Author’s note: This essay originally appeared in The Baffler web-zine July 2016
The following was my original submission draft. It may contain some typos.
The Future of the City
by James Howard Kunstler
One spring day not so long ago, I had a low-grade epiphany walking across New York’s Central Park from my hotel on the West Side to the Metropolitan Museum of Art off Fifth Avenue. First I noticed that the park was in absolutely immaculate condition, in better shape than ever in my lifetime, going back to my 1950s school days. The Sheep’s Meadow was now a lush greensward — compared to the brown hard-pan wasteland it had been back in the day. The Bethesda Terrace beside the lake and the adjoining Great Mall with its once-decrepitating Naumberg bandshell were all fixed up. Vanished original buildings such as the Dairy, designed by Olmsted and Vaux in the 1850s and then lost to decay, had been meticulously reproduced. The epiphany part was when I realized that this miracle was altogether a product of the financialization of the US economy. A Niagara of money had flowed into the tax-deductable mission of the Central Park Conservancy.
It was a short leap from there to realize that over the past quarter-century every formerly skeezy neighborhood in Manhattan had undergone remarkable renovation: the Bowery, Alphabet City, Times Square, the Meatpacking District, even Harlem, not to mention the practically whole new nations of Brooklyn and now Queens. Well, all those hedge funders needed someplace to live, as did those who work in other well-paid but less-exalted professions: show business, fashion, media, and computer tech. Same story: the financialization of the economy, and the resultant widening disparities of income between Wall Street and the rest of the nation, had concentrated immense wealth in Gotham.
When I was a young man in the 1970s, New York was on its ass. Bankrupt. President Gerald Ford told panhandling Mayor Abe Beame to “drop dead.” Nothing was being cared for. The subway cars were so graffiti-splattered you could hardly find the doors or see out the windows. Times Square was like the place where Pinocchio grew donkey ears. Muggers lurked in the shadows of Bonwit Teller on 57th and Fifth. These were the climax years of the post-war (WW II) diaspora to the suburbs. The middle class had been moving out of the city for three decades leaving behind the lame, the halt, the feckless, the clueless, and the obdurate “risk oblivious” cohort of artsy bohemians for whom the blandishments of suburbia were a no-go state-of-mind. New York seemed done for. And meanwhile, of course, other American big cities were likewise whirling around the drain. Detroit, Cleveland, Chicago, Cincinnati, St. Louis, Milwaukee, Baltimore, and Washington DC…. Horrors. Even San Francisco was a dump in the cold, dark, pre-dawn years of the dot-com age (when I lived there in 1974-5).
On the other hand, sunbelt metroplexes such as Atlanta, Houston, Dallas, Charlotte, and Phoenix were booming back then, but not in a way that made any sense in traditional urban terms. They merely expressed the most exaggerated characteristics of suburban sprawl in new and horrifying ways: downtowns decorated with “signature” office towers that went utterly lifeless after 5 p.m. — because nobody lived there — surrounded by vast asteroid belts of suburban chain store dreck and tract housing monotony, dominated by tangles of freeways. These weird new crypto-urban agglomerations had been hardly more than tank towns before 1945, so even their worst car-dependent features and furnishings were pretty new, that is, not yet subjected to the ravages of time. Which is to say they were typologically different from the older US cities like New York.
In any case, getting back to my stroll across Central Park that spring morning, there was a second part to my low-grade epiphany — which was that I was here witnessing the absolute peak of a cycle in the life of New York; that from this point forward things would start falling apart again, and probably worse than the previous time in the 1970s. I shall elaborate on the shocking particulars of that presently, but first I must describe exactly what the financialization of the economy was about and why it is coming to a bad end.
Contrary to the American religion of endless progress, the techno-industrial age is a story with a beginning, a middle, and an end, and we are closer to the end of that chapter in human history than to the middle of it. By the 1970s, the USA began to feel the bite of competition from other parts of the world that had rebuilt their industrial capacity following the debacle of World War II. Our factories, which had not been bombed during the war, were old and worn out. Environmental consciousness produced stringent new regulation of dirty industries. Third World nations with rising populations offered ultra-cheap labor and lax regulation. So, we “off-shored” US industry, which for a century had been the major source of our economic wealth.
Industrial production was replaced mainly by two activities. First, after being constrained by the oil crises of 1973 and 1979, the suburban sprawl build-out resumed with vengeance in the 1980s. Secondly, and connected with sprawl via the mortgage racket, was the expansion of the financial sector of the economy from five percent to over 40 percent. The suburban sprawl part was easy to understand. It was the preferred template for property development, an emergent process over the decades. The local zoning and building codes had evolved to mandate that outcome by law. The separation of uses became more extreme: housing tracts here, office parks there, shopping somewhere else, connected solely by cars. You couldn’t build a popsicle stand anywhere in the USA without supplying fifteen parking spaces. The new laws for handicapped access had the unintended consequence of heavily discouraging buildings over one story. The tragic part was that suburban sprawl was a living arrangement with no future. The oil crises of the 70s had portended that, but both the zoning codes and the cultural conditioning over-rode that warning. Anyway, Americans simply couldn’t conceive of living any other way.
Back when finance was a mere five percent of the economy, banking was boring and didn’t even pay so well. It was based on the 3-6-3 formula: borrow money at 3 percent, lend it out at 6 percent, and be on the golf course at 3 o’clock. In the 1960s, bank presidents and stock brokers might have a color TV instead of a black-and-white, and they might drive a Cadillac instead of a Chevrolet, but they didn’t live on another planet of ultra-wealth. The role of banking in the economy was straightforward: to manage society’s accumulated wealth (capital), and re-deploy it for productive purposes that would produce yet more wealth.
The computer revolution of the 1990s helped take finance to a whole other level of hyper-complexity with astonishing speed and, because the diminishing returns of technology always bite, this venture produced some ferocious blowback — namely, that many of the new “innovative” financial instruments created by computer magic enabled swindling and fraud on a scale never seen before. This was especially true in the securitization of mortgage debt into fantastically complex mutant bonds, many of which were notoriously designed to blow up and reward their issuers with bond “insurance” payouts. That bit of mischief led to the crash of 2008. The systemic damage of that event was never resolved but simply papered over by taxpayer bailouts and massive Federal Reserve “interventions” that continue to the present.
This chain of events entailed an unprecedented growth of debt at all levels of society (household, corporate, government) such that the obligations eventually outstripped any plausible prospect of repayment. Something very sinister and largely unacknowledged lay behind it. This was the fact that real economic growth in the old developed nations had sputtered (and was soon to sputter in the “emerging” economies, too). And behind that was the fact that the world had run out of affordable petroleum. There was still a lot of oil left in the ground, but it cost too much to get out — whatever its “market” price ended up being once it was gotten out. Without ever-increasing supplies of oil that was cheap to produce, you couldn’t get economic growth, and without that growth, you couldn’t pay back the interest on the ever-increasing debt that was needed to get the oil out of the ground (and to run industrial societies generally).
Quite a quandary, totally unacknowledged in the public discourse. If anything, the authorities — business leaders, the media, politicians — had gotten the story all wrong with their blather about “energy independence” and “Saudi America.”
The “peak oil” story had worked out rather differently than even close observers had imagined ten years ago. It could be boiled down to a simple equation: oil above $75 a barrel crushed industrial economies; oil below $75 a barrel destroyed oil companies. The Ponzi scheme known as the “shale oil miracle” only extended the damage in the bond markets and postponed the energy reckoning by a few years. The shale oil companies weren’t making money when the stuff sold for $100 a barrel in 2014, but the high price succeeded in crushing the economy. Then, when demand cratered and the price of oil fell to under $40 a barrel, the shale oil companies started to go bankrupt, because it still cost them $75 to pull it out of the ground, and they had to keep pumping it out to maintain cash flow to service their junk bond financing.
I elaborate on these arcane matters because it is fundamental to understand that the root cause for the sputtering of economic growth is that the primary resource needed for creating it (oil) has exceeded our ability to pay for it — and despite all the wishful thinking, there is no alt-energy rescue remedy to replace it. Hence, we’ve been borrowing from the future (piling up debt) to keep the vast complex systems of advanced civilization running. And now we’ve run out of our ability to pile on anymore debt. The result will be a collapse of our complex systems and a re-set of human activity to a lower and simpler level. How disorderly the process gets remains to be seen, and where it stops is as yet unknown. But it will have everything to do with how human life organizes itself on-the-ground, and therefore with the future of our cities.
One can state categorically that the colossal metroplex cities of today are going to have to contract, probably substantially. They have attained a scale that no plausible disposition of economy looking ahead can sustain. This is contrary, by the way, to most of the reigning utopian (or even dystopian) fantasies which, any way you cut them, only presume An ever-greater scale of everything. The great renovation of New York City circa 1990-2015 was enabled by Wall Street’s management role in the supernatural debt growth of the period combined with the creaming off of fees, commissions, and bonuses by bankers in the context of absent regulation abetted by pervasive accounting fraud in both private business and government. This is what brought us all the renovated neighborhoods, the scores of new residential skyscrapers, the multiplication of museums and cultural venues, and the buffing up of Central Park. It will be followed by a steep and harrowing descent into disinvestment.
Apart from that unnerving prospect, it must be said that the recent rediscovery of city life in America, per se, was a positive thing, given the decades-long experiment with automobile suburbia. It’s hardly surprising that generations raised in that vapid, soul-killing milieu desperately sought something better, denser, and more active. Notice, though, that the revival of cosmopolitan life mainly took place in those cities connected by some degree to the financialized economy: New York, Boston, Washington, Chicago, and San Francisco. Cities such as Detroit, Cleveland, Buffalo, St Louis, Kansas City, and many more “flyovers” continued to sink even as the new starchitect condo towers rose up over lower Manhattan. It was also unfortunate that few small cities and towns benefited from the re-urbanization movement.
Most cities are located where they are because they occupy important geographical sites. New York has its excellent deep water harbor and the Hudson River estuary. These outstanding amenities were enhanced later with canal connections to the Great Lakes and the St. Lawrence. San Francisco and Boston, ditto great harbors. Detroit stands on a strategic river between two Great lakes. And so on. There are sure to be some kind of human settlements in these places as long as people are around, though they may be very different in scale and character from what we have known them to be. Detroit will probably never again be the colossus it was in 1950 but something will occupy that stretch of river.
On the other hand, the techno-industrial economy allowed cities to develop rapidly in places in that lacked outstanding natural features. Denver and Atlanta grew up around railroad depots, provisional human constructs that may or may not have value going forward, given America’s extreme neglect of its once-excellent rail system. Places like Phoenix, Tucson, Las Vegas, and much of Southern California may become uninhabitable without cheap air-conditioning-for-all, a viable automobile-based transport system, and the ability to produce food locally. Cities in the “wet sunbelt” such as Miami, and Houston, may succumb to rising sea levels. Orlando may decline out of sheer irrelevance when its theme park economy withers.
The current scale of our “metroplex” cities is inconsistent with the resource and capital realities of the future. Just about everything in our world is going to have to get smaller, finer, and also more local. The failure of suburbia is pretty plain to see, and its trajectory is not hard to understand. But do not assume that there will necessarily be a great demographic rush into the big cities as suburbia fails. The big cities will have enormous trouble with their aging infrastructure — the 100-year-old water and sewer systems, the stupendous hierarchies of paved roads, the bridges, and tunnels, etc. The American electric grid is decrepit and the estimate for fixing it alone runs greater than a trillion dollars. The cities will also have problems with the debt-based promises of support for public employees and dependent underclass populations. These places will have to contract around their old centers and their waterfronts, if they have them. The process will entail the loss of vast amounts of notional wealth represented in buildings and real estate. It may provoke ethnic battles between groups fighting over who gets to occupy the districts that retain value.
New York City and Chicago face an additional problem: an extreme overburden of skyscrapers. Our society does not know it yet, but the skyscraper is already an obsolete building form, and for a reason generally unrecognized: they will not renovated. They have no capacity for adaptive re-use. The capital will not be there to renovate things at the giant scale at which they were originally built. There’s also a good chance that many manufactured modular building materials will not be available, either, for instance, gypsum board (“sheetrock”). It might seem to be a humble material, but it actually requires very long and sophisticated mining and manufacturing chains, and it may be assuming too much that these supply chains will continue to operate in the years ahead. The same can be said of steel beams and trusses, aluminum sashes, metallic and enamel claddings, plate glass, concrete block, cement, plastic or metal pipe, silicon gaskets, plywood, etc. In short, these enormous buildings, now considered assets will quickly turn into liabilities.
This outcome is unrecognized largely because under current conditions the professionals involved — developers and architects — cannot resist the temptation to maximize the floor-to-area ratio of any given urban building lot. Why stop at six stories when the zoning law allows sixty? Why make only $10 million on any given parcel of land when you can make $100 million in sales and commissions. They simply can’t imagine behaving differently for now. But in the future, a new consensus may eventually form that the scale and height of new buildings must be a lot more modest. (By the way, central Paris is still mostly composed of buildings under seven stories, without detracting from its cosmopolitan verve). In the future, we may decide that the maximum building height is keyed to the number of stories you can ask people to walk up comfortably.
A related issue, however, is also not generally recognized: the potential failure of the condominium model of property ownership. Also known as deconstructing the rights of real estate, this experimental system, in which ownership is portioned out among individual apartment dwellers, and managed under a corporate property-owners association, has only been tried on a mass basis since the 1970s. That is to say, we’ve only experienced it on our way up a colossal mountain of debt accumulation; we have no idea what happens during the period of debt default we have entered. It takes only partial failure of a condominium building — apartment owners defaulting on their mortgages and failing to pay association dues — for the property association to fail, meaning that afterward there will be little maintenance and repair of the building. Do not assume that our current financial arrangements have resilience. Like other elements of this story, they seemed like a good idea at the time. And then times change.
I would introduce the perhaps jarring idea that the locus of settlement in the USA is headed for an even more striking change, namely that the action is going to shift to the small cities and the small towns, especially places that exist in a meaningful relationship to food production. These places are currently the most derelict and disinvested in the nation. I would argue that they are about to regain importance. For one thing, the global economy is unwinding. It never was a permanent installation in the human condition, contrary to what Tom Friedman said in his books and newspaper columns. That global economy was the product of special circumstances, namely a hundred years of super-cheap energy, and about seventy years of relative peace between the major powers of the world. Those conditions are now ending, and the transient globalized economic relations that flourished under them — the chain of products moving from the factories of Asia to the Wal Marts of America — are coming to a close.
The economy of North America will be much more internally-focused in the years ahead. We will have to rely much more on what we can produce closer to home, and that production is sure to be at lower level than what we are used to. Among other things, it will lead to the resurrection of America’s inland waterway system, including the towns and cities along it. Places like Cincinnati, Louisville, and Memphis will regain importance, though probably not gigantic scale. Do not assume that the trucking industry will continue to function, or that we will make the necessary reinvestment in our existing rail lines. Do not assume that any models of our current commercial system will continue as we know them, including national chain shopping, the supermarket method of food distribution, or contemporary banking.
Suspend all your assumptions about our ability to continue the familiar arrangements of the present day. We are passing through a difficult transition and I don’t think it will lead to the techno-nirvana that many are expecting. In fact, I think we are likely to lose many of the technological advances that we have come to take for granted, starting with the ubiquity of the Internet — which depends, after all, on a completely reliable electric grid. We are heading into a contraction of techno-industrial activity and probably an eventual contraction of population. We have to make things smaller, more local, and finer.
If you could go back in time to the year 1950, to Cadillac Square in the center of downtown Detroit, and interview a proverbial “man-on-the-street” there about the future, he might have had a hard time grokking what actually happened to the place after 1970 — the astounding devastation that occurred without a war taking place. Likewise, I think the American public fails to see the probable arc of the current story. We are expecting nothing except more technological magic, and that is sure to leave a lot of people disappointed.