THE AVENUE SEPTEMBER 8, 2009
Wish you were here! Today, I'm in sunny Las Vegas to help roll out an interesting new Brookings initiative and realizing I'm residing at ground zero of America's current economic quandary.
No large U.S. Metro has suffered greater house price declines in the last year. No large metro has a higher concentration of foreclosures. Gross metropolitan product has declined by 3 percent since its 2007 peak. And unemployment now exceeds 13 percent.
But Vegas represents a kind of extreme point of America's economic predicament in another way: It's the nation's capital of consumerism.
There's growing consensus that the nation needs to export more goods and professional services and depend less on consumerism. And indeed, consumption is down a bit nationally and the savings rate is up with many economists arguing it will stay higher.
Yet check out this chart, which shows that Las Vegas depends on consumption activities (real estate, construction, eating, drinking, and hospitality) for more than half (53 percent) of its metro private sector GDP. This is an amazing reliance, as is Orlando's 46 percent figure.
Vegas’ numbers are not typical. No, what's interesting about Las Vegas is the extent to which it stages--in hyper-extreme form--many of the biggest questions posed by the current economic breakdown and needed “rebalancing." Las Vegas' astronomical dependency on fun and games raises the question: now that the fun is over, what will be the driver of the next period of high-quality, sustainable growth, not only here but in the country at large?
Many metropolitan areas ( like San Jose, for example) have consumption figures as low as 21 percent of GMP because they are busy developing and exporting things like software applications, search engines, iPods, thin-film solar cells, or electric cars. It’s doubtful that consumption-oriented metros, though, can pass others with a huge head start in these export industries.
It is time for Vegas to seriously consider diversifying its casino and convening economy, perhaps stressing the convening part to advance it so far that it morphs into high-end professional services, strategy discussions, and 21st century business opportunities, like those in the clean energy economy. In this way, Vegas could begin exporting more than just fun (which is unfortunately a consumption item).