Monday, August 22, 2011

Florida (and the nation's) model of growth is bankrupt ... by gimleteye

Back in the late 1980's, when I first became engaged as a civic activist in the Florida Keys, the arguments used by the Chamber of Commerce, developers and bankers to promote building and construction were novel to me. Points of conflict were routinely over building in wetlands or environmentally sensitive lands in the Keys. It was necessary to open new areas for development, their argument went, because the great public purpose of new development was to build tax base.

Not only was tax base the Holy Grail of local government, but "growth pays its own way" and "it is what the market wants". Every subsidiary argument, zoning and permitting decision was grounded in this circular political calculus: since every property owner had the same inherent right to build, since all development was good because it created tax base and it is what the market wants, therefore all development was good and should be permitted. Although a few were also skeptical of this snake oil formula, the entire political apparatus was organized against any questioning of the orthodoxy. It was frantically defended by the claims of an entrenched status quo in the Keys, tied to property rights advocates and the evolving Wise Use Movement; a western based, conservative agenda that ties directly to the religious right and Tea Party today but then found fertile soil in Florida.

It didn't matter what arguments people, citizens and neighbors used to push back against this Perpetual Motion Machine. Not the warnings that it would all come crashing down, some day. (We were called Chicken Littles, then.) This was before the internet boom. It was even before email and AOL and mass media consolidation. It was certainly before the housing bubble that drove up prices in the Keys to double and triple and quadruple the values of the 1980's.

The media was no help, either. What newspapers could handle were small, feel-good stories. But growth-- ie. advertising revenue-- was the third rail of the news business and in the Keys, it was standard operating procedure that stories would be scrubbed for any whiff or odor of dissent from the party line on building and development that transcended actual party lines. Democratic officials were as helpless as Republicans: none fought the tax base argument that animated Florida politics ever since the Everglades were first drained by Napoleon Bonaparte Broward.

The results on the ground nearly a quarter century later from my first experiences are clear as day. Floridians are in an economic crisis without precedent. Where we once joked that the state bird was a construction crane, these days it is hard to crack a smile through the detritus of ghost suburbs and neighborhoods where foreclosures and short sales set the market price and the safest place to be employed is with government. Because there has been no civic debate or dialogue on the mechanics of growth tied to construction and development, there is literally no language to begin the discussion. "Jobs" is the mantra, with nary a hint of how to get there in terms of over-arching economic policies.

Here is how it all went so wrong, here and everywhere the model of suburban growth metastasized like an aggressive cancer: growth of itself does not pay its own way. No one listened, twenty five years ago. And no one is even talking about this, today. The housing bubble was the source of transient profits for the mainstream media. Without it, and with pressure from internet based sources of news, the mainstream press continues to struggle to find its way. The bankers and banksters are mostly still in place. They rub shoulders with the downtown land use attorneys, lobbyists, and occasional newspaper publisher: who among this group would ask for accountability for the fallen?

There has been no day of reckoning for the trillions plowed into a bankrupt growth model that nonetheless forced the greatest wealth distribution in U.S. economic history. The Federal Reserve, with its repetitive stimuli, is pushing against a string. In Florida, between the banks deemed "too big to fail" and smaller institutions that currently exist as "walking dead" and under consent orders with the FDIC, one could estimate that 60 percent of all banking institutions are functionally broken.

The banks are holding assets (ie. mortgages for commercial and residential real estate and derivatives of those mortgages) worth far, far less than they hold on their books. But so far, there is no discussion at all; on what premises were these millions of mortgages issued, land use changed from wetlands or agriculture to zoned for platted subdivisions or condo farms? This would certainly seem the moment for deep introspection by the public of the tired cliches and canards that animate the public commons: "government is the enemy", "the 'free market' protects people better than regulations", and "growth at any cost pays its own way". Instead, we are getting the exact opposite of what we need: frantic, mindless idiocy packaged in sound bites that resonate in focus groups.

Until we have a public conversation about the bankrupt model of growth that still dominates Florida we will depend on the kindness of strangers like the Chinese or Brazilians or Germans for good news on our economy. Who will lead that conversation? Not the bankers in downtown Miami who cheered the nutrients of super low interest rates to fertilize the building boom, not the Chamber of Commerce or Associated Industries or Latin Builders who are waiting for the miracle to come, and so far, not the media.

Bonus Pak: James Kunstler's latest rant ...

By James Howard Kunstler
on August 22, 2011 8:36 AM

I suppose we'll know in a few hours whether Colonel Muammer Gaddafi gets hung out to dry, Mussolini-style, from a lamp-post, or is mercifully handed a one way ticket to Palookaville, a.k.a. The Hague, where old despots go to eat French fries with mayonnaise and be judged. The rebels celebrating in Tripoli's main square looked a tad ticked off about all the trouble it took to pry the old rascal off his throne. Over in Syria, Bashar al-Assad, the ophthalmologist who rules the place, must be following developments with a keen interest. (Perhaps he will hastily decide to re-open his medical practice in, say, Iraq.) Despite the bubbling of CNN news-readers, I suggest that we Westerners hold our applause until the world gets a clue as to who or what will govern Libya (or Syria, in the event).
Besides, we have a sort of Man-Who-Would-Be-Gaddafi fresh out of the woodwork right here in the USA. I speak of Texas Governor Rick Perry, the Bush-Without-a-Brain clone who pulled off a kind of "hat-trick" of cretinism last week by 1.) announcing his disbelief in climate change science; 2.) announcing his disbelief in evolution science; and 3.) more or less threatening to lynch Federal Reserve chairman Ben Bernanke. The nation has not seen such a puffed up rogue take the stage since the days of Huey Long, but the rural idiocy that saturated Louisiana in the 1930s has finally seeped all over the country so that even people in once-literate Minnesota are represented by reality-averse evangelical maniacs. Candidates like Perry and Bachmann make a plain vanilla narcissist like Sarah Palin look at least capable of running a student council. What a low moment in America's history. Don't lose sight of the fact that there's room for the bar to go further down.
Otherwise, the weekend was notable for the complete and utter retreat from public view of European leaders charged with figuring out some way around the EU's banking woes. The dirty secret is that there isn't any way around these Alp-size heaps of broken promises, worthless certificates, overdrawn accounts, shiftless governments, and booby-trapped counter-party contracts. The people in charge are trying like hell to make it through the vacation season before the entire continent tips over, but then what? I'll tell you: the chain-lightning of ruin will crackle across the Sargasso Sea and strike deep in the heart of JP Morgan, Bank of America, Goldman Sachs, Citi, and all the other citadels of grift until blood runs out the bronze nostrils of George Washington's statue on the portico of Federal Hall. I don't begrudge poor Barack Obama's attempt to eat a few ice cream cones at the seashore with his wife and two girls. Some presidents are just one-termers. History is cruel that way. But it also rhymes. Rick Perry may be as dumb as Ronald Reagan.
Nobody can believe what's happening. Nobody knows what to do. Well, here's some straight dope: do you want to have an economy? Then prepare to cut your losses and move on. There's so much to do "out there" in America, but the catch is it's not the same as what we've been doing. Do you want to eat a few years from now? Get serious about reorganizing agriculture on a smaller, finer, more local scale. Believe me, there will be plenty of jobs. Only they won't be like sitting in a cubicle writing a marketing plan for a video-game about the slaughter of gym rats from another planet. Do you want to be able to travel around this big country in a few years? Start working on the nearest reconstructable railroad line - and get over your techno-grandiose fantasies about running all the cars on algae, corn, or the plug in the wall. Do you want have some household goods in the future without sending an order halfway around the world? Figure out a way to make stuff in some North American place where there is running water for electric power.
There isn't a politician out there, including the Paul duo, who can really articulate the direction in which history is propelling us. This "recession-depression" narrative doesn't even adequately capture it. This is the end of a certain way of doing things - the industrial growth-spurt fiesta. We're in permanent contraction now. There are no technological rescue remedies that will restore the old economic regime. The banks are not working anymore because we can't create more real wealth, and the wealth we pretended to create for thirty-odd years in the form of IOUs can't be paid back into existence. We can't fund anymore senior golfing careers and a lot of people will have to just stop eating fried pork rinds, guzzling Pepsi Cola, and then waddling into the emergency room for consolation.
Does this sound a little harsh? Surprise: history is not your therapist. This is the New Age you never expected. Crybabies need not apply.

1 comment:

Anonymous said...

Okay, gimleteye.

Let me introduce just two words into the civic debate,

…two words seemingly lost in our public dialogue on the economy, two words never mentioned in our modern day discussions by too many who are either unaware or forgetful as to these two words that have become so vastly undervalued in modern day life, so overlooked and lost in the minds of far too many,

two words that tend to be alien to far too many in government where subsistence relies on so many public sector salaries, two words that are so attributable to our prosperity as Americans in a country still free, two words that are so vital and essential to us all, particularly in the currently diminishing private sector world most of us still live in:


The real estate bust of 2007, the housing bubble burst and the sever devaluation of real property we all continue to suffer through is largely attributable to government (through Fannie Mae and Freddie Mac) taking on all the finance risk taking within what used to be the private sector home mortgage market. 

Without the private sector risk takers and the creative and innovative people they assemble in collaborative efforts, nothing would ever get built, there’d be no long term economic churning, real wealth creation, an expanding private sector that provides sustaining work for everyone, real job creation, and an expanding tax base, all of which allows to be paid the slew of the myriad of taxes to provide for the tax revenues of the public sector so that it can do their vital work as well.

What needs most of all to be brought to the fore is the folly that public sector government spending can be equated to private sector spending.

Private capital and private resources applied with private risk taking within the private sector are altogether different from public sector government spending other people’s money acquired through taxes extracted from the private sector.

This is the real world of personal risk taking, privately applied capital and productive resources, the real world struggle of just making a living in the results oriented private sector that does not allow for waste, inefficiencies and protracted development.

There's a strong lesson here for those willing to comprehend that as we stand now in the Summer of 2011, we need desperately to expand the private sector if we are ever to get out of this hard, deep recession.  

It is the private sector from which our prosperity comes.  It is the private sector that initiates, innovates, creates and provides for everything and everyone, including the public sector.  

If history has taught us anything, from the Mayflower venture to the homesteaders hard quest west in covered wagons to the present day, our great country was built much more by risk takers in the private sector than comfortably seated public sector government panels.

It is private capital privately applied with private risk taking within the private sector that is as Winston Churchill said, although not a perfect system, it is the only alternative to the socialists' road to ruin running out of other people's money.