Exclusive Interview with Joel Kotkin

Joel Kotkin’s writing is not easily pigeonholed. Alienated from California’s Democrat and Republican parties, both of which he believes are dysfunctional, Kotkin focuses on the interests and aspirations of California’s disappearing middle class. With positions on energy and land development that challenge the conventional wisdom of Democrats, and positions on infrastructure development and other public investment that challenge the conventional wisdom of Republicans, Kotkin nonetheless constructs compelling arguments for how to revitalize California’s economy. Joel Kotkin is a professor of urban development, currently a fellow at Chapman University in Orange, California, and the Legatum Institute, a London-based think tank. Kotkin’s new book, The Next Hundred Million: America in 2050, explores how Kotkin believes the nation will evolve in the next four decades. Do Kotkin’s insights constitute a coherent policy framework that might animate a powerful coalition of middle class voters, demolishing traditional political boundaries? Kotkin’s work is essential reading for anyone who wants to thoroughly understand California’s public policy options. We caught up with him last month, and here’s what he had to say:

(1)  You have become an influential writer on global, economic, political and social trends. You have a unique perspective that includes an emphasis on geography and demographics. How would you describe your analytical approach?

“I try to ask ‘what is the best data out there,’ I do a lot of comparative studies – how are we doing compared to other places. California is competing with other states in the U.S.”

(2)  What would you say are the primary challenges facing California?

“We have an increasingly parasitic economy. Our politics increasingly cater to a ‘gentry liberal’ elite. California accommodates high end industries but middle class employers go elsewhere. As a result California ends up with an affluent class, a very large low-income class and a struggling, diminishing middle class. For example, people move to the Bay Area in their twenties and leave in their thirties and forties because they can’t afford it. In Los Angeles, migration indicators are near the bottom in the U.S. California has disproportionate asset bubbles that make housing unaffordable. We don’t attract families with these policies. There has been a tremendous decline in the percentage of children in California’s population.

California’s business environment is byzantine – getting anything through in California is almost impossible. This is very difficult on entrepreneurs and small companies. California’s business community is too weak, relative to its size, it may be the most impotent in the U.S. There are strong lobbies on specific issues – but outside of tech and Hollywood people there’s not much – and the technology and Hollywood lobbies don’t care much about the middle class, much less the working class. These oligarchs are so cut off they have no concept of reality. The number of tech start-ups are way down, and people start companies to get acquired, not to be self-sustaining.

Public sector unions have lots of money and lots of reasons to be engaged in these issues They win by default. Basically the public employees are just more powerful and more organized and everything else is weaker.

The way things are, taxpayers and consumers get hammered.”

(3)  You have described the political elite now controlling California as a coalition of the “digital oligarchy,” the public sector unions, and the “Hollywood / Media claque.” What sort of a coalition could possibly be formed to counter this, and what would their message be to voters?

“I don’t know. The natural coalition would be a middle class party that wanted broad based growth including infrastructure. Republicans and Democrats are both dysfunctional. The Republicans don’t want to spend money on infrastructure. They are right that high-speed rail is bad, but they aren’t fighting to fix our ports, improve our roads, or rebuild our water infrastructure. Those are not their issues. Republicans seem to be often against ANY infrastructure.

The question, if not the message, is how do middle class workers live and how can we make their lives better? How do we build infrastructure that does the most for the population that we have? How do we grow the economy in a more equitable way? Couldn’t the money we’re putting into the high-speed rail be used to improve the roads?”

(4)  You have stated that the Democratic “Upstairs Downstairs” coalition is coming apart. Can you define what you mean by the “upstairs downstairs” coalition, and why it is coming apart?

“It has an internal contradiction because it is a coalition of the rich and the poor. Are you going to have energy rates that are so high that any private energy user goes somewhere else? Gentry liberals are pushing that to the extreme at the expense of the low income and working class. On the other hand, the middle class electorate may have already declined so much that the the upstairs-downstairs coalition may win by default. Nobody much listens to Republicans anymore in California.”

(5)  Why are you a Democrat?

“I was brought up as a Democrat, but more or less I’m politically homeless. I still think Pat Brown was a great governor. I like the Harry Truman / Pat Brown version of Democrats. Also, I don’t like the social conservatives. Finally, I think libertarians are too abstract in their view of society, they don’t think about the impact of their ideas on large numbers of people. They live in a world of theories. There’s a situation now in California where being a Republican would be worthless, it’s like being a member of the British Tory party while you’re living in the Soviet Union. I don’t know what the Democrats would have to do wrong to not win in California.

Small businesspeople, homeowners; there are a lot of people out there who are basically Independents or Democrats who aren’t in any way persuaded by Republicans. So the trajectory of the Democratics is to move further and further to the left because they can get away with it.

In California the middle class are leaving, the twenty-somethings haven’t grown up, and the wealthy benefit from Democratic policies. Of course the Democrats also have a huge public sector base, along with the people dependent on government programs. Democrats don’t care about upward mobility for 2nd geneneration Latinos – not their priority I don’t see liberals or conservatives focused on this. Latinos aren’t heavy in the public workforce, and regulations against business hurt them more than others. They are hurt by the deindustrialization of the economy and by bad freeways.”

(6)  One of your articles is entitled “Thinking Outside the Rails on Transit.” Do you think we need more freeways? Is the death of the automobile greatly exaggerated? What do you envision as the car of the future, or the primary transportation mode of the future, and why?

“The primary mode of transportation will remain cars, although people will drive less because they work from home and are unemployed. Most of California’s mass transit needs would be better served with dial-a-ride, shuttles and rapid busses than with light rail. While some light rail trains are filled on select routes in parts of Los Angeles and the Bay Area, many appear empty even during rush hour.

With respect to transportation solutions we have to come up with what is the problem you are trying to solve and how do you solve it in a way that serves people. Light rail is social engineering that benefits large scale politically connected developers. We are building housing that people don’t want. We are making people live in small apartments and take expensive rail systems. The problem in California is that ideology has become theology.”

(7)  While economic development and affordable transportation and energy are compelling issues for people of low and moderate income, how do you address the claims that using fossil fuels will destroy the planet by contributing to global warming?

“First of all, I’m not a climatologist. So let’s take as a given that there’s a problem – that’s certainly possible. You could address this by encouraging people to work at home. Also, we’re already headed to far more fuel efficient cars. We could promote dispersed development so people can live where they work. The idea that you are going to densify cities will never relieve transportation. You can’t comfortably densify an auto-dependent city – you create terrible congestion problems.

If you look at the ideology of some greens they want to shrink the middle class to have no car and live in an apartment. That is not what people want, that is not their aspiration. This kind of redevelopment helps the public sector and a handful of speculators, developers and middlemen, but it does nothing for the middle class.”

(8)  You provide ample evidence that families prefer suburbs with detached homes and large yards. And there is ample land within California to accommodate land development. But how do you counter the prevailing conventional wisdom – and policies – that restrict land development in order to protect the environment?

“You can sensibly develop land to accommodate people and industry in a responsible way – look at Irvine and Valencia. You aren’t going to get the mass industrial / suburbia that you used to. But you have to ask what kind of future you want. Urban land use planners are massively pro-density, when the fact is people start to look for detached homes in their thirties and they stay in their homes till they are in their eighties. For example, in the 1980’s boomers moved into cities, then in the 1990’s they moved to suburbs. If you’re wealthy you can stay in the city and have children, but most people who want families move to inner-ring or outer-ring suburbs.”

(9)  Let’s suppose the policies you advocate are successful, and the price of housing becomes affordable again in California. More generally, let’s suppose that by reintroducing competition, lifting onerous restrictions on businesses, and opening land and energy resources for development, we lower the cost of living in California. Won’t this put millions of homeowners and commercial property owners into default because it will collapse their collateral? How do we make California’s economy affordable without triggering a massive liquidity crisis for millions of people?

“The problem is we’re now in that trap. We are in a position where we have to have an unreasonable pricing structure to prop up the economy, and as a result people are fleeing or not coming the state. I’m not exclusively advocating low density, I’m just saying let’s have a market. If people want high density, fine. The notion that people want to live in high density is wrong unless you are young or in your mid-to-late seventies and eighties. But you can’t build a society on artificially inflated asset values, because that accelerates the class division.

You have to unwind this gradually – our biggest danger isn’t becoming too affordable, it’s the opposite. For example, 47% of families in Los Angeles are paying 50% or more of their income on rent or mortgages. It will take a long time before we have to worry about liquidity. As it is, we have trapped people in their homes which are the only things that are increasing in value and the only way they can move is by leaving the state. Meanwhile, immigration has slackened even in Southern California. Immigrants know that even if they work in a low-paying job in a hotel in Houston the chances they can save and buy a house are infinitely better than in California. If you want to have an asset based economy then accept we’re going to have feudalism because the price of entry is just too high.

We’re going through a “happy talk” period right now because of a relatively small tech bubble. We have to think about how we create a sustainable economy so you’re not dependent on bubbles.”

(10)  The United States has healthier demographics than virtually any other developed nation. But do you think automation will make it increasingly difficult for labor intensive businesses to compete and offer well-paying jobs? What about Japan, a society that is adapting to an aged population through massive automation including android service workers? Isn’t that an inevitable economic model – aren’t the Japanese just 50 years ahead of the rest of the world in this regard?

“People have been predicting mass unemployment due to automation for 100 years. There are lots of opportunities that would emerge if the economy were to take off. One of the great tragedies is that when you get this big increase in minimum wage it will just accelerate the process of automation.

If you accept very low birthrates permanently, what signal does that send to a society? There is a demoralization of society – we are potentially headed towards Brave New World, not 1984, we can end up without the traditional lynchpins of our society – everything will be how can I be titillated. But we won’t become Japan if the U.S. doesn’t become totally secularized, if immigration continues, and if we don’t implement the anti-family land-use policies.

California was populated by people who aspired to and acquired middle class status. Do we want to live in a society where the vast majority of people think they can’t move up? We have ratcheted down our expectations. There are still a lot of opportunities, however. Our technological growth is not as great as it could be. If you build housing and infrastructure, people won’t go elsewhere to get things done.”