Of Irritations and the World's Greatest City


I deeply admire people who write well. I might even confess that I envy writers whose prose is lucid and vivid. Unfortunately, I don’t count myself among them. In a recent piece entitled “Perhaps it’s High Time for a War on Irritants” (see International Herald Tribune of March 31, 2007), Roger Cohen writes vividly about what he calls “irritations.” “[A]ny longish marriage is of course an exercise in irritation management. Irritants are irksome but not life-threatening. They impact the brain or gut about the level of the sound of a metal implement being scraped across a pan.” He then gives some examples of things he is irritated by, including:

…theft-dissuasive hotel closet hangers that can only be suspended on rings with key-like slots … small-print menus in dark restaurants, the beat from barely audible taxi radios, the extremely enthused voices of mortgage brokers, ditto telemarketers, the repetitiveness of New York menus (anyone for braised short ribs?) and the small print through which credit card issuers rob you. I also bridle at Marshall Plans for Africa, Marshall Plans for Mexico, outsized American sushi, the way banks go about “identity theft,” expiring hotel key cards, express trains going local … but these irritants fade beside overpriced restaurant wine lists, wind power, (noisy and ugly), the ’08 American election as conversation filler (bring back the weather), sommeliers who taste your wine, sommeliers who decant indifferent wine, sommeliers who overfill your glass, and the number of bad sommeliers. Then, of course, we must suffer the onebag- carry-on rule at Heathrow… It’s amazing, when you think about it, what we have to put up with: airport shoe removal, slow drivers in the fast lane who won’t move over, TV remotes of giddying complexity, the humorless, the huffy, the hearty, and slow-moving people in airports who still don’t understand shoe-removal is part of the routine bin Laden brought us.

Cohen then suggests that, because life is fleeting and we have only the one lifetime,

…succumbing to irritants is a poor use of time. It’s a bad habit, like checking e-mail every few minutes. But looked at another way, irritants are the very stuff of life, its grit, its seasoning, its squeaky wheel, without which an irritating blandness would turn the world into a kind of global ashram. There’s little chance of that, however, so long as we have Hugo Chavez; requests from U.S. airlines not to gather by the toilets; people who use elevators to go up one flight; different electric cords for cellphones, iPods and laptops; rising ATM fees; the $2.50 charge for a salad instead of fries with a sandwich; and the unfathomable near-global passion for headache-inducing Prosecco.

I am sure that all my readers have their own list of things they would call “irritants.” I travel frequently, and I find particularly irritating the lengthy immigration and custom queues I am forced to endure in most countries. (Singapore is an exception.) I also have to confess – and at the risk of being called a chauvinist – that although I love women dearly in small doses, I have never met a woman I didn’t find irritating after a day or two (or, to be perfectly honest, after just a few hours). I suppose women feel the same about men. But the reason I started this discussion about “irritations” is that many Americans are surprised at the degree of anti- American sentiment that is currently sweeping the world.

Since I have many close American friends whose intellect I highly respect, and as I know the United States reasonably well, having visited all but four of the US states, I believe I am reasonably qualified to comment on the “Irritating American,” as opposed to the “Ugly American.” The term “Ugly American” came from a book of the same name, written in 1958 by William Lederer and Eugene Burdick, which became a bestseller. (It was made into a film starring Marlon Brando in 1963.) The book described the blundering, arrogant, corrupt, and incompetent behaviours of Americans involved with foreign aid in Southeast Asia.

The “Irritating American”, by contrast, is neither the American tourist travelling around the world, nor the American businessman living outside the United States, but the present US government and its foreign policy. It is best epitomised by Miss Condoleezza Rice. I don’t think that many people in the world today dislike the American people, who are now far less “ugly” and much more humble than they were in the 1950s and 1960s when the US economy was still dominant and US dollars still had huge purchasing power compared to any foreign currency (prior to its devaluation in the 1970s). Also, since the 1960s, the world has become accustomed to all kinds of “ugly people”: the “ugly Arabs” in the late 1970s, the “ugly Japanese” in the late 1980s, and now the “ugly Chinese” or “ugly Russians”. No, what bothers people isn’t the behaviour of Americans outside the US, which is usually far better than that of Swiss, German, or Italian nationals. What irritates everyone around the world is the constant lecturing by American policymakers about human rights and democracy, and the blatant dual and hypocritical standards the US applies to foreign governments and cultures.

To its credit, the American society tolerates very harsh criticism, which is in contrast to many foreign societies where strict censorship of any critical voice is the norm, and where dissenters are often prosecuted, imprisoned, or eliminated. Take as an example Nicholas Kristof writing for The New York Times about “Iran’s man on the inside” (see The New York Times of March 20, 2007). Kristof sarcastically wonders whether Dick Cheney is not an Iranian mole, because “the Bush administration’s first major military intervention was to overthrow Afghanistan’s Taliban regime, Iran’s bitter foe to the east. Then the administration toppled Iran’s even worse enemy to the west, the Saddam Hussein regime in Iraq. You really think that’s just a coincidence? That of all 193 nations in the world, the United States toppled the two neighboring regimes that Iran despises?”

Kristof then explains how the US administration has “systematically antagonized America’s former allies in Europe and Asia, undermining chances of a united front to block Iranian development of nuclear weapons” and how Bush and Cheney “harmed American interests not out of malice but out of ineptitude.” He concludes that American interests are as vulnerable to “incompetence as to malicious damage” and that “whenever we’ve suspected a mole in our midst, we’ve gone to extreme lengths to find the traitor. This time, betrayal not by a mole but by failed policies, let’s just be as resolute. It’s time to uproot policies that in the last half-dozen years have damaged American interests incomparably more than any mole or foreign spy has in the last 200 years.”

The other thing that gets on people’s nerves is the constant boasting by America’s policymakers and leaders about the supposed superiority of the United States. Now, this may have to do with Americans’ ideas about best marketing practice, but it annoys people to constantly read and hear about “the world’s best team”, “the world’s best product,” “the world’s greatest economy,” and “the world’s best city” in reference to New York.

Is There a “World’s Best City”?

Alex Beam, a columnist for The Boston Globe, recently took a bite out of the Big Apple hype when he wrote about NYC & Company, a city agency (the honorary chairman is Michael Bloomberg and the chairman is the likable Jonathan Tisch), which, flush with a US$45 million tourism promotion budget, launched an ad campaign in several European countries aimed at dispelling stereotypes that the city is too expensive, that “New Yorkers are exceptionally rude,” and that “crime is rife” (see “Taking a Bite out of Big Apple Hype,” International Herald Tribune, March 16, 2007). According to Beam, an ad in a London Underground station hyping “cheap” New York prompted the following swift response from David Usborne, who covers New York for London’s Independent newspaper: “The city has a nerve to place those ads. Cheap is Buenos Aires or Havana, not here. Finding a bed for under $500 a night over the Christmas period in Manhattan was tougher that persuading a New Yorker to eat minced pie.” And commenting on NYC & Co’s website (www.nycopenbook.com), Beam notes that it contains all the expected clichés: “[I]f nothing else, NYC & Co’s relentless hype confirms New York’s reputation as the City of Grandiose, Bogus, and Misleading Claims.”

Beam says of the website’s boast that “New York is the ‘World’s Best City’ according to Travel + Leisure magazine”: “Well, no. If you take the time to check – and frankly, who would bother? – you see that ‘Florence tops the list of World’s Best Cities for a second time this year,’ according to T+L World’s Best Awards 2006. New York descended to eighth place this year, one spot above Beirut and down from sixth in 2005.”

Beam then also refutes New York’s claims to be the “Safest Large City” and the “Greenest Large City” and asks rhetorically: “Who couldn’t be amused by the tourism flacks’ puffing of New York’s ‘outstanding transportation options.’ ‘Getting to and around New York City is a breeze,’ they say [emphasis added]. It’s a good thing they didn’t read last week’s article by Nicole Gelinas, an editor at the Manhattan Institute’s City Journal, about America’s second oldest subway system: ‘dismal … downright intolerable … dangerous floor-to-ceiling turnstiles … dangerously unprotected … and it will only get worse’.” (The NY & Co website does, however, contain some very useful information, such as the fact that, in 1998, “Ashley” was the most popular name for newborn girls in New York City…)

Personally, I think that New York is a very impressive and vibrant city. I shall never forget the view I had one early morning recently when my plane from St. Louis made a loop around Manhattan’s skyscrapers before descending into La Guardia. But, like the readers of T+L magazine, I wouldn’t vote for New York as the world’s best city – though I find laughable the magazine’s inclusion of Bangkok and Chiang Mai among the top-ranking cities (in order, Florence, followed by Rome, Bangkok, Sydney, Chiang Mai, Cape Town, Buenos Aires, New York, Beirut, and San Francisco). While both Bangkok and Chiang Mai may have some appeal at night, they simply don’t compare in terms of cultural heritage and beauty to European cities such as Vienna, Paris, London, Salzburg, Bruges, Amsterdam, Madrid, and Istanbul, or to Middle Eastern and North African cities such as Jerusalem, Marrakesh, Fez, and Isfahan, not to mention Asian cities such as Kyoto, Nara, Udaipur, and Jaipur. But what the readers of T+L perceive to be the best cities in the world isn’t particularly important.

Perhaps what is more relevant is which cities offer the highest quality of life for residents and expatriates. In those terms, according to Mercer Consulting, Zurich ranks first, followed by Geneva, Vancouver, Vienna, Auckland, Düsseldorf, Frankfurt, Munich, Bern, Sydney, and Copenhagen. The best American cities, as far as quality of life is concerned, are Honolulu (ranked 27th in the world), San Francisco (28th), and Boston (36th), while New York is ranked 46th behind Washington DC, Chicago, and Portland. (The Mercer Consulting analysis is based on an evaluation of 39 quality-of-life criteria for each city, including political, social, economic, and environmental factors, personal safety and health, education, and transport and other public services.) While I wouldn’t rely overly much on the Mercer survey as a measure of the quality of life in these cities of a typical household (since the survey participants were expatriates and business people), it is still remarkable that among the top 25 cities ranked on this measure, 15 are located in Europe, 5 in Canada, and 5 in New Zealand and Australia – and none in the United States. That may not be entirely fair; for example, I think that San Francisco deserves to rank higher than both Calgary, for climatic and cultural reasons, and Wellington in New Zealand, for the simple reason that New Zealand is geographically almost at the bottom of the world. Equally, it is hard for me to envision Frankfurt offering a better quality of life than San Francisco, Chicago, Seattle, San Diego, or Miami, the latter three of which are ranked even below New York but which offer, in my opinion, a very high quality of life.

In any event, I suppose there is no such a thing as “the world’s best city” since where you enjoy living depends very much on your individual circumstances and preferences. A pensioner may find Auckland, Wellington, Chiang Mai, and Bern attractive, whereas a young, ambitious, single individual may be more attracted to London, New York, Los Angeles, Miami, Hong Kong, Shanghai, or Tokyo. Since I have noticed from emails I receive that an increasing number of Americans are toying with the idea of leaving, or have already planned to leave, the US and frequently asked me where they should move to, I would like to offer the following suggestions.

The first question someone who is considering moving should ask is what kind of people and society he or she likes. If a single male doesn’t like Asian women, then he shouldn’t consider moving to Asia; and if a woman dislikes Arab men, then she shouldn’t move to Dubai, Bahrain, Abu Dhabi, or Riyadh. There is also an issue with respect to security and health care. Africa, the Caribbean, and Latin America are less desirable in these respects than are Europe and Asia. Taxation is a further consideration, but since Americans are taxed on their worldwide income this is less of an issue for them. For people with some taxation flexibility, most emerging economies don’t tax foreigners on their worldwide income. As an example, under Thai law I am a retiree and since I don’t do any business in Thailand I don’t need to pay any taxes. Mobility is also important. If you don’t intend to do much travelling, then it may suit you perfectly well to live in New Zealand, Kathmandu, or Buenos Aires. However, if you frequently need to travel regionally or around the world, you might opt instead for New York, Boston, San Francisco, Seattle, Vancouver, Hong Kong, Singapore, Dubai, or one of the major European cities. Bear in mind that it may take you as little as 20 minutes to get from any downtown location in Singapore or Zurich to the airport, whereas it may take an hour in Tokyo or New York, or around two hours in Sao Paulo.

Education for your children is also a consideration. In most European cities (excluding the United Kingdom, Italy, Spain, and France) and in Singapore, government-owned schools will provide adequate (excellent in the Scandinavian countries) schooling for children. Finally, everyone should consider three important questions. How will the economic and social geography of a particular city change in the future? Which cities offer value for money? And is living in a city necessary or desirable at all, compared to living in the countryside?

As I have written in the past, since the breakdown of the socialist and communist ideologies and the end of policies of isolation and hostility towards foreign investors in India, the world’s economic geography has been changing rapidly. In Europe the economic centres are moving to the East, with cities such as Vienna, Berlin, Istanbul, and relevant. In Asia, Shanghai, Beijing, Mumbai, Bangalore, and Ho Chi Minh have already overtaken, or will soon overtake, in importance cities such as Hong Kong, Manila, Kuala Lumpur, Jakarta, and Manila. In the Middle East and Central Asia, cities such as Dubai, Baku, Tbilisi, and Almaty are likely to gain in importance, while Cairo will lose out. The change in economic geography arising from the breakdown of communism is also evident in the US. Challenged by new low-cost manufacturing centres in Asia, former industrial cities such as Detroit and Cleveland are losing out.

At the same time, because of demographic changes and a shift from a “productive economy” to an “unproductive service”-driven economy, cities that appeal to retirees (Miami and surroundings, and Phoenix) or that attract gamblers, such as Las Vegas and Macao, are growing rapidly. Admittedly, the US also has highly productive service industries (knowledge-based industries) such as information technology, communication, biotechnology and other medical fields, nanotechnology, defence, and so on, and the cities where these industries form clusters (most notably along the West Coast and in New England) are experiencing an upswing. (The West Coast is also a beneficiary of closer trading and transportation links to Asia through its ports.)

Then, as we all know, the current “excess liquidity”-driven environment has had an enormously beneficial impact on financial centres such as New York, Boston, Chicago (but to a lesser extent), London, Zurich, Frankfurt, Hong Kong, Singapore, Mumbai, Tokyo, and Sao Paulo (the latter three being large industrial agglomerations benefiting less from the financial sector). To what extent financial centres will continue to distance themselves in the creation and accumulation of wealth compared to the rest of the economy remains to be seen, but given my recent rather negative comments about the financial sector it would surprise me if the metropolises where brokers and asset managers congregate didn’t endure some hardship in the next few years.

The Industrial Revolution brought huge improvements in transportation (railroads and canals), which allowed the centres of production to be removed from the consumer markets. Electricity then allowed factories to migrate from close proximity to power sources such as water and coal, to other locations as long as transportation costs didn’t become an obstacle. The 20th century brought further improvements in transportation. First, the automobile, trucks and roads fostered the growth of suburbs. In the 1970s, the invention of the container lowered transportation costs and delivery times dramatically and allowed factories to be located anywhere in the world, provided there was a transportation and port infrastructure. Today, with air cargo having become far more important for higher-value-added products, and where speed of delivery is crucial due to a rapid obsolescence (high-tech equipment and consumer electronics), manufacturing centres can be located anywhere in the world where there is an efficient physical, commercial, and legal infrastructure. Moreover, as knowledge-based service industries proliferate, and with the vast improvement in telecommunication (the Internet), research and development, management of an entire multinational corporation, and all sorts of tradable services (accounting, back-office, engineering, design, etc) can be carried out from anywhere in the world.

Now, this may have enormous implications for cities such as we know them, and such as have existed throughout history. The rise of ecommerce is likely to render traditional trading centres, if not obsolete, then at least less relevant. Also, if management is free to move anywhere in the world, it is likely that migration to low-tax jurisdictions (Ireland, Dubai, Hong Kong, Singapore, Switzerland, Luxemburg, etc) will become the norm over time. In particular, financial service companies will no longer have to be located in “financial centres” – a trend that is already well under way, if you consider that the world’s largest fixed income securities manager is located in Newport Beach, rather than in London or New York. In fact, the future corporation may not even have space in an office building. Its employees could all work from home, which could be anywhere in the world, and could communicate through videoconferencing, the Internet, and by telephone. There is also the possibility that, in future, some companies will have very few employees. Research and development, production, marketing, and distribution will all have been outsourced, and most decisions will be taken by computer models. What this means is that, in future, cities that were built as, and thrived as, commercial or financial centres may become less important from a business point of view. The future role of cities may therefore be driven more by conventions, leisure and cultural activities, nightlife, entertainment venues, and tourism.

Another point regarding future changes in the world’s economic geography that one should consider is security. Throughout most of history, cities offered some protection in wartime, and against bandits and hordes of nomadic tribes that cleaned up everything in their path. But future wars are unlikely to be fought by divisions of tanks facing each other, and by the invasion and occupation of territories. (Even the neoconservatives are likely to concede this at some time in the future.) Wars will increasingly be fought by economic and financial means, with biological weapons (spreading of pandemics), and by attacking the infrastructure of a country through the elimination of an important city’s entire power supply or by paralyzing its commercial and financial infrastructure. Therefore, from a security point of view, life in the countryside may be more desirable than life in a large city. Moreover, life in a more belligerent country may be more risky than living in politically more neutral countries such as the Nordic nations of Europe, Switzerland, Canada, New Zealand, and most Asian and Latin American societies.

Then, there is the issue of value for money. This is less of an issue for the super-rich, where tax and estate duty considerations outweigh the cost of housing and living. As I have explained in the past, most of the Asian countries (excluding Hong Kong) offer relatively good value for money in terms of real estate prices and living costs. This is particularly true if secondary cities are considered as a place of residence. (This is also true with respect to other countries in the world.) To reside one or two hours from New York, London, Moscow, or Paris could be a far better choice, in value for money terms, than living in a prestigious area of a major city. (In London, condos in a high-end new development have sold for close to US$8,000 a square foot.) There are, however, exceptions. Life can be at least as pricy as in the major cities in the ghettos of the super-rich, such as Zug in Switzerland, Monaco, Bermuda, fashionable areas of Connecticut, and in California (notably Beverly Hills), as well as in renowned and popular resort destinations such as Aspen, Palm Beach, St. Barth, St. Moritz, Marbella, and St. Tropez.

It can be expected that budget airlines will support the trend of living in secondary cities and the take-up of secondary residences in more remote regions, where previously such places were either difficult to reach by car or accessible only by non-budget airlines.

There are two further issues to consider in relation to ongoing changes in the world’s economic geography: political trends, and where future wealth will be created. US foreign policies and the courteous nature of US immigration and custom officials and Homeland Security personnel have played right into the hands of London and made it the world’s capital. Understandably, Muslims don’t like to travel to the US. But I also know that a large number of non-Muslims are disgusted with America’s foreign policies (rightly or wrongly) and will no longer travel there. Admittedly, there are also likely to be 500 million people from Africa, the former Soviet Union, Asia, and Latin America who would give anything in order to be permitted to migrate to the US (though they would probably also give anything to move to Western Europe, Japan, Australia, or to wealthy cities in Asia).

My point is that in many countries where wealth is now accumulating because of oil reserves and other mining wealth (OPEC, Nigeria, Venezuela, Russia, and Central Asia), governments are becoming less keen to invest in the US. Moreover, these countries’ more well-to-do citizens are more likely to invest in, travel to, and take up residence in Western Europe, the Caribbean, or Asia, than in the US. What this means is that countries that pursue less assertive foreign policies – such as the Latin American continent, Asia, Western Europe, Canada, and Australia – are relative winners in terms of the shift in the world’s economic geography. Exacerbating this trend is also, of course, the faster growth of the emerging economies when compared to the US. So, whereas it is possible that, from a near-term perspective, the stock markets of India, China, and Vietnam are overvalued compared to the US market, these countries’ long-term growth rates of around 8% per annum should continue to appeal to long-term investors.

In the past, from time to time, mining centres and resource-rich countries and regions became enormously rich. (In the 16th century, it was Potosi; in the 19th century, California, Manaus, Haiti, and Ceylon; in the early part of the 20th century, Texas, Australia, and Argentina; in the 1970s, OPEC countries and other oil producers; and currently, all oil producers around the world.)

While I am not necessarily making a prediction, I suggest that there is a possibility that following a 200-year lasting decline in commodity prices in real terms, commodities – including farm products – will appreciate in real terms for many more years. If this were indeed to be the case, it is conceivable that, as on past occasions, some countries, regions, and cities could reach a higher per capita income than the US or Western European countries. This may sound hard to believe, so in support I would like to reproduce a brief description of life in Manaus at the end of the 19th century, taken from the book One Riverby Wade Davis (www.mongabay.com).

With the invention of the automobile in the late 19th century, the rubber boom began. As demand for rubber soared, small dumpy river towns like Manaus, Brazil, were transformed overnight into bustling centers of commerce. Manaus, situated on the Amazon where it is met by the Rio Negro, became the opulent heart of the rubber trade. Within a few short years Manaus had Brazil’s first telephone system, 16 miles of streetcar tracks, and an electric grid for a city of a million, though it had a population of only 40,000. Vast fortunes were made by individuals, and “flaunting wealth became sport. Rubber barons lit cigars with $100 bank notes and slaked the thirst of their horses with silver buckets of chilled French champagne. Their wives, disdainful of the muddy waters of the Amazon, sent linens to Portugal to be laundered… They ate food imported from Europe … [and] in the wake of opulent dinners, some costing as much as $100,000, men retired to any one of a dozen elegant bordellos.” The citizens of Manaus “were the highest per capita consumers of diamonds in the world”.

I have little doubt that this account is as exaggerated as the 16th century saying that the streets of Cadiz were paved with gold. (Cadiz was the port of entry for Spain’s silver and gold shipments from the Americas.) But it is true that in the 19th century and early 20th century some of the world’s richest families had built their wealth based on mining and plantations, and that some of the world’s leading tycoons and playboys came from Bolivia, Chile, Venezuela, Peru, Brazil, and Argentina. (In 1900 the highest per capita income countries were the UK, New Zealand, the US, and Australia, and the poorest the Congo, China, and Mongolia.)

What I am suggesting is that if the long wave up-cycle in commodity prices (the Kondratieff upswing) is in existence and if the Goldilocks protagonists are right, much higher commodity prices could lead to some stunning changes in wealth creation in the world, with resource producers and cities located in resource-producing areas advancing economically relative to the rest of the world.

So, all the above criteria considered, I would aim to live – if the US is the first choice – in an agricultural region (Iowa, Nebraska, Tennessee), or on the West Coast (Seattle, San Francisco, San Diego). As an aside, my friend Mac Overton, whose family is from Tennessee but who also owns some property in Florida, reports that property taxes and insurance costs in Florida are nearly four times as high as in Tennessee. Furthermore, U-Haul transportation rates from Florida to Tennessee are more than double the reverse route, which suggests some real estate arbitrage.

Outside the US, but still in the Americas, I find Canada (Vancouver) appealing, as well as Brazil (Rio de Janeiro), Argentina, Uruguay, and Cuba. In Asia, Auckland, Sydney, Melbourne, Perth, Kyoto, Hong Kong, Shanghai, Dalian, Beijing, Bangkok, Pattaya, Phuket, Hua Hin, Chiang Mai, Hanoi, Ho Chi Minh, Singapore, and Kuala Lumpur, all have, for different reasons and purposes, a special appeal. In the Middle East, I would consider Dubai and Almaty. In greater Europe, most cities have some appeal, but in terms of convenience, scenery, quality of life, and security, it would be hard to beat Swiss cities. (However, to be fair, a former girlfriend of mine who was rather switched on in every respect used to say that Switzerland would be paradise if it were not for the Swiss people… Perhaps this accounts for why I live in Asia.) I also greatly enjoy the Nordic cities, but for someone who enjoys winter sports they are not very conveniently located and taxation is very high.

One city that I consider to be under-rated and which may enjoy a significant revival is Istanbul. For me this is one of the world’s most remarkable cities, if not the most remarkable one from a historical, cultural, and scenic point of view. Other regions and cities that combine good value and high growth potential are the Dalmatian Coast, Sicily (Palermo), Eastern and Central Europe, and, of course, Russian cities such as Moscow and St. Petersburg. Hard-core contrarians might consider a move to Algeria, Libya (which has huge potential), or Iran. And lastly, for the adventurous Wall Street executive who has just received a huge bonus and now has some spare cash, a move to Baghdad, equipped with a convoy of tanks, could be an interesting experience. Property prices there are low, which may have something to do with Mercer Consulting’s rating Baghdad as the city with the world’s worst living conditions!

Dr. Marc Faber

May 8, 2007

The Daily Reckoning