Shadows of a Sunbelt City

The Environment, Racism, and the Knowledge Economy in Austin

Eliot Tretter, Deborah Cowen, Nik Heynen, Melissa Wright

• Publisher: University of Georgia Press
• Year: 2016
• Print ISBN: 9780820344898, 9780820344881
• eBook ISBN: 9780820349091
• Topic: Social Sciences
• Subtopic: Discrimination & Race Relations
• Index: Social Sciences

Austin, Texas, is often depicted as one of the past half century's great urban successstories—a place that has grown enormously through "creative class" strategies emphasizing tolerance and environmental consciousness. In Shadows of a Sunbelt City, Eliot Tretter reinterprets this familiar story by exploring the racial and environmental underpinnings of the postindustrial knowledge economy. He is particularly attentive to how the University of Texas—working with federal, municipal, and private-sector partners and acquiring the power of eminent domain—expanded its power and physical footprint. He draws attention to how the university's real estate endeavors shaped the local economy and how the expansion and upgrading of the main campus occurred almost entirely at the expense of the more modestly resourced communities of color that lived in its path.

This book challenges Austin's reputation as a bastion of progressive and liberal values, notably with respect to its approach to new urbanism and issues of ecological sustainability. Tretter's insistence on documenting and interrogating the "shadows" of this important city should provoke fresh conversations about how urban policy has contributed to Austin's economy, the way it has developed and changed over time, and for whom it works and why. Joining a growing critical literature about universities' effect on urban environments, this book will be of interest to students at all levels in urban history, political science, economic and political geography, public administration, urban and regional planning, and critical legal studies.

PART I

Forces of Growth

CHAPTER 1

The Making of a Globalized Austin

The Environment, Racism, and the Knowledge Economy

Down the standard path, capital is put into a production process, converted into a commodity and sold upon the market under the tight discipline of socially necessary turnover time. But money can also flow into fixed capital and consumption fund formation, including the formation of physical infrastructures. It can also flow into science and technology, [into] improved administration, or into the creation and maintenances of a variety of social infrastructures which enhance the conditions for surplus value production. The temporal discipline down each of these paths is much relaxed because the turnover times are much longer.

David Harvey, The Limits to Capital

Because of its central location in the state and its convenience to the Industrial Southwest Area, its position as an educational and governmental center and its consequent supply of highly trained professional people and technical specialists required by certain high performance industries, and extraordinar[il]y desirable living conditions which have attracted and held an efficient labor force, Austin probably should be attractive to new industries such as research, fabricating plants, electronics manufacturing, precision tool and instrument manufacture and other “light” industrial operations.

City of Austin, Austin Development Plan

In 2008, when the Globalization and World Cities (GAWC) Research Network ranked cities in the global urban hierarchy, Austin placed in the category of “sufficiency” or, more precisely, in the bottom of half of the fifth-tiered cities. Two years later, in 2010, Austin had climbed two tiers in the GAWC rankings to the lower third of the “gamma” group, but in 2012 it was demoted to the upper echelons of cities characterized as having only “high sufficiency.” The GAWC metric is “based upon the office networks” of leading “advanced producer service firms,” and although this metric is not without problems, it is still telling that Austin, which had not even made the first ranking in 2000, was by 2008 fully recognized to be ensconced as a medium-sized city-region within the global urban network (Network 2012).

This chapter’s central purpose is to place Austin’s patterns of urban and regional development since the 1970s within a much larger political, social, and economic context and to show some of the factors that have propelled the city into the middle ranks of global urban hierarchy. While others have offered accounts of the city’s rapid ascent, what I suggest is that Austin’s rise into the global marketplace results from how its growth coalition, because of a unique set of local conditions, was able to effectively capitalize on the growing flow of investment into what geographers call the “tertiary circuit of capital.” I argue that this rising stream of investment, which helped propel Austin’s regional growth, was driven in part by the internal spatiotemporal dynamics of the tertiary circuit (its long turnover time and ability to absorb tremendous amounts of investment) and by external developments—that is, the development of legal and financial systems designed to support a system of knowledge-rent seeking.

This chapter has four sections. The first two outline three longstanding and important issues that affect urban governance in Austin and provide a brief history of the city’s urban development and integration into the global economy (points developed in more detail in other chapters). In the third section, the focus shifts to the knowledge economy and the two most dominant schools of thought about what propels regional growth and uneven development, and I suggest an alternative account grounded in an understanding of spatiotemporal dynamics of the circulation of capital. The fourth section outlines many important structural changes in the U.S. economy over the last forty years and highlights their impact on regional development and the urbanization process. I draw special attention to the increasing financialization and internationalization of the U.S. economy (particularly for real estate) and discuss what geographers call the secondary circuit of capital (investments into physical infrastructures). Finally, I turn to a discussion of science and technology and their role in research and development. Here, I discuss the changing role of university research and the growing financialization of R & D, grounding it in a discussion of the tertiary circuit of capital (investments into social infrastructures).

Twentieth-Century Austin: Urban Governance, Power, Racism, and Inequality

As in other Texas cities, during the twentieth century a progrowth coalition of members from the Austin business community, represented by its principal organization, the Chamber of Commerce, substantially influenced how the city was governed and, in turn, its urban planning priorities. While their dominancy has not gone uncontested, as other chapters in this book demonstrate, the Chamber’s ideals about what kind of city Austin ought to be are still reflected in the vision that is largely embraced by the city’s governing elites.

Like other Texas cities, Austin has a history going back to the mid-nineteenth century that is marked by social, cultural, and legal systems that supported white supremacy and “nonwhite” servitude (Lack 1981). As Austin continued to grow, its employment structures, system of education, relations of social intercourse, housing patterns, and other factors were organized by both legal and extralegal means to ensure racial inequalities and white domination (McDonald 2012). In the twentieth century, this racial hierarchy built on a strict white/black binary was complicated by the urbanization of a large and growing Hispanic population, who were white by law but in practice were treated as something other than “white.” While the structures of systemic racism have changed during Austin’s history, as other chapters in this book show, the legacies and realities of this unequal system continue to influence the city’s governance, patterns of growth, and urban planning priorities.

During the twentieth century, wealth inequality has been considerable in Austin. While the disparities in income and wealth between white and nonwhite have been substantial, even among “whites” there have been significant class differences. For instance, in 1938 Lyndon Baines Johnson, then representing Austin in Congress, complained in his famous “Tarnish on the Violet Crown” speech that the city had a higher percentage of homes that were in disrepair, uninhabitable, overcrowded, or without adequate facilities than sixty-four other cities across the United States (Johnson 1938). Moreover, a survey conducted in the 1950s by famed urban economist Wilbur Thompson ranked Austin the fourth most unequal city in the United States, a situation that Thompson suggested was characteristic of cities without large manufacturing bases and with histories of discrimination toward African Americans (Thompson 1965, 110). Certainly, economic inequalities have risen in Austin since the 1980s (as they have in nearly all metropolitan statistical areas [MSAS] across the country), and class differences among social groups have become more apparent and accentuated by spatial distribution and segregation inequality (Straubhaar et al. 2012). Nevertheless, Austin was already a city with significant differences in wealth before the contemporary development of the knowledge economy, and the increasing stratification of the technical division of labor has helped reinforce and deepen existing patterns of wealth inequalities.

New Developments, Old Patterns: A Brief History of Austin’s Urbanization and Its High-Technology Industrialization

Beginning in the late 1970s and accelerating rapidly in the late 1980s, Austin emerged as one of the most competitive midsize cities in the core of the global economy and one of the fastest-growing urban areas in the United States (Long 2010; McCann 2003; McCann 2007). In general, Austin’s growth reflects the trend of other Sunbelt states that have had substantially faster rates of urbanization over the last forty years than other areas in the United States (Storper and Walker 1984; Shermer 2011). Regionally, in Texas’s urban triangle—formed by the mega-conurbations around Dallas–Fort Worth, San Antonio–Austin, and Houston-Galveston—there has been sustained, rapid, and intensive interurban growth over the last four decades (Davies 1986). Although primary-sector activities, such as raw mineral extraction and agriculture, still have a considerable role in Texas’s economy and are vital in sustaining its high rates of urbanization, there has been a significant diversification of the state’s economy since the 1980s, and high-technology industries in tertiary or quaternary sectors such as software design, semiconductor manufacturing, aerospace, biotechnology, and computer equipment have become important engines of economic growth in urbanized areas (Rodriquez and Fukasawa 1996; Lyons and Luker 1998).

But Austin’s story of economic and urban development is nevertheless unique. While the Houston and Dallas regions have ranked among the largest cities in the United States since at least the 1960s, the Austin metropolitan area has been one the ten fastest-growing regions in the country over the last thirty years, far outpacing the rates of urban growth in other Texas cities (Frey 2012). Moreover, unlike these regional counterparts, Austin emerged as a center in the global economy without a significant manufacturing or industrial base (Feagin 1988; Kaplan 1983; Melosi 1983; Phillips 2006; Shelton et al. 1989).

Since at least the beginning of the twentieth century, Austin’s urban development has benefited from the city’s roles as the state capital and home to the flagship campus of the University of Texas. By all accounts, Austin’s governing elites attempted to exploit being the exclusive location of these institutions in order to promote growth, and for decades the city remained overwhelmingly dominated by these institutions and their outsized role in the local labor market. While Austin’s local growth coalition embraced the city’s role as an educational and government center before the 1950s, they still tried, though mostly unsuccessfully, to promote Austin’s manufacturing and commercial base (Austin Board of Trade 1894; Austin Chamber of Commerce 1916). Despite the fact that the state government and the university remained the essential ingredients that propelled Austin’s growth in the latter half of the twentieth century, industrializing central Texas became possible only after several substantial changes in the structures of the economy.

Since at least the 1960s, in part because its two main employers, the state government and the university, dominated the local job market, Austin has been distinguished by the proportion of its population with a high level of formal education. A 1966 study on Austin’s social and neighborhood characteristics noted that in 1964 the city’s “median education level . . . was estimated to be 11.8 years”—a figure the authors claimed was one of the highest education indexes for any “medium-sized” U.S. city (Hazard, Kelsey, and Strickland 1966, 195). In 2000, Austin ranked second among seventy-five cities in the “proportion of adults holding at least a bachelor’s degree” (Gottlieb and Fogarty 2003, 329). Recently, Jeremiah Spence and others have argued, the high level of educational attainment in Austin has been a significant driver of the city’s competitiveness, but the disparities in formal education are also increasingly important in creating a more socially bifurcated city (Spence et al. 2012).

Furthermore, Austin has had a distinctive reputation for the countercultural movement that developed there after the 1950s and for its “liberal” political and cultural atmosphere, and the city has continued to be seen as distinct from other Texas cities (Long 2009; Rossinow 1998). Again, the university’s elephantine role is the most significant contribution to these twin developments. Richard Florida has contended that over the last thirty years, Austin’s tolerant and alternative sensibility has been a key driver of growth in Austin, as it has created a unique mise-en-scène and enhanced the city’s quality of life, making Austin more attractive to young, upwardly mobile professionals and high-technology firms (Florida 2005). Although such an account does point out the importance of cultural traditions and other amenities or extraeconomic factors that have supported the city’s growth, it largely discounts the significance of other political-economic factors that may have been more important in driving the region’s competitiveness.

Austin has unique patterns of residential segregation, which have remained relatively fixed since they were established in the first half of the twentieth century, despite the city’s population growth. Wealthier residents reside mainly in the west and northwest, while the city’s more modestly resourced communities live in the south and southeast. As more technically skilled people have come to the city, particularly those seeking high-paying jobs in the growing high-technology sectors, they have settled in existing neighborhoods or in new developments in the north or northwest (Orum 1987, 306–348). In contrast, the neighborhoods in the eastern and southeastern areas—due to a number of legal, extralegal, and financial constraints that are explored in more detail in chapter 6—have developed as the principal residential areas for more modestly resourced communities. Although recently, as chapters 4 and 5 discuss in detail, wealth and racial demographics in the eastern areas have shifted because of gentrification (especially in those historically more modestly resourced neighborhoods located near the city center), even today longtime and newly arriving nonwhite minorities and less technically skilled laborers tend to live in East Austin (Skop and Buentello 2008; Wilson, Rhodes, and Glickman 2007).

In the 1980s, Austin’s urban geography was significantly affected by a land-development boom and a later bust, both driven in part by a lax lending market and in part by the development of an infrastructure of high-technology firms. By the early 1980s, Austin had attracted the investment of a number of high-technology firms, which had spawned some development in the city’s suburban fringe. However, when the Microelectronics and Computer Corporation (MCC, a firm discussed in detail in chapter 3) announced its plan to build its new headquarters and facilities in a northwest suburb, a land boom began, anticipating the arrival of legions of new residents. In a frenzy, developers drew up plans for large-scale residential and commercial projects in the areas adjacent, or easily accessible, to MCC’s site (Kahn and Farley 1984, 82). These projects found easy financing in the loose lending market that had been created in Texas when the high price of oil in the early 1980s produced large reserves of money in the state’s economy (Feagin 1988). Banks, and particularly newly deregulated savings and loans swimming in cash, were eager to finance commercial and residential projects in Austin’s newly developing suburbs and its older downtown (Barna 1992). By the mid-1980s, Austin’s “financial institutions invested 50 to 75 percent of their portfolios in land and construction” (Kim 1998, 79). However, in 1985 the price of oil fell and the pace of urban growth slackened. Developers found that they were unable to lease space in their new office buildings or sell their land holdings. As a result, some developers and bankers, among them some preeminent local and state figures, took huge financial losses; others, unable to meet their debt obligations, went bankrupt. For instance, former Texas governor and secretary of the treasury John Connally lost millions on a new high-end residential development in a western suburb of Austin, while local businesspeople John Watson and Pike Powers, who had also speculated in the northwest, were forced into bankruptcy (Hight 1994; Gibson and Rogers 1994, 438–439; Copelin 1996).

In the 1990s, a boom dynamic returned, this time fueled by the so-called tech or dotcom bubble, which significantly propelled Austin’s industrial development and its fast ascent into a leading position in the global economy. As Long points out, “Between 1989 and 1999, over three hundred companies—most of them tech-related—had either headquartered or located offices in Austin” (Long 2010, 39). Moreover, in the 1990s Austin was, for the first time, able to attract larger amounts of investments from venture capitalists (Oden, Kang, and Kwon 2007). Although there were some venture capital firms based in Austin in the 1980s, these firms did not invest in Austin, nor was the city able to draw much outside venture capital (Smilor et al. 2007). By the mid-1990s, however, Austin began to receive about “one to two percent of the [United States’] total . . . venture capital investment” (about $2.3 billion), and “the rate of growth” of this investment in the city was “almost double the rate of growth” for the United States (Mahdjoubi 2004, 149). For example, Austin’s largest and most significant venture capital firm, Austin Ventures (founded in 1984), financed 26 new Austin businesses in 1996 and 166 by 1999 (Walker 2000). In the late 1990s, Austin was again swimming in money; at the height of the technology bubble, according to Walker, eleven companies formed in Austin in 1999 had an estimated stock market value of $23 billion. But after the bubble burst in late 2000, many of the businesses Austin Ventures had helped finance (and many other firms) went bankrupt, the total stock market value of those eleven firms dropped by about 45 percent, and Austin lost an estimated forty-one thousand jobs (Peng 2007). However, the bust in 2000 had a more muted impact on Austin’s real estate market than the collapse more than a decade earlier, and overall the crash had less effect on slowing Austin’s urban growth; during the first decade of the twenty-first century, Austin continued to expand its profile as a center of high technology, attracting substantial investment from several more multinational companies and venture capital funds (Florida 2013; Gibson and Butler 2013).

The increasingly significant role played by high-technology firms in Austin since the 1970s has been accompanied by the increasingly significant role of the University of Texas (with the backing of the state of Texas) in supporting the region’s industrialization. The university’s support for undergraduate and graduate education (especially in the material, natural, and physical sciences) yielded a substantial pool of technically skilled workers who could support the endogenous development of high-technology firms. Moreover, UT faculty and researchers have founded several successful technology companies, and the university’s land-development programs, as chapters 2 and 3 show, have had an essential role in supporting the development of high-technology firms in the city. More recently, the university’s expanded role in supporting knowledge transfer to industry and the commercialization of its own discoveries has proved critical for Austin’s regional development. For instance, between 2003 and 2011 UT issued “276 U.S. and 148 foreign patents” and its annual revenues from licensing income increased from about “$500,000 in 1992 to over $25 million in 2011,” and in the years since 2003, “58 spinoffs [have been created] based on UT Austin research” (Gibson and Butler 2013, 69).

Producing a Knowledge Economy: The Tertiary Circuit, Urbanization, and Knowledge-Rents

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Table of contents

• Cover Page
• Title Page
• Copyright Page
• Contents
• Acknowledgments
• Introduction
• Part I Forces of Growth
• Part II Urban Transformations
• Bibliography
• Index
• Footnotes