Americas inability to build things is crippling it, the economics writer Noah Smith wrote in a blog published on Monday. The things hes referring to are housing, transit, solar power, transmission lines, semiconductor production, you name it. Theyre being stalled because of permitting and development rules in particular but the NIMBY (or not-in-my-backyard) crew in general. Smith is a well-known economics commentator, but his bit of a rant struck a chord with many on Twitter, including its CEO, Elon Musk.
Smiths blog post, on his personal Substack, stresses that America used to be unwilling to spend on building things, but now its worse. We spend money now, he wrote, but that hasnt equated to more things getting built. The U.S. doesnt have too much trouble garnering financial capital, but projects and developments are hindered by local interests who exploit a thicket of veto points to preserve the built environment of the 1970s.
Smith, who has a doctorate in economics and has taught at Stony Brook University but has mainly written on macroeconomics, with a stint at Bloomberg Opinion among his credits, offered a diagnosis of American decline that struck a chord with the worlds richest man. (Musk himself has a sizable fan base despite his eccentricities, likely because hes a forward-looking billionaire who promises to escape this sense of stagnation.) Smith identifies the build-nothing mentality as a shadow subsidy to make up for the fact that real incomes have stagnated since the 1970s, including a few periods when they flatlined. In short, America would rather buy off the current class of homeowners than make any painful economic sacrifices.
Smiths Twitter thread promoting his blog post prompted hundreds of responses, including a tweet from Musk: We have made large construction projects almost illegal. And Musk has had some run-ins with NIMBYs. In 2018, his plans for a private underground transit system stalled after two Los Angeles neighborhood groups filed an environmental lawsuit against the Boring Company (the case settled). Hes also run into development issues in Europe that may not necessarily qualify as NIMBYism, with the rolling out of a Tesla gigafactory being halted after environmental activists debated its potential impact.
To start, Smith gave the example of the University of California at Berkeleys plan to build student housing. The proposal was blocked by a California appeals court last week, citing the states Environmental Quality Act and ruling that students could potentially be seen as an environmental impact. To which California Gov. Gavin Newsom responded: Our CEQA process is clearly broken when a few wealthy Berkeley homeowners can block desperately needed student housingCalifornia cannot afford to be held hostage by NIMBYs.
Similar situations, Smith writes, should be expected to unfold all over the country but especially in California because of the states push to build more affordable housing. But Smith argues that Californias environmental review law will act as a last line of defense for those that oppose the development of affordable, or even just more, housing. All the while, housing just isnt being built across the country, he writes.
As for transit and green energy, both have funds allocated to developments but arent using that money to build. Green energy developments are affected by two major factors, in Smiths view: the Biden administrations crackdown on sourcing from China as well as a wave of NIMBY opposition to the projects. He cites a recent Wall Street Journal report that the actual number of green projects has plummeted despite the allocation of $400 billion for them in the Inflation Reduction Act.
Smith also argues that NIMBYs hold up transmission lines, which affects Americas ability to build renewable energy. As for semiconductors, despite plans to build a plant in Arizona, the U.S. cant seem to build much, Smith says, because its running into major cost issues.
America is spending all the money, and things still arent getting built, because of the countrys broken system of permitting, land use, and development, Smith writes, again stressing that money is not the same thing as physical stuff, which has been keenly felt with the highest inflation in four decades as too much money chases too few goods.
He argues that in the U.S. people are provided with a kind of subsidy to keep their world from changing. If you own a home, you can attempt to restrict local housing supply, preserve the environment youre used to, and keep streets quiet and uncrowded. Smith is far from the only commentator to make this argument. For instance, The Atlantics Annie Lowrey wrote just weeks ago, Everything is about the housing market, with high urban rents making life worse for everyone.
The country can no longer afford this form of shadow subsidy, Smith argues. If America continues on this path, standing by the build-nothing mindset, then the middle class will slip into genteel poverty and America will lose its leading position in the global economy, he claimed indirectly, albeit poetically: Someone else will build the future on the bones of our civilization.
He urged America to slash the thicket of red tape around development, and it seems the worlds richest man agrees.
Smith did not immediately respond to Fortunes request for comment.
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