The Cheap/Cool Connection

A blog about business and economics.
Dec. 28 2011 10:32 AM

The Cheap/Cool Connection

Two examples from recent history that I think follow the Berlin cheap rent path to coolness come to mind that might help to persuade the as-yet-unpersuaded. One is Prague in the 1990s. In terms of building stock, this is a famously gorgeous city that's unique and not reproducible. But several decades of Communism left the country poor, but it was still a pretty well-ordered, safe city and Eastern European Communists were good at building mass transit. Consequently, when the Berlin Wall fell you suddenly had this influx of foreigners into the city doing all kinds of cool/arty/entrepreneurial stuff that was made possible by the fact that Prague offered an astonishing value proposition for anyone with hard currency who wasn't specifically tied down to a corporate gig in a major western business center. Gary Shteyngart satirized Prague as "the Paris of the nineties," which is a joke, but also a reminder that what to many people is the canonical cool Paris (see, e.g., Midnight in Paris) is the Paris of the 1920s which, like Prague in the 1990s, offered a low cost of living to foreigners thanks to the then-prevailing weak franc. Of course the Prague party could only last so long before rents and labor costs went up, which is how Budapest (and even Belgrade) got to be the new Prague.

A North American example comes from the Montreal indie rock boom of the aughts. Montreal was has historically been a majority Anglophone city in a majority Francophone province on a majority Anglophone continent. Consequently, whatever language people spoke at home, English was the language of Montreal's thriving business community. But the Francophone majority in Québec didn't like the province's economic domination by English, and set about implementing language regulations that drove many large firms out of Montreal. Hence the anomalous fact that the top executives of the Bank of Montreal now work in Toronto. This left Montreal with basically an excess of buildings relative to the new, smaller size of its business community but it was still a big, bilingual city with free health care for everyone. That turned it into a great place for artists and musicians of various kinds (basically people who didn't need to worry about the problems of running a major coproration in a linguistic/regulatory war zone) to live and work in and gave us Arcade Fire, Wolf Parade, etc.

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You don't, however, need a specific disaster to generate a similar effect. Autin stays much cheaper than coastal metropolises simply because of Texas isn't (yet) sprawl-constrained the way California and the Northeast are.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.