Citiwire.net

For Release Friday, October 23, 2009
Citiwire.net

The truism, of course, is that Las Vegas is the great exception–a bizarre, completely unrepresentative aberration thankfully isolated in the middle of the Mojave Desert.

And there is plenty of truth to the perception, crystallized in the fantastical, now mostly frozen construction site of the Strip skyline.

And yet, as my group at the Metropolitan Policy Program at the Brookings Institution launches an initiative to deepen our research in the Mountain West, I find myself thinking less about the ways Las Vegas is strange and more about how it is representative, even emblematic of America’s current predicament.

After all, Las Vegas’ gargantuan problems and its necessary way forward mirror and take to an extreme those of our troubled nation as a whole.

Southern Nevada, for starters, may well stand at ground zero of a national economic crisis made massive by speculation, financial game-playing, and insufficient attention to the fundamentals. No large U.S. metro area has suffered house price declines greater than Las Vegas’ 24 percent slump in the last year. No large metro has a higher concentration of home foreclosures. Gross metropolitan product has declined by 3 percent since its last peak in early 2007. And unemployment now exceeds 13 percent.

In this respect, Vegas exemplifies and exaggerates America’s economic quandary.

Most notably, growing consensus believes the nation needs to export more goods and professional services, and trade less on consumerism. As Larry Summers, the director of the National Economic Council, said recently, “The rebuilt American economy must be more export-oriented and less consumption oriented.”

Yet this is potentially disastrous for Las Vegas–just as it is challenging for the nation–because the Crystal City is massively over-dependent on consumption. Using one group of indicators, for example, we calculate that Las Vegas depends on consumption activities (real estate, construction, eating, drinking, and hospitality) for an astonishing 53 percent of its private-sector metropolitan GDP.

Only southern Nevada is not alone in its dependency: Orlando relies on consumption for 46 percent of its output, San Diego for 38 percent, Phoenix 34 percent, and so on, with the metropolitan average running to about 27 percent.

That hints how Las Vegas represents only a heightened case of the nation’s broader vulnerability to any long-term increase in the savings rate and consumption pull-back. It also points to the immense challenge the nation faces in returning to a semblance of balance and economic sanity, including through goods exports.

Or to put it another way, Las Vegas epitomizes to a heightened degree many of the questions facing the whole nation. Where will the next period of growth come from? How can we build a more sustainable new economic order? How will we use the bad times to change and get better?

As to the answers to those questions, the potential outlines are slowly coming into view, but they will be hard to fill in, whether nationally or in Las Vegas.

Much is fluid, but it seems pretty clear now that the next economy must require reforms and new investments in infrastructure, innovation (especially in energy), education, and sustainability. Nationally, a major new partnership between Washington and U.S. metros is necessary to make the most of America’s place in it.

And here again, Las Vegas offers a relevant instance. Too little work aimed at science, technology, and energy innovation is going on. The region contend with seriously low education levels and major water sustainability and development challenges. And its potential as a convening hub for major conferences and professional services development is undermined by its woefully deficient highway, rail ands transmission grids to move people in and out efficiently.

Yet for all that, the region is groping its way forward, motivated by a degree of fear.

Key leaders are pushing hard for a high speed rail link to Los Angeles and talking up a true interstate link to Phoenix.

Talk continues about ways to move the region’s convention and visitors economy up the value chain to make the place a true center of higher-value convening and deal-making, with a focus on renewable energy deployment.

And beyond that, few metros have made more striking efforts to go green. Per capita water consumption is plunging. The huge CityCenter project on the Strip will open soon as the world’s largest green development project. And no state has shifted faster and farther toward renewable energy than Nevada.

In short, bizarre, heedless, and extreme Las Vegas is not solely deviant but also paradigmatic. Like the rest of America, it went too far, and broke down, and now faces the challenge of the “reset” with the beginnings of a new approach. But it had better use these bad times well.

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Mark Muro is a fellow at the Brookings Institution and the policy director of the Metropolitan Policy Program there. He is also a research director of the new Brookings Mountain West initiative. He can be reached at mmuro@brookings.edu.

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