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The Jig is Up: Unless We ‘Change the Rules of the Game’

Mark Pisano / Jan 14 2012

For Release Saturday, January 14, 2012
Citiwire.net

Mark PisanoAmericans are now beginning to realize that their world is not the same, that fundamental change is underway. Incomes have dropped for ten years; the unemployment rate, while slightly lower right now, is persistently high. Looking to the future, Americans know there will no quick return to normalcy. Support for bipartisan leadership is actually a cry for a new direction that will provide long term real changes and not more incremental quick fixes and policy spins that do not work.

Why this change in fortunes and what can we do about it? We are caught in the wave of a fundamental transition greater than any period in recent memory, a transition that will redefine how we think and act going forward. The promise of a “flat world” of cheaper products so we can consume more and find interesting places that we can visit has resulted in a migration of jobs from the US to abroad and, according to the World Bank, the largest movement of peoples (country to city) in recorded history.

The world is not as flat as we envisioned. Instead the gateways to this global world, the places where international airports, ports, finance, marketing and distribution centers converge, are the attractors of growth. New logistic supply megaregions, involving multiple states and portions of large states such as Texas and California, have been identified by the public policy group, America 2050. More disturbing, America 2050 noted, the rest of the country is losing population and economic growth to the rapidly growing states and regions, creating huge inequities in the U.S. Abroad, particularly in the developing world, these mega-global gateway regions are logistic production centers. People outside these global megaregions are falling behind.

The information revolution is now coupled with the logistic revolution, with its massive container ships, double–stacked trains and barcoded distribution driven distribution centers, to redefine how the world market works. A semi-truck sized container costs $600 to transport from China to Los Angeles, making our competitors equivalent to our neighbor. Interestingly, moving the same or equivalent amount of goods from Los Angeles to Houston costs $1,400 due to the inefficiencies, primarily in the urban regions, of our land system. The trade policies of the world’s countries and these new logistical innovations are creating a new competitive reality that we never envisioned. The international sector growth from 8 percent to almost 40 percent in the last 20 years means that the U.S.A. is no longer an island where we can do what we want without implications.

The total cost — of doing business, public and private lifecycle costs over time — counts significantly. When we take public and private actions, they will affect our international competitive position. Competitors like China do not make a distinction between public and private expenditures; they make investments that are needed to run their society so they can produce and export with an eye to export more. Collective choice goods, such as transportation systems and education, are all part of the costs that go into producing and selling and they all contribute to growth in the economy.

Unfortunately, U.S. decision-making does not look at cost this way. What is more important, we do not consider long-term costs. If we do not have up-to-date logistics systems in place to move our goods in these logistics megaregions, and if we do not have higher speed rail in place to move workers (particularly skilled workers) over the longer distances involved, we disadvantage ourselves. Meanwhile our competitors have or are developing this infrastructure.

Another cost is how we put ourselves together to deal with these collective choice issues. Infrastructure, energy, education, environment, health require all sectors to work together differently and will require fiscal resources that our debt-laden governments at all levels cannot provide if they are looking seriously at lifecycle costs. If we do not address these issues, which are the foundations for competitiveness, we fall further behind.

Bringing people and sectors together happens when collective interests are furthered by working together and the results of this cooperation can be realized. This has happened historically in this country at the grassroots level in communities. Because of the complexity that has evolved through globalization, this form of collaboration will need to evolve beyond the community to the region and even to the megaregion. Critics will say that it won’t happen. But we are now beginning to see that leaders are developing strategies to bring the sectors together to address their collective choice issues.

In the Northeast Megaregion from Boston to Washington, DC, the Regional Plan Association, a business led organization, is mobilizing support for the development of a high speed rail system in the Northeast Corridor to move skilled labor from one metro region to another and to facilitate business transactions in the megaregion. The strategy captures labor and business mobility and land use benefits to finance the system. Federal financial instruments and state cooperation will accelerate the evolution of the system, but the leadership is coming from within.

In the Southern California Megaregion, governmental leadership from the Southern California Association of Governments developed a new logistics corridor to move goods from the Ports of Los Angeles and Long Beach through the region, removing blockages and lawsuits that were threatening the development of the ports. The key to the strategy was the business and public agreement on a container fee that was based on the benefits the project developed and was implemented by a new institution–the Alameda Corridor Authority. A federal loan accelerated the development of the project but the leadership came from within.

In the Northwest megaregion, the recession of the 90′s led the political leadership to capitalize on the region’s major locational advantage of being a global trading center to form the Greater Seattle Trade Alliance as an alliance of business, government and educational interests. The alliance developed strategies that led to the development of the FAST Corridor (Freight Action Strategy for Seattle-Tacoma) which will facilitate the movement of containers out of the ports. Additionally the Alliance created a public and private marketing strategy for the region that accelerates its growth. Again federal assistance is important to the regional strategy but the leadership is local.

Examples abound throughout the country of new regional educational, health, environmental and infrastructure partnerships to address these collective choice issues, aiming to find new lower cost solutions and develop new resources. Leaders throughout the country understand that we need to roll up our sleeves and, with new rules of the game for our organizations, work differently to address the issues we face in a way that deals realistically with our cost and our competitiveness issue.


Mark Pisano served for many years as Executive of the Southern California Association of Governments, with headquarters in Los Angeles. He is currently a Distinguished Fellow at the Bedrosian Center for Governance at the University of Southern California.

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2 Comments

  1. Mayraj Fahim
    Posted January 15, 2012 at 12:45 am | Permalink

    America’s future relies on changing the paradigm. Fragmented governance has meant economic segregation for the future majority. Time is not America’s friend as the new dominant generation’s babies were born last year. The education system needs to be different by the time they start school, or America needs to prepare a future with a developing country profile. Can regional organizations make this monumental change happen? That is the biggest issue they face, it seems to me.

  2. Marc Brenman
    Posted January 15, 2012 at 8:44 am | Permalink

    A number of these regional efforts appear good on the surface, but are making it easier and cheaper for Americans to consume foreign goods, most particularly those from China. This is destroying US manufacturing and jobs. For example, the Alameda Corridor, brought into fruition with federal and state money, appeared to be a good idea, and it did have some good results. But the long term results were not good, as long as the US imports more than it exports. Recent statistics show that the international trade gap is widening. It’s time to invest inside the US, and make goods such as solar panels, wind turbine blades, and parts for the SF Bay Bridge inside the US, repurposing vacant factories around the country. There are plenty of infrastructure needs inside the US, such as rebuilding the electrical distribution system, covering the canals that carry water from northern to southern California to reduce evaporation, providing broadband for all Americans, providing mass transit bus services, reducing college and graduate school tuitions, and reducing the foreclosure crisis by reducing mortgages and mortgage rates to market values. Put Americans back to work instead of making it easier to import foreign goods.