is of the top-down sort typically prescribed by metropolitan Canadian intellectuals: Force everybody out of owner-occupied housing (in the name of "economic nimbleness"), and shove 'em into milk crates in the urban centers. Which IMO runs against some fundamental human traits, and could only be accomplished by government fiat.

Tam said...

Hey, I just said it was "interesting", not a "blueprint for the future"...

Anonymous said...

"the thin ribbon of worn Highway that snakes through the peaks and over icy passes..."

That's right poetic, right there.
Bear with me now, I'm working without a net, but I think the next part goes something like:

"On the 19th, a single copper wire parted along the Taggart main line in Montana. That wire carried the traffic for all the trains loaded with Minnesota's grain harvest. The telegraph in Eddie Willers' office..." Words to that effect.

Stop the Comet. I want to get off. There's a tunnel...

Ed Foster said...

I have to go with Old Grouch on this one. Actually, I usually do. Who was it who said "The definition of wise is anyone erudite and convincing who happens to agree with me"? The article was self-serving at the least, wishful thinking more likely.

Corporations tend to have their headquarters in presige locations, but their production facilities are off in the hinterlands, where the rents are cheap and the work ethic more common.

IBM may have a very impressive building in New York, but their wealth is manufactured in places like Manchester CT (pop. 35,000) and dozens of other similar sized towns. The mass exodus from Silicon Valley to greenbelt areas in Nebraska and New Hampshire has accelerated the tax base debacle in California, something I find quite enjoyable.

Also, Proffesor Florida's lumping manufacturing with construction was flagrantly disingenuous. Housing was a bubble, and, due to oversupply, will be a net drag on the economy for years to come. The auto industry will mimic housing until unempoyment drops below 6% again, but go back to being happily viable when people have used up the enourmous backlog of cheap cars sitting on the lots.

But I work in manufacturing, and know how desperate high tech durable goods companies are for help. Anything less than a 50 hour week is unheard of in firearms production(thank you B.O.), machine tool manufacture, and aerospace.

55 to 65 hours is more common, and contracts are being left to sit due to a lack of help. In just the last 2 or 3 years, average hourly wages for a qualified CNC machinist have gone from high teens to mid twenties in the jobshops, closer to $30-$35 in the OEM's doing the assembly.

For reference, that's $1,500 to $2,500 dollars a week for blue collar, dirty fingernail guys, with benefit packages any CEO would find attractive. But the jobshops are not union, and their productivity dwarfs any place "run" by the UAW or Machinist's Union.

When I was doing source inspection for Pratt & Whitney/Sikorsky/Hamilton Standard and Rolls-Allison about 2 years ago, our inhouse cost to machine parts was about $300 per hour. Even subtracting overhead for assembly areas and R & D, it was in excess of $240/hr. The jobshops supplying us were getting about $65 per hour, and making schedule/quality far above the few remaining corporate departments still manufacturing parts.

Any wonder places like Rolls/Royce/Allison, Pratt & Whitney, and G.E. Aero are all assembly houses now, putting together parts made in the little Lassez-Faire shops all over the Connecticut River Valley? And don't even get me started on what labor relations were like at Colt's back in the early '90's.

Bottom line: brighter people than me have been pointing out that America's financial future is in producing durable goods, especially those that require constant innovation, rather than the gradualist "type improvement" the asians do.

Something like half the entire world's basic research is done in the U.S., and basic research is what produces new and highly profitable technology rather than tweaking old stuff.

It's the greenbelts, well outside the rust belt cities, that are attracting the innovative thinkers, with low tax and high freedom state governments. Clean, friendly places to raise families, without the PC, welfare culture, and government inspired undertones of incipient race war common to the ugly places.

Frighteningly, I'm starting to see the first faint stirrings of the job shop mentality beginning to stir in those same greenbelts.

It's going to be a while yet before Connecticut loses much manufacturing business to Nebraska, New Hampshire, or Nevada, but I suppose in the long run it will be more cost effective to have the brains and the muscle close together.

What will happen in the abandoned cities I don't know. They're all Democrat controlled, and the Democrats have an essentially medival culture. Lots of unproductive people at the top, even more on the bottom, and almost nobody in the middle except mid level government flunkies. Can you say dichotomy?

And so the wheel turns.