More Crisis Geography

The economic crisis continues to reshape our economic geography.

Despite short-term hits, the world's leading financial centers, New York and London, are likely to remain on top through the crisis and beyond, according to Peking University professor Michael Pettis, writing in Newsweek:

Financial crises tend to trigger overwrought predictions of major economic shifts--and then debunk them. Today's global economic meltdown is no different. In recent months, it has become popular to predict that New York and London (or NyLon, as they're together known) will soon lose market share as cities in the emerging world use the crisis to wrest away dominance. But history suggests that the opposite is more likely: that New York and London will actually increase in importance over the decade to come ...

Big centers have two huge advantages over smaller rivals: greater liquidity and larger networks. Big investors tend to flock to big financial capitals because they offer higher volume and lower trading costs, and issuers of stocks, bonds and other financial products follow the flock of investors. ...When a liquidity boom ends, however, it tends to accentuate the advantages of big markets while diminishing those of smaller ones.

China Digital Times picks up China Law Blog's similar reading about:

why New York will remain as the world's financial capital and why, despite the projected growth of Asia's economies, we should not expect Shanghai, Hong Kong, or anywhere else to usurp it. At least not for an exceedingly long time.

Older Rustbelt centers continue to get clobbered by the structural decline of manufacturing.  Job losses at bankrupt automakers GM and Chrysler have been highly concentrated in older Rustbelt centers as this NYT map shows.
auto jobs.jpg

And, the sun continues to set on shallow-rooted Sunbelt cities, according to this Associated Press analysis.

Some cities -- Las Vegas, Phoenix, Fort Myers are good examples -- hitched their floats to housing bubbles and got caught up in development that depended largely on, well, development itself, rather than sustainable, scalable, productive industry, economic analysts say. ...

AP Stress Index figures, which calculate the economic impact of the recession on a scale of 1 to 100, illustrate how the downturn has played out in some of these communities:

In Maricopa County, home to Phoenix, the Stress Index more than doubled from 5.12 at the beginning of the recession in December 2007 to 12.67 in March 2009, worsened by a foreclosure rate that nearly tripled.

Mounting foreclosures in Las Vegas' Clark County drove up its Stress Index score from 10.5 at the start of the recession to 19.3 in March 2009.

In Lee County, home to Fort Myers, unemployment has doubled and foreclosures have soared 75 percent since the recession began, lifting its Stress Index from 10.5 to 19.98 ...

Now Phoenix's hotel industry is tanking, according to the Wall Street Journal.

"Phoenix suffers from the dual challenges of overbuilding and shrinking demand due to the national drop-off in corporate conferences," said David Loeb, a hotel-industry analyst with Robert W. Baird & Co. "All of this means that Phoenix's hotel market has experienced one of the steepest downturns among the big markets."

Presented by

Richard Florida is Co-founder and Editor at Large of and Senior Editor at The Atlantic. He is director of the Martin Prosperity Institute at the University of Toronto and Global Research Professor at NYU. More

Florida is author of The Rise of the Creative ClassWho's Your City?, and The Great Reset. He's also the founder of the Creative Class Group, and a list of his current clients can be found here

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