The 21st Century Has Been Hard On US Households [feedly]

The 21st Century Has Been Hard On US Households
https://economicfront.wordpress.com/2018/08/21/the-21st-century-has-been-hard-on-us-households/

The 21^st Century has not been a good one for most working people in the United States.  In fact, for most of this century, real median household income has been below its starting value in January 2000.

The chart below shows real (inflation-adjusted) and nominal (or current dollar) median household income over this century.  As we can see, the fall in real median household income over most of the first eight years was nothing compared to the hit median household income took over the next 8 years. This record is even more appalling when one considers that the US was officially in an economic expansion from November 2001 to December 2007, and then again from June 2009 to the present.

The next chart brings the pressures working families have faced this century into sharper relief.  It shows the percentage change in real median household income, both monthly and using a three-month moving average, over time.  It does this by dividing the value of each median income variable by its respective value at the beginning of 2000.

It has been a long, hard slog, but finally, in 2018, the average household is enjoying some real growth in income.  Real median household income, as of March 2018, was 1.8 percent above its January 2000 level. The 3-month moving average was also 1.8 percent above its January 2000 benchmark.

While encouraging, recent gains have been far too small to compensate for the many preceding years of actual loss. Moreover, it remains to be seen how much longer this expansion will continue.  As the New York Times reported,

Federal Reserve officials are beginning to worry about a possibility that seems remote to workers who still feel left behind: the danger of the economy's running too hot, destabilizing financial markets and setting off a rapid escalation in wages and prices that could force the central bank to slam the brakes on growth.

Translated, this means that if labor costs rise enough to eat into corporate profits, Federal Reserve officials will respond with interest rate hikes to slow down economic activity and weaken labor's bargaining power.  And so goes the new century.

The 21^st Century has not been a good one for most working people in the United States.  In fact, for most of this century, real median household income has been below its starting value in January 2000.

The chart below shows real (inflation-adjusted) and nominal (or current dollar) median household income over this century.  As we can see, the fall in real median household income over most of the first eight years was nothing compared to the hit median household income took over the next 8 years. This record is even more appalling when one considers that the US was officially in an economic expansion from November 2001 to December 2007, and then again from June 2009 to the present.

The next chart brings the pressures working families have faced this century into sharper relief.  It shows the percentage change in real median household income, both monthly and using a three-month moving average, over time.  It does this by dividing the value of each median income variable by its respective value at the beginning of 2000.

It has been a long, hard slog, but finally, in 2018, the average household is enjoying some real growth in income.  Real median household income, as of March 2018, was 1.8 percent above its January 2000 level. The 3-month moving average was also 1.8 percent above its January 2000 benchmark.

While encouraging, recent gains have been far too small to compensate for the many preceding years of actual loss. Moreover, it remains to be seen how much longer this expansion will continue.  As the New York Times reported,

Federal Reserve officials are beginning to worry about a possibility that seems remote to workers who still feel left behind: the danger of the economy's running too hot, destabilizing financial markets and setting off a rapid escalation in wages and prices that could force the central bank to slam the brakes on growth.

Translated, this means that if labor costs rise enough to eat into corporate profits, Federal Reserve officials will respond with interest rate hikes to slow down economic activity and weaken labor's bargaining power.  And so goes the new century.

 -- via my feedly newsfeed

Joseph Stiglitz: The Myth of Secular Stagnation [feedly]

Joseph Stiglitz, Nobel Prize winner and former chair of the World Bank under Clinton,  here gives a major rebuttal to the "secular stagnation" thesis enunciated primarily by Larry Summers, the former Treasury Secretary and Chairman of Obama's Council of Economics advisers. He implies it is a cover for the failure of the Obama administration to sufficiently stimulate the economy following the 2008 Great Recession onset. He makes a convincing case for the shortcomings. However I am not sure he is calculating the political dimension (e.g. counting VOTES) correctly, if at all, in making the critique.  Summers is a genius too. And is reported "on the inside" to have argued forcefully for a stronger stimulus. Nonetheless, identifying the critical points in  the string of failures that got us into this SERIOUS mess hopefully can shine the light on the path out of both secular, and ideological, stagnation

The Myth of Secular Stagnation
https://www.project-syndicate.org/commentary/secular-stagnation-excuse-for-flawed-policies-by-joseph-e-stiglitz-2018-08

Aug 28, 2018 JOSEPH E. STIGLITZ

Those responsible for managing the 2008 recovery found the idea of secular stagnation attractive, because it explained their failures to achieve a quick, robust recovery. So, as the economy languished, a concept born during the Great Depression of the 1930s was revived.

NEW YORK – In the aftermath of the 2008 financial crisis, some economists argued that the United States, and perhaps the global economy, was suffering from "secular stagnation," an idea first conceived in the aftermath of the Great Depression. Economies had always recovered from downturns. But the Great Depression had lasted an unprecedented length of time. Many believed that the economy recovered only because of government spending on World War II, and many feared that with the end of the war, the economy would return to its doldrums.


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Something, it was believed, had happened, such that even with low or zero interest rates, the economy would languish. For reasons now well understood, these dire predictions fortunately turned out to be wrong.

Those responsible for managing the 2008 recovery (the same individuals bearing culpability for the under-regulation of the economy in its pre-crisis days, to whom President Barack Obama inexplicably turned to fix what they had helped break) found the idea of secular stagnation attractive, because it explained their failures to achieve a quick, robust recovery. So, as the economy languished, the idea was revived: Don't blame us, its promoters implied, we're doing what we can.

The events of the past year have put the lie to this idea, which never seemed very plausible. The sudden increase in the US deficit, from around 3% to almost 6% of GDP, owing to a poorly designed regressive tax bill and a bipartisan expenditure increase, has boosted growth to around 4% and brought unemployment down to a 18-year low. These measures may be ill-conceived, but they show that with enough fiscal support, full employment can be attained, even as interest rates rise well above zero.

The Obama administration made a crucial mistake in 2009 in not pursuing a larger, longer, better-structured, and more flexible fiscal stimulus. Had it done so, the economy's rebound would have been stronger, and there would have been no talk of secular stagnation. As it was, only those in the top 1% saw their incomes grow during the first three years of the so-called recovery.

Some of us warned at the time that the downturn was likely to be deep and long, and that what was needed was stronger and different from what Obama proposed. I suspect that the main obstacle was the belief that the economy had just experienced a little "bump," from which it would quickly recover. Put the banks in the hospital, give them loving care (in other words, hold none of the bankers accountable or even scold them, but rather boost their morale by inviting them to consult on the way forward), and, most important, shower them with money, and soon all would be well.


What was needed was more than a massive bank bailout. The US needed a fundamental reform of its financial system. The 2010 Dodd-Frank legislation went some way, though not far enough, in preventing banks from doing harm to the rest of us; but it did little to ensure that the banks actually do what they are supposed to do, focusing more, for example, on lending to small and medium-size enterprises.But the economy's travails were deeper than this diagnosis suggested. The fallout from the financial crisis was more severe, and massive redistribution of income and wealth toward the top had weakened aggregate demand. The economy was experiencing a transition from manufacturing to services, and market economies don't manage such transitions well on their own.

More government spending was necessary, but so, too, were more active redistribution and pre-distribution programs – addressing the weakening of workers' bargaining power, the agglomeration of market power by large corporations, and corporate and financial abuses. Likewise, active labor-market and industrial policies might have helped those areas suffering from the consequences of deindustrialization.

Instead, policymakers failed to do enough even to prevent poor households from losing their homes. The political consequences of these economic failures were predictable and predicted: it was clear that there was a risk that those who were so badly treated would turn to a demagogue. No one could have predicted that the US would get one as bad as Donald Trump: a racist misogynist bent on destroying the rule of law, both at home and abroad, and discrediting America's truth-telling and assessing institutions, including the media.

A fiscal stimulus as large as that of December 2017 and January 2018 (and which the economy didn't really need at the time) would have been all the more powerful a decade earlier when unemployment was so high. The weak recovery was thus not the result of "secular stagnation"; the problem was inadequate government policies.

Here, a central question arises: Will growth rates in coming years be as strong as they were in the past? That, of course, depends on the pace of technological change. Investments in research and development, especially in basic research, are an important determinant, though with long lags; cutbacks proposed by the Trump administration do not bode well.

But even then, there is a lot of uncertainty. Growth rates per capita have varied greatly over the past 50 years, from between 2 and 3% a year in the decade(s) after World War II to 0.7% in the last decade. But perhaps there's been too much growth fetishism – especially when we think of the environmental costs, and even more so if that growth fails to bring much benefit to the vast majority of citizens.

There are many lessons to be learned as we reflect on the 2008 crisis, but the most important is that the challenge was – and remains – political, not economic: there is nothing that inherently prevents our economy from being run in a way that ensures full employment and shared prosperity. Secular stagnation was just an excuse for flawed economic policies. Unless and until the selfishness and myopia that define our politics – especially in the US under Trump and his Republican enablers – is overcome, an economy that serves the many, rather than the few, will remain an impossible dream. Even if GDP increases, the incomes of the majority of citizens will stagnate.


JOSEPH E. STIGLITZ

Writing for PS since 2001
249 Commentaries

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Joseph E. Stiglitz, a Nobel laureate in economics, is University Professor at Columbia University and Chief Economist at the Roosevelt Institute. His most recent book is Globalization and Its Discontents Revisited: Anti-Globalization in the Era of Trump. -- via my feedly newsfeed

The Transatlantic Alliance Will Survive Trump [feedly]

The Transatlantic Alliance Will Survive Trump
http://cepr.net/publications/op-eds-columns/the-transatlantic-alliance-will-survive-trump

Mark Weisbrot
The Nation, August 27, 2018

See article on original site

Every week, and often more than once a week, there is another article in the major media or in foreign policy publications about the demise of the post-World War II Anglo-American world order. These analyses typically single out the Transatlantic Alliance between the US and Europe ― two of the world's largest economies ― for special concern and anxiety as the underpinning of this world order. Not surprisingly, President Trump's wildly fluctuating comments on NATO (despite the fact that he is expanding it), his unprecedented rudeness to European leaders, and his friendliness with Putin at the Helsinki summit have all added to the angst.

The basic story behind this moaning and melancholy is that the leaders of America put together a "rules-based" system based on "open markets" and democracy (the two are sometimes seen as synonymous) that has fostered prosperity and relative stability. The United States was the only sizable industrial economy to emerge not only unscathed, but with its economy doubled in size, following World War II. While others might have taken advantage of this unrivaled power for their own gain, the story goes, America's beneficent rulers constructed a world order for the good of everyone. Trump is seen as a threat to its continued existence.

This assessment of the post-WWII world order leaves out some three million dead Vietnamese, and half a million dead in Indonesia who might question the beneficence of this system if it had not killed them. More recently, a million dead Iraqis, if they could be heard, might also raise objections about whether American dominance has been in the interests of all. And there are hundreds of millions of people in Latin America, Africa, and Asia who suffered for decades under US-backed dictatorships, as well as US-sponsored wars. Much of the violent dysfunctionality in these countries today is a direct result of these interventions, as well as continuing US influence.

In fact, as I write this now, the US military is directly involved in a war that has deliberately produced what the UN has called the worst humanitarian crisis in the world, in Yemen. It has pushed more than eight million people to the brink of starvation, created the worst outbreak of cholera in modern history, and killed thousands of civilians in bombing raids. The United States is providing midair refueling to the Saudi and UAE bombers, intelligence, targeting assistance, on-the-ground military personnel, and more ― constrainedonly by growing opposition in the US Congress.

But let us ignore these inconvenient truths for a moment, as almost all of these analyses do.

Let's look at the present situation. The Transatlantic Alliance is much stronger than most of these analysts recognize. This is mainly because it is not just an alliance of democratic governments with shared values, but also an alliance of the rich countries of the world ― their leaders, that is ― against the poor and middle-income countries of the world.

The rules of the World Trade Organization, to which 164 countries are bound, were written by US and European corporations. The WTO's most significant achievement since its creation in 1995 was to increase US-style patent protection throughout the world, leading to the deaths of millions of poor people who could not get access to essential medicines. After years of struggle, some of these rules were rewritten, but much damage remains. The WTO's rules on agriculture also greatly disadvantage developing countries and seek to prohibit governments from subsidizing domestic production for domestic consumption to feed people who are badly malnourished, e.g., in India. WTO rules also make it much more difficult for developing countries to employ the industrial policies that high-income countries like the US used to get where they are today.

The International Monetary Fund, an organization that has 189 member countries, is run by the United States and Europe. In fact, for most of the world outside of Europe, the US Treasury Department is in charge. The World Bank, which by custom since 1946 has to have a president who is American, is also controlled by the United States and its allies, and cooperates with the IMF in promoting and imposing economic policies that Washington favors. These policies are often not in the interest of developing countries, as one would expect from organizations that are not accountable to low- and middle-income countries, or to any electorate.

These are the institutions of global governance that exercise power in the world, other than the UN Security Council, where the Transatlantic Alliance must share veto power with Russia and China. The IMF, for most of the past half century, has been the mostimportant avenue of US influence over low- and middle-income countries. It has sat at the top of a creditors' cartel, where countries who did not agree to IMF conditions would not get loans from other multilateral lenders (e.g., the World Bank) and sometimes not even from the private sector. This cartel lost influence in most middle-income countries in the first decade of the twenty-first century, but it has been coming back some (e.g., in Argentina) and still maintains its creditors' cartel in poor countries.

European leaders are quite angry about the Trump administration's unilateral abrogation of the Joint Comprehensive Plan of Action, the negotiated agreement with Iran that had put an end to the threat that it would develop nuclear weapons in the foreseeable future. Europe clearly has much more of a security risk from the Middle East, including Trump's threatened war with Iran; not to mention all the political problems that have been created by the refugee inflow that was primarily a result of US intervention there. But what did they do about it, after their anxious pleading with Trump failed to move him? Nothing, because these leaders ― not the people of Europe, who have been screwed royally since the Great Recession ― need their beloved partner in crime.

The US is the gendarme of the rich counties' global economic and political order. This is partly because the US did not suffer the destruction that Europe did in the world wars, and partly because Europeans have developed welfare states that do not allow for the fantastically wasteful military spending that maintains 800 US military bases across the globe.

But Washington's weapons of mass and ordinary destruction are by no means its whole arsenal. The "exorbitant privilege" of being able to print the world's most important currency, which makes up 60 percent of the world's reserves held by central banks, is another. When Lehman Brothers collapsed in 2008 and the world financial crisis hit, the Federal Reserve arranged currency swaps for its European partners to make sure that they didn't suffer any temporary international liquidity problems. On the other side of the divide, if you are outside Washington's good graces, the dollarized world financial system allows the US vastly more power than other countries would have to enforce sanctions against you (e.g., in the cases of Cuba, Venezuela, and Iran), without, or even against, the United Nations' approval.

Europe's elite are bound to the rulers of the United States by virtue of their common interest in maintaining their dominance of the world economy. This is despite the reality that their spoils do not trickle down to the citizenry of the United States or of Europe.

This Anglo-American dominance won't last forever. Eurasia, the world's largest land mass, which bred the colonial powers who conquered the world, continues to increase its economic integration despite the United States' best efforts to counter this world-historical trend with its attempted TPP and TTIP commercial agreements. China's economy is already 25 percent larger than that of the US on a purchasing power parity basis. (This is the measure most used by economists for international comparisons, since it takes into account price differences between countries.) In a decade, it's projected to be about twice as big as that of the US.

Over time, European countries, led by their corporations and financial institutions, will look more to the East and less to the West as the world becomes more multipolar and the US share of the world economy shrinks. But for the near future, the US and European elite need each other as the global hegemon tries to hang on to its unelected position. Trump can be as rude, crude, and ignorant as he pleases with his European allies, but it won't make them rebel against "the leader of the free world."

---

Mark Weisbrot is Co-Director of the Center for Economic and Policy Research in Washington, D.C., and the president of Just Foreign Policy. He is also the author of "Failed: What the 'Experts' Got Wrong About the Global Economy" (2015, Oxford University Press). You can subscribe to his columns here.

 -- via my feedly newsfeed

Yes, Republicans Are or Are Pretending to Be Easily Grifted Morons: The Theory of Relativity: Is It Time to "Teach the Controversy"?: Hoisted from Seven Years Ago [feedly]

DeLong raises a good question, and includes a quiz with the Kucinitz essay...How up to speed is your 'scientific' bullshit detector

Yes, Republicans Are or Are Pretending to Be Easily Grifted Morons: The Theory of Relativity: Is It Time to "Teach the Controversy"?: Hoisted from Seven Years Ago
http://www.bradford-delong.com/2018/08/yes-republicans-are-or-are-pretending-to-be-easily-grifted-morons-the-theory-of-relativity-is-it-time-to-teach-the-contro.html

 -- via my feedly newsfeed

Recovery Radio:Recovery Radio Podcast: Sober Service

John Case has sent you a link to a blog:



Blog: Recovery Radio
Post: Recovery Radio Podcast: Sober Service
Link: http://recovery.enlightenradio.org/2018/08/recovery-radio-podcast-sober-service.html

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Bernstein: ISDS and the US [feedly]

For those seeking general background on Investor State Dispute Settlement, check wikipedia's intro. This is an important, critical issue in developing progressive trade theory and practice. Bottom line: US corps sought immense bilateral and NAFTA (also TPP)  trade advantages by agreements endorsing the rights of US companies to  sue trading partner governments not just for Bolshevik style nationalizations, but also for any reforms that might affect their bottom line, or tax obligations to the partner. Trade agreements founded on mutual benefits were corrupted significantly by fees and other sanctions used to punish less powerful partners, who might not, for example, be able to afford the millions in legal fees to prosecute their cases in US Courts (also preferred in agreements). 

Its interesting that protests from progressives on this matter were negated by the commercial forces dominating most negotiations, but now gain ground among right wingers worried that OTHER existing and emerging "investor states" (competitors, not allies to Trump) may reciprocate.

Jared drills into the details.....

ISDS and the US
http://jaredbernsteinblog.com/isds-and-the-us/

I've been touting the fact, i.e., as I understand it, that this new US/Mex NAFTA agreement just struck yesterday largely gets rid of investor dispute rules (investor state dispute settlement, or ISDS) that many progressive have long complained about. (To be clear, whether this deal is going anywhere is a whole other story; I'm skeptical.)

I'm working on a piece about how the new deal looks a lot better for workers on both sides of the border than prior agreements, but re ISDS, the very knowledgeable Lori Wallach tell me it "ends the possibility of any future U.S.-Canada ISDS cases. This is huge given major US-Canada cross investment." For Mexico, where domestic courts are less reliable, investors who want to bring a case must first exhaust domestic court and administrative remedies, before turning to new procedures that significantly raise the bar to investor compensation (the fact that the Business Roundtable is already complaining about this part of the deal is revealing in this regard). There is apparently a carve out for investments in Mexican energy production that would allow a small group of U.S. investors the same protections as in earlier agreements, but this looks to have been the negotiating price for the larger advances just noted.

My friend Jay Shambaugh, presumably implying that ISDS ain't so bad, asks the reasonable, though rhetorical (if not snarky: surely Jay, a former Obama-admin economists who's one of my go-to peeps on international trade, knows the answer). Has a company used ISDS under NAFTA to overturn a US law or regulation?

No, meaning fears about the process overriding US sovereign laws have not been realized. If that's Jay's point, it's a relevant one with which I agree.

But their are still at least two big, existing problems. First, ISDS has been used by corporate bullies of rich countries to extract millions in fines and fees from poorer countries, and not for investor takings (which would be legit) but for protections prohibited by trade deals (examples here and here). What I want to see much more in U.S. trade agreements–and Jay might agree–is less protectionism of the advanced countries' investor class and its IP and drug patents, and more lifting of standards in poor countries.

The second problem with ISDS is broader:

Through the backdoor of trade agreements, the ISDS process imposes extreme property rights' concepts rejected repeatedly by Congress and U.S. courts, such as the notion that governments should pay "regulatory takings" compensation to property owners for the right to enforce environmental, health and other safeguards that could undermine the value of their property or investment. We must not solve the problem of weak rule of law among our trading partners by having the broad public bear investment risk or by changing fundamental principles of U.S. law. Instead, investment risk must be borne by the investors themselves; it is their skin, not ours, that should be in the game.

Final point. While the US hasn't lost a case, a country is only really exposed to ISDS risk when partner countries have substantial investments in the other countries in the deal. That's why, according to Lori, "54 of the 56 NAFTA ISDS cases to date attacking U.S. or Canadian laws were brought by investors from the Canada or the U.S., not from Mexico."

Surely, this makes no sense. ISDS isn't in place–or at least it shouldn't be–to be invoked in advanced countries with mature legal systems. Let the nationally-sanctioned, highly functional court systems work it out! (Jay: agree or disagree?.)

In fact, recent journalistic research reveals speculation by financial investors in ISDS cases, wherein investors either purchase companies with the express purpose of filing an ISDS claim or directly bankrolling the cases in order to claim a share of the fine. (Investors refer to this practice as "third-party funding of international arbitration against foreign sovereigns".) Gus van Harten, a law professor who has studied these activities, finds that investors "…can get an award for billions of dollars when that award would never come out in domestic law. It's just a jackpot for speculators."

End of the day, the fact that ISDS hasn't overridden any U.S. laws is comforting and Jay's right to "ask" about it. But that doesn't mean it's non-evil!

 -- via my feedly newsfeed

The Technology Tel [feedly]

The economics of agglomeration are fascinating, and giving rise to lots of academic and government study. The tech infrastructures that both reflect, and enable, agglomeration history are like a map of changes in city and regional architectures

The Technology Tel
https://digitopoly.org/2018/08/25/the-technology-tel/

Most technology nerds know "tel" as a prefix meaning "transmission over a distance," as in telecommunications, television, or telemarketing. Most are unfamiliar with an altogether different meaning as found in the phrase "technology tel," which is the modern and digital equivalent to an archaeologist's tel.

Archaeologists define tel as a mound created by many generations rebuilding on the same location, where past efforts become foundations for new generations. This meaning of tel arises in locations that humans have inhabited for many centuries, such as the ancient cities of the Near East and Mediterranean.

Similarly, a technology tel accumulates generations of digital infrastructure built in one location, where it serves interdependent or independent functions. Technology tels exist in every major city, and though city dwellers interact with them regularly, they tend to blend into the background.

Unlike its archaeological counterpart, a technology tel accumulates material in a matter of decades or faster, which makes it possible to observe and illustrate its economic determinants. Those economics occasionally gain attention from developers and city planners, and they are worth some attention from anyone interested in the modern digital experience.

FINANCIAL DISTRICTS

Technology tels grow due to three economic factors:

• infrastructure is built in locations where the most users create the most demand,

• the presence of a prior generation lowers the cost of installing the next, and

• technical factors raise the productivity of collocating two distinct pieces of equipment.

These factors reinforce one another, keeping equipment in the same location.

Southern Manhattan contains the mother of all technology tels. Long before the era of modern technology, anyone affiliated with financial markets already crowded into the district. Then, electronics worked their way into the location to serve the industry. It is obvious why. Financial users have long been lead users of information technology, so every financial office needed equipment from the frontier. Accordingly, after the early 1980s, the district became home to LANs, laptops, servers, screens, printers, and WiFi routers. Plenty of advanced infrastructure also found its way there, both to serve the same set of users and to increase effectiveness through collocation. Many workers use the same ISPs, Internet cables, 4G antennae, LAN maintenance staff, and hosting facilities.

Although sharing is efficient, organic growth is uncoordinated and does not stress efficiency. Instead, competition induces duplicate supply. Multiple upgrades of buildings attract the best tenants, so competitive incentives induce earlier upgrades, and the cycle continues—keeping the technology tel near the frontier.

Users and equipment compete for space, driving up its price. And so arises one of the most telling symptoms of a crowded technology tel: Despite expensive real estate, some buildings house data-centers filled with servers for nearby users who demand low latency. Those datacenters also hap-pen to be in place where there is easy access to the fiber. That is as it should be. The functional value of the datacenter is highest there, which contributes to the willingness to pay for the space.

Today, crowding is visible everywhere. Data equipment, servers, and switches inhabit every closet and basement, and antennae and dishes crown the top of every building. Data lines snake through every tunnel and available duct, including Manhattan's bridges. Wires traipse every elevated path-way, especially telephone poles, if available. Aesthetics are optional. Equipment goes wherever it can fit and, in some places, where it should not have gone.

Most crowded technology tels generate spawning, that is, the movement of activity to other locations away from the technology tel, either to escape the price of space or the lack of available space. For example, today, the equipment for the electronic New York Stock Exchange and related ex-changes for high-frequency traders sits in northern New Jersey. These are organized around some datacenters, which, if you think about it, are just miniature technology tels coordinated by a manager.

Crowding and spawning are not unique to southern Manhattan. The same economics created other technology tels in many other locations. Consider the second-largest financial center in North America: Chicago. Yet again, that city contains a large network of preexisting tunnels and conduits to support an enormous knot of wires and connections. All the electronics inside the down-town loop today take advantage of it. In another parallel, part of the electronic infrastructure to support the electronic exchanges also left the financial district. Part resides at a datacenter in Arora, a western suburb, and part resides at a datacenter at 350 E. Cermak, two miles south of downtown.

The latter is a retrofitted printing building (which used to print the Sears Roebuck catalogue, among other things). It is a massive building containing nearly infinite conduits and pipes. With more than a million square feet, I see little reason to doubt its claim as one of the largest datacenters anywhere.

POLICY

The accumulated investments of a technology tel create a number of opportunities and headaches. Catalogue them as growth, neglect, and security.

Growth looks like the attractive part of a technology tel. Once started, an existing location acts as a magnet for more investment and people. For example, in the last few decades, the technology tel built around San Francisco's financial district spawned a nearby technology tel in the area south of Market Street—albeit, with some help from city planners. That area was among the seediest parts of the city during my childhood, but now it's a showcase for technology-led urban growth.

As in the case of San Francisco, organic growth often does not just happen on its own. That motivates a question: Can growth be jumpstarted in a new location by a city planner? Some cities in low-density locations have tried to do so through abatements for property and/or sales taxes, as well as expedited permitting. In recent times, this has worked with a propitious situation, namely, a location next to (transcontinental) access lines and inexpensive (overbuilt) electrical supply.

Critics of such programs note that these programs mostly attract datacenters, which create limited employment for construction work and modest employment thereafter. A moderately sized datacenter employs a few dozen people—maintenance and security staff, and a few technicians—and has limited local consequences. It mostly acts as a footloose secondary facility for backup storage for distant users. Giant warehouses and low-rise buildings (with little architectural beauty) typically do not result in a particularly attractive business district.

The addition of a few steady jobs hardly seems worth the effort and expense. So why do so? For one, if enough such buildings can be located in the same area, it can motivate investment in shared infrastructure, such as cellular towers, which spurs further investment. For two, these mini technology tels generate little traffic, meaning there will be few burdens for public administrators. Many planners in low-density locations would prefer that over nothing.

Even with such modest payoff, it is easier said than done. A thriving technology tel depends on each piece working well. Ask a city planner, and he or she will explain the challenges of lining up all the pieces. A local electrical, cable, or cellular company might fail to keep up with the frontier; a freeway exit might need repaving; or a state agency might drag its feet issuing permits.

Some difficult economic problems also can get in the way. For example, the deployment of 5G has many city planners vexed. The prior upgrade between 3G and 4G lowered the costs of deployment by using the existing rights-of-way and infrastructure, such as towers and pathways for backhaul of signals. As of this writing, however, 5G signals do not operate like 4G signals. That could drive up expenses in a local technology tel that wants to remain relevant.

Security risks raise different issues. Consider the technology tel in Ashburn, Virginia, next to Washington Dulles International Airport. That location became focal because it contained one of the original switches for the Internet, and then AOL and other dot-com wunderkinds moved in. For more than two decades, it has had a momentum all its own, with almost no spawning. Today, this location contains an enormous collection of datacenters, Internet switches, and private firms who take advantage of the connectivity, making it one of the largest technology tels in North America. Any firm trying to service the Eastern Seaboard or the federal government invests there.

Notice the historical irony. Building secure communication infrastructure in military applications provided one of several motives for DARPA to invent packet switching many decades ago. Yet, economic forces have created just about the opposite of what the military wanted: potential for a single point of technical failure due to a concentrated geographic target.

Interdependence links one failure to another in a technology tel, and this too creates potential head-aches. One of Chicago's experiences illustrates this well. In April 1992, some misplaced pile drivers in the Chicago River started a leak in a conduit tunnel, which was first discovered by a workman inspecting fiber lines running through the tunnel. The city ignored the warnings, and the unrepaired leak eventually became a flood. Many basements were served by interconnecting underground tunnels, so the flood spread. Swimming fish appeared in basements. It took a while to clean up. Settling the insurance claims was an even bigger mess.

CONCLUSION

A technology tel is propelled by the relentless urge to build and agglomerate. Crowding and spawning have become part of the landscape. Take a look around you. It is everywhere and notice-able, if you just look for it.

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