Henry Kaiser created an empire worth tens of billions of dollars and earned a personal fortune of $2.5 billion. Yet he is almost forgotten today. On his death, he divided his fortune between his second wife, Ale, and the Henry J. Kaiser Family Foundation, which was created to support the Kaiser medical program. His son, Edgar, received nothing because he was “otherwise cared for.”
Edgar replaced his father as chairman of the various Kaiser companies. But his personal investments in these companies was small, which may be why he was unable to keep the companies going. Edgar probably had a net worth of about $50 million, which is insignificant compared with Henry’s worth.
Since the financial crisis has been caused by falling housing prices, some people (including John McCain) have argued that the government should take steps to prop up housing prices. Harvard economist Edward Glaeser and Wharton economist Joseph Gyourko think this is a bad idea.
“Housing affordability has long been a stated goal of the Federal government,” observe G&G in the Economists’ Voice, an on-line journal edited by Joseph Stiglitz. “Why should it now try to make it more difficult for people to buy, or rent, a home by supporting prices?”
Late in life, Henry J. Kaiser became one of the earliest and biggest boosters of the Hawaiian tourist industry. He built the territory’s first destination resort, the Hawaiian Village Hotel. He built a large housing development named Hawaii Kai. He encouraged the airlines to increase flights to Hawaii. And he bought television and radio stations, both in Hawaii and on the mainland, to promote tourism.
Kaiser’s Hawaiian Village resort in the early 1960s. The pink on the right are catamarans; the radio tower at left is probably for Kaiser’s station, KHVH.
Because of his cement interests, Kaiser had visited Hawaii before the war, but — ever the workaholic — he wasn’t much interested in vacationing. In 1951, however, his wife Bess died. Less than four weeks later, Kaiser stunned his colleagues and shocked Oakland social circles by marrying Bess’ nurse, who was just half his age. Alyce “Ale” Kaiser opened his eyes to new ventures and ideas.
Recent news report indicate that up to 30 transit agencies may need to cut service in order to meet payments demanded by banks because of the financial meltdown. These payments are a part of “sell/leaseback” arrangements the transit agencies entered into over the last decade or so as a way to “creatively finance” some of their capital improvements.
Under federal tax law, a private company can get tax advantages from depreciating its capital investments. Public transit agencies are not taxpayers, so they get no such advantages. So, about two decades or so ago, somebody had a great idea: why not sell buses and trains to private investors? They can get the tax benefits from depreciation, and meanwhile they can lease the equipment back to the transit agencies at a rate that accounts for the tax benefit. The investors and transit agencies effectively split the tax benefits.
As early as 1942, Henry J. Kaiser publicly worried that the end of the war would see a return to depression conditions, particularly in the West where most of his operations were located. As Mark Foster, one of his biographers, notes, “Kaiser felt a deep personal responsibility for helping maintain prosperity after World War II, particularly in the West.”
Kaiser Industries headquarters in Oakland.
Henry J. Kaiser owned a profitable cement business and a thriving steel operation. While expanding these businesses after the war, he also quickly moved to enter several new industries, including autos, housing, and aluminum. While he certainly hoped to profit in these industries, he also saw them as a way to promote the region’s economic growth.
Some people blame Alan Greenspan’s policy of low interest rates for causing the housing bubble. Why did Greenspan keep interest rates low? “I did not forecast a significant decline” in housing prices, he told Congress yesterday, “because we had never had a significant decline.”
If you fail to look closely at the data, you will come up with the wrong policies. Nationally, we’ve never had a housing bubble. Locally, we had several. But until now, they have been in so few states that they haven’t impacted the national economy.
The above chart shows the ups and downs of two housing bubbles in California, the first peaking in 1980 and the second in about 1990. Hawaii, Oregon, and Vermont also had bubbles at about the same time. By an extraordinary coincidence, these are the only states that had growth-management planning in the 1970s.
By 1998, more than a dozen states — including Arizona, Florida, much of New England, and New Jersey — had growth-management laws. So when the housing bubble started growing about that time, it affected nearly half of all American housing. Greenspan continued to insist there was no national housing bubble, and he was right. But as Paul Krugman noted in 2005, local bubbles appeared in places that had strict land-use regulation.
Restrictions on housing created shortages that not only made prices go up, they made them more volatile. As the Antiplanner has previously noted, the fact that prices are falling is not an indication of too much supply, but too little.
Low interest rates did not cause the housing bubble, though higher rates might have suppressed it somewhat. Unless we understand what did cause the bubble — growth-management planning — we will adopt the wrong policies and fail to prevent the next one.
Congratulations to New South Wales for showing the world that it, too, can waste a lot of money building ridiculous rail lines. The Australian state’s Labour government had planned to spend $1.4 billion (all figures in this post in Australian dollars) building a 16-mile line from the suburbs of Chatswood to Parramatta. But local residents protested the line’s routing through a park, so planners decided to put the rail line underground, greatly increasing the cost.
The original plan: Parramatta to Chatswood.
The line now under construction from Epping to Chatswood is only about 8 miles long and the cost is nearly $2 billion. (The $2.3 billion cost quoted in the papers apparently includes interest.) The other 8 miles were postponed because they would cost $1.2 billion and add only 15,000 new riders to the system.
Under construction: Epping to Chatswood.
How many new riders will the $2.0 billion segment add? 12,000. So how does that make sense?
For part I, see Henry J. Kaiser, Entrereneur.
In 1940, Henry J. Kaiser joined with the Todd shipbuilding company to bid on a contract to build 60 merchant ships for the British government, which desperately needed ships to import supplies during the war. Todd would build half the ships in its East Coast shipyards, while Kaiser would build the other half from a yet-to-be-built shipyard in Richmond, California.
Kaiser’s Oregon Shipyard on Swan Island in Portland.
Kaiser, of course, had never built either a ship or a shipyard in his life, but that didn’t faze him. When he told British and, later, American officials how fast he thought he could build ships, they thought he was delusional — no one had ever built ships that fast. Yet he revolutionized the shipbuilding business, bring assembly line techniques to an industry used to custom, one-off designs.
With the help of other members of the Six Companies, Kaiser built seven shipyards in Portland and Richmond capable of building 58 ships at one time. By the end of the war, these yards had built 1,490 ships, an average of about one per day. Most of the ships were the type of merchant ship known as Liberty ships. But Kaiser also built 12 other kinds of ships, including troop transports, landing ship tanks, and escort carriers. In all, Kaiser supplied more than a quarter of all U.S. ships built during the war.
“What is the optimal relationship between land use and transit,” asks Patrick Condon, “and what transit mode would best support this optimum state?” He concludes that cities should invest more in “trams” (streetcars) rather than in long-distance, higher-speed rail systems.
Flickr photo by NeiTech.
Condon is a professor of landscape architecture at the University of British Columbia, where he is also involved in Sustainability by Design, which is trying to create a sustainable “vision” for the Vancouver region.
Condon’s answers to the above questions differ greatly from from the Antiplanner’s. This is partly because Condon bases many of his calculations on hypothetical numbers rather than actual data, and partly because his definition of “optimal” seems to transmogrify from paragraph to paragraph so that, in the end, it means whatever he wants it to mean.