Monday, February 22, 2010

Letter from New Orleans

Here we are in the fourth week of a five-week stay in New Orleans. Anything to get away from New York weather in February. I grew up here, leaving after high school, while Donna spent three decades here running a contemporary art gallery. So rather than visiting, we are returning home.

New Orleans is a slow-paced town. Compared with most other cities, we move deliberately.  We obsess over food and restaurants.  Eating out, the conversation revolves about what we ate last night, what we’re eating now, and what we’re going to eat tomorrow. Life goes on pretty much as it did when I was growing up here.

And the social structure is little changed. In a 2007 Commentary magazine essay entitled, “New Orleans – An Autopsy,” a former grammar school classmate of mine, Ben C. Toledano, ascribed much of the city’s economic diminution relative to our peers to the practices and prejudices of a narrowly based social and economic oligarchy that largely controlled the city.

So the economy continues to be tourism-dominated. Too many people earn minimum wage and too few jobs are created. Too few of the best and the brightest can find opportunities here, and they leave to enrich other communities. Our erstwhile peers when I was growing up -- Dallas, Houston, and Atlanta -- have morphed into major metropolises, with growing populations, greater commercial importance, and higher standards of living. New Orleans just shuffles along.

What a Weekend!  But on the surface, you would never sense those issues.  Particularly this month. Normally, the big deal this time of year is Mardi Gras. But over a single weekend in February, Mardi Gras was eclipsed by two dramatic events: the Saints winning their first-ever Super Bowl, and a reform mayor winning election in a landslide.

Everybody knows the Saints story. They suffered through four decades of futility, and rightfully earned the sobriquet “Aints.” But this year, the planets were in alignment and the fairy tale ended happily for New Orleans.

I've never seen so many people in the city so elated about a single event. It was clearly the biggest morale boost in the 4 1/2 years since Katrina struck.  Thousands of fans surrounded the airport on the team’s return from Miami. Hundreds of thousands attended the celebratory five-hour parade two days later that brought the city to a halt.

By contrast, the Indianapolis Star reported:

Sparse crowd greets Colts on return

By Kevin O'
The end of the Indianapolis Colts' season came down to 11 people. Not the 11 players on the field during the Super Bowl, but the 11 who showed up at Indianapolis International Airport.
Unfortunately, success on the football field doesn’t help solve the city's historic problems of miserable governance and economic failure. Yet many people I’ve talked with in the post-Super Bowl euphoria seem to think that good things will happen because of the Super Bowl.  Somehow, they equate an athletic victory with an economic accelerator. This lack of realism underscores one of the problems with New Orleans -- too many live in a dream world.

Hood Robin?  Like many cities, New Orleans and Louisiana politicians consider professional sports teams to be a driver of economic development. This is an argument, shared by many other officials around the country, that simply is not borne out by disinterested analysis. But politicians love sports, they love the idea of having an NFL teams in their community, and they love the seats they get for the games.  So we have this remarkable situation where hard-pressed taxpayers finance über-wealthy owners with stadiums, stadium upgrades, and cash subsidies to stay put.

In the euphoria that followed the Super Bowl victory, a new deal was just announced that further locks in the Saints owners, the Benson family. According to the Feb. 21 Times-Picayune, the terms perpetuate and even enhance older agreements that are mind-boggling. 

"Counting all the impacts of Superdome enhancements, new and remaining state subsidies, property leases and other sources of income, the deal for the Benson family and the Saints adds up to more than $400 million in guaranteed revenue over the next 15 years. Additional financial benefits could flow from co-investors using tax credits and from non-guaranteed office, plaza and parking revenue."

Hundreds of millions of dollars transferred from the state and city to the family – for which they promise, promise, promise not to ever leave New Orleans (never, or until the termination of the contract, whichever comes first).  Rob the poor to pay the rich.  Some deal.

Real Solutions  What about real solutions to the city’s problems?  They start with better governance.  And fortunately, the February 6th election of Mitch Landrieu as mayor -- the day before the Super Bowl -- could go a long way toward restoring the integrity and competence of the city's governance. I need remind no one about the sad history of corrupt and incompetent mayors.

The most remarkable aspect of the election is that Landrieu won 365 of the 366 precincts, and had almost five times the vote of the runner-up. In a city long victimized by poor racial relations, the fact that Landrieu won across every economic, ethnic, and racial segment bodes well for the city for the next four to eight years.

Football victories by good teams make people feel good. Electoral victories by good people can actually do good.

Challenges and Opportunities  And some good things can happen, will happen, and are even happening already. Chief among the needs is reducing the city's crime rate. New Orleans has often been near the bottom nationally in many rankings-- e.g., education, poverty, job creation.  Unfortunately, however, we lead the country in one ranking – per-capita murder rate. That is not a leadership we're particularly proud of, and it’s certainly not one that tends to attract convention planners or company relocators. But I’m convinced that it’s a problem that is fixable -- by a competent civic leadership -- and will be fixed.

And thanks to Katrina -- yes, I said thanks to Katrina -- the K-12 public educational system is one of our rays of hope. After the storm, the state government took over one of the worst K-12 educational systems in the country and facilitated the establishment of charter schools (all  union-free). Over half the schools now are charters – highest in the country -- and the numbers continue to increase. And the charter students' performances and attendance figures also are rising dramatically. (Note the piece I wrote two years ago on the Edible Schoolyard charter school.) See, we actually lead in something other than the murder rate. Indeed, New Orleans has become a national laboratory for reforming the public school system.

Leaving Behind the Banana Republic Economy Job creation is a far more difficult job. The city has suffered a brain drain since the 1930s when Huey Long perfected a culture of corrupt government that has spread throughout the state.  One result – Louisiana and New Orleans have been abysmal failures at keeping their talent or inducing outside companies with high-paying jobs to be moved here.  Every other southern state has been more successful. We have been unable to change our brain drain into a brain gain, or to create economic engines of growth.

But that could change now in New Orleans. As vital services restored, as the crime rate drops, as a new educational system develops, and with a renewed emphasis on economic development, the city can start eliminating the negatives and accentuating the positives.  It can play up one of its unique attributes -- it's a desirable and stimulating place to live.

Here’s Question for You Tell me honestly, if you were CEO of a company in Somewhere, USA, seeking to start up, expand or relocate, would you rather spend your remaining years being bored to tears in 99% of the cities in the US, or would you rather live in a city with incomparable élan, musical heritage, multicultural populace, unique architecture, and fabulous restaurants? Would you like to dine out Saturday night at Denny’s, or maybe the local Holiday Inn dining room, or would you rather delight in the fare at Commander’s Palace in the Garden District, or Galatoire’s in the French Quarter, or Gautreau’s uptown, or one of hundreds of other bastions of a Creole-cum-Cajun-cum-French-cum-Southern cuisine unique to the world?

Parades  And parades. Lots of parades.  New Orleanians love, love, love parades.

New Orleanians will parade for any reason. For all reasons. They parade when people die, they parade when football teams win, they parade for weeks before Mardi Gras, they parade all day on Mardi Gras, and they even parade for their animals. A week ago we walked to the French Quarter and watched the Krewe of Barkus go by -- yep, a parade of dogs.  

And there's the Krewe du Jieux, which I learned of in the online publication, Tablet, in a piece written by Justin Vogt. At its parade, you can spot the sign, "Jew Dat."  Naturally, it already has a spin-off, the Krewe du Mishigas.  Given that old habits die hard, it's highly unlikely that the kings of Comus (the most social, old money and secretive krewe) and Jieux will meet at midnight on Mardi Gras any time soon.  But, hey, who knows?  The Saints won the Super Bowl.

Streets  A note on some favorite New Orleans street names.

Uptown, three streets that cross St. Charles Avenue in succession: Webster, Henry Clay, and Calhoun. How fitting that the Yankee Daniel Webster and the Southerner John Calhoun are separated by the “Great Compromiser,” Henry Clay.

In a city with such a rich artistic heritage, it's only appropriate that all nine muses are represented by streets. Indeed, just below the Garden District you'll find, in succession, these streets: Urania, Polymnia, Euterpe, Terpsichore, Melpomene, Thalia, Erato, Clio, and Calliope.  Of course, the natives pronounce almost all of them all wrong -- it's part of their charm. But, then, New Yorkers don't even know how to pronounce their own Houston St. (they call it "how stun").

Last, I'm enamored of Broad Street and Toulouse Street.  Why?  Because they formed the answer to a clue in a treasure hunt I participated in during high school. The clue was "baggy trousers."  The answer was obvious.  We immediately drove to the intersection of "broad and too loose."

Speaking of Job Creation  From the Feb. 21 Times-Picayune:
CORRECTION: I am sorry to disappoint all the readers who wished to apply for the position, but New Orleans does not employ a “sex assessor.” That was a misprint in Wednesday's column. It should have read “tax assessor.”

Tuesday, February 2, 2010

A Modest Proposal: A Real High-Speed Rail Program

Once upon a time in America, we built great things.  We created nation-building canals, giant dams, coast-to-coast railroads, massive bridges, unprecedented war machines, national highways, and awe-inspiring spaceships.  These projects were expensive and they took a long time to complete – years, even decades.  But they served a useful purpose, were popularly accepted, and have had a profound impact on strengthening the infrastructure of our country and enriching our lives.

In 1825, the Erie Canal, financed by New York State, connected Lake Erie to the Hudson River. The 363-mile waterway effected a huge reduction in transportation costs, helped open up the West, and established New York as the leading port in the country.

In 1863, the transcontinental railroad was completed, linking the East and West coasts.

In 1914, the United States finished construction of the Panama Canal, one of the largest engineering projects in history. Under the aegis of Theodore Roosevelt, its impact was enormous, shortening ships’ voyages between Atlantic and Pacific oceans from thousands of miles to 48 miles.

During the Great Depression, a host of new initiatives helped create jobs and restart economic growth. Hoover Dam (right), then the largest in the world, was completed and Grand Coulee Dam started. Among the more successful FDR programs were the Tennessee Valley Authority and the Works Projects Administration. The WPA built thousands of schools, hospitals, bridges, parks, sports stadiums, sewer lines and myriad other public works. At its peak, it employed over three million. Funding reached $2 billion annually ($30 billion today adjusted for inflation).

World War II led to the Manhattan Project, which ultimately spawned nuclear power as a byproduct. Radar was perfected. Aircraft and ship production reached unprecedented levels.

Perhaps the last major infrastructure effort by the United States in the last 50 years was the interstate highway system. President Eisenhower signed into law the Federal-Aid Highway Act of 1956.The program featured a 41,000-mile network of limited-access roads linking 90 percent of all cities with populations of more than 50,000.  The Federal Government contributed $25,000,000,000 [$192 billion in current dollars!] among the states over the following thirteen years.

The Apollo program, initiated by President Kennedy in 1961, was successfully realized in 1969 with the successful landing of men on the moon. Apollo was a reaction to the twin scares from the Soviet Union’s space program. First was the shock of the unmanned Sputnik in October 1957, the world’s first artificial satellite. Second was the flight by Yuri Gagarin in April 1961.  He became the first man in space. Just over a month later, Kennedy announced the Apollo program, thereby initiating a race to the moon (a race, by the way, that the Soviets never bothered to enter).

While the Apollo program was successful in exciting the public and in developing a capability for human spaceflight, it was less successful when undergoing a cost-benefit analysis, particularly compared with robotic spaceflight. The latter has about two orders of magnitude lower cost than human flight, with about two orders of magnitude higher productivity and scientific research. Unmanned satellites have revolutionized communications, navigation, weather forecasting, mapping, and astronomy.  Not as sexy as humans flying around in spaceships, but a much bigger bang for the buck. 

Looking at the list of infrastructure achievements, most were phenomenal. Some were responses to hot or cold war challenges. Others were peacetime improvements to our infrastructure that yielded a stronger and more vibrant nation. They created jobs, strengthened the economy, and helped raise our standard of living.

But as they say, what have you done for me lately? In the 54 years since the interstate highway legislation passed Congress, nothing even close has followed. Five decades, zilch.

It’s not that we don’t spend money.  In the last two years we’ve spent massive taxpayer funds -- hundreds of billions of dollars -- allegedly in the public interest.  But regrettably, not for productive projects, not for infrastructure, not to accentuate the positive, but rather to eliminate the negative.  Unprecedented public funding has been used to rescue dying, mismanaged and inefficient industries. We poured enormous amounts into the financial sector. We saved the legacy automobile industry in order to preserve jobs. A short-term success, but a long-term mistake. 

Let's see what Intel’s former CEO, Andy Grove, said about this in a Wall Street Journal op-ed, likening the technological revolution that hit the computer industry three decades ago to the one now reshaping the auto industry:

The transformation of an entire industry does not happen very often. It only occurs when a number of factors align, such as a change in consumer demand, a shift of parts of the major supply chain from one country to another, and the emergence of key technological changes…
This is what happened in the computer industry in the 1980s and '90s [when all the mainframe companies were hemorrhaging money]…

Imagine if in the middle of the computer transformation the Reagan administration worried about the upheaval and tried to rescue this vital industry by making huge investments in leading mainframe companies. The purpose of such investments would have been to protect the viability of these companies. The effect, however, would have been to put the brakes on transformation and all but ensure that the U.S. would lose its leadership role…

The PC changed [the industry.] In just a few years, the industry was pulled apart and reassembled…

The government's investment in General Motors might be directly helpful if the auto industry only had the recession to contend with. But that is not the case. The industry faces the confluence of a world-wide recession, rising fuel prices, environmental demands, globalization of manufacturing, and, most importantly, technological change involving the very nature of the automobile…
Electric cars have become viable and will likely only become more capable in the future... Electric cars may match the needs of our time better and become more desirable than cars relying on the internal combustion engine…
The U.S. government is investing in the automobile industry with the intention of preventing jobs from being lost. This may improve GM's ability to operate within today's structure. But there is no comparably large investment being made to develop the capabilities that could serve the company in a new era of electric cars.
China appears to be making a different bet… China is putting a great deal of effort into developing and manufacturing batteries. Essentially, it is betting that it can take the lead in creating the foundation technology of what will likely be the new structure of the auto industry.

One Investment Idea -- Battery Technology

I agree with Grove.  A massive federal investment in developing new battery technology would pay great dividends. One by one, the world's automakers are exploring with varying degrees of enthusiasm all-electric vehicles. But to make them truly practical – not just a second-car option -- a new generation of battery technology is required. The energy density and recharge time of today’s lithium-ion batteries are simply not adequate to allow for widespread replacement of internal combustion autos.
As the owner of an all-electric car (a 2008 Tesla Roadster), I can enthusiastically testify as to the excitement of driving the car -- it accelerates from 0 to 60 miles an hour in 3.9 seconds. But the limited range (200-plus miles if you drive it prudently) creates "range anxiety." That is, as approach its maximum range, you start getting really anxious.  You're not sure just how far you can go before you deplete the battery. And you don’t want to get stranded; there's no quick fill-up at a nearby filling station.  The recharge time from dead battery to fully charged ranges from four hours (with a 220V, 70 amp line) to 40 hours (with a standard 110V line).
We need a massive investment in new battery technology.  Batteries unfortunately are not beneficiaries of Moore’s Law, an observation that over the last five decades semiconductors have doubled their performance every year-and-a-half to two years. We need battery breakthroughs, but if someone is making a massive investment in battery technology, it’s not in this hemisphere.

Another Investment Idea -- A Real High-Speed Rail Program
There is one new infrastructure plan that’s getting a lot of attention right now -- high-speed rail. Indeed, last week the US Department of Transportation announced that it was awarding $8 billion to states across the country “to develop America's first nationwide program of high-speed intercity passenger rail service. The President’s bold vision for high-speed rail is a game changer,” said Transportation Secretary Ray LaHood.
Sound good? It sure does. Until you look at the numbers. It turns out that $8 billion, plus an additional $1 billion per year for five years, is still chump change compared to what's needed and what other countries are doing to create nationwide high-speed rail service. In fact, it’s a number well short of. say, the $17 billion we spend annually on candy.  The paltry size of the proposed new rail program is maddening: it’s big enough to get people excited, but not enough to really make a difference.  And it doesn’t begin to compare with what’s happening elsewhere in the world.
We're all familiar with what's happening abroad. Japan has had its bullet trains for decades. France has the TGV (Train à Grande Vitesse), and similar programs thrive in Germany, Spain, Italy, South Korea and Taiwan. But the real game changer, as with so many other advanced developments, is happening in – you guessed it -- China.
Recently, China leaped ahead of the world by opening the world’s fastest long-distance passenger train service. The Harmony Express covers the nearly 700 miles from Guangzhou to Wuhan in less than three hours, compared with 11 hours previously. By comparison, the fastest American service, the Acela, takes the same time to travel the 225 miles between New York and Washington, D.C.  One-third the distance in the same time.  That’s embarrassing.
But the Harmony is just a harbinger. As Fortune reported last August, China's high-speed rail program calls for 16,000 miles of new track to be installed by the year 2020. Their spending in 2010 alone will be $50 billion. Total program spending will reach hundred of billions of dollars.
The next major link will be between Beijing and Shanghai. Traveling at a peak speed of 220 miles an hour, the train will traverse the 665 miles, including stops, in less than four hours.
Imagine traveling on the ground from New York to Chicago, a comparable distance to Beijing-Shanghai, in less than four hours. No airport hassle, few weather delays, no ramp waits, more civility. And remember this, if you want to get discouraged: Today’s commercial air experience is worse than it has ever been -- but better than it will ever be. Trains, anyone?
Not everyone is enamored of high-speed rail for the United States. Indeed, in an op-ed piece in yesterday’s Wall Street Journal, one critic of high-speed rail claims that it is "driven by little more than a romantic notion to confer a European ambience on American cities." He criticizes the DOT plan for being too ambitious.  (Too ambitious?) And I find it interesting to read through an 834-word essay railing (so to speak) against high-speed rail, yet mentioning nothing about the revolutionary (so to speak) program in China. 
Critics claim rail travel will always be inefficient and costly.  But to compare the economics of old passenger-rail technology to the new high-speed revolution is like comparing internal-engine, propeller-driven aircraft to modern day jets.  High-speed rail will offer new economics and new passenger experience.
Unfortunately, you'll just have to imagine a world-class high-speed rail program in America, because it ain't gonna happen.  Not in my lifetime. Simply put, major infrastructure projects take years or even decades to complete, a period far longer than most politicians' terms of office. The costs of big projects are current, the benefits are in the future. 
Spending a billion or two a year on high-speed rail sounds good, but it will just provide ammunition for the critics. Money will be spent, but nothing dramatic will happen. It’s another attempt to do it on the cheap. Too bad.
It's time for inspired vision. For innovative thinking. For big ideas. And in the United States, not just in China.

Your thoughts on a big new idea?  Just comment below: