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Samizdata quote of the day

There was a time — and it really wasn’t that long ago — when if you were a financial firm, you had to have an office in Lower Manhattan, when film studios had to have offices in Los Angeles, and high-tech firms really needed to be in Silicon Valley. If Travis Brown’s big data set shows us anything it is that those days are done. You can build very fine automobiles in the United States, but if you aren’t already in Detroit, you’d be a fool to set up shop there. For the feckless governors of high-tax, big-government states with Governor Perry and Governor Scott breathing down their necks, the only question is which Rick they’re going to get rolled by.

Kevin Williamson

11 comments to Samizdata quote of the day

  • Paul Marks

    There are lower taxed States either Texas or Florida (for example South Dakota), but Florida, Texas and Tennessee have big cities (and very low taxed States do not).

    The problem with all these States is the Federal government – its regulations (for example the EPA push to control ALL sources of CO2 would crush economic activity in all States), its wild taxes and government spending (impossible, unsustainable, entitlement schemes), and its insane monetary and banking system.

    Yet any effort to get out of this trap by secession will be condemned as “racist” or “neo confederate”.

    By the way – Michigan (the State Detroit is in) is NOT that bad – certainly not if you compare it to nearby Minnesota and Illinois (both of which are hopeless cases – wild government promises will destroy them).

  • Schrodinger's Dog

    I don’t agree.

    Cars are the exception that proves the rule about the importance of physical location. They’ve become medium-tech commodity products best produced in places with with low labour and associated costs: hence the car factories in places like Tennessee and Alabama. And let’s not forget the huge incentives given to the car companies to locate their factories in those states.

    In other sectors, the old centres still very much hold sway. Is it really possible to make it in the movies, even now, without being in Hollywood? Can you really be in finance and not in New York? As for high-tech, in the 1980s the area along Route 128, to the west of Boston, was touted as the Silicon Valley of the east. But who remembers it, or the companies, like Wang Computer, which were located there, now? Obviously things may change. Technology may change; or governments may finally get too greedy and, via taxation and regulation, kill the geese which lay the golden eggs.

    Despite the the internet and telecommunications in general offering the possibility for anyone to do anything anywhere, the old centres are still holding-up remarkably well. In the UK, London is probably now more dominant than at anytime since the eighteenth century. The law, medicine, finance and even high-tech are all centred on London. (During the dotcom boom of the late 90s, more than one internet company moved from the provinces to London, because that was where the action was.) Meanwhile, the regional centres brough forth by the industrial revolution, such as Manchester and Newcastle, have faded in recent decades and don’t show any signs of coming back in the near future.

  • Richard Thomas

    Texas is starting to significantly draw tech from California. My understanding is that Silicon Valley was located mostly because of natural resources available there (notably water) which encouraged hardware production. With hardware production almost completely overseas now and the shift in focus to software, that is not in play anymore and most of what is holding companies there is inertia. IT is fairly low inertia though so between the fantasically cheaper cost of living in Texas and the fact that it is only a short plane ride away, it’s an easy move to make.

    Hollywood could be a different issue. I understand that the major draw there was the near constant good weather. CGI movies and animation and modern filming techniques reduce the utility of that to a degree but I think live-action movies will (likely) always be in demand.

    FWIW, I don’t really consider Tennessee to have big cities. The entire population of TN is comparable to that of London. It always floors me how tiny the capital is.

  • Mr Ed

    SD the draw of London is regulatory and fiat money driven. UK healthcare is centered on State-run slaughterhouses, and wealthy people live in London and buy their private healthcare there. Certainly there is comparative advantage to being based in London, but why in any particular case?

    Banking/Finance clusters round the Bank of England, its head office in a City growing fat on fiat money and QE.

    The law in London, yes the Commercial Bar is eminent, but the High Court sucks in costs imposed on production, lowering living standards elsewhere in the UK.

    Film and media still cluster in Soho, I have seen it myself, but even here wages are not high. Young graduates on mid £20k salaries.

    Tech? SIilicon Roundabout makes er… what? INMARSAT was there long ago, the lauded start-ups are just Freeserve reheated on hot, fiat money.

    Why is London dominant? Because it is the core of the State, and fiat money, sucking wealth out of the rest of the UK. The bigger the State and the more fiat money flows out at rigged interest rates, the more the UK’s economy is distorted by institutions based in London.

    I travel around England a lot for work, and away from the Home Counties, where there is some amazing manufacturing, I drive on bumpy roads and I see in the main tatty towns full of shabbily-dressed people, not a prosperous country. If the Bank of England were closed, the situation would be very interesting, as London’s ‘economy’ collapsed and the underlying reality emerged.

  • Eric

    Texas is starting to significantly draw tech from California. My understanding is that Silicon Valley was located mostly because of natural resources available there (notably water) which encouraged hardware production.

    California has very little water in general. As random as it is, the reason Silicon Valley is in California instead of, say, the Tennessee River Valley (which would be a better place to manufacture, well, pretty much anything) is William Shockley’s ailing mother lived in Palo Alto. That’s where he started the Shockley Semiconductor Laboratory, which became the kernel for everything that followed. I suspect there’s a strong network effect with high-tech companies in general – you locate your facilities where you can find the sorts of people you need to hire, and those people will, in turn, tend to relocate to the area with the most job opportunities.

    That’s not to say the state couldn’t wreck a good thing.

  • CaptDMO

    “That’s not to say the state couldn’t wreck a good thing.”
    Ok, THAT cost me a bit of coffee through the sinus.

    A while ago I learned a (to me)”new word” here: Subvention.
    Of course, once I discover something “new”, it seems to “pop up” again and again.
    Of course, I’ll probably casually toss it around wherever I think it’s even REMOTELY appropriate.(Yes, like a Sophomore)

    Shameless plug for David Mamet’s latest social commentary revelation book (non-play related).
    “The Big Secret”, where “subvention” popped up.

  • Richard Thomas

    Thanks, Eric. Always handy when something you thought you knew is proven to be wrong. I’m not sure where that little fake factoid came from but it’s now expunged.

    One thing I am a little more confident about is that it’s not necessarily just the government to blame but the high cost of living (ok, some government involved in that) but also property prices and traffic.

    The thing is, as well as the network effect holding people in Silicon Valley, once the migration begins, it doesn’t take long before the network effect starts taking hold in the new place too and the reasons to resist moving start to fade away. Consider the myspace => facebook migration that reduced myspace to a nothing website in an almost trivial amount of time.

  • Paul Marks

    Hollywood is a terrible place to actually make films – the taxes are high and he unions have a stranglehold.

    Finance and New York City – yes there is a reason for that the NEW YORK FEDERAL RESERVE.

    The bankers (and other such) are like welfare people – living close to the dole office. Indeed there are actual rules insisting that certain banks (for example those dealing in government debt – which, by the way, the Federal Reserve “loans” them the, newly created, money to buy the government debt) have to be the ones the Fed deals with (and they just happen to be in New York City…..).

    When the New York was truly the Empire State it made sense to have offices there – now it is the highest tax State in the union, and the most regulated (as concerns financial services).

    So it would take more than habit (“we have always been here”) to keep financial services in New York City – they are kept there by WELFARE.

  • Natalie Solent (Essex)

    To me, the really shocking part of that article by Kevin D. Williamson is not the paragraph quoted – striking though it is – but the one immediately preceding it. I quote:

    5. Don’t just be crazy — be California crazy. California is running out of things in the present to tax, and its future does not look terribly bright, so it has resorted to taxing the past. A combination of judicial shenanigans and legislative incompetence resulted in California’s reneging on tax incentives that had been offered to some businesses — and then demanding the retroactive payment of taxes for which businesses had never been legally liable. Small-business owners, some of whom had sold their businesses years ago, suddenly got demands for taxes running well into the six figures. And, California being California, it had the gall to charge those businesses interest on taxes they had never owed. Jim Fowler, a software entrepreneur, was hit with a bill for more than $600,000. “I think that’s the part that’s really going to ruin trust in the state of California,” he said. “You can’t do this to entrepreneurs. Entrepreneurs will stop coming here.”

    The bold type was added by me. It looks a little as if this measure will be overturned, but it may not be, and whether it is or not I am filled with wonder that any “lawmaker”, however left wing, however shortsighted, could actually think this will help their problems.

  • Paul Marks

    Once California was a fine place to live – and to do business.

    Not just the very good universities – but taxes were not high and regulations were not that bad.

    Now the taxes are extreme and so are the regulations.

    Even the universities are being undermined – by the huge expense of tuition (pushed up by government subsidies – in a process that even David Ricardo would have understood, but which modern “intellectuals” pretend not to) and by attacks on knowledge itself as a “Western imperialist construct”.

    How a computer works (how anything works) is not “capitalist ideology” it is objective fact.

    Deny objective facts and (eventually) this high tech industry will die.

  • Paul Marks

    Yes Natalie – the Californian “liberal” “Progressive” legislators have no understanding of the principles of law – such as that no law should be retroactive (making past conduct illegal – or demanding taxes for past activity that were not due in the past).

    This is because the teaching of law in most American universities has become a twisted mess – and the decay started at the top with the Harvard Law School (more than a century ago).

    And the teaching of law became a twisted mess, because American philosophy became a twisted mess – with the rise of Pragmatism (William James and his pals) with their denial of objective truth.

    To them (the “Progressive” the “intellectuals”) law is simply power, a way to achieve their objectives (their whims) such things as principles of law (of jurisprudence) have no meaning for such people – no more than they had for Thomas Hobbes. All that matters to them is power – and “law”(to them) is simply their orders – their commands.

    If all the above sounds like Ayn Rand it would because that, on this, the lady was correct.

    And think – the Bill of Rights (both the Federal Bill of Rights, and the State Bills of Rights) are going to be put in the hands of such “Progressively educated” people.