Tuesday, May 27, 2008

The North American Union

I came across a very interesting “social science fiction” essay today at All About Cities, by Wendy Waters. What she proposes is that over the next 20 (!) or so years, American cities, burdened with the efforts of keeping up their infrastructure and their level of prosperity, will give up on trying to get the money needed out of the federal government, and so, starting with New York, will declare independence to take control of their financial house. Within a few years, most major cities in the States will follow suit, and Americans and their companies will flee Canada and these new city-states. Give it a few more years, and these cities states will band together to form a union à la European Union, with the end game of Canada and the United States become a common political union, built from a basis of these city-states. I was very impressed when I first read this, because it’s one of the few probable explanations of how Canada and the States could merge into a single political entity. However, I can’t help but poke a few holes in the logic.

Take a read of what Wendy has written and then the rest of what I've written will make a lot more sense - The origins of the Federation of North American City States.

The Art of Timing

While to argue the timeline presented is to argue semantics, but let me just comment that I think the outcome presented is only possible because the timeframe is relatively tight (about 20 years).

Why would they let New York go?

The start of this process is that New York declares independence, effective 2018. It is suggested that the Union will let the city slip away relatively quietly, as the United States would be mired in several “oil wars”. I question whether the American populace would let one of their gems and a cradle of the American Union go so quietly. The last time some tried to skip the Union, we got a 4 year Civil War. On the flip side, would New Yorkers be willing to lose their identity as Americans? It doesn’t take long traveling through the States to realize Americans are very proud of who they are and their history.

Border Problems

With New York as a separate nation-state, somewhere there will be a line – a proverbial “line in the sand”. Of particular concern is how “thick” that border would become. The American philosophy seems to favour security over trade, and a look to the Canadian-American border might offer some insight: if the oil wars do continue for the next ten years, expect long border waits, significant delays in shipping, seemingly random refusals of entry, and the inability for New Yorkers to easily live and work in the US or to live on one side and work on the other side of the border. In effect, New York would find itself a chasm away from the States, which could undermine the status of the ports and airports of New York as gateways to the rest of the continent. How many companies currently headquartered in NY would feel that they have no option but to move their “American” base to the States to sidestep the border mess?

Show Me the Money!

The supposed impromptus for New York’s split is the ability of the city to lower its taxes and be more nimble in its government spending. However, as New York steps off on its own, it would discover, like any college kid moving out for the first time, that the ‘real world’ is expensive. To maintain confidence in holding the UN headquarters and one of the world’s busiest ports, NY would need to make a strong showing of either security or military force, including a naval presence (Good luck trying to get a couple of warships out of the US Navy as you walk away from the Union…). NY would also find itself responsible for the ‘alphabet soup’ of Federal agencies, including the CIA, the FBI, the DEA, the IRS, the FCC, and FAA, FEMA, NOAA, the SSA, and so on. Those agencies, although easy to label as “fat federal bureaucracies,” do benefit from economies of scale. In short, I think New Yorkers would find themselves paying higher taxes as an independent nation.

Political Will

Here’s the wildcard – who will step up to the plate and make it all happen? More demanding and more important than anything listed above will be the political will to make it happen. Maybe that will will be enveloped in a charismatic leader or a grassroots movement, but it is the element that will make or break this political change, and also the hardest to predict. With the right leader, NY would rise above the struggles and would become a great nation-state; without that leader, this whole discussion will remain academic.

Conclusion

What I admire about Wendy is that she has been able to put together a well-thought out and arguably plausible series of events, although I do question many of her assumptions. Add to the mix that Microsoft recently announced plans for a Vancouver campus, in part to sidestep US immigration bottlenecks, and maybe the future is with us already. In any case, it will be interesting how the needs of cities are addressed in the coming years, and see what extremes cities are forced to to maintain their prosperity.

Sunday, May 04, 2008

Cheap Oil's Gone; Now What?

What's right about America is that although we have a mess of problems, we have great capacity - intellect and resources - to do some thing about them.
- Henry Ford

Oil is at an all-time high, and everything seems to be pointing to the price to keep going up. So what does that mean to you and I over the next few years?

Oil – Driving Economics & Politics

Oil for long has been called “Black Gold”, and which current prices, a full out gold rush is upon us, boom towns (i.e. Fort McMurray) and all. The value of these deposits will give economic power to the regions so endowed. Russia has been accused of using its oil and gas reserves for political purposes. Closer to home, Alberta has become an oil powerhouse, with Saskatchewan, Newfoundland, and Nova Scotia poised to join the club – and the combination has made Canada the largest foreign supplier of oil to the United States.

What’s Under the Hood?

As gas prices rise, alternate fuels start to look more and more attractive. Corn ethanol has been pushed in the States for some time, but is highly subsidized. Don’t be surprised to hear about ethanol from some “weird” sources in the future. The Holy Grail would be to find a way to use an industrial waste product like wood chips or waste paper. Other technologies to watch include plug-in cars, hybrids (battery technologies), fuels cells, hydrogen, and stuff coming out of left field that is unheard of today.

Fill 'er Up!

The increasing price point will also mean that those transporters who can benefit most from economies of scale, like railways, will become increasing competitive. Look for a rail yard expansion coming to a city near you.

Urban Renewal

As commuting gets more and more expensive, people are going to start reconsidering how far they want to go, and how they want to go the distance. Expect to see an increased interest in public transit, new and in-fill developments increasingly being built around public transportation systems, especially light rail, and an increased interest in condo living downtown.

I can take myself as an example of this: about a year ago I moved from a lovely place out of town to almost the center of town, a distance of about 40km. I enjoy being able to walk to most things, and everything else is a 10 minute drive. At today’s gas prices, I figure I save myself at least $250/month.

Onshoring

Whether this will get hidden in general inflation or not is yet to be seen, but since almost all consumer and industrial good are physically transported, and thus the consumer will facer higher prices for just about everything. Offshoring – placing production plants far from markets, typically overseas – has been economical because wages offshore and transportation have been cheap. As both rise, look for companies to consider moving production back closer to markets – typically North America and Europe.

The Northwest Passage

The Artic for many is written off as a vast, cold, snow-covered wasteland, but it also contains the prize that brought Columbus and many others to the Americas – the Northwest Passage. While estimates vary, the consensus is the global warming will open up the currently ice-bound passage to ocean-going vessels. The big deal is that going through northern Canada is much shorter than going through the Panama Canal, shaving 4000 miles off the trip from Europe to Asia!

The Political Fallout

As the Northwest Passage opens up, the unresolved question of “Who control the Passage?” will come to a head – on one side, Canada claims the passage as internal waterways, while several other countries, including the United States, claim the waterway as international waters. I hope that a peaceful solution can be found before we have a human or ecological disaster in the High Arctic due to lack of, or disregarded, rules.

The future seems to be upon us, while few things seem certain, the fact that the future will be different that today and bring different challenges seems certain. My faith is that, like Henry Ford stated long ago, we have the capacity to overcome whatever challenges may face us.

To the future!