Why America will become socialist

[Beet]

Figure 1. Concentration in big cities: Not only an American phenomenon



Well not exactly socialist, but the era of small government conservatism is over. It is simple. The economy has fundamentally changed. The Amazon HQ2 decision has proved this... left to its own devices, the free market will concentrate growth in a few megacities like NY, SF, DC, Seattle.

The rest of the country will start to realize that they are economically screwed in this system, and their influence over the federal government is all they have left. At the extreme, places like West Virginia are the paupers of the new system. Why did West Virginia become so Republican? Because the Democrats stopped protecting the coal industry. Is the free market ever going to rescue West Virginia? No... not in 500 years. Will the government? There is a chance. See, their only hope is via the government. At some point, West Virginia will realize it's two Senate seats are its top economic resource, but if they vote for Senators who oppose government spending, they are only stopping themselves from using it.

Some states will look at their highways, their dams, their universities, their military bases, and realize... wow, the fact that we matter is because at some point long ago in history, the government invested something here. Some railroad or canal came. Some Senator brought home a pork barrel project. Some land grant university was founded. Or some enterprising entrepreneur founded a company at a time when people like them looked for cheap land and labor, whereas now that is over... in the 21st century if you want to found a company you move to where all the other ones are. Economic convergence (much of it New Deal-driven anyway) is over. The 19th century is back.

[dead0man]

You think the future means people are going to start NEW companies in the some of most expensive places in the world to live and work?

[Badger]

You think the future means people are going to start NEW companies in the some of most expensive places in the world to live and work?

It has kind of been the trend, yes. For about a hundred and fifty years now actually

[Slander and/or Libel]

You think the future means people are going to start NEW companies in the some of most expensive places in the world to live and work?

Look at where the big tech companies are putting their new headquarters. They're not choosing to put them in places where they'd have vastly cheaper construction and infrastructure costs, and where they'd certainly be showered with incentives. They're putting them universally in already dense, wealthy areas.

[Fight for Trump]

I consider myself a socialist of sorts.

[Person Man]

You think the future means people are going to start NEW companies in the some of most expensive places in the world to live and work?

You get what you pay for, right?

[dead0man]

You think the future means people are going to start NEW companies in the some of most expensive places in the world to live and work?

It has kind of been the trend, yes. For about a hundred and fifty years now actually

maybe, lets find out.  Lets look at the Fortune 500 at the companies started in the last 150 years and see if you're right.
1.Wal Mart-Rogers AK, not a good start for your argument
2.ExxonMobile-ugg, that ones complicated, if it's close, I'll come back and figure how to judge this one
3.Berkshire Hathaway-this one is complicated too, but Omaha!
4.Apple-I'll give you that one (though Silicon Valley was lot less of a big deal in 1978 than it is today)
5.UnitedHealth Group-ugggg, this is going to be way harder than I thought
6.McKesson Corporation-WTF is a McKesson Corporation?, pharmaceutical company, too old
7.CVS-Lowell MA 1963, I'll give you that one too, but like Apple, it's not a hard one
8.Amazon-Seattle 1995, your best one yet
9.AT&T-not as easy to find as I'd hoped (ie, wiki isn't telling me clearly )
10.GM-Flint, was Detroit one of the most expensive places in the world in 1903?



Yeah, I'm not seeing it.

You think the future means people are going to start NEW companies in the some of most expensive places in the world to live and work?

Look at where the big tech companies are putting their new headquarters. They're not choosing to put them in places where they'd have vastly cheaper construction and infrastructure costs, and where they'd certainly be showered with incentives. They're putting them universally in already dense, wealthy areas.

sure, but I thought this hijack was on where NEW companies were going to start.  Companies started by a group of rich people buying up a bunch of other companies that make things are going to start in "the most expensive places in the world" and already well established companies can open new facilities there too, but the innovators (generally) haven't and I don't see why they would start now.

[Karpatsky]

You think the future means people are going to start NEW companies in the some of most expensive places in the world to live and work?

No ѕhit. The advantages of setting up in areas where there is already economic activity far outweigh the potential extra wage costs needed to offset cost of living:

• Preexisting high concentration of well-educated and potentially industry-experienced people to act as a labor base
• Presence of services and amenities to act as a secondary incentive for needed specialists
• Proximity to secondary services and industries which are relevant to business needs
• Preexistence of a customer base if providing a secondary product
• Tax codes and regulations written with similar organizations in mind
• Increased contact and communication with competitors, ie 'coffeetable spillover effect'
• Preexisting infrastructure & shipping partners to manage transport of raw materials and finished products, if relevant

There's a reason places like Silicon Valley exist, and why few starting a tech company choose to set up in rural WV to avoid those terrible Seattle rents.

[dead0man]

You think the future means people are going to start NEW companies in the some of most expensive places in the world to live and work?

No ѕhit. The advantages of setting up in areas where there is already economic activity far outweigh the potential extra wage costs needed to offset cost of living:

• Preexisting high concentration of well-educated and potentially industry-experienced people to act as a labor base
• Presence of services and amenities to act as a secondary incentive for needed specialists
• Proximity to secondary services and industries which are relevant to business needs
• Preexistence of a customer base if providing a secondary product
• Tax codes and regulations written with similar organizations in mind
• Increased contact and communication with competitors, ie 'coffeetable spillover effect'
• Preexisting infrastructure & shipping partners to manage transport of raw materials and finished products, if relevant

There's a reason places like Silicon Valley exist, and why few starting a tech company choose to set up in rural WV to avoid those terrible Seattle rents.

I'm not saying they will be started in rural WV (or even Rogers Arkansas), I'm saying they'll be started in Des Moines, Austin and Columbus, not lower Manhattan or SF proper.  And I'm talking innovative startups, not from scratch Giant Corporations^TM.


Any more strawmen need to be knocked down? I've got nothing going on this morning.

[Karpatsky]

Since we xposted, I'll respond to this as well - you are taking far too stringent a definition of his argument. The point is not that eventually all economic activity will be concentrated in San Fran, Seattle, and New York, but that the vast majority will be concentrated in left-leaning, urban areas, and that is empirically happening.  The places with the highest startup growth in general these days are essentially exclusively deep blue cities with pop>300,000, for the reasons I described above.

[Karpatsky]

You think the future means people are going to start NEW companies in the some of most expensive places in the world to live and work?

No ѕhit. The advantages of setting up in areas where there is already economic activity far outweigh the potential extra wage costs needed to offset cost of living:

• Preexisting high concentration of well-educated and potentially industry-experienced people to act as a labor base
• Presence of services and amenities to act as a secondary incentive for needed specialists
• Proximity to secondary services and industries which are relevant to business needs
• Preexistence of a customer base if providing a secondary product
• Tax codes and regulations written with similar organizations in mind
• Increased contact and communication with competitors, ie 'coffeetable spillover effect'
• Preexisting infrastructure & shipping partners to manage transport of raw materials and finished products, if relevant

There's a reason places like Silicon Valley exist, and why few starting a tech company choose to set up in rural WV to avoid those terrible Seattle rents.

I'm not saying they will be started in rural WV (or even Rogers Arkansas), I'm saying they'll be started in Des Moines, Austin and Columbus, not lower Manhattan or SF proper.  And I'm talking innovative startups, not from scratch Giant Corporations^TM.


Any more strawmen need to be knocked down? I've got nothing going on this morning.

OK, we did it again - looks like no one in this thread seems to actually disagree with each other. Des Moines, Austin, and Columbus are all quite left-leaning as well.

[Amenhotep Bakari-Sellers]

California and the West Coast are becoming entitlement states. As Latinos are making it such, blacks are moving from midwest as well.

But, Americans do want to use entitlements to better themselves not become dependent

[pbrower2a]

You think the future means people are going to start NEW companies in the some of most expensive places in the world to live and work?

This contradicts the idea that government might even care about places in decline, as in northeastern Pennsylvania. It is easy to understand why administrative offices and marketing or advertising would be concentrated in few places with such activities as warehousing and manufacturing done elsewhere.

[Beet]

You think the future means people are going to start NEW companies in the some of most expensive places in the world to live and work?

It has kind of been the trend, yes. For about a hundred and fifty years now actually

maybe, lets find out.  Lets look at the Fortune 500 at the companies started in the last 150 years and see if you're right.
1.Wal Mart-Rogers AK, not a good start for your argument
2.ExxonMobile-ugg, that ones complicated, if it's close, I'll come back and figure how to judge this one
3.Berkshire Hathaway-this one is complicated too, but Omaha!
4.Apple-I'll give you that one (though Silicon Valley was lot less of a big deal in 1978 than it is today)
5.UnitedHealth Group-ugggg, this is going to be way harder than I thought
6.McKesson Corporation-WTF is a McKesson Corporation?, pharmaceutical company, too old
7.CVS-Lowell MA 1963, I'll give you that one too, but like Apple, it's not a hard one
8.Amazon-Seattle 1995, your best one yet
9.AT&T-not as easy to find as I'd hoped (ie, wiki isn't telling me clearly )
10.GM-Flint, was Detroit one of the most expensive places in the world in 1903?

I am talking about current trends, not the past:

[pbrower2a]

10. Detroit already had much industry when Ford Motor Company came into existence. The auto industry was so big a share of the American economy that much activity developed around it. That includes suppliers and finance (of people buying cars). Detroit was a city with a dense population until the 1950s -- and pricey real estate.

And let's not forget the auto workers as a market. It is telling that the company that pioneered the 'urban' sound has the name "Motown". The Detroit Tigers may have been priced out of Ruth, Gehrig, and DiMaggio, but they had the ticket revenue for Gehringer and Greenberg -- and won the American League title in 1934, 1935, 1940, and 1945. Four league titles in twelve years is impressive. Education? The University of Michigan churned out engineers, many going to the auto industry.

Obviously Detroit and Flint are in serious decline because automobiles are no longer the driving force (pardon the pun) in the American economy. Detroit has gone from one of the more expensive places to live to one of the cheapest. In view of the limited opportunity, the cheapness is no bargain.     

[Indy Texas]

You think the future means people are going to start NEW companies in the some of most expensive places in the world to live and work?

No ѕhit. The advantages of setting up in areas where there is already economic activity far outweigh the potential extra wage costs needed to offset cost of living:

• Preexisting high concentration of well-educated and potentially industry-experienced people to act as a labor base
• Presence of services and amenities to act as a secondary incentive for needed specialists
• Proximity to secondary services and industries which are relevant to business needs
• Preexistence of a customer base if providing a secondary product
• Tax codes and regulations written with similar organizations in mind
• Increased contact and communication with competitors, ie 'coffeetable spillover effect'
• Preexisting infrastructure & shipping partners to manage transport of raw materials and finished products, if relevant

There's a reason places like Silicon Valley exist, and why few starting a tech company choose to set up in rural WV to avoid those terrible Seattle rents.

I'm not saying they will be started in rural WV (or even Rogers Arkansas), I'm saying they'll be started in Des Moines, Austin and Columbus, not lower Manhattan or SF proper.  And I'm talking innovative startups, not from scratch Giant Corporations^TM.


Any more strawmen need to be knocked down? I've got nothing going on this morning.

I don't know what a "from scratch Giant Corporation" is.

Facebook "started" in Cambridge in a dorm room but they moved to San Francisco very quickly because that's where you have to be if you want to be anything in the technology sector.

You could "start" a software company in Des Moines. What are you going to do when you have to hire large numbers of people? The people you want aren't going to want to live in Des Moines. What are you going to do when you need huge capital infusions? The small regional banks in Iowa don't do startup funding; you have to go to California or New York and they're not going to pay attention to some podunk outfit in Iowa - you need to be where they are so they'll take you seriously and because they want to keep an eye on you.

[136or142]

In economics terms, the concept being discussed here is known as the 'Cluster Effect' which is basically the same as 'network externalities' (or network effect, or positive network effect.)

https://en.wikipedia.org/wiki/Network_effect
https://en.wikipedia.org/wiki/Business_cluster#Cluster_effect

This is what Wiki says about the similarity:
The cluster effect is similar to (but not the same as) the network effect. It is similar in the sense that the price-independent preferences of both the market and its participants are based on each one's perception of the other rather than the market simply being the sum of all its participants actions as is usually the case. Thus, by being an effect greater than the sum of its causes, and as it occurs spontaneously, the cluster effect is a usually cited example of emergence.

To which I say: huh?


The United States is not moving into having 'mega cities' but what are referred to as Metropolitan Statistical Areas (MSA) https://en.wikipedia.org/wiki/List_of_metropolitan_statistical_areas.  

That article says that there 383 of them in the United States but that only 53 of them are estimated to have populations of over 1 million.  However, many of them are growing in population (and many quite rapidly.)  So, most likely the U.S will end up with X number of metropolitan statistical areas with vast spaces of near emptiness in between (not all that different from now, just more so.)

In regards to tech, in addition to Austin becoming a growing area for high tech, the 'Research Triangle' in North Carolina has been around for a long time as has Northern Virginia.  There isn't simply one place, and not all jobs are going to be in high tech manufacturing or research.

Raleigh-Cary, NC MSA   1,335,079   1,130,490   +18.10%   Raleigh-Durham-Chapel Hill, NC CSA
Washington-Arlington-Alexandria, DC-VA-MD-WV MSA   6,216,589   5,636,232   +10.30%   Washington-Baltimore-Arlington, DC-MD-VA-WV-PA CSA
Austin-Round Rock, TX MSA   2,115,827   1,716,289   +23.28%   
(San Antonio is included in a separate MSA which is also rapidly growing.)
San Antonio-New Braunfels, TX MSA   2,473,974   2,142,508   +15.47%

The first number is the 2010 census, the second number is the estimated population as of 2017.

Given, for instance, the proximity of Austin to San Antonio, I would expect that these MSAs will also start merging together.

So, this leads to the countering economic idea that 'everything finds its own equilibrium.'  If there are too many people living in an area, not only the high land costs for the company is a problem, but so is the high congestion and the rent costs for the workers.  The basic problem is when the workers can't afford to live in an area.   I think it's akin to the Yogi Bera line "the restaurant is so crowded, nobody goes there anymore."

This is what the wiki article on the cluster effect says: In the case of Silicon Valley as stated above for example, increased crowding in the valley led to severe shortage of office and residential space which in turn forced many companies to move to alternative locations such as Austin, Texas and Raleigh-Durham, North Carolina even though they would have liked to stay in the valley.


Of course, this doesn't help West Virginia, but then, there have always been growing industries and dying industries, and I don't particularly see the collapse of the coal industry as all that directly related to the increase in High Tech.

[136or142]

More on the cluster effect: The term business cluster, also known as an industry cluster, competitive cluster, or Porterian cluster, was introduced and popularized by Michael Porter in The Competitive Advantage of Nations (1990).[5] The importance of economic geography, or more correctly geographical economics, was also brought to attention by Paul Krugman in Geography and Trade (1991).[6] Cluster development has since become a focus for many government programs. The underlying concept, which economists have referred to as agglomeration economies, dates back to 1890, and the work of Alfred Marshall.

I remember Michael Porter back around 1990.  He was commissioned to do a report for the Government of Canada in the early 1990s when much of the country was in a severe recession (it was much worse than the U.S recession at the same time.)  Not surprisingly he recommended that Canada invest in areas in order to develop clusters, and I believe the general reply from the 'elite opinion' at the time was 'that sounds like government picking winners rather than letting free markets decide.'

Canada has generally done well economically since the early 1990s, but it seems to me that the ability of governments to play a positive role in the economy should not be so quickly dismissed on the basis of simplistic ideology.

[136or142]

You think the future means people are going to start NEW companies in the some of most expensive places in the world to live and work?

No ѕhit. The advantages of setting up in areas where there is already economic activity far outweigh the potential extra wage costs needed to offset cost of living:

• Preexisting high concentration of well-educated and potentially industry-experienced people to act as a labor base
• Presence of services and amenities to act as a secondary incentive for needed specialists
• Proximity to secondary services and industries which are relevant to business needs
• Preexistence of a customer base if providing a secondary product
• Tax codes and regulations written with similar organizations in mind
• Increased contact and communication with competitors, ie 'coffeetable spillover effect'
• Preexisting infrastructure & shipping partners to manage transport of raw materials and finished products, if relevant

There's a reason places like Silicon Valley exist, and why few starting a tech company choose to set up in rural WV to avoid those terrible Seattle rents.

I'm not saying they will be started in rural WV (or even Rogers Arkansas), I'm saying they'll be started in Des Moines, Austin and Columbus, not lower Manhattan or SF proper.  And I'm talking innovative startups, not from scratch Giant Corporations^TM.


Any more strawmen need to be knocked down? I've got nothing going on this morning.

I don't know what a "from scratch Giant Corporation" is.

Facebook "started" in Cambridge in a dorm room but they moved to San Francisco very quickly because that's where you have to be if you want to be anything in the technology sector.

You could "start" a software company in Des Moines. What are you going to do when you have to hire large numbers of people? The people you want aren't going to want to live in Des Moines. What are you going to do when you need huge capital infusions? The small regional banks in Iowa don't do startup funding; you have to go to California or New York and they're not going to pay attention to some podunk outfit in Iowa - you need to be where they are so they'll take you seriously and because they want to keep an eye on you.

Bank of America is the 9th largest bank in the world based on total assets and it has multiple branches in Iowa.

[Famous Mortimer]

America will become socialist. The question is whether it will be Swedish style socialism or Venezuelan style socialism. It depends on if we stop taking in endless free riders sooner or later (probably later, so we'll end up with Venezuela).

[Statilius the Epicurean]

Same thing is happening in the UK as well: London and the surrounding area is sucking up all economic growth due to its pre-existing competitive advantage.

Excellent book about it here: https://www.amazon.co.uk/New-Geography-Jobs-Barack-Discussion/dp/0544028058

This thread is right that this trend will drive the political economy of the 21st century, and in fact is already doing so.

[136or142]

Same thing is happening in the UK as well: London and the surrounding area is sucking up all economic growth due to its pre-existing competitive advantage.

Excellent book about it here: https://www.amazon.co.uk/New-Geography-Jobs-Barack-Discussion/dp/0544028058

This thread is right that this trend will drive the political economy of the 21st century, and in fact is already doing so.

Metro London has a population of 14 million while the U.K has a population of 66 million.  So, Metro London is more than 20% of the population.  In contrast, the largest metro Area in the U.S, New York City, has a population of around 20 million, but it's only around 7% of the entire U.S population.  So, no one individual metropolitan area is going to dominate in the U.S in the same way as London can do so in the U.K.

[Statilius the Epicurean]

Same thing is happening in the UK as well: London and the surrounding area is sucking up all economic growth due to its pre-existing competitive advantage.

Excellent book about it here: https://www.amazon.co.uk/New-Geography-Jobs-Barack-Discussion/dp/0544028058

This thread is right that this trend will drive the political economy of the 21st century, and in fact is already doing so.

Metro London has a population of 14 million while the U.K has a population of 66 million.  So, Metro London is more than 20% of the population.  In contrast, the largest metro Area in the U.S, New York City, has a population of around 20 million, but it's only around 7% of the entire U.S population.  So, no one individual metropolitan area is going to dominate in the U.S in the same way as London can do so in the U.K.

Okay? I wasn't saying that would happen in the US. And either way, this doesn't help rural and post-industral areas.

[136or142]

Same thing is happening in the UK as well: London and the surrounding area is sucking up all economic growth due to its pre-existing competitive advantage.

Excellent book about it here: https://www.amazon.co.uk/New-Geography-Jobs-Barack-Discussion/dp/0544028058

This thread is right that this trend will drive the political economy of the 21st century, and in fact is already doing so.

Metro London has a population of 14 million while the U.K has a population of 66 million.  So, Metro London is more than 20% of the population.  In contrast, the largest metro Area in the U.S, New York City, has a population of around 20 million, but it's only around 7% of the entire U.S population.  So, no one individual metropolitan area is going to dominate in the U.S in the same way as London can do so in the U.K.

Okay? I wasn't saying that would happen in the US. And either way, this doesn't help rural and post-industral areas.

No, it doesn't.  I was discussing this with another person just yesterday in a different board.  Ever heard of Ghost Towns before? 

The problem is that people in these areas (at least in the U.S) have become wedded to 'place' but not necessarily because they don't want to move but because they at least have a place to live.  Their only asset is their property, but because of the lack of economic activity, their property is worthless (or close to.) 

So, what to do?  You can
1.Try and help redevelop the area
2.Try and help the people in the area by providing them assistance to relocate and retrain.
3.Say 'not my problem, everybody is on their own.'

I think the second is the most practical and the most compassionate (though keeping in mind the idea of equilibrium which suggests a balance of some sort between the first and second ideas), but obviously it has problems as well as many of the people who live in these towns are 40+ years of age and won't easily be hired due solely to their age.