Philadelphia Reflections: Revisionist Themes

Revisionist Themes

A set of working papers, still under construction.

The following papers are incomplete, subject to revision, and not really intended for public viewing. Comments from interested readers are therefore most welcome.

Philadelphia City-County Consolidation of 1854

Consolidation Map 1854

Philadelphia is still referred to as a city of neighborhoods. Prior to 1854, most of those neighborhoods were towns, boroughs, and townships, until the Act of City County Consolidation merged them all into a countywide city. It was a time of tumultuous growth, with the city population growing from 120,000 to over 500,000 between the 1850 and 1860 census. There can be little doubt that disorderly growth was disruptive for both local loyalties and the ability of the small jurisdictions to cope with their problems, making consolidation politically much more achievable. A century later, there were still two hundred farms left in the county which was otherwise completely urbanized and industrialized. For seventy five years, Philadelphia had the only major urban Republican political machine. By 1900 (and by using some carefully chosen definitions) it was possible to claim that Philadelphia was the richest city in the world, although this dizzy growth came to an abrupt end with the 1929 stock market crash, and the population of Philadelphia now shrinks every year. In answering the question whether consolidation with the suburbs was a good thing or a bad thing, it was clearly a good thing. But since Philadelphia is suffering from decline, it becomes legitimate to ask whether its political boundaries might now be too large.

Philadelphia Map 1762

The possible legitimacy of this suggestion is easily demonstrated by a train trip from New York to Washington. The borders of the city on both the north and the south are quickly noticed out the train window, as the place where prosperity ends and slums abruptly begin. In 1854 it was just the other way around, just as is still the case in many European cities like Paris and Madrid. But as the train gets closer to the station in the center of the city, it can also be noticed that the slums of the decaying city do not spread out from a rotten core. Center City reappears as a shining city on a hill, surrounded by a wide band of decay. The dynamic thrusting city once grew out to its political border, and then when population shrank, left a wide ring of abandonment. It had outgrown its blood supply. Prohibitively high gasoline taxes in Europe inhibit the American phenomenon of commuter suburbs. The economic advantage of cheap land overcomes the cost of building high-rise apartments upward, but there is some level of gasoline taxation which overcomes that advantage. Without meaning to impute duplicitous motives to anyone, it really is another legitimate question whether some current "green" environmental concerns might have some urban-suburban real estate competition mixed with concern about global warming. Let's skip hurriedly past that inflammatory observation, however, because the thought before us is not whether to manipulate gas taxes, but whether it might be useful to help post-industrial cities by contracting their political borders.

Philadelphia Map 1860

Before reaching that conclusion, however, it seems worth while to clarify the post-industrial concept. America certainly does have a rust belt of dying cities once centered on "heavy" industry which has now largely migrated abroad to underdeveloped nations. But while it is true that our national balance of trade shows weakness trying to export as much as we import, it is not true at all that we manufacture less that we once did. Rather, manufacturing productivity has increased so substantially that we actually manufacture more goods, but we do it with less manpower and less pollution, too. The productivity revolution is even more advanced in agriculture, which once was the main activity of everyone, but now employs less than 2% of the working population. This is not a quibble or a digression; it is mentioned in order to forestall any idea that cities would resume outward physical growth if only we could manipulate tariffs or monetary exchange rates or elect more protectionist politicians to Congress. Projecting demographics and economics into the far future, the physical diameters of most American cities are unlikely to widen, more likely to shrink. If other cities repeat the Philadelphia pattern, the vacant land for easy exploitation lies in the ruined band of property within the present political boundaries of cities, or if you please, between the prosperous urban center and the prosperous suburban ring.

Many American cities with populations of about 500,000 do need more room to grow, so let them do it just as Philadelphia did a century ago, by annexing suburbs. But there are other cities which have lost at least 500,000 population and thus have available low-cost low-tax land which would mostly enhance the neighborhood if existing structures were leveled to the ground. Curiously, both the shrunken urban core and the bumptious thriving suburbs could compete better for redeveloping this urban desert if the obstacles, mostly political and emotional, of the political boundary could be more easily modified. But that's also just a political problem, and not necessarily an unsolvable one.

http://www.philadelphia-reflections.com/blog/1573.htm

Second Mortgages Want to Be First

Chrysler Logo

In a bankruptcy proceeding, there has long been a traditional conflict between the holders of first mortgages and the holders of second mortgages. It goes like this: since the holder of a first mortgage gets paid first, his incentive is to hurry up the process and get the money. The holder of a second mortgage, however, only gets paid what is left, so this party will normally wish to stall proceedings in the hope the market will improve and give the second mortgage a better payout. Normally, this sort of predictable dispute is covered by contracts, and in any event most banks hold both kinds of mortgages and are neutral about what is just and fair. In the current banking crisis, however, the major banks have developed an incentive to favor the second mortgage, so they have a new view of what is just and fair. Four of the largest banks hold a total of $440 billion of second mortgages, but have very few first mortgages because they were sold off in the securitization process. The banks mostly retained the function of servicing first mortgages, however, so they now have quite a conflict of interest.

Something like this seems to be going on with the resolution of the Detroit auto makers, with the difference that politicians tend to favor the interest of the auto workers in the bankruptcies because there are more voters to be influenced. And in the case of the auto companies, there are stockholders who will be wiped out by a bankruptcy unless the liquidation of the company assets produces enough cash to satisfy the creditors, secured and unsecured. After all, stockholders aren't creditors at all; they are owners of the company. No matter how things turn out, however, the secured creditors would normally have first call on whatever is salvaged. So, it's one class of secured creditor against another, or else it is the secured creditors against the "stakeholders", employees or any other unsecured creditor. If the government intervenes, there is the additional issue of the Fifth Amendment of the Constitution, which prohibits government from the "taking" of private property without just compensation. Representative Conyers of Michigan, whose political allegiance is not in doubt, has introduced legislation to prohibit lawsuits in these matters. So now, the prospect grows of a constitutional clash between Congress and the Supreme Court, over the Constitutionality of such a law which denies due process. So that gets us into the fourteenth amendment, too. If we look beyond the technicalities, the looming clash is between President Obama and Chief Justice Roberts. One of them wants to take money from secured creditors and make it available to someone with more political clout; and the other surely wants to preserve the sanctity of contracts, the rights of property holders, due process, and the right of the Supreme Court to declare contrary laws to be unconstitutional.

Unless someone backs off, the situation would seem to be as monumental as Franklin Roosevelt's Supreme Court-packing proposal. Because -- there is every reason to anticipate a 5-4 vote by the Supreme Court, a 5-3 vote if Justice Souter is not replaced by that time, and strenuous efforts to alter the balance.

http://www.philadelphia-reflections.com/blog/1631.htm

Tour of Duty in 'Nam

Vietnam War

Col. Dan McCall talked to the Right Angle Club about wartime experiences in Vietnam recently. He really didn't want to, thought he was being asked to talk about retirement planning, or asset allocation, or something else he knew something about. But the Program Chairman this year is also a Colonel, and wasn't about to be talked out of it; he wanted Vietnam, sir, and nothing else. So, for the first time in forty years, he did. He hadn't talked about it with his family or, during a career rising from Lieutenant to Colonel, with his associates in the National Guard.

Perhaps a little slow and fumbling at first, we heard of going to a place where it's 120 degrees in the shade, every day. Where he fainted from a heat stroke on the first day off the plane in Saigon, and soon found that it happened to everyone. Within thirty days, every single person had dysentery. The plane that lands troops in Saigon doesn't turn off the engines, and takes off as soon as the last man deplanes. As well it might, because it attracts sniper fire as it takes off. Once there, the only form of transportation for anyone going anywhere is by helicopter; plenty of peasants with chickens in their laps are taken along, too.

Ho Chin Minh Trail

His unit, the 82nd Airborne, was deployed to the west of Hue, the ancient capital. The country is near the border with North Vietnam, and the land is a fairly narrow strip between the ocean and the Laotian border. The Ho Chi Minh trail, where the enemy comes from, is just over the border inside Laos. Our troops never go there, but B-52 bombers go there plenty, leaving impressive craters in the ground. The unit was mortared every night, and rockets made an impressive noise as they went overhead toward Hue. The American forces almost never went out at night. Deployments in the jungle lasted 45 days, without baths or toilets; mostly, you walked into the enemy by accident on the trail. One of the prizes was a Chinese officer, carrying much better maps of the region than the American Army had. One night, sniper fire seemed to be coming from a small island in the river, and the response was to send thousands of shells back, filled with 3-inch steel darts. The next morning, every tree on the island was normal enough on the Laotian side, but nearly covered with steel darts on the Vietnam side. Although the command from headquarters was to report a body count, there were no bodies to count. At the end of one 45-day deployment, there had been no food or water for three days. When the "ships" came to take them out, there was a celebration with rice wine. You make rice wine by soaking stalks of rice in water, letting it ferment. The water is pretty murky to begin with, and gets worse as it ferments; you have a good time, anyway, with the villagers bringing in a pig to roast.

82nd Airbourne

The CIA had its own private army, Rangers and Special Forces. There were local mercenaries, mostly from Thailand. The 82nd Airborne -- The All American Division -- had a tradition of parachute jumping in every military engagement since World War II, but in the jungle there was no place for, or point in, jumping. But at the end of their deployment, they jumped once, anyway. When you got home, the movies were kind of a joke, but Apocalypse Now came close to giving the right feeling. Although of course people asked what it was like, you didn't talk about it. No one did.

One member of the Right Angle Club who had spent a year there, muttered an answer. "And people didn't really want to hear about it, either."

http://www.philadelphia-reflections.com/blog/1717.htm

Children's Scholarship Fund

Children's Scholarship Fund of Philadelphia

Ida Lipman recently visited the Right Angle Club, to acquaint members with the nature of its new charity, the Children's Scholarship Fund of Philadelphia. This fund is a response to a rising feeling that the nation's leading social problem lies in upgrading the educational strength of the new generation of poor people, who are increasingly at a disadvantage working in unskilled jobs against foreign competition in a globalized economy. Poor people will never rise out of poverty by taking jobs that foreign competitors are willing to perform at even lower wages. And while everyone hopes poor people can take on better-paying jobs, it requires better education to do it.

The educational problem of motivating children to higher attainments than their parents is a difficult social task in both urban and rural districts, but peer pressures to hold down their classmates seems stronger or at least different in the urban settings. In both environments, of course, the educational attainments of both the parents and the teachers have been aimed at a lower level than the task requires. It somehow proves unrealistic to shift expectations as rapidly as we need to, and we are lucky that philanthropic donors have been willing to test out some radical experiments in the whole educational experience, including students, teachers and parents.

Thus, the Children's Scholarship Fund has been willing to dispense several thousand scholarships to private schools in the Philadelphia region, purely by lottery, without regard to the traditional basis of merit. This policy would probably be disruptive if scholarships were universally available, undermining the spirit of meritocracy which is so central to our educational system. But since we are only partially addressing the failures of a system of universal free public education, a stronger argument can be made that changing the culture occasionally requires that we set aside the incentive of overtly rewarding the behavior we seek. The hope is that a demonstration project with such a radical change will set other motives into motion. Resources are limited; it is recognized that among the ninety percent of students who fail to receive the scholarship by lottery, there will be many who are more talented than the few who are lucky enough to get an award. The point is easily overlooked however that these scholarship students must apply for the lottery, and be supported for partial financial assistance by their parents. These parents must sincerely want to raise the educational goals of their children, and convey that motivation to the kids in whatever way they are able to convey it. The pressure of less lucky playmates and neighbors to hold them back, it is hoped, will be lessened by the simple recognition that a lottery gives everyone an equal chance, provided they step forward and pledge themselves to try to succeed.

John Walton of the Wal-Mart family

It's a bold and imaginative approach, a highly counter-intutitive one. John Walton of the Wal-Mart family matches the contributions of other donors at fifty cents on the dollar through his family foundations, which was jointly founded with Ted Forstman of the Wall Street firm. Many longitudinal studies will eventually show how much this bold and charitable venture really helps the students and the community; since it is private money in use, criticism should be held back until the results begin to be apparent. To whatever degree and in whatever way the scholarship fund is a success, the public must be willing to praise both its spirit of generosity, and its willingness to take a chance. Let's all mark this down in our notebooks, to see how it all turns out in ten or so years.

http://www.philadelphia-reflections.com/blog/1746.htm