Hilton Americas Houston

The Metropolitan Revolution: Remarks at Central Houston 2012 Annual Meeting

Editor's Note: In a recent speech, Bruce Katz heralds the Houston area as an emerging example of metropolitan innovation and smart governance. Katz also notes that this is part and parcel of a broader metropolitan shift, where regional leadership and economic development drive growth and opportunity.

I want to thank Bob Eury for that introduction and applaud you for your exceptional leadership of Central Houston.   

This is an exciting time to be in Houston.  Since the end of the Great Recession, this region has had the second best recovery among any of the 100 largest metro areas in the U.S. Your unemployment rate—at 7 percent—remains over a percentage point better than the national unemployment rate.

It’s also exciting because of the tremendous amount of momentum and activity in downtown and central Houston.  This organization has been critical to that success.  Your work on business recruitment and development, sustainability, transit, Main Street revitalization and social issues like homelessness has helped create a thriving urban core … or what the County Judge refers to as the “dynamic nerve center” of the region.

Finally, it’s great to see that Houston remains focused on its future. The four local propositions on the ballot next month are all critical for the long-term health and prosperity of the city and metro. The region needs a quality transit system, good high schools and community colleges to educate the next generation workforce, and ample green space for sustainable and inclusive growth.  I support Central Houston in hoping all four measures are passed.

My goal today is to put this city … and the remarkable progress that you have made in downtown and central Houston … into a broader context. 

I will make three points.

First, the urban cores of America’s metropolitan areas have been dramatically revalued in the past two decades by broad economic, demographic, and developmental forces.   I believe that a new form of place-making is emerging in the United States, what I call “innovation districts.” I believe Houston can be a leader in this wave of place-making given the spatial configuration of your distinctive clusters, universities, firms, and amenities.

Second, Houston’s ambitions and success reflects a profound structural shift in power and governance in the U.S. Across the nation, cities and metros are taking control of their own destinies, becoming deliberate and intentional about their economic growth. Power is devolving to places and people who are closest to ground and oriented toward collaborative action. This shift is changing irreparably who our leaders are, what they do, and how they govern. In this century, leadership in the United States will bubble up from the bottom rather than rain down from the top.  We call this “The Metropolitan Revolution.”

Finally, Houston and all U.S. metro areas will need to up their game in light of the partisan gridlock and ideological polarization that today defines our national government ... and the coming scale back of federal resources in coming years given the overarching budget deficit.  The brutal reality is that Washington and frankly Austin will not be there to help and you will more on your own than at any time in modern memory.  I will lay out my top suggestions for what you do going forward.   

So let me begin with my first point about the revaluation of America’s urban cores.

After 50 years of unmitigated sprawl, the urban and metropolitan landscape in the United States is changing in dramatic ways after the housing bubble collapse in the mid and late-2000s.

For the most part, population growth in emerging suburban and exurban counties has slowed down post-recession whereas growth in most cities and dense suburban counties has picked up speed.  Most important for our conversation today, downtowns are back.  Metros with more than 5 million residents experienced a 13.3 percent increase in downtown residents during the last decade, while the downtown population in metros with 2.5 to 5 million people grew by 6.5 percent during this period.

This shift in settlement patterns is not an aberration; rather, it is reflective of some profound forces at play in the U.S. and global economy.

At the heart lies the restructuring of the U.S. economy.  A new growth model and economic vision is emerging from the rubble of the recession, a next economy where we export more and waste less, innovate in what matters, produce and deploy more of what we invent, and build an economy that actually works for working families. The next economy will be fueled by innovation, powered by low carbon, driven by exports, rich with opportunity, and led by America’s largest metropolitan areas.  

This economic restructuring has enormous impacts on the built environment and the form of cities and their metros.  A consumption economy focuses on building homes and big box retail, in isolated zones, generally far away from denser urban cores. 

An innovation economy, by contrast, craves proximity, extols integration, and champions the synergistic mash up between firms in disparate sectors, educational institutions, and the housing, retail and amenities. These are the sorts of interactions and mutual benefits that cities, with their density and diversity, can disproportionately supply. As one industry feeds another, productivity improves, entrepreneurship is encouraged, and employment and wages increase in the region.

Yet physical form is not only affected by economic imperatives.  Demographics play a central role and the location and living preferences of rising demographic groups are changing radically.

Research shows that a growing segment of the population prefers communities that are walkable and livable. Elderly individuals increasingly seek places with easy access to medical services, shopping, and other necessities of daily life. Middle-aged couples whose children have left the nest are newly receptive to urban neighborhoods, cultural amenities, and shorter commutes. Young people, in particular, are experimenting with urban lifestyles, eschewing auto-centric lifestyles of previous generations in favor of biking, public transportation, and car sharing programs in urban areas. In fact, one study found that 16- to 34-year-olds in American households with incomes over $70,000 increased their public-transit use by 100 percent during the last decade.

Economic restructuring and demographic transformation is driving a new form of place-making within cities and metros. This new type of place-making—“innovation districts”—clusters and connects leading edge anchor institutions and cutting edge companies with smaller entrepreneurial firms, mixed-use housing, office and retail, and 21st century amenities and transport.  

This is a seismic shift in how we build our major cities and metros here and abroad.

In the 19th century and early 20th century—in Manchester, in Torino, in the Ruhr Valley, in our industrial Midwest—we built industrial districts, characterized by a high concentration of industrial enterprises commonly engaging in similar or complimentary work.

In the mid and late 20th century—in Raleigh-Durham, in Silicon Valley, in suburban Washington, Boston, and Seattle—we built science and research parks and corporate campuses.  Spatially isolated, accessible only by car, these parks put little emphasis on the quality of place or on integrating work, housing, and recreation.

Innovation districts reflect a new vision of where creative and talented workers want to live and work and how ideas happen.  They place a far greater emphasis than industrial districts or science parks on the physical realm—infrastructure, urban design, and architecture—as well as the community environment—affordable housing, social activity, cultural institutions, and events.   Innovation districts view cities not just as consumer zones of Starbucks and stadia, restaurants and retail, but hubs of invention, collaboration, and entrepreneurialism that drive the broader economy.

Barcelona’s and Boston’s innovation districts are the current buzz.

22@ Barcelona is located in a former industrial area on the Barcelona waterfront.  115 blocks in size, it now is home to five major clusters—media, medical technologies, ICT, energy, and design. In less than a decade, 69 percent of the area has been transformed and almost 4,500 firms have located there or are in the process of locating to the site.   

The Boston Innovation District, located on 1,000 acres of the South Boston waterfront, was created in 2010 to take advantage of the strong assets of the city—many strong universities, human capital, and a growing concentration of life sciences and tech clusters. Since January 2010, 55 new businesses and 2,000 new jobs have been created on the site.

I would argue that Houston can play in the same league as Barcelona and Boston.  Your economy is super vibrant and your mix and location of clusters, anchors, institutions, and firms is distinctive and primed for growth.

This leads to my second point: the United States is experiencing a Metropolitan Revolution; a structural shift in power and leadership away from Washington, D.C. and even state capitols, towards cities and metropolitan areas … and the networks of individuals and institutions who govern them.  

This shift in power starts, of course, with a simple truth: Cities and metropolitan areas are the engines of economic prosperity and social transformation in the United States. Our nation’s top 100 metropolitan areas sit on only 12 percent of the nation’s land mass but are home to two-thirds of our population and generate 75 percent of our national GDP.   Metros dominate because they embody concentration and agglomeration—networks of innovative firms, talented workers, risk-taking entrepreneurs, and supportive institutions and associations which cluster together in metropolitan areas and co-produce economic performance and progress.  There is, in essence, no American (or Chinese or German or Brazilian) economy but rather a network of metropolitan economies.  

Cities and metropolitan areas are also on the frontlines of America’s demographic change.  Every major demographic trend that the U.S. is experiencing—rapid population growth, increasing diversity, an aging tsunami—is happening at a faster pace, a greater scale and a higher level of intensity in our major metropolitan areas. 

Empowered by their economic strength and demographic dynamism, cities and metros are positioning themselves at the cutting edge of reform, investment, and innovation.

Signs of the revolution can be witnessed all across our country.  It can be found in grand, economy shaping gestures: an Applied Sciences District in New York City, an Infrastructure Trust in Chicago, large scale transit investments in Denver and Los Angeles, modernization of port and freight infrastructure in Miami and Jacksonville.  

But it can also be discovered in smart structural interventions: an intermediary in Northeast Ohio that helps manufacturing firms retool their factories for new demand; a Regional Export Council in Los Angeles that helps small businesses access global markets; and a network of Neighborhood Centers right here in Houston that gives new immigrants access to low cost banking, education, child care, and health care.

What unites these disparate efforts?

First, metropolitan leaders are measuring what matters.  In a world that rewards places that strengthen distinct assets, metros need, first and foremost, a clear understanding of what makes them special, the discipline to build on their competitive advantages and the will to hold themselves accountable. This, to borrow from Michael Lewis’ indelible phrase, is Moneyball for Metros. 

Second, metropolitan leaders are acting with intentionality and purpose.  After decades of pursuing fanciful illusions (becoming the next Silicon Valley) or engaging in copy cat strategies, metros are deliberately building on their special assets, attributes, and advantages using business planning techniques honed in the private sector.  The pre-recession economy, driven by consumption and amenities, celebrated the uniform.   The next economy, driven by production and innovation, rewards the distinct. 

Third, metropolitan leaders are blending the ecosystem and the enterprise.  Smart metros do not just focus on the one transaction, attracting the one firm.  They focus on building effective structures, institutions, intermediaries, and platforms to give firms, dozens of firms, what they need: talent, capital, market intelligence, strategic advice, branding, and marketing. These interventions help firms create jobs in the near term, but also help retool the broader metro economy for the long haul. They become the gift that keeps on giving.

Finally, metropolitan leaders are collaborating to compete.  Neighboring cities and metros, long divided by petty differences, now realize they need to come together to engage forcibly in the global market, with and against cities and metros five or 10 times their size.  As Colorado Governor John Hickenlooper likes to say "collaboration is the new competition."

I believe the metropolitan revolution is a structural phenomenon rather than a cyclical response to the current partisan divide in Washington D.C. 

That’s because the contrast between the federal and state governments and metropolitan networks could not be starker.

The federal government and the states are legacy, almost anachronistic institutions: hyper-political and partisan, hopelessly fragmented, specialized and compartmentalized, frustratingly bureaucratic, technocratic, and prescriptive.   By contrast, cities and metros have emerged as uber-networks in a world in which people live, operate, communicate, and engage through networks: interlinked firms, institutions, and individuals working together across sectors, disciplines, jurisdictions, artificial political borders, and, yes, even political parties. 

The federal government and the states are present oriented.  They govern, administer, and legislate in two-year cycles, aligned more with the timeline of political elections than with social or market dynamics.   By contrast, you are intensely focused on, in the words of John Hofmeister, former president of Shell Oil, “getting the future right.”  You think in the long term, act in the short run.  

The federal and state governments are organized as a collection of hardened “silos and stovepipes,” fragmented executive agencies overseen by separate legislative committees.   A transportation agency responds to transportation challenges like congestion with transportation solutions like widening a road, affirming the old adage that “If you have a hammer, everything looks like a nail.” 

Cities and metros are, by contrast, organic communities.   Resolving a transport challenge, for example, might most effectively and efficiently be achieved through a shift in housing or jobs location or alternative means of mobility.  Metros are integrated rather than compartmentalized, holistic rather than segmented.

The Metropolitan Revolution is upending our fundamental views about our country.  In traditional political science textbooks, the United States is portrayed neatly as a hierarchical structure – the federal government and the states on top setting direction, the cities and metropolitan areas on the bottom waiting to receive largesse or permission.  

The metropolitan revolution is exploding this tired construct.  Cities and metropolitan areas are becoming the leaders in the nation: experimenting, taking risk, making the hard choices, asking forgiveness not permission.  A “new normal” in leadership could soon define a nation where metros lead and the federal government and states follow.

This leads to my final point: for Houston to prosper, you will need to take full ownership of your future.

Here is the brutal reality: Cities and metropolitan areas are on their own. 

Mired in partisan division and rancor, the federal government appears incapable of taking bold actions to restructure our economy and maintain those policies in a predictable fashion over time.   Recent Supreme Court decisions have also circumscribed the ability of the federal government to respond to national challenges.  States are a varied lot.  Some like Illinois are too broke and broken to engage.  Most, like Georgia, Ohio and, in my view, Texas, have a long history of antagonism towards their urban and metropolitan engines.

To paraphrase Pogo, we have met the solution and it is us.  There are no excuses.  There is no deus ex machina.  The cavalry is not coming.

That reality will be distressing to some … but liberating to others.

Here is my advice on where to head.

First, double down.  In fact, quadruple down.

There is always a tendency for cities and metros to change horses in mid-stream and hop from strategic initiative to strategic initiative.   With Washington adrift, with global markets uncertain, this is a time for sustained focus and discipline.   You have accomplished an enormous amount in the past several decades, restoring the core of this grand metropolis and helping push transformative investments like the ones on your ballot this year.  Do not waver.   Pick those few catalytic projects and interventions that will further your progress, green light and fast track them … and get stuff done.  Central Houston’s strategic vision—focusing on urban place, business development, transportation and education—is exactly the right kind of vision to build the future.

Second, aim high.   When I look at Houston, I see an embarrassment of economic riches and possibilities.  Perhaps most intriguing is the potential for Houston to graduate from being the global capital of conventional energy to being the global hub of clean energy and the clean economy more broadly. 

For all the ideological discourse about the clean economy, we know that it is large, diverse, and disproportionately production, innovation, and export oriented. Brookings’ research shows that America already has a strong base of 2.7 million clean economy jobs, in sectors ranging from renewable energy to pollution reduction.

To put that number in perspective: the clean economy is nearly twice the size of the biosciences field, 60 percent of the 4.8 million strong IT sector, and larger than fossil fuel related industries.  

Brookings’ research shows that Houston has strong potential in clean sectors such as renewable energy services, geothermal, and professional environmental services. Houston’s goal should be to build on its strengths and dominate in these sectors.

Third, be assertive with your state and federal governments. 

Whoever wins the national election in 31 days, it is clear the federal government will scale back.   But the current debate, largely framed around deficit targets, entitlement spending, and programmatic budgets, is not sufficient.   We face more fundamental decisions, not just about the size and scale of the federal government but its scope and purpose, not just about federal focus but about federalist delivery.

Everyone in this room knows that the national government is a sprawling, legacy, byzantine, enterprise.  The Simpson Bowles Commission, for example, found that there are over 44 job training programs across nine different federal agencies, and 105 programs meant to encourage STEM education.

As Washington struggles with deficit reduction, it is not enough to get the federal fiscal house in order.  It is time for a house cleaning of epic proportions.  One can imagine multiple ways—for example, consolidating trade agencies with similar missions, consolidating workforce programs under a performance block grant—to modernize the federal government to leverage the possibilities of a differentiated economy.

What does that mean for Houston?  Get ahead of the curve.  Provide tangible, concrete ideas for federal reforms will unleash innovation and give city and metropolitan leaders the flexibility to do more with less. 

Fourth, go global.   The 21st century Metropolitan Revolution will be global in scope, in reach, in impact.  For the first time in recorded history, more than half of the world’s population lives in cities and metropolitan areas. By 2030, the metro share will surpass 60 percent.  Rising nations like China, India, and Brazil and their rapidly growing metros now power the world economy and drive global demand.

We believe that the world is on the cusp of a new global network of trading cities that link with each other on trade, learn from each other on urbanization and governance, and leverage each other on issues of mutual concern at the international stage.    In some respects, we are going back to the future, to the Silk Road, to the Hanseatic League … when urban trade drove economies and relationships between cities drove urban trade.

Already, U.S. urban and metropolitan leaders are venturing outside the country, forging strong trade and other links with their counterparts in rising cities in rising nations: New York and London, Silicon Valley and Bangalore, Detroit and Torino, Los Angeles and Shenzhen, Miami (and Houston) and Sao Paulo.  These networks obviously start with firms and ports that do business with each other.  But, over time, they extend to supporting institutions—governments, universities, business associations—that provide support for companies at the leading edge of metropolitan economies.   Mayor Parker and other leaders need to be commended for the efforts they have made to structure lasting relationships with major Brazilian cities and metros.

As metros link, they learn.  A metropolitan business plan in Seattle informs one in Sao Paulo.  Mayoral governance in New York is mimicked in London.  An innovation district in Barcelona fuels thinking in Boston.  Training industrial workers in Munich translates to Milwaukee.  Bus rapid transit in Curitiba inspires Orlando.

As metros link and learn, they leverage.  Metros are finding their collective voice at the continental and international stage, binding together and advocating if not demanding that nations and multi-lateral institutions act on urgent matters like climate change.  

Houston is obviously a global city, the “gateway of North America” in the words of Judge Emmett.   But to be fully successful in this century, you will need to be fully globally fluent.   In less than two months, a delegation of Houston’s leaders will be joining Brookings and JP Morgan Chase in Sao Paulo for an international forum on trade and investment.    In my view, that is exactly the kind of engagement that this century demands … and rewards. 

Conclusion

Let me conclude with these thoughts.  I am bullish on Houston.  This organization … and your broader city and metropolis … have shown the ability over decades to evolve and iterate and and recover and reinvent yourself, building from a strong base of firms and sectors. 

This is not a time to rest on your laurels.   This is not a time to admire what you have accomplished. 

We are living in an Urban Age and a Metropolitan Century … where everything you have done prepares you for what is to come.

Be bold.  Be focused.  Be disciplined.   I look forward to your success.