Thursday, September 15, 2011

How the built environment and gas prices affect the economy

Has it really been a month since the last post? Wow, shame on me. Sadly, there isn't a lot going on. I have touched on Elm Place getting a chance, the Atmos Complex and the Continental getting started on a residential conversion and I touched briefly on the Statler. The only current project I have neglected is the conversion of an old federal courthouse and post office into residential units, but that has flown under the radar a bit.

My normal M.O. is to find a bit of news and discuss it, putting a bit of my personal beliefs in the post. Rarely do I just throw out my beliefs in an editorial fashion. This will be an exception.

A lot is being made upon the economy and the the need for jobs. However, what I am seeing is decades of a declining manufacturing base and a shift to the service sector (which is primarily things like retail, restaurant along with the finance, insurance and real estate sectors). The problem with that, as I see it, is that type of system requires two things. It needs goods to be brought in or imported, since they aren't being made here and it requires money to be already present in the system. The collapse of the economy was due in part to trading of bad securities, or people trying to make money off of existing money.

In my opinion, that works well in good times. In bad times, it does not. However, people will always need goods. I am typing this on an existing good, a laptop. I am sitting on a sofa, probably made overseas. My son is squeaking a toy, not made in the USA. These are material goods, made and sold overseas. Opportunities to make money like that are lower in the US than in China, who has barely noticed the global recession, because they make the world's goods.

To some extent, this was unavoidable. Yes, China can pay their workers $1.50 a day, saving the company money. So that means they are passing the savings on to us consumers right? No. Even in these trying times, corporations are profiting more than before the recession. In fact, they are profiting more than any other time in the last two decades. More and more, the middle class is getting squeezed. Prices are rising and wages are not. One reason is that decent paying manufacturing jobs are being sent overseas and being replaced with low wage service jobs.

As odd as the connection may sound, that is one reason why I am a fan of high gas prices. If it costs more to ship the goods made overseas here than the wages that were eliminated, than many of the jobs will come back if nothing more than to keep costs as low as possible.

But that leads to a catch-22. If gas prices are high, doesn't that also create a squeeze on the average American, since they have to pay more for transportation? Ah, but what if more Americans were able to live in a walkable, transit-provided area? Then the shock wouldn't be as great.

Consider these next two maps, which come from this website that calculates cost of housing per income and cost of housing and transportation per income. It consistently shows that even in places where housing costs are high, places that are more urban are not as costly per capita as places that are automobile-oriented.

Here is Dallas. Note that in the suburbs, housing costs per income are greater than in the urban areas near downtown Dallas.

Now notice how much more blue the area becomes when transportation costs are added.

Doesn't it stand to reason that if more places were walkable, people would drive less, thus lowering the cost of transportation and adding more money to people's pocketbooks? So if gas prices were to continue to rise, but more people were able to blunt that impact by having the option not to drive, and jobs returned back to this country, then isn't that a win-win for everyone?

While this may be a little simplistic, so is general economics. There are certainly a lot of other things that could help, such as moving a lot of freight, especially long distance, to more efficient rail lines and let freight concentrate on local distribution, but it does get the point across. If gas prices stay high, and there is no sign that they won't, but more people consume less gas, than the economy can get back on track.

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