City of the Future

The Great Contraction

Talk about surreal.

It’s only been a few years since James Howard Kunstler really started beating the drum of urban contraction:

I think that what we’re about to see is an epochal reversal of the 200-year-old trend of populations moving from the small towns and the farms to the big cities. That is going to reverse, and we’re going to see big cities contract substantially, and people moving back to smaller cities, smaller towns, and indeed to an agricultural landscape that is going to require a lot more human attention to make productive.

Which, needless to say, was a view so far outside of the mainstream that Kunstler he might as well have been announcing an imminent Martian invasion.

How times have changed. From today’s New York Times:

The government is looking at expanding a pioneering scheme in Flint, one of the poorest US cities, which involves razing entire districts and returning the land to nature. Local politicians believe the city must contract by as much as 40 per cent, concentrating the dwindling population and local services into a more viable area . . .
Having outlined his strategy to Barack Obama during the election campaign, Mr Kildee has now been approached by the US government and a group of charities who want him to apply what he has learnt to the rest of the country.
Mr Kildee said he will concentrate on 50 cities, identified in a recent study by the Brookings Institution, an influential Washington think-tank, as potentially needing to shrink substantially to cope with their declining fortunes.
Most are former industrial cities in the "rust belt" of America's Mid-West and North East. They include Detroit, Philadelphia, Pittsburgh, Baltimore and Memphis.

That’s not all; rural Michigan is turning paved roads back to gravel. From the Chicago Times:

About a quarter of the state’s county road agencies largely left out of the federal stimulus package, which focuses on highways and other major thoroughfares, say they can’t afford some costly repaving projects and have crushed up deteriorating roads . . .
More than 20 of the 83 counties in Michigan, home to the nation’s highest unemployment rate for much of the past four years, have turned rural roads back to gravel with no immediate plans to repave, according to the County Road Association of Michigan. About 50 miles have been reverted in the last three years . . .
Montcalm converted nearly 10 miles on three primary county roads into gravel in May. Crushing the pavement and laying gravel cost about $10,000 a mile. Repaving a mile with asphalt would cost more than $100,000. The county had patched the roads in bits and pieces for years. But with potholes the size of steering wheels and no money for an extensive repaving, crews figured it wasn’t worth another piecemeal job.

It seems as though we’re already beginning to “make other arrangements” as slide past not just peak oil but peak capital, and peak everything else.

When Giants Fall: Review

Like his previous work, Financial Armageddon, Michael J. Panzner’s When Giants Fall provides a brief but surprisingly comprehensive picture of our unfolding economic catastrophe.

It’s also a curious book, not easy to categorize. Panzner perspective is that of long-time veteran of stock, bond and currency markets, but he is wise enough to see that one can’t describe the financial mechanisms of the meltdown without looking deeply at the political, social and individual ramifications of what is going on. To put it another way, if you’re looking for quick investments tips on (as Panzner himself joked in a recent interview) “how to make a killing in a world gone to hell” you’ve come to the wrong place.

In fact, in spite of the quote on the book jacket which reads “for those enlightened few who understand what is really going on and what will likely happen next, the chaotic years ahead may well represent a singular opportunity” the book itself provides no such easy answers. There are many suggestions of what to avoid: stocks, bonds, most real estate. But as to what will do well at any given point, the only good answer is likely to be: “it depends.”

At the heart of the book is the observation that for myriad reasons the United States is rapidly losing its place as the world singular superpower—from resource constraints to debt at all levels, to a collapsing dollar. This doesn’t mean that competitors like Russia and China will have an easy go of things. “While the United States may be the main loser, it won’t be alone,” Panzner writes. “The rest of the world will also be wracked by what is likely to be a long and debilitating malaise.”

Unlike some financial doomsayers, Panzer grasps the implications of resource limits to growth as well. While he is agnostic about the idea of a near-term peak in oil, he recognizes growing demand for oil in the developing world will very likely suck up any new capacity that could come on line.

This is not a small distinction; differing scenarios for the rate and timing of global oil decline versus the simple inability to keep up with demand make for drastically different outcomes. But Panzner is right to be cautious about predictions.

It seems increasingly clear that we have entered an era when the predictions—even of those who were correct up to now—are diverging. The problem is that even for those of us who understand the broad outlines of what is happening, getting the ever-crucial details right in the moment will continue to prove challenging if not impossible.

In that sense, When Giants Fall is a highly enlightening portrait of how things may fall out, and an invaluable tool for scenario planning. Does it have all the answers? Of course not; nobody does.