Dear Friends,
It seems to me, American cities have committed suicide, entering the doom loop of economics. Under the normal progression of creative destruction, you would expect the collapse to be followed by a Renascence. Sadly, in this case that’s unlikely. Because the problem that’s destroying our cities isn’t going away with the economy. It’s entrenched. Diverting the normal creative destruction cycle. Sticking them in the destructive phase… forever. Many cities are stuck in the doom loop of economics. Though not all are, or used to be, mega cities. Small towns sometimes get stuck too. Usually from poor decisions by the town elders. Seeking short term success, and personal profit, over the city’s interest. Leading to a town getting stuck in the doom loop… just like NYC and SF are now.
Joseph Schumpeter in his book, Capitalism, Socialism and Democracy, coined the term, “Creative Destruction.” My take on his idea is that economics runs in a cycle. That cycle is similar to the natural growth cycle of organisms. There is a period of growth, followed by a period of stagnation, then growth again, and so forth. In economics, his theory is that the growth phase (creation) creates malinvestments, high cost and graft. The recession phase (destruction), cleans out the malinvestments, cuts the cost of start ups and cleans out the graft. Then entrepreneurs buy up those cheap storefronts, factories and commercial buildings to start their businesses. The cycle starts anew. The Holy Grail of economics, the cup Keynes clutched at, is to stop the cycle at the top.
The destruction phase can’t be overcome by cheap facilities, if regulations, graft and crime make it impossible to do business. The best idea will fail, even with almost no overhead, if the moment the doors open, everything is stolen. Only in places where there’s high profit can graft be successfully maintained. Then there are taxes and regulations. Money is fungible, it’s like water, always seeking level, so a cost is a cost. No matter if it’s for facilities… or lawyers and taxes. Therefore, in places with high taxes and regulations, even a free property can be too expensive to renovate. Especially when those same taxes and regulations are driving away the other businesses and those with means to leave. That’s how big cities and small towns get stuck in the destruction phase of creative destruction.
To allow such cities as Chicago, Detroit and Baltimore to rise, the people holding them down must be removed. With the corruption at the ballot box in those cities, that’s not going to happen. So they’ll continue their free fall to oblivion. Despite having cheap infrastructure, a workforce and ideal locations. Because the source of the friction to their rise is built into their systems. Regulations make it incredibly expensive to do anything. Graft and taxes follow any success at all. That is, if a business can get past the rampant, unprosectued crime. Finally, a main tenet of Confucius was that people follow their leaders. From the mayors office and beat cop to the poop gatherer on the street, the entire edifice of government in American cities, have followed. They’re corrupt to the core. Smart people are fleeing.
America is being drained. One look at the US debt clock proves it. Our decaying cities and towns are only the physical manifestation of it. The rot started at the top and it’s at the top that we have to address it. Rudy Giuliani cleaned NYC up, and now is public enemy number one… even as NYC has become a disaster zone again. Showing what the elite want. The rush of people with the means leaving is creating a vacuum drawing in freeloaders speeding the descent. Companies are leaving our cities due to crime, the “migrant” crisis and safety. Even as small businesses are on their heels. If a shop owner defends himself from a thug, robbing him, NYC police arrest the shop owner. The problems our cities and small towns face, are largely of their own making, but at least the corrupt are getting rich doing it.
Sincerely,
John Pepin
