HSR and Economic Expansion
We’re used to the claims from HSR deniers and critics that HSR’s costs are too high to be justified. These folks think nothing of dismissing the hundreds of thousands of jobs that the system would create. Their argument, a deflationary and Hooverist argument, has been that we should not spend the $40 billion or so it takes to get Phase I of California HSR built from SF to LA and Anaheim, no matter the costs of having to expand airports and freeways to handle the demand, no matter the long-term increases in oil prices.
We have been battling these arguments with a great deal of success ever since this blog launched nearly 2 years ago. But now we are armed with a powerful new tool to help explain just how HSR will help improve our economy. The Martin Prosperity Institute based at the University of Toronto, headed by Richard Florida, a renowned scholar of the 21st century economy, has a new study out showing the impact of HSR on the economy. Their argument is it brings “expanded opportunities and reduced costs” to regional economies. It will likely be dismissed by those who believe the status quo works just fine, but for the rest of us who understand that change is already under way, it is a big boost to our claims that HSR is essential to California’s future prosperity.
The study grew out of the Martin Prosperity Institute’s examination of proposed Canadian HSR projects, but is broadly applicable to North America as a whole, as the authors explain:
Economic history is replete with evidence of forward-thinking infrastructure investments that could not be justified by the evaluation tools of their time but ultimately proved transformative to the economic system. The Trans-Canada railway, the U.S. Interstate Highway System, and ARPANET (precursor to the Internet) all fall into this category. The new paper argues that high-speed rail infrastructure has the potential to have the same sort of transformative effect.
Their point is powerful: the current “evaluation tools” we have are designed for a late 20th century economy where the price of oil is dirt-cheap and the overriding imperative is to fuel a series of asset bubbles to allow the financial economy to grow rapidly. Edward Glaeser’s thoroughly discredited attack on HSR is a good example of how 20th century tools that are now obsolete don’t provide a full picture of HSR’s benefits.
So what are those benefits?
First, it expands the labour pool available to employers, bringing talented workers from nearby centres within commuting distance and thus expanding the quantity and quality of available employees. So, for example, high-speed rail would enable a company in Toronto looking for a mobile user-interface designer to draw on talent living in Kitchener-Waterloo, London, and Kingston. In economic terms, an effective transportation system improves productivity because it helps allocate labour inputs more effectively.
Or, translated to California, HSR would enable a company in San José to draw on talent living in Fresno, Burbank, or Orange County. Some might argue that we’ll all just telecommute and there’ll be no need for face-to-face meetings ever again, but as someone who actually telecommutes for a living, I can assure you that it absolutely does not replace face-to-face meetings. The latter will always be an important part of the business world. Always. You cannot build meaningful collaborative relationships without somewhat regular in-person meetings. And many companies still prefer to have their employees under one roof in order to achieve better working relationships and outcomes.
Second, high-speed rail expands the size of the job market available to workers. Because it increases the distance that commuters can travel for work, it allows them to seek employment across what were once multiple, separate labour markets. This is particularly important in an era when self-employment, contract-oriented work, and part-time work are all rising, meaning that workers are searching for jobs more frequently than ever. Eliminating the need to move to a new home to follow economic opportunity saves significant financial and social costs.
This is extremely important, and is totally ignored by those financially secure people on the Peninsula who have the luxury to whine about a perceived (and unlikely) hit to their property values while many of their neighbors and fellow Californians struggle to keep their homes and put food on the table.
The economy of 21st century California will require much greater flexibility from workers. People living in the Bay Area will start to need to consider working for SoCal-based employers and vice-versa. Richard Florida’s upcoming book, The Great Reset, argues that the current economic crisis is totally reshaping the economic geography of the United States. The outcome of the Great Recession will be the establishment of new labor markets that are comprised of multiple nearby metropolitan areas, and that only a few of these regions will thrive in the first decades of the 21st century, whereas others will wither.
In the second half of the 20th century freeways, and rail systems like BART, helped take job markets that were highly localized in nature – San Francisco, Oakland, Richmond, etc – and knit them into a “Bay Area” that had not just a regional identity but a genuinely regional labor market.
Florida’s argument, reflected in the Martin Prosperity Institute study, is that this is already happening again, just on a larger scale. The Bay Area, the Central Valley, and Southern California will become a “megaregion” encompassing 80% of the state’s population. If that megaregion is to fulfill its potential and compete not only with other megaregions on the continent already served by effective intercity passenger rail (the Northeast Corridor), but with other megaregions around the globe served by HSR (Iberia, France, Benelux, eastern China), it needs to be able to move workers within the region as affordably and efficiently as possible.
Those needs cannot be served by our current infrastructure. Airlines are already struggling under the weight of rising oil prices and a security theater of the absurd. HSR is the only way to combine speedy travel with affordable travel, especially in an era of steadily rising oil prices. Just as the transcontinental railroads made California’s agricultural industry possible, as the Panama Canal helped make our manufacturing industry possible, as the interstate freeways helped make our late 20th century jobs possible, and as ARPANET and other defense-funded research at places like Stanford helped make Silicon Valley possible, HSR will make 21st century prosperity possible.
The study adds a third point:
Third, faster connections extend the benefits of other expensive, productivity-enhancing infrastructure across the entire mega-region. International airports, major research universities and reference libraries are all more financially viable and internationally competitive when they serve a larger population. High-speed rail allows them to build the scale they need to achieve world-class excellence and also spreads their high costs across a wider population.
If you ever wondered why SFO is a big backer of HSR, there’s an answer. But more importantly, that’s also a big part of the reason why local chambers of commerce in the Bay Area, the Central Valley, and Southern California support HSR, along with organizations comprised of large corporations such as the Bay Area Council (which 60 years ago played the key role in getting BART off the ground) and the Silicon Valley Leadership Group.
HSR would make it easier for students to attend UC Berkeley, UCLA, Stanford, USC, and other key institutions by making commuting a viable option (living on campus is an unbeatable but costly experience). Other institutions that are or will fuel economic growth in the 21st century will be renewed by being able to draw upon a far larger pool of users and talent.
One thing the study summary doesn’t explain is the benefits to entrepreneurs and creative innovators in existing economic powerhouses of being able to quickly access cheaper land and space. Let’s say you work in Silicon Valley and have some interesting new ideas for some green technology – but finding the space to set up your business is tough since rents are so high in the Bay Area’s urban core.
HSR gives you a solution – go find some cheap place out in Fresno and set up there. Commute the hour or so out there to work and then back home to Santa Clara County.
It works in reverse. As we saw in the 2000s, places like Stockton and Modesto became home to Bay Area commuters priced out of the nine-county market. This was a totally unsustainable situation, and once commute costs rose too high, the housing bubble collapsed and turned the San Joaquin Valley into California’s Detroit. But HSR will make those cities viable again as commuter suburbs – and will mitigate against sprawl, since physical proximity to a station will become of paramount importance.
In short, there are many reasons to believe that HSR is vital to California’s economic future. Yet it faces opposition from the forces who defend a failed status quo.
Nearly every single one of the Peninsula NIMBYs, for example, are people who have benefited financially from the late 20th century. I have no objection to that in principle. But they are now feeling threatened by the emergence of a 21st century economy and the infrastructure needed to support it. So their reaction is to try and strangle that economic growth in the crib by preventing the infrastructure from getting built.
It is a reactive, short-term, and delusional strategy. They’ll eventually be taken under by the collapse of the 20th century model as the rest of us already have been. But because they retain some prosperity, they believe preserving it is the highest priority. They think that because it’s their property values which are (mistakenly) assumed to be threatened, they can generate sympathy from enough political forces to help kill HSR.
What they don’t understand, in their myopic belief that there’s nothing at all wrong with the status quo, is that the failed status quo is threatening a whole lot more people. And that many, MANY more Californians see HSR as a way to help grow the economy for the coming decades. Californians aren’t interested in bailing out and propping up those who are doing just fine during this recession. They want to help put people back to work, and produce a state that is globally competitive, free from dependence on soaring oil prices, and that can innovate our way into leading the sustainable technologies of this century rather than relying on the unsustainable technologies of the last century.
In short, while the NIMBYs believe their economic self-interest is powerful, our economic self-interest is FAR more powerful. They are merely defending what they’ve already got. The rest of California is fighting for its future, for its ability to keep its head above water, for its ability to compete nationally and globally.
That is why we fight for HSR. That is why we reject the inherently elitist arguments of the HSR opponents and critics. And that is why we will ultimately prevail and build a 21st century California where prosperity is shared by the many, rather than hoarded by the few.