Friday, June 16, 2006

Will Federal Funds Preclude Systemic Change?

By "Mr. Melpomene" a contributor...

The direct injection of massive amounts money into this economy (via the Federal Bailout/LRA) may actually have a perverse affect.

While it will undoubtedly lead to stabilization of asset pricing (homes, in particular). It cannot affect the long term health and viability of the community any more than a lottery winner can become immune from cancer.

Repairing and rebuilding damaged structures will not ultimately be profitable unless the local/regional economy can grow fast enough to attract buyers and tenants of those structures as they come online. The bigger challenge is to create an entire paradigm shift that changes from bust to boom.

Consider the year 2008: With FEMA and the construction workers gone, who is going to live in these properties? Or, put more financially, who is going to pay top dollar for these properties once the LRA money has been spent on their re-construction?

Will the regional economy have grown enough to attract back 200,000 plus residents by the time this property hits the market? Or is the next phase of the recovery going to be characterized by the availability of fully renovated and/or brand new housing that is ‘dirt cheap’ in comparison to Atlanta, Tampa, Houston, Dallas and other cities?

It seems possible that the federal money is guaranteed to put much more housing into the market. Will this policy ultimately replace thousands of acres of empty blighted homes with thousands of acres of unwanted but renovated homes? Is renovation saturation in the cards?

To avoid this, we must create a “World Class New Orleans” that can grow as fast as we can re-build.

Somehow, the sustainable, non-temporary construction jobs portion of the local economy has to grow at a tremendous rate over the next 18-24 months. But, a local economic growth rate far above the national economy isn't going to come from hanging new sheetrock in old houses. It is going to require world class innovation and productivity.

Unlike any American polis, New Orleanians have immediately and viscerally faced a 21st Century that is unlike anything prior, in almost every way. This could be a competitive advantage over the long run, but becoming a growing city on a par with any worldwide will likely require shifting the bedrock foundations of the culture and economy of Louisiana that dates back to its European foundations.

Whereas, the British Empire was built on global trade, the French paradigm was based upon the concessionaire – exclusive contracts awarded by the King. Most notoriously, the Mississippi Company of John Law was the first opportunity for Louisiana to negatively affect the nascent global financial markets of the late 18th Century when Law’s ability to ‘create’ money instead of earning it ultimately collapsed in chaos that reverberated for decades.

The tentacles of the French paradigm are evident in such things as the Harrah’s Casino contract, Riverboat gaming, or less obviously the City Council’s role in every zoning decision that conflicts a 1940’s era zoning ordinance with modern development trends. The disproportionate power enjoyed by the State of Louisiana at the expense of its former largest city is an example of imported Euro-phile colonial statism that has anachronistically remained beyond its own political or economic merits. Louisiana, probably more than any other place in the United States besides Washington DC, is a place where the intersection of politics and economics is often driven more by political power than economic merit.

This generation did not invent cronyism, or corruption, nor will it banish it, but an honest assessment of the challenges we face going forward will require an admission of its existence, and that it is a limit on organic, indigenous economic growth in a time when those limits are a dangerous burden.

Consider that the City that was once probably the most important geography in the western hemisphere is realistically not in the top 2,000 cities worldwide today in either population or economic production. Le Deluge is not the cause of centuries of decline. Absent a change in the way things are done, putting billions of Federal dollars into the usual gumbo of politics, fiefdoms, racism, class fear/envy, and parochial traditionalism will only result in the same schizophrenic outcomes.

Yes, New Orleans is a unique place. But unique does not have to mean dysfunctional. Otherwise, the new New Orleans is not going to be World Class in anything other than booze soaked nostalgia and bitterness.

Moving towards “World Class” may require New Orleans to accept several unpleasant truths.

1) The place was limping when it took its death blow.

2) Only a 21st Century community will be viable in this century, so there is no era of New Orleans’ history (authentic or romanticized) that is an appropriate goal of re-building efforts.

3) A 21st Century metropolis is educated, clean, digital, functional, innovative, inviting, multi-ethnic, has a level playing field, is safe and is consequently relevant.

4) Great Cities create and attract great people, places that shun great people based upon race, class, religion, language, and parochialism export them.

5) Government spending alone will not return the City from the one hundred fiftieth or so largest city in the nation back to the 31st largest.

6) Outside money does not create opportunity, it finds it.

7) World Class is not going to come from above, it is only going to come from within.

8) "If nothing changes, then nothing changes"

The Federal reparations are welcome compared to the alternative of injust neglect, particularly given that the U.S. Army killed more Americans, on our own soil, than any time since at least 1865.

But, don't forget, while the event was a nightmare, we had been stoically putting the best face on decades of [helicopter free] humiliation prior to the final collapse. The I-Wall design didn't make our public school system a fraud; The ACOE didn't put a pothole on every corner. FEMA didn't order a mandatory evacuation of the Fortune 500 from our City in the 1990's.

Even if every house is re-built better than before, there is so much more to be done if we wish to attract prosperity, instead of pity.

Sinn Fein!

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