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Wall Street Journal

 

The Curse of the Creative Class

January 19, 2004

By Steven Malanga

Providence, R.I., is so worried that it doesn't appeal to hip, young technology workers that local economic-development officials are urging a campaign to make the city the nation's capital of independent rock music. In Pittsburgh, another place that fears it lacks appeal among talented young people, officials want to build bike paths and outdoor hiking trails to make the city a magnet for creative workers. Meanwhile, a Memphis economic-development group is pressing that city to hold "celebrations of diversity" to attract more gays and minorities, in order—in their view—to bolster the local economy.

If you think these efforts represent some fringe of economic development, think again. All of these cities have been inspired by the theories of Richard Florida, a Carnegie Mellon professor whose notion that cities must become trendy, happening places in order to compete in the 21st-century economy is sweeping urban America. In his popular book "The Rise of the Creative Class," which just appeared in paperback after going through multiple hardcover editions, Mr. Florida argues that cities that attract gays, bohemians and ethnic minorities are the new economic powerhouses because they are also the places where creative workers—the kind who start and staff innovative, fast-growing companies—want to live. To lure this work force, Mr. Florida argues, cities must dispense with stuffy old theories of economic development—like the notion that low taxes are what draw in companies and workers—and instead must spend heavily on cultural amenities and pursue progressive social legislation.

A generation of leftish policy makers and urban planners are rushing to implement Mr. Florida's vision, while an admiring host of uncritical journalists tout it. But there is just one problem: The basic economics behind his ideas don't work. Far from being economic powerhouses, several of the cities the professor identifies as creative-age winners have chronically underperformed the American economy. And, although Mr. Florida is fond of saying that today "place matters" in attracting workers and business, some of his top creative cities don't even do a particularly good job at attracting—or keeping—residents. Before the rest of urban America embraces the Pittsburgh professor's trendy nostrums, let's take a closer look at them in practice.

Richard Florida's work first began attracting attention because he sought to explain what new-economy workers and their companies valued to a generation of urban politicians and policy wonks baffled by the late-1990s tech boom. Many municipal officials during those heady years suddenly found their cities populated with youthful entrepreneurs whose new companies had struck it rich in the stock market or with venture capitalists. These Internet kids, largely playing with other people's money, sought to move their hot businesses into cool neighborhoods with architecturally rich traditions, where they installed basketball courts in their new offices, held meetings with their dogs prancing about, and hired young, single workers like themselves, who worried more about a city's music scene than its personal income—tax rates.

Mr. Florida, who started his career as an academic economist writing dry treatises on industrial production, began contemplating this world when Carnegie Mellon enlisted him to help Pittsburgh attract and retain more educated workers and high-tech firms. He observed in the mid-1990s that cities reputed to be cool, "in" places seemed to be incubating many of the hottest new technology companies, and he began to wonder if, in the jargon of academia, some new paradigm was emerging, based on the "lifestyle choices" of a new generation of workers.

In 1998, he met a Carnegie Mellon graduate student, Gary Gates, who was tracking U.S. gay communities using Census Bureau statistics on unmarried same-sex households. In what he describes as a major revelation, Mr. Florida noticed that Mr. Gates's list of America's most gay-friendly cities closely matched his list of hip technology centers. Looking for other ways to measure the distinguishing characteristics of the new-economy cities, Mr. Florida developed a so-called Bohemian Index, which counted the number of artists, writers and performers in a city. He added a Creative Class Index to measure a city's concentration of knowledge workers—scientists, engineers, professors, think-tank employees. Each index, Mr. Florida was stunned to find, correlated highly with the other indexes. Cities with many gays were also places with lots of performers, creative workers and tech companies.

At this point, Mr. Florida made two big—and dubious—leaps in logic. First, he assumed that there was some causal connection linking all of these indexes to economic growth. Then he decided he could infer just what it was about these cities that helped power this growth. He concluded that in the new economic order, the engine of growth wasn't individual companies but, rather, creative workers, who came to live in cities they admired and then started their own firms or attracted businesses seeking educated workers. What enticed these workers, the professor concluded with very little evidence, was that the cities were "tolerant, diverse and open to creativity."

Mr. Forida found a ready audience for his ideas on the lecture circuit, then refined and expanded them in "The Rise of the Creative Class," which reads more like a pop cultural and social history of the Internet generation than an economic-development treatise. Sprinkled with references to Baudelaire, Bob Dylan, T.S. Eliot and Isaac Newton, the book is largely a recounting of the 1990s technology explosion, with chapters devoted to such already-familiar subjects as the casual dress revolution ("The No-Collar Workplace") and the tendency of young tech workers to toil long hours ("The Time Warp"). Eager to demonstrate that he is as hip as the people he writes about, Mr. Florida describes talented young software engineers as rock stars, labels one of his chapters "a rant," and approvingly describes a business conference where attendees were issued Wiffle Balls to pelt speakers with whom they disagreed.

While much of "The Rise of the Creative Class" is little more than Mr. Florida's depiction of the Internet bubble's go-go culture, the last third of the book offers urban policy makers a seemingly dazzling new economic-development agenda derived from these observations. To capitalize on the hot new economy, Mr. Florida tells policy makers, they must reach out to the creative class, whose interests are different from those of the buttoned-down families that cities traditionally try to attract through good schools and low taxes. The new creative class craves a vibrant nightlife, outdoor sports facilities and neighborhoods vibrant with street performers, unique shops and chic cafes.

In Mr. Florida's universe, the number of local bands on the pop charts becomes more important to the economy than tax codes. "It is hard to think of a major high-tech region that doesn't have a distinct audio identity," Mr. Florida writes, sounding more like a rock critic than an economics prof. Creative workers want to live and work in "authentic" neighborhoods of historic buildings, not areas that are "full of chain stores, chain restaurants and nightclubs," he asserts. Accordingly, cities should stop approving expansive new condo developments on their outer boundaries and instead focus on retooling former warehouse and factory districts.

It isn't all rock music, antique architecture and snowboarding, however. Workers also seek enlightened communities and employers who encourage differences. In focus groups, Mr. Florida says, young knowledge workers say that they are drawn to places "known for diversity of thought and open-mindedness." For example, young heterosexual workers tell Mr. Florida that they seek out companies that offer domestic-partner benefits, not because they plan to use them, but because such benefits signal that the company practices the kind of tolerance they approve of.

According to Mr. Florida, the winners in an age that values these attributes include gay-friendly San Francisco, laid-back Austin, multiculti New York and progressive Minneapolis. Mr. Florida advises leaders of cities trying to emulate this group to ensure that their towns remain "open to diversity" by promoting laws that creative types see as welcoming while guarding against social legislation that makes their cities seem less tolerant. (Although the professor isn't explicit in his book about what kinds of laws attract the creative class, last summer he told a Canadian newspaper that "the legalization of gay marriage is one of the great talent attraction packages of the last hundred years.") Political leaders should also invest in "lifestyle amenities," like bike paths (an obsession of Mr. Florida's) and running and roller-blading trails. Cities should follow the example of Austin, where public television features live music festivals, and where city leaders require companies that want to expand downtown to contribute to an arts-and-culture fund.

Following this prescription, Mr. Florida tells us, there's hope for any city, even his decidedly unhip hometown. Under the professor's spell, Pittsburgh is working on becoming a creative talent magnet. One sure sign that its prospects are brightening, Mr. Florida tells us: the Showtime cable network chose the city as the location for the series "Queer as Folk." Can prosperity be far behind?

It's not hard to see why Mr. Florida's ideas would have wide appeal. His book has struck a chord among a generation of young, tech-oriented workers and entrepreneurs—the Fast Company magazine crowd that Mr. Florida is writing about—because rather than bash their go-go, Silicon Valley culture, as critics from both the left and the right have done for different reasons, Mr. Florida celebrates it.

"The Rise of the Creative Class" also appeals to a broader group of young, educated workers, who, as David Brooks describes in "Bobos in Paradise," have managed to combine two traditions that had previously been at odds—the bourgeois work ethic with bohemian culture—into something new, which Mr. Florida calls his "creative class." To such people, work offers spiritual as well as economic gratification. They may come to the office dressed in jeans and sneakers, but they happily work 12-hour days, view their co-workers as close friends, and look to their jobs for a sense of personal fulfillment, growth and even identity. Unlike Mr. Brooks, who gently satirizes these bobos, Mr. Florida regards them as a powerful and admirable new capitalist class that state and local policy makers should court enthusiastically.

Mr. Florida's ideas also spark enthusiasm among the advocates of public funding of cultural institutions and the arts. Mr. Florida gives them a rationale for ever more government support. Iowa's director of cultural affairs, Anita Walker, spouts pure Floridese when she declares, "Culture is no longer a frill. It is [economic] fuel."

But most important, to a generation of liberal urban policy makers and politicians who favor big government, Mr. Florida's ideas offer a way to talk economic-development talk while walking the familiar big-spending walk. In the old rhetorical paradigm, left-wing politicians often paid little heed to what mainstream businesses—those that create the bulk of jobs—wanted or needed, except when individual firms threatened to leave town, at which point municipal officials might grudgingly offer tax incentives. The business community was otherwise a giant cash register to be tapped for public revenues--an approach that sparked a steady drain of businesses and jobs out of the big cities once technology freed them from the necessity of staying there.

Now comes Mr. Florida with the equivalent of an eat-all-you-want-and-still-lose-weight diet. Yes, you can create needed revenue-generating jobs without having to take the unpalatable measures—shrinking government and cutting taxes—that appeal to old-economy businessmen, the kind with starched shirts and lodge pins in their lapels. You can bypass all that and go straight to the new economy, where the future is happening now. You can draw in Mr. Florida's creative-class capitalists—ponytails, jeans, rock music and all—by liberal, big-government means: diversity celebrations, "progressive" social legislation and government spending on cultural amenities. Put another way, Mr. Florida's ideas are breathing new life into an old argument: that taxes, incentives and business-friendly policies are less important in attracting jobs than social legislation and government-provided amenities. After all, if New York can flourish with its high tax rates, and Austin can boom with its heavy regulatory environment and limits on development, any city can thrive in the new economy.

Armed with such notions, cities across North America, Europe and as far afield as New Zealand are rushing to implement the professor's ideas. Cincinnati, its image battered by race riots just two years ago, is in the process of being Floridized: It invested $1.3 million in the requisite bike path and in a recreation area stretching from downtown to the airport, and it has put another $2.2 million into a cultural fund, which it plans to invest in "edgy" arts groups in an effort to create a bohemian "street culture." Among its grants: $40,000 to a local blues music society. Supporters of a Florida-inspired group, Cincinnati Tomorrow, are also lobbying to overturn legislation, spearheaded by local black churches, that opponents say makes the city less gay-friendly.

Despite a budget deficit, the state of Iowa has put aside tens of millions of dollars for a cultural/economic plan, including $45 million for "community attractions," ranging from hiking trails to entertainment districts, in the state. Advocates of Mr. Florida's ideas in Iowa managed to win the money even though, as a sympathetic state legislator recounts, "we have a hard time convincing rural legislators that arts and culture are key to future economic growth." One can just imagine that conversation.

Austin, already one of the winners in Mr. Florida's world, is working hard to keep its edge. The city sets aside taxes on hotel rooms and car rentals to support local artists. A City Council economic-development subcommittee has adopted the slogan "Keep Austin Weird" to emphasize its belief that support for offbeat culture is essential to the city's economic future. One defining assertion of that conviction, as Mr. Florida approvingly reports, is that Austin has erected—right smack in the midst of its downtown jogging trail—a bronze statue honoring not Sam Houston or Jim Bowie, but rock guitarist Stevie Ray Vaughan.

Mr. Florida's ideas are making headway in Canada, too. Glen Murray, mayor of Winnipeg, Manitoba, who recently delivered a stirring keynote address at a creative-class conference in Toronto, nearly doubled arts spending, despite the city's tight budget and complaints from businesses and residents about high taxes and inadequate basic services. Responding to critics of proposed tax increases to pay for his nostrums, Mr. Murray recently said in pure Floridese: "What kills a city are people who want only low taxes, only want a good deal and only want cities to be about . . . pipes, pavement and policing."

But cities rushing to embrace Mr. Florida's ideas have based their strategies more on wishful thinking than clear-eyed analysis. Neither the professor nor his most ardent adherents seem worried that the Internet generation formed its eccentric capitalist culture during a speculative bubble, when billions of dollars of free-flowing investment capital gave workers and their bosses the freedom to ignore basic economic concerns, and that now, with that money vanished and many companies defunct, a focus on such old-economy ideas as profits and tax rates has re-emerged.

Moreover, as Mr. Florida's ideas reach beyond urban-planning types and New Age liberal politicians, they are at some point likely to find resistance from the hard-core urban left, composed increasingly of social-services activists and representatives of public-employee and service-industry unions, who demand ever more government spending for social programs, not art and culture. Indeed, the professor's relentless argument that governments should help furnish bobo-friendly amenities ultimately comes to sound like a new form of class warfare: old-economy workers have no place in his utopian dreams.

A far more serious—indeed, fatal—objection to Mr. Florida's theories is that the economics behind them don't work. Although his book bristles with charts and statistics showing how he constructed his various indexes and where cities rank on them, the professor, incredibly, doesn't provide any data demonstrating that his creative cities actually have vibrant economies that perform well over time. A look at even the most simple economic indicators, in fact, shows that, far from being economic powerhouses, many of Mr. Florida's favored cities are chronic underperformers.

Exhibit A is the most fundamental economic measure, job growth. The professor's creative index—a composite of his other indexes—lists San Francisco, Austin, Houston and San Diego among the top 10. His bottom ten include New Orleans, Las Vegas, Memphis and Oklahoma City, which he says are "stuck in paradigms of old economic development" and are losing their "economic dynamism" to his winners. So you'd expect his winners to be big job producers.

Yet since 1993, cities that score the best on Mr. Florida's analysis have actually grown no faster than the overall U.S. jobs economy, increasing their employment base by only slightly more than 17%. Mr. Florida's indexes, in fact, are such poor predictors of economic performance that his top cities haven't even outperformed his bottom ones. Led by big percentage gains in Las Vegas (the fastest-growing local economy in the nation) as well as in Oklahoma City and Memphis, Mr. Florida's 10 least creative cities turn out to be jobs powerhouses, adding more than 19% to their job totals since 1993—faster growth even than the national economy.

Mr. Florida's 10 most creative midsized cities are even less impressive economic engines. Since 1993 these cities, which include such underperformers as Albany, N.Y., and Dayton, Ohio, have increased their job totals by about 16%—less than the national average.

But Mr. Florida rarely lets basic economic data get in the way of his theories. Since the Internet meltdown, for instance, he has said that, although some of his most creative cities don't seem to be doing very well these days, their performance shouldn't be viewed so narrowly. "These places have been growing for decades building solid new industries that have helped to strengthen our economy," he writes. But this simply isn't true. Jobs data going back 20 years, to 1983, show that Mr. Florida's top 10 cities as a group actually do worse, lagging behind the national economy by several percentage points, while his so-called least creative cities continue to look like jobs powerhouses, expanding 60% faster than his most creative cities during that same period. None of this is surprising; given that many of Mr. Florida's most creative cities are so tech-oriented, the further back one looks, to the days before the tech boom, the less impressive their performance is likely to be. In fact, the economics of Mr. Florida's theories look good only if you take a snapshot of the numbers in a narrow time range—just before the Internet bubble burst.

It's no mystery why the numbers turn out this way. Mr. Florida's basket of indexes selects cities that participated in that bubble. The professor focused on these cities in developing his theories; it was their characteristics that he sought to identify when he constructed his various creativity indexes, so it's predictable that they wound up scoring highest. Mr. Florida's entire theory, in other words, is based on circular logic.

Jobs don't tell the whole story. Mr. Florida likes to talk about his most creative cities as centers of innovation, and, based on his writings, one would assume that these cities would be home to thousands of fast-growing companies.

But many are not. In fact, according to one recent independent study of entrepreneurship in America, Mr. Florida's most creative cities are no more likely to be powerful incubators of fast-growing businesses than those at the bottom of his rankings.

In 2001, a National Commission on Entrepreneurship study entitled "Mapping America's Entrepreneurial Landscape" ranked U.S. cities on how well they hatch high-growth companies. Unlike Mr. Florida, the commission developed a precise method of measuring high-growth centers: It calculated the percentage of companies in a local economy that grew by 15% a year for five consecutive years in the mid-1990s. Unlike Mr. Florida's anecdotal observations of places where he assumes that plenty of entrepreneurial activity is taking place, the commission's numbers-oriented approach precisely charts America's entrepreneurial topography. Unexpectedly, the study concludes that "most fast-growing, entrepreneurial companies are not in high tech industries," but rather "widely distributed across all industries."

Among major cities, Detroit—omitted from Mr. Florida's most creative cities—finished second in the commission's report, incubating about 50% more fast-growing companies than the average of all major cities, with a particular strength in nurturing high-growth manufacturing businesses. By contrast, New York, which is among Mr. Florida's most creative big cities, finished at the bottom of the commission's study, producing fast-growing companies at less than half the rate of all big cities. The results were much the same for midsize cities. While Florida-favorite Austin scored well, finishing No. 1 among midsize cities, Las Vegas also shone, coming in second, despite ranking as one of Mr. Florida's least creative cities. Other inconsistencies abound. San Diego, perennially one of Mr. Florida's top-ranked cities, scores way below average in producing fast-growing companies, while Grand Rapids, Mich., one of Mr. Florida's least creative cities, was well above average. The study demonstrates how Mr. Florida's theories aren't even good at predicting the most fundamental measure of entrepreneurship.

If Mr. Florida's cities can't produce jobs or high-growth companies at a rapid rate, you would think they would at least do a good job of attracting and retaining people, given the professor's notion of the importance of place in the new economy, as a magnet not just for the talented but for residents of all kinds. But Mr. Florida is wrong again. Many of his "talent magnets" are among the worst at attracting and, more important, hanging on to residents. Just look at the 2000 census reports on domestic migration, which follow the movements in and out of metro areas by U.S. residents. That report found that New York, among Mr. Florida's top talent magnets, lost 545,000 more U.S. residents than it gained in the latter half of the 1990s, the worst performance of any U.S. city. The greater San Francisco metro area was close behind, with a negative domestic migration of more than 200,000 people. In fact, five of the 10 places atop Mr. Florida's creativity index had steep losses of U.S. residents during that period, while some of Mr. Florida's creative losers—including Las Vegas, Memphis and Tampa—were big winners.

The only thing that keeps some of Mr. Florida's "ideal" cities from population loss is that they attract large numbers of foreign immigrants, who replace fleeing U.S. citizens. But cities that operate this way can hardly be called talent magnets or economic engines, because the U.S. residents they lose are, by and large, better educated and wealthier than the immigrants they attract. To illustrate: An Empire Foundation study of New York City's out-migration during the mid-1990s found that those leaving Manhattan earned, on average, about $60,000 a year, while studies of Internal Revenue Service data have shown that foreign immigrants who move into New York typically earn just $25,000 their first year there, which puts them among the city's lowest 25% of earners.

It's no coincidence that some of Mr. Florida's urban exemplars perform so unimpressively on these basic measures of growth. As Mr. Florida tells us repeatedly, these cities spend money on cultural amenities and other frills, paid for by high taxes, while restricting growth through heavy regulation. Despite Mr. Florida's notion of a new order in economic development, the data make crystal-clear that such policies aren't people- or business-friendly. The 2000 census figures on out-migration, for instance, show that states with the greatest loss of U.S. citizens in 1996 through 2000—in other words, the go-go years—have among the highest tax rates and are the biggest spenders, while those that did the best job of attracting and retaining people have among the lowest tax rates. A study of 1990 census data by the Cato Institute's Stephen Moore found much the same thing for cities. Among large cities, those that lost the most population over a ten-year period were the highest-taxing, biggest-spending cities in America, with per capita taxes 75% higher than the fastest-growing cities. Given those figures, maybe Mr. Florida should have called his book "The Curse of the Creative Class."

The city that sits at the pinnacle of Mr. Florida's list, often jokingly referred to as the "People's Republic of San Francisco" because of its socialistic political culture, is the perfect example of what happens to cities that follow this heavy-handed governing philosophy. While San Francisco sports taxes higher than all but a few U.S. cities, and passes laws forcing business to boost wages, San Francisco's jobs economy has expanded at only one-fourth the rate of the national economy over the past 20 years.

Similarly, high-tax New York has been caught in a cycle of boom and bust that has produced no net job growth in 40 years. During the mid-1990s, the city briefly got back to basics when the Giuliani administration focused on fighting crime and cutting some taxes and spending, and—presto!—for the longest period since World War II, the city's economy outpaced the nation's. However, now that the city's political culture has veered sharply to the left again, with a mayor who declares that taxes don't matter to businesses or residents, New York is once again an economic slacker, having lost 200,000 jobs, or nearly 6% of its jobs base, in the current recession.

These examples only accentuate what is otherwise obvious: There is little evidence that people or businesses set much store on what Mr. Florida is prescribing. A Money magazine poll rating dozens of factors that people consider in choosing a place to live found that the top 10 reasons fell into two broad categories: low costs (including low property and sales taxes) and basic quality-of-life issues (good schools, low crime, clean air and water). By contrast, Florida-esque issues ranked low: Diversity was 22nd on the list, while cultural amenities like theaters and museums ranked 27th and lower, and outdoor activities even lower.

The Money list illustrates an underlying problem with Mr. Florida's whole approach. Not only does he believe that marginal attractions like an idiosyncratic arts scene can build economic power, but he thinks that government officials and policy makers like himself can figure out how to produce those things artificially. He doesn't seem to recognize that the cultural attributes of the cities he most admires are not a product of government planning but have been a spontaneous development, financed by private-sector wealth. While Mr. Florida's writings denigrate efforts of cities to power their economies by building sports stadiums and convention centers, the professor thinks that he, by contrast, has found the philosopher's stone that will turn public spending on amenities into economic-development gold.

It is exactly because Mr. Florida is an exponent of this kind of aggressive, government-directed economic development (albeit with a New Age spin) that liberal policy makers and politicians have latched on to his theories so enthusiastically. To them, an expanding government is always more interesting than an expanding economy—especially if economic growth depends on something so very uninteresting as low taxes and small government. But it is just as likely that the Floridized brand of aggressive governing will get things as wrong as the builders of sports stadiums and convention centers did.

One clear example of how things are likely to go wrong is in Richmond, Va., where the city fathers and local economic-development types—touting Mr. Florida's ideas—are trying to revive their downtown by making it a trendy arts district. To finance its efforts, the town recently passed a restaurant tax and is now contemplating raising its hotel taxes—to the howls of local businesses. "They haven't figured out that those tax increases will probably kill as many jobs as their plan will create," says Scott Moody, a senior economist with the Tax Foundation.

If Richmond's city leaders have their priorities askew, they are not alone in the creative age. Concerned with inessentials, cities under Mr. Florida's thrall can easily overlook what residents really want. Consider Winnipeg's Mayor Glen Murray, one of Canada's chief Florida fans, who even brought the professor north to tout his ideas to Canadian political leaders. While Mr. Murray invests in cultural amenities and derides people who want cities to focus only on "pipes, pavement and policing," the most distinguishing characteristic of Mr. Murray's mayoralty has been this: for several consecutive years, Winnipeg has been the murder capital of Canada.

Welcome to the creative age.

Mr. Malanga is a senior fellow at the Manhattan Institute and a senior editor of the institute's City Journal, in whose Winter issue this article appears.

Original Source: http://www.opinionjournal.com/extra/?id=110004573

 

 
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