interesting article interesting article , especially since it came from britain . . . it does
mention enron too .
the next global city ?
the blob that ate east texas
jun 21 st 2001
houston
from the economist print edition ( june 23 , 2001 )
for most outsiders , texas is a foreign country . its biggest city , though ,
might surprise the rest of the world
when a texan in a big hat tells you how wonderful his home town is , reach
for the salt . bob lanier , the former mayor of houston , isn ' t actually
wearing a stetson as he gazes from his penthouse down on a city that sprawls
25 miles away in every direction . but metaphorically he is . houston , he
claims , could become one of the great cities of the world . the remarkable
thing is that he might be right .
from the time the city was founded in 1836 until the 1970 s , houston doubled
in size almost every decade . then , despite one of the deepest slumps any
city had experienced since the 1930 s , the metropolitan area managed to add lm people in the 1990 s to grow to 4 . 7 m , making houston the fourth - largest
city in america . it is already bigger than berlin and , with a gdp of around
$ 215 billion a year , has a larger economy than hong kong . because it is the
nearest metropolis to the cities of northern mexico , it may attract another
2 m people over the next two decades , which would give it almost the same
size of population as london has now . but a global city ? these are few and
far between . houston can hardly dream of becoming a global financial centre
like london , new york or tokyo . but its business leaders think it could
become a cosmopolitan , entrepreneurial hub , a hong kong , a san francisco or
even a new los angeles . it shares la ' s smog , its sprawl , its latino culture ,
even its ugly hubris ; and by some measures it surpasses la ' s ability to
reinvent its economy . can it use its adaptability to turn itself into a
properly international place ?
oil be there for you
its hopes still depend disproportionately on its most global industry .
energy accounts for half of houston ' s economy . during the 1970 s , while the
rest of america stagflated , houston boomed as high oil prices sucked
billions into the country ' s oil capital . in that decade alone , the city
built almost as much new office space as the total amount of commercial
property available in san francisco . money was being lent and business plans
formed on the assumption that oil would go to $ 50 a barrel . at the height of
the boom , about 80 % of the city ' s economy was oil - related . the bust was
traumatic . by the mid - 1980 s , all that new office space stood empty . every
big local bank was taken over . only one of the property developers then in
business is left .
unsurprisingly , a certain paranoia lingers in the city about the oil
business . the greater houston partnership , the main business lobby , has
spent the past 20 years frantically encouraging the city to diversify . yet
the fact is that the energy business and houston itself have emerged
stronger from the terrible bust . as company after company was forced to cut
back , they collapsed their operations back into houston and seem unlikely to
be dispersed again . in 1999 , when oil slumped to $ 10 a barrel and the number
of oil rigs in america fell to its lowest point in living memory , houston
still managed to add energy jobs . now another boom is in prospect , with oil
prices high again . matt simmonds , the head of a local energy consultancy ,
argues that america ' s past reluctance to build new power plants will force
it to increase energy capacity by around 30 % in the next ten or 15 years .
the rig count is already 50 % above last year , and natural gas exploration is
soaring . if oil prices stay high ( a big if ) and if other countries share
america ' s energy worries , houston will grow in importance .
it is hampered by a wild - catting reputation . in fact , the energy business is
changing in three significant ways , and houston is the centre of all of
them . first , technology . not long ago , oil drills went down to 1 , 500 feet
( 457 metres ) . now they go to 15 , 000 feet . companies use four - dimensional
computer imaging to plan new fields ( time is the fourth ) . this is making oil
an information - intensive business and puts a premium on the kinds of skills
available in houston . second , the cost of new oilfield exploration and
development has risen so far that even newly merged behemoths cannot always
finance them alone . this makes deal - making vital , which is good for the city
where deals are made . if you are not attending , say , lunch at houston ' s
petroleum club , you are out of the loop . third and most important , oil is
now only part of a bigger energy business , which includes electricity . once
divided into self - contained regional markets run by local utilities , the
electricity business is being changed by the gradual emergence of a national
grid dominated by power producers and traders . big users now decide whether
to buy power at long - or short - term rates , rather as they arrange their
financing . a new business of energy arbitraging is emerging , and itscentre
is houston .
three of the five new skyscrapers going up downtown have as their main
tenants energy companies that did not exist ten years ago . one of them ,
enron , is building a 50 , 000 - square - foot trading floor ? ? single - company
answer to the chicago board of trade . enron has probably been houston ' s
most successful energy company of the past ten years . it has never explored
for , pumped up , or refined a single drop ofoil . out of the black stuff
however well - placed houston is to take advantage of the energy business , it
will never be a great city as a one - trick pony . its boosters point to other
strengths :
* trade . houston is america ' ssecond largest port , which is remarkable
considering it is 50 miles from the sea .
* computers . the city is home to compaq , america ' s third - largest pc maker . if
you include dell , based in austin , two of america ? ? four big computer firms
are in south - east texas , not silicon valley .
* space . the national aeronautics and space administration centre is in
houston , thanks to lyndonjohnson , a native son .
* medicine . houston is home to probably the largest medical complex in the
world . in a moment of extraordinary optimism , the city set aside 700 acres
in the middle of town for medicine . the hospitals , clinics and research
centres of the texas medical centre employ 55 , 000 people and deal with
70 , 000 patients a day . st luke ' s has performed more heart surgery than any
other hospital in the world . md anderson and the texas children ' s hospital
are among the top two in their respective specialities , cancerand
paediatrics .
this list has holes in it . houston has no real financial services ( the
mainstay of the biggest global cities ) or pharmaceuticals ( despite the
medical centre ) . and some of its new industries are less robust than the
boosters claim . its port ' s success depends on the vagaries of mexico ' s
economy . space does not employ many people and is unlikely to grow until the
far - off day when the commercialisation of space arrives . the texas medical
centre is set up on a not - for - profit basis , so it has not been able to
commercialise its activities ( hence the lack of drug firms ) , though a new
biotechnology park may help . in fact , houston ' s main hope for diversifying
lies not so much in particular sectors as in something intangible : its
stunning ability to create new firms . for the past three years , houston has
created more new companies than any city in america . it is almost certainly
the best place either to start a business or find a first - time job . the
reasons for this are the real driving forces behind its success . the beauty
of entrepreneurialism
the first is unmeasurable , a no - holds - barred optimism of the old school . one
survey shows that about two - thirds of americans agree with the assertion
that if you work hard in this city , eventually you will succeed . but
houston ' s figure even at the bottom of the city ' s recession was 75 % , and now
it is 88 % , the highest - ever , and ( says the survey ' s author , stephen
klineberg of rice university ) the highest of any bigamerican city .
it may not be true that anything is possible in houston , but people act as
if it were . bill gilmer , the chief economist of the houston branch of the
federal reserve system , argues that this explains why houston recovered so
fast from the oil bust : unemployed engineers went out and set up their own
firms , just as aerospace engineers did in los angeles when the end of the
cold war put them out of business . the second advantage is technical .
uniquely for an american metropolis , houston has no citywide zoning
ordinances . when planning decisions are made , they are made by developers on
their own land . for the would - be entrepreneur , it is thus easier and cheaper
to find a place to set up shop in houston than in any other city in america .
lack of zoning laws hands power to developers who insist that new
developments be large to capture economies of scale . they expand in leapfrog
fashion , ignoring small 20 - acre plots near the city centre in favour of vast
planned towns further out . this drives land prices sharply down , especially
the further you go from the centre . on top of that , an aversion to red tape
makes it easy to get building permits . barton smith , a land economist at the
university of houston , reckons lack of red tape is at least as important to
keep costs low as lack of zoning laws .
lack of zoning also makes neighbourhoods slightly more mixed in terms of
usage ( residential and commercial are more muddled up than elsewhere ) and
racially . because there are no zoning laws to force , say , a bankrupt
restaurant to re - open as a restaurant , areas change shape quickly . at the
same time , houston is less segregated racially than any other city , bymost
measures .
one should not be over - impressed by this . whites in houston may be more
likely than their peers elsewhere to have had a conversation with someone of
a different race in the previous week , but that hasn ' t stopped them heading
for the suburbs . much of the racial mixture downtown is of blacks , latinos
and asians ( the city has america ' s second - largest vietnamese settlement
after southern california ) . but because zoning laws do not enable local
groups to keep poor people out ( for example , by requiring that all housing
plots be huge ) , houston remains racially desegregated by american standards .
this helps draw in immigrant workers , creating a pool of labour .
that leads to the third of houston ' s main characteristics which should prove
an advantage in the 21 st century : racial tolerance . houston looked like a
southern town until the 1970 s : white , with a large black minority . a
generation later , its population is roughly one - third white , one - third black
and ( slightly over ) one - third brown . other cities have similar profiles but
none went from a bi - racial to amulti - racial city quite so abruptly .
even more strikingly , it did so peacefully . houston has not had a race riot
since 1914 . for the largest southern city to have gone through the
civil - rights era and its aftermath without upheaval is a remarkable comment
on its politics . minorities have long been fully or over - represented in the
city council , county commissions and the texas state legislature . bob stein
of rice university argues that , unlike other growing cities , houston is
reinventing the tradition of a powerful group of civic - minded business
leaders , the fate of whose companies is closely tied to that of the city .
ken lay , enron ' s chairman , is an example . he has been the driving force
behind the building of two sports stadiums , and has a pet project to boost
child literacy . rumour has it that he may run for mayor . the effect of this
sort of civic - minded activism showed up in the late 1990 s . at a time when
america was busily abolishing affirmative - action programmes , houston went
the other way : it had a new one approved in a city - wide referendum . for
better or worse , this showed how racially tolerant it is . for how much
longer ?
in many ways , houston is thriving because it has kept alive an
old - fashioned , industrial mode of growth , built on cheap land , low taxes ,
immigrant labour and unfettered pro - business policies . this model may not be
enough in the next decades .
houston is ugly . it was hardly charming to begin with and has pulled down
many of its old buildings . it may have to pull down even more after recent
floods caused $ 2 billion - worth of damage . it is also , as al gore rudely
pointed out during the presidential campaign , polluted . since cities now
have to attract skilled workers with quality of life benefits , this is a big
problem , and not one that can be overcome by cheap housing .
business leaders are frantically trying to catch up . in an unusual example
of bipartisanship , a fervently conservative property developer has joined
forces with a former member of the clinton administration to back a $ 500 m
bond issue to plant lm trees . the greater houston partnership has executed
an about - turn on pollution . having argued last year that new pollution
controls damage growth , it is now on a crash course to cut ozone - creating
emissions as fast as it can . if this sudden change of mind is real , it
poses a tough question about zoning . houston has 2 , 300 people an acre ,
compared with 6 , 000 in los angeles and 20 , 000 in new york ( at the other end
of the scale ) . this extraordinary extensiveness is expensive . at one point
in the early 1990 s , houston alone was spending more on roads than any state
except california ( and , of course , texas ) .
there are doubts about how much further sprawl can go . three - quarters of the
best - paid jobs are still on or within the inner ring road . some new suburbs
are 50 miles away . can the city continue to burst outwards while attracting
the skilled people whose jobs are downtown ? and surely that means
introducing zoning ? lastly , houston faces a severe problem in the one area
where its national reputation is high : education . to run his number - one
priority , mr bush picked as secretary of education rod paige , a former head
of the houston independent school district . the president claimed ,
correctly , that mr paige had overseen substantial improvements in the city ' s
education , especially among minorities . what he did not say is that these
improvements have been nothing like enough . despite successes in individual
schools , half of all latinos fail to graduate from high school , compared
with 10 % of whites and 20 % of blacks . whites are abandoning houston ' s public
schools . they represent only 12 % of pupils ; 54 % are latino . more than a
quarter of today ' s schoolchildren are likely to dropout .
in a world where a good job depends on having a college degree , this is
alarming . rice university ' s mr klineberg argues that new immigrants from
mexico arrive lagging further behind the rest of the country educationally
than did the wave of immigrants in the early 1900 s . the first wave took
several generations to catch up . today ' s immigrants will have to close a
bigger gap more quickly . if they do not , they may end up in an underclass
that could scratch at houston ' sracial harmony .
this is houston
can houston make it ? the city has experienced the three big transformations
that affect america in their purest form : the change from a raw - material
economy to services ; the change from a bi - racial to a multi - racial place ;
and the moderation of a no - holds - barred pro - business culture to take account
of environmental and social costs . elsewhere , these changes have occurred
over 50 years . houston has lived through them in 20 . and the next 20 years
will probably be just as dramatic and successful . hold onto those stetsons .
copyright ? ? 1995 - 2001 the economist newspaper group
ltd . all rights
interesting article
interesting article , especially since it came from britain . . . it does
mention enron too .
the next global city ?
the blob that ate east texas
jun 21 st 2001
houston
from the economist print edition ( june 23 , 2001 )
for most outsiders , texas is a foreign country . its biggest city , though ,
might surprise the rest of the world
when a texan in a big hat tells you how wonderful his home town is , reach
for the salt . bob lanier , the former mayor of houston , isn ' t actually
wearing a stetson as he gazes from his penthouse down on a city that sprawls
25 miles away in every direction . but metaphorically he is . houston , he
claims , could become one of the great cities of the world . the remarkable
thing is that he might be right .
from the time the city was founded in 1836 until the 1970 s , houston doubled
in size almost every decade . then , despite one of the deepest slumps any
city had experienced since the 1930 s , the metropolitan area managed to add lm people in the 1990 s to grow to 4 . 7 m , making houston the fourth - largest
city in america . it is already bigger than berlin and , with a gdp of around
$ 215 billion a year , has a larger economy than hong kong . because it is the
nearest metropolis to the cities of northern mexico , it may attract another
2 m people over the next two decades , which would give it almost the same
size of population as london has now . but a global city ? these are few and
far between . houston can hardly dream of becoming a global financial centre
like london , new york or tokyo . but its business leaders think it could
become a cosmopolitan , entrepreneurial hub , a hong kong , a san francisco or
even a new los angeles . it shares la ' s smog , its sprawl , its latino culture ,
even its ugly hubris ; and by some measures it surpasses la ' s ability to
reinvent its economy . can it use its adaptability to turn itself into a
properly international place ?
oil be there for you
its hopes still depend disproportionately on its most global industry .
energy accounts for half of houston ' s economy . during the 1970 s , while the
rest of america stagflated , houston boomed as high oil prices sucked
billions into the country ' s oil capital . in that decade alone , the city
built almost as much new office space as the total amount of commercial
property available in san francisco . money was being lent and business plans
formed on the assumption that oil would go to $ 50 a barrel . at the height of
the boom , about 80 % of the city ' s economy was oil - related . the bust was
traumatic . by the mid - 1980 s , all that new office space stood empty . every
big local bank was taken over . only one of the property developers then in
business is left .
unsurprisingly , a certain paranoia lingers in the city about the oil
business . the greater houston partnership , the main business lobby , has
spent the past 20 years frantically encouraging the city to diversify . yet
the fact is that the energy business and houston itself have emerged
stronger from the terrible bust . as company after company was forced to cut
back , they collapsed their operations back into houston and seem unlikely to
be dispersed again . in 1999 , when oil slumped to $ 10 a barrel and the number
of oil rigs in america fell to its lowest point in living memory , houston
still managed to add energy jobs . now another boom is in prospect , with oil
prices high again . matt simmonds , the head of a local energy consultancy ,
argues that america ' s past reluctance to build new power plants will force
it to increase energy capacity by around 30 % in the next ten or 15 years .
the rig count is already 50 % above last year , and natural gas exploration is
soaring . if oil prices stay high ( a big if ) and if other countries share
america ' s energy worries , houston will grow in importance .
it is hampered by a wild - catting reputation . in fact , the energy business is
changing in three significant ways , and houston is the centre of all of
them . first , technology . not long ago , oil drills went down to 1 , 500 feet
( 457 metres ) . now they go to 15 , 000 feet . companies use four - dimensional
computer imaging to plan new fields ( time is the fourth ) . this is making oil
an information - intensive business and puts a premium on the kinds of skills
available in houston . second , the cost of new oilfield exploration and
development has risen so far that even newly merged behemoths cannot always
finance them alone . this makes deal - making vital , which is good for the city
where deals are made . if you are not attending , say , lunch at houston ' s
petroleum club , you are out of the loop . third and most important , oil is
now only part of a bigger energy business , which includes electricity . once
divided into self - contained regional markets run by local utilities , the
electricity business is being changed by the gradual emergence of a national
grid dominated by power producers and traders . big users now decide whether
to buy power at long - or short - term rates , rather as they arrange their
financing . a new business of energy arbitraging is emerging , and itscentre
is houston .
three of the five new skyscrapers going up downtown have as their main
tenants energy companies that did not exist ten years ago . one of them ,
enron , is building a 50 , 000 - square - foot trading floor ? ? single - company
answer to the chicago board of trade . enron has probably been houston ' s
most successful energy company of the past ten years . it has never explored
for , pumped up , or refined a single drop ofoil . out of the black stuff
however well - placed houston is to take advantage of the energy business , it
will never be a great city as a one - trick pony . its boosters point to other
strengths :
* trade . houston is america ' ssecond largest port , which is remarkable
considering it is 50 miles from the sea .
* computers . the city is home to compaq , america ' s third - largest pc maker . if
you include dell , based in austin , two of america ? ? four big computer firms
are in south - east texas , not silicon valley .
* space . the national aeronautics and space administration centre is in
houston , thanks to lyndonjohnson , a native son .
* medicine . houston is home to probably the largest medical complex in the
world . in a moment of extraordinary optimism , the city set aside 700 acres
in the middle of town for medicine . the hospitals , clinics and research
centres of the texas medical centre employ 55 , 000 people and deal with
70 , 000 patients a day . st luke ' s has performed more heart surgery than any
other hospital in the world . md anderson and the texas children ' s hospital
are among the top two in their respective specialities , cancerand
paediatrics .
this list has holes in it . houston has no real financial services ( the
mainstay of the biggest global cities ) or pharmaceuticals ( despite the
medical centre ) . and some of its new industries are less robust than the
boosters claim . its port ' s success depends on the vagaries of mexico ' s
economy . space does not employ many people and is unlikely to grow until the
far - off day when the commercialisation of space arrives . the texas medical
centre is set up on a not - for - profit basis , so it has not been able to
commercialise its activities ( hence the lack of drug firms ) , though a new
biotechnology park may help . in fact , houston ' s main hope for diversifying
lies not so much in particular sectors as in something intangible : its
stunning ability to create new firms . for the past three years , houston has
created more new companies than any city in america . it is almost certainly
the best place either to start a business or find a first - time job . the
reasons for this are the real driving forces behind its success . the beauty
of entrepreneurialism
the first is unmeasurable , a no - holds - barred optimism of the old school . one
survey shows that about two - thirds of americans agree with the assertion
that if you work hard in this city , eventually you will succeed . but
houston ' s figure even at the bottom of the city ' s recession was 75 % , and now
it is 88 % , the highest - ever , and ( says the survey ' s author , stephen
klineberg of rice university ) the highest of any bigamerican city .
it may not be true that anything is possible in houston , but people act as
if it were . bill gilmer , the chief economist of the houston branch of the
federal reserve system , argues that this explains why houston recovered so
fast from the oil bust : unemployed engineers went out and set up their own
firms , just as aerospace engineers did in los angeles when the end of the
cold war put them out of business . the second advantage is technical .
uniquely for an american metropolis , houston has no citywide zoning
ordinances . when planning decisions are made , they are made by developers on
their own land . for the would - be entrepreneur , it is thus easier and cheaper
to find a place to set up shop in houston than in any other city in america .
lack of zoning laws hands power to developers who insist that new
developments be large to capture economies of scale . they expand in leapfrog
fashion , ignoring small 20 - acre plots near the city centre in favour of vast
planned towns further out . this drives land prices sharply down , especially
the further you go from the centre . on top of that , an aversion to red tape
makes it easy to get building permits . barton smith , a land economist at the
university of houston , reckons lack of red tape is at least as important to
keep costs low as lack of zoning laws .
lack of zoning also makes neighbourhoods slightly more mixed in terms of
usage ( residential and commercial are more muddled up than elsewhere ) and
racially . because there are no zoning laws to force , say , a bankrupt
restaurant to re - open as a restaurant , areas change shape quickly . at the
same time , houston is less segregated racially than any other city , bymost
measures .
one should not be over - impressed by this . whites in houston may be more
likely than their peers elsewhere to have had a conversation with someone of
a different race in the previous week , but that hasn ' t stopped them heading
for the suburbs . much of the racial mixture downtown is of blacks , latinos
and asians ( the city has america ' s second - largest vietnamese settlement
after southern california ) . but because zoning laws do not enable local
groups to keep poor people out ( for example , by requiring that all housing
plots be huge ) , houston remains racially desegregated by american standards .
this helps draw in immigrant workers , creating a pool of labour .
that leads to the third of houston ' s main characteristics which should prove
an advantage in the 21 st century : racial tolerance . houston looked like a
southern town until the 1970 s : white , with a large black minority . a
generation later , its population is roughly one - third white , one - third black
and ( slightly over ) one - third brown . other cities have similar profiles but
none went from a bi - racial to amulti - racial city quite so abruptly .
even more strikingly , it did so peacefully . houston has not had a race riot
since 1914 . for the largest southern city to have gone through the
civil - rights era and its aftermath without upheaval is a remarkable comment
on its politics . minorities have long been fully or over - represented in the
city council , county commissions and the texas state legislature . bob stein
of rice university argues that , unlike other growing cities , houston is
reinventing the tradition of a powerful group of civic - minded business
leaders , the fate of whose companies is closely tied to that of the city .
ken lay , enron ' s chairman , is an example . he has been the driving force
behind the building of two sports stadiums , and has a pet project to boost
child literacy . rumour has it that he may run for mayor . the effect of this
sort of civic - minded activism showed up in the late 1990 s . at a time when
america was busily abolishing affirmative - action programmes , houston went
the other way : it had a new one approved in a city - wide referendum . for
better or worse , this showed how racially tolerant it is . for how much
longer ?
in many ways , houston is thriving because it has kept alive an
old - fashioned , industrial mode of growth , built on cheap land , low taxes ,
immigrant labour and unfettered pro - business policies . this model may not be
enough in the next decades .
houston is ugly . it was hardly charming to begin with and has pulled down
many of its old buildings . it may have to pull down even more after recent
floods caused $ 2 billion - worth of damage . it is also , as al gore rudely
pointed out during the presidential campaign , polluted . since cities now
have to attract skilled workers with quality of life benefits , this is a big
problem , and not one that can be overcome by cheap housing .
business leaders are frantically trying to catch up . in an unusual example
of bipartisanship , a fervently conservative property developer has joined
forces with a former member of the clinton administration to back a $ 500 m
bond issue to plant lm trees . the greater houston partnership has executed
an about - turn on pollution . having argued last year that new pollution
controls damage growth , it is now on a crash course to cut ozone - creating
emissions as fast as it can . if this sudden change of mind is real , it
poses a tough question about zoning . houston has 2 , 300 people an acre ,
compared with 6 , 000 in los angeles and 20 , 000 in new york ( at the other end
of the scale ) . this extraordinary extensiveness is expensive . at one point
in the early 1990 s , houston alone was spending more on roads than any state
except california ( and , of course , texas ) .
there are doubts about how much further sprawl can go . three - quarters of the
best - paid jobs are still on or within the inner ring road . some new suburbs
are 50 miles away . can the city continue to burst outwards while attracting
the skilled people whose jobs are downtown ? and surely that means
introducing zoning ? lastly , houston faces a severe problem in the one area
where its national reputation is high : education . to run his number - one
priority , mr bush picked as secretary of education rod paige , a former head
of the houston independent school district . the president claimed ,
correctly , that mr paige had overseen substantial improvements in the city ' s
education , especially among minorities . what he did not say is that these
improvements have been nothing like enough . despite successes in individual
schools , half of all latinos fail to graduate from high school , compared
with 10 % of whites and 20 % of blacks . whites are abandoning houston ' s public
schools . they represent only 12 % of pupils ; 54 % are latino . more than a
quarter of today ' s schoolchildren are likely to dropout .
in a world where a good job depends on having a college degree , this is
alarming . rice university ' s mr klineberg argues that new immigrants from
mexico arrive lagging further behind the rest of the country educationally
than did the wave of immigrants in the early 1900 s . the first wave took
several generations to catch up . today ' s immigrants will have to close a
bigger gap more quickly . if they do not , they may end up in an underclass
that could scratch at houston ' sracial harmony .
this is houston
can houston make it ? the city has experienced the three big transformations
that affect america in their purest form : the change from a raw - material
economy to services ; the change from a bi - racial to a multi - racial place ;
and the moderation of a no - holds - barred pro - business culture to take account
of environmental and social costs . elsewhere , these changes have occurred
over 50 years . houston has lived through them in 20 . and the next 20 years
will probably be just as dramatic and successful . hold onto those stetsons .
copyright ? ? 1995 - 2001 the economist newspaper group
ltd . all rights