How Can We Sustain Boomtowns

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Seeing the development of Dubai (UAE), Phoenix (Arizona, USA) and Edmonton (Alberta, Canada) worries me. I feel they grow so fast and rapid, I wonder how can we keep up the growth of these boomtowns (esp. Edmonton and Dubai after oil) run out of their main resources?

ive been to phoenix and it was absolutley a horrendous place to be in. talk about an overload, i need small towns only please! flagstaff is getting to the point where i wanna leave but the dynamic landscape averts me

Assuming some variant of capitalism remains the economic organization of most of the world, I would say that you can't. The business cycle, in some form or other, means that businesses and consumers go through periods of expansion, followed by periods of either paying for the expansion and reducing consumption or perhaps even contraction.

FWIW, My limited understanding of Keynesian economics is that government intervention is done to "smooth" the peaks and valleys of this cycle, by running surpluses during good times (sopping up excess money as taxes that would otherwise fuel the boom) and deficits during bad times (injecting money into the economy that would otherwise not be there). Which kind of makes sense to me, except for the fact that no country I'm aware of has ever been able to actually do it this way. Governments seem quite willing to run deficits, and are a bit less willing to run surpluses long-term. (A politician just let money sit there?) But putting all that aside, not even the Keynesians think the cycle can be eliminated entirely.

And just out of curiosity, why would you want to? I mean, 12% growth of $1,000 for 20 years (compounded quarterly) leaves you with something like $10,500 at the end, ignoring discount factors. A nice return on your savings, but I can't see how that wouldn't cause some nasty inflation to kick in when taken out to an economy as a whole.

I think you're a year or two behind the times here. Dubai has already said they're not meeting their next debt payment. I'm thinking they're ultimately going to default, unless someone like Saudi Arabia makes some kind of deal to cover it, to keep the whole gulf region stabilized.

And what happened there candidly makes no sense in economic terms. I mean, why does Dubai need the world's tallest building? Is raw land that expensive there? Or my personal favorite, the world islands? How on earth did this not get laughed out of whatever bank it was that fronted the money for this when presented to them? But there they are. Average daily temperature on them something like 106° F during the summer. Where do I sign up to buy one?

In sum, I don't think what went on in Dubai was "development" so much as "crony capitalism," where any and all projects got funded so long as you knew the right people. It simply couldn't last.

And as to US real estate: It went insane in several markets, Phoenix being one of them. But Phoenix actually isn't the worst of the lot. Las Vegas, San Francisco just about all of Southern California and probably the whole state of Florida are in worse shape IMO and probably still have a lot further to fall. A bit dated, since it stops in 2007, but the US Real Estate Prices Roller Coaster is still worth a watch. Utterly unsustainable, especially when plotted against incomes. See here for that.

And quite frankly so much of this growth or development was nothing more than a huge run-up in the US trade deficit, especially to China, that I'm seriously starting to wonder exactly how bad things might get if China stops sending the US real stuff in exchange for IOUs.

Not sure about Canada at all, though I thought Vancouver was actually the city where things have gotten most out of hand, not Edmonton.

Good that someone read what I actually wrote and replied what I wanted to read.

I am glad that I gained wonderful insights on sustaining boomtowns from a personal point of view. I am not sure of what you think though about this.

However, I really hoped that someone will do something about these boomtowns. Dubai tried to diversify via real estate, while Edmonton tried to do the same through trade and perhaps finance. I just hope that these cities will not gather rust when their buildings become abandoned when they fail to recover from the permanent loss of economic activity. The question is, what can we do to sustain enough economic acitivity to broaden the economic base of these cities, beyond real estate/energy/finance?

I know what your saying, especially living in Cleveland and seeing other cities like Pittsburgh that were big in the steel industry fall off the map. I think its really in mobility and creative thinking on how to open a city back up to industry. Cleveland has been rather business unfriendly, to the point that we have lake Erie right in front of us, one of the largest bodies of fresh water along with the rest of the great lakes, *huge* natural resource for chemical refining and the like, and yet we won't touch it. Not to mention the great lakes are great for shipping, water is still the cheapest and likely will be the cheapest form of transport for a long time. Michigan's plight is equally baffeling and with most of the cities in the industrial midwest that seem to be decaying - I attribute the problems largely to political problems. We have the means to shift things around but I think we're very much in the tug of war of 'do we want to endorse good capitalism or do we want to prove that capitalism doesn't work by deliberatly snuffing it as a means of future success?' - Cleveland has been on the wrong path IMO on that for a long time, luckily it hit a tipping point recently where Cuyahoga government will be restructured with a new set of elect in a couple years; it should be interesting to see if they can put us back on the map.

No economic boom can be sustained indefinitely

ruveyn

The boomtowns need continually to look at ways of diversifying. Otherwise, they will become bust-towns.

I am originally from Houston, and it's practically the poster city for sprawl.

Hey Tim, Houston was one of the few cities that had successfully diversified along with Pittsburgh, PA. Please share with us how your hometown managed to grow continuously without end.

Booming apparently has its minuses, too.

Boom towns are just that...towns with explosive growth from a fortuitous finding.

The key to sustainability is to recognize (1) that the source of the explosion in growth and prosperity WILL NOT last forever and (2) finding ways to diversify the economy so when the gravy train stops running, the community can go on with a comfortable working local economy.

Sadly, most leaders don't look very far ahead.

Edmonton will be fine. We actually have other resources here. Those other places are pretty singular in their natural resources.

Hmm, are the new growth poles the finance and transport industries? What other things Edmonton has besides all these plus oil/natural gas?

Hmm, are the new growth poles the finance and transport industries? What other things Edmonton has besides all these plus oil/natural gas?

Phoenix is a strange case of overgrowth, poor prioritization and municipal planning, and lack of resources. Arizona has a surprising number of resources, providing there is sufficient water diverted to support it... and that won't be as forthcoming in the future. Housing went berserk, suffering one of the largest boom/bust swings in the nation with entire subdivisions being foreclosed upon, and with current average sales prices well below $100,000.00 as compared to $225,000.00 and more than they were selling for five years ago. What historic areas that did exist were destroyed in the 1960's and 1970's for an elevated freeway project that was later canned and left entire areas barren within the city. Laws were passed restricting the height of buildings to "preserve the natural skyline" which was then decimated by square mile after square mile of unabated sprawl and waste of land, the resulting pollution masking what was originally intended to be protected. And generations of transplants has brought plants which require absurd amounts of water and maintenance, choking out native species and spreading allergens everywhere.

That said, I don't know that there is a purpose to maintaining the growth of "boomtowns" - these were intended to be transitional areas for a short period, not long term solutions. What is there to gain? Doesn't it make more sense to let them run their course than to artificially inflate them? Nothing is permanent; sometimes, the best thing is to let things run their course.


M.