Sunday, September 13, 2009

Houston a "World Capital of the Future"

Joel Kotkin has an article on the "World Capitals of the Future" (originally in Forbes), focused mainly on emerging countries, but with a nod to a handful in North America, including Houston (Forbes detail page).

Of course, none of these cities' wealth or economic power have passed leading global centers like Tokyo, London, Paris, New York, Chicago, Los Angeles, Seoul, Singapore and Hong Kong. But our list of emerging global cities is clearly gaining on them – and with remarkable speed.


Not all our emerging cities are in the developing or former Communist world. North America boasts at least three genuine emerging world cities: Calgary, in Canada, and Houston and Dallas. These regional economies have been built around energy and expanding industrial power. They also have enjoyed rapid population growth. Last year, Houston and Dallas grew more than any other metropolitan region in the country; over the past decade, their populations have increased six times more rapidly than New York, Los Angeles, Chicago or San Francisco.

But it's not all a demographic game; cities like Phoenix and Las Vegas have similarly enjoyed rapid growth but do not fit on the rising global cities list. The key difference lies in the Texan cities' rising corporate power. Houston, with 27 Fortune 500 firms, has passed Chicago in the number of Fortune 500 companies, while Dallas, with 14, ranks third. Together, the two Texan cities account for about as many Fortune firms as New York, once home to almost a third of the nation's largest companies.


These emerging world cities also have survived the housing crisis much better than their national competitors. The growth of India and China has created an ever-richer market for commodities, as well as expertise residing in places like Perth, Calgary, Dallas and Houston, much of it built around commodity and resource extraction. The evolving ties between burgeoning world cities also spill over into the growing tourism industry in Perth and the expanding medical service complex in Houston.

Do you think he missed any? Atlanta? Others? Arguments for or against any of the choices? Let me know what you think in the comments.

Hat tip to Frank.

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At 8:54 AM, September 14, 2009, Anonymous kjb434 said...

Atlanta's prominence on the world stage exists for two reason:

1996 Olympics
Major Airport HUB

Houston has held a prominent place on the world stage for many more reasons (which is why we don't need the Olympics).

At 9:03 AM, September 14, 2009, Blogger Tory Gattis said...

The hub alone may do it for them over the long term. Extensive flights across North America, Europe, and Latin America, plus some to Asia and Africa.

At 11:38 AM, September 14, 2009, Blogger greyhound said...

All the qualities mentioned make Houston a place to come for work--but not to live. I know I'm leaving at the first opportunity.

At 12:13 PM, September 14, 2009, Blogger Unknown said...

greyhound - I often hear this criticism of Houston, but to me (and many others who have come here) quality of life first begins with the ability to make a living. I came here to improve the quality of life for me and my family and that starts with a good job. I’ve lived in cities that were deemed more “livable” than Houston, but without a decent living I didn’t find them to be enjoyable places. People talk about Houston in terms of “work” and “money” as if this is of secondary importance to a happy life. For most people “work” and “money” are key components to living a decent life. Perhaps you are fortunate to live and work wherever you want, but the average person does not have that luxury. I guess that’s part of Houston’s problem – it carters to the average person and that won’t win you any popularity contests.

At 1:53 PM, September 14, 2009, Blogger Tory Gattis said...

Greyhound: plenty of people say the same thing about London and NYC(Florida is the official retirement capital of NYC workers). What would you be leaving for? Better weather? Better geography? (mountains, forests, etc.) A different kind of urban experience? Or something else?

At 1:54 PM, September 14, 2009, Blogger Tory Gattis said...

P.S. Christopher: I totally agree.

At 4:09 PM, September 14, 2009, Anonymous longcat said...

Did you see the blog post on marginal revolution about Houston and zoning? Very controversial take that essentially Houston has so many other types of land use regulations that it was not in fact that dissimilar to any other zoned city.

At 5:13 PM, September 14, 2009, Blogger Tory Gattis said...

Thanks for the heads up. I've seen the paper before, but not the MR post. I commented over there - look for the comment with this time stamp: Sep 14, 2009 6:07:06 PM

At 8:52 PM, September 14, 2009, Blogger Unknown said...

This comment has been removed by the author.

At 8:53 PM, September 14, 2009, Blogger Alon Levy said...

The mention of Calgary is a bit weird. Calgary is Riyadh with freedom; its economy is almost entirely based on oil. The problem is that in periods of high oil prices, it has to contend with high inflation. This makes it hard to economically diversify, so that when oil prices are low, growth suffers. Once people figure how to use alternative energies, Alberta is going to look like Yorkshire and West Virginia.

Houston is a more complex case. Its per capita income, expressed as a percentage of the US average, goes up and down with the price of oil. But it also has a lot of other industries, including heavy manufacturing and shipping, which Calgary doesn't. And it's never had the same inflation problems as Calgary. At least it has above-average incomes and per capita income growth, unlike Dallas and Atlanta.

At 10:50 PM, September 14, 2009, Blogger Rail Claimore said...

kjb434: The Olympics might have helped for short-term name recognition, but it's way more than that. Atlanta doesn't have as many Fortune 500s as the Texas metros, but it has its fair share of around 14, despite acquisitions which took away Georgia-Pacific and Bellsouth. Some of those companies are among the most recognized brand names in the world, and those companies are as diverse as the economic profile of the area itself. Having the cable media industry it has also helps.

That being said, I think Atlanta has fallen somewhat short of its potential over the past decade and needs some sort of jolt to get it going again. But given the demographics of the people who are moving there, particularly talented individuals from the northeast and some from Midwestern states like Ohio and Michigan, I would not place my bets against it. There's also a flood of people from Florida moving there, and I would expect that to continue once the economy straightens itself out.

Alon Levy: Atlanta as recently as the late 1990's had one of the highest per-capita income levels in the country even without taking cost of living into consideration (and the highest when taken into consideration). It was in the same league as Boston, Seattle, Denver, and Minneapolis: metro areas we tend to associate with high per-capita wealth.

Since then, its income levels have somewhat stagnated, and while it's still higher than the national average, it's no longer top tier like it once was. The reason for this is that population growth rates over the past decade have outpaced job growth rates. Atlanta also has experienced a surge in immigration from outside the US, which tends to put downward pressure on wages. On top of that, there were also significant high-wage job losses in the recession earlier this decade, losses that haven't been made up for, yet. I wouldn't be surprised if a similar scenario played out in Houston and Dallas back in the 1980's with the energy crash. The demographic changes were probably similar then.

At 1:54 AM, September 15, 2009, Blogger Alon Levy said...

Rail, I'm not sure which data set you're using. Mine is from the Bureau of Economic Analysis, which says the Atlanta region's per capita income is 91% the national average. If instead of regions you're using combined statistical areas then Atlanta's at 96% instead.

Also, I'm not sure how much I should trust a cost of living index where New York's transportation costs are higher than the national average. On average, people living in New York City spend 4% of their income on transportation, compared with a national average of 12%. Taking the subway is much cheaper than driving. New York's transportation cost index should be closer to 30 than to the 114 it's given.

In general, the numbers in the index invite disbelief - e.g. the index also says New York is twice as expensive as Detroit, which would imply New York is about 30% poorer in real terms. This doesn't square with the facts of poverty in both cities - e.g. Detroit has protein shortages, New York doesn't; Detroit's infant mortality is 16.3, New York's is 6.

At 9:12 AM, September 15, 2009, Blogger Tory Gattis said...

It uses the ACCRA cost of living index, which is the standard used by companies across the country for location-based wage adjustments. It's a pretty definitive source. See

Of course the Manhattan subway is cheap. But getting in from the outer boroughs or the farther suburbs is not as cheap. There's the cost of taxis. And finally there's the fact that most of that transit systems' budget is supplied by taxes, which still ultimately comes out of locals' pockets (even if it is a different budget category than transportation). At the end of the day, I suspect they based most of their cost estimates on the vast majority that live outside of the core of NYC and use both cars and commuter rail.

As far as Detroit, the core city has plenty of poverty, but the suburban cities in the MSA are still relatively well off, many with high paying union mfg or white collar professional jobs (although obviously those are both in steep decline with the auto industry).

I wouldn't be surprised to see a $45K household in the Detroit MSA live better than a $90K household in NYC.

At 3:39 PM, September 15, 2009, Blogger Alon Levy said...

My point is that even in Manhattan, people who make $30k a year live demonstrably better than people who live on $15k a year in Detroit.

Corporate cost of living computations assume a certain lifestyle, which isn't true for locals. For example, the cost of living for Tokyo or Moscow assumes that you own a car and live in a detached home, which makes sense if you're a Westerner working for a multinational, but not if you're actually from Tokyo or Moscow. That's how you get cost of living adjustments that say Moscow is among the most expensive cities in the world, when in terms of quality of life it's comparable to US inner cities, which have a slightly higher per capita income. With Tel Aviv it's even worse - the cost of living comparisons put it on a par with the coastal US cities, whereas in fact the apartment where I lived in Tel Aviv, a 2,500 sq. ft. four-bedroom penthouse in a middle class neighborhood, would probably rent for $2,500+ in Houston and $5,000 in New York; my family paid $1,600.

The numbers for New York have the same problem. The cost of living adjustment says that New York housing is five times more expensive than Houston housing. Even in Manhattan, that isn't true - rent is only about twice as expensive as in Houston. In Queens and Jersey City, rents are barely higher than in Houston. Housing only costs five times as much if you insist on buying a luxury condo or a large detached house, which is not the type of housing most people in the area live in.

At 4:17 PM, September 15, 2009, Anonymous Anonymous said...

Alon - Obviously there are a lot of variables on NYC housing (with rent stabilization being a big factor), but just recently I had a coworker relocate to Manhattan and is currently renting a 500 sq foot apartment that recently came available for $1800. My brother is paying $1800 for a sublet in Chelsea at 700 sq feet. Even in the "coolest" area of Houston (which wouldn't hold a candle to NYC), a comparable place wouldn't come near 50% of the cost.

As for $30,000 in NYC v. $15,000 in Detroit, I'm not so sure of that. Having lived in Bay Ridge Brooklyn, take out the excitement and the buzz of living in NYC but keep the same cost of living, and I'm not sure your quality of life is all that much better, if at all better.

At 6:34 PM, September 15, 2009, Blogger Alon Levy said...

Anon, I'm not looking at buzz. I'm looking at poverty statistics like infant mortality (New York's is 6, Detroit's is 16.3), and at stories about Detroit's protein shortages, which just don't exist in New York.

My guess about a factor of 2 difference comes from looking at classifieds on the New York Times and the Houston Chronicle. In Houston, a 1-bedroom in the 700 square feet area seems to rent for between $600 and $1,200, and most are in the $800-900 area. This is about half the rent of your brother in Chelsea, which is one of the more expensive areas of Manhattan (try Upper East Side if you want cheap).

At 11:47 PM, September 17, 2009, Blogger Dette said...

I don't know if this is the right place to post this, but NPR Morning Edition is having several pieces on Houston this week.

At 2:11 PM, September 18, 2009, Blogger Tory Gattis said...

Yes, thanks. I'm keeping up with them. May blog on them soon.


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