At the conclusion of the Punic Wars, Rome found itself with a large swath of territories to rule and exploit whose inhabitants did not fit into the traditional republican paradigm the city had carefully nurtured for several hundred years. What to do? Multi-millionaire senators were eager to step forward as governors of these large territories, thereby reaping massive financial advantage for themselves. The spoils of this system, paid to only a small elite, allowed a tiny number of families to buy most of the land around Rome, while the gentleman farmers of yore were left with naught. The middle class was eradicated; the city became a two-class society, with only a tiny upper class able to afford and therefore to own and control the land, while vast masses of plebeians were left living off the largesse of the state. Traditional Roman values quickly broke down amid the corruption and dictatorship which followed.
Now consider the elite cities of San Francisco, New York, and Boston. All three of these superstar cities have reached a point at which it is impossible for middle-class people to own a house. All three are becoming two-class societies, inhabited only by the ultra-wealthy and those on welfare.
Wall Street's 2006 megabonuses created thousands of instant millionaires, and, with their venture-fund soulmates in places like San Francisco, Boston and Greenwich, the best people are prowling for Ferraris, planes, multimillion-dollar condos, the newest $200 lunch place and the latest in high fashion.
As in ancient Rome, the rapid increase in property values is not mainly the result of productive inhabitants.
In some superstar cities less than 10% of households can afford a median-priced home. Nationally the average is about 50%.
This is good news for those who hold property, but has been less than a blessing for those middle-class families who might want to enter these markets. In some superstar cities less than 10% of households can afford a median-priced home. Nationally the average is about 50%.
Mr. Gyourko traces these surging prices to two basic causes. First, there remains in superstar cities a remarkable concentration of very high-earning families who can bid up real estate. The second factor lies with the regulatory and tax regimes, which greatly limit the production of housing and job opportunities, particularly for middle-income families, not only in the city cores but in surrounding areas.
Our tier-one cities have become exclusive enclaves of the ultra-wealthy, an elite group of rulers like Soros and Chomsky who never encounter and feel no real connection to ordinary middle-class families with ordinary desires to get ahead and prosper themselves. The middle class is fleeing elsewhere.
...the demographic trends are not nearly so promising [for the elite cities]. Over the past decade college-educated workers — who once disproportionately migrated to the superstar cities — now appear to be tilting instead to more affordable, family-friendly places. Since 2000, Riverside, Phoenix, Charlotte, Las Vegas and Dallas all have been among the big net gainers with such migrants. In contrast New York, Boston, L.A. and even the Bay Area, a big winner in the 1990s,
These facts ran through my mind today as I picked up the "Business" section of today's New York Times. I perused the entire section but was completely unable to find a single article which dealt with anything except the entertainment industry(!). Every single article was about theater, television, radio, the movies, or the web-as-entertainment. With only the New York Times to go on, an immigrant Indian could well be forgiven for believing that steel, mining, farming, manufacturing of all sorts, paper-making, oil-drilling, etc. etc. are all activities unknown to Americans. The truth is that such other occupations, being the backbone of the middle class, are increasingly unknown among New Yorkers as well as the denizens of the other elite US cities, but not to Americans as a whole.
Yet the current situation is dangerous, for we are find ourselves suddenly ruled only by these elites, by people who get up in the morning, read their local newspaper, and think that "business" means arts. Barney Frank of Boston, Nancy Pelosi of San Francisco, and Charles Rangel of Manhattan are in charge. Our press and media slavishly follow the lead of the now-provincial New York Times.
In the long run, the power and energy of a free people will move away from the elite cities. It is already happening. Increasing wealth, concentrated in a few places, has led American society to a fundamental fork in the road. If the provincial and shielded ultra-wealthy continue to rule, we are likely to follow the path of ancient Rome, our middle class broken and our traditional values a travesty. The alternative is that the rising power centers of free people bettering their lives in places like Dallas, Minneapolis, Denver, Charlotte, etc. yank the power away. This is the fundamental political conundrum of our age.