Lone star upgrade

Twin Freaks: Bavaria and Texas

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Hold your hats, boys, the surprises just keep on coming. Source: DPA
  • Why it matters

    Why it matters

    Attitudes to climate and social issues are changing gradually in Texas, one of the most conservative states in the U.S. and the state is diversifying its economy away from its dependence on fossil fuels.

  • Facts

    Facts

    • Texas’ economy depended on oil until it started to diversify as Bavaria did, moving away from agriculture and attracting biotech, IT and environmental technology firms.
    • When the oil price started to collapse in 2014, multinationals shed 99,000 jobs in Texas alone.
    • Texas is home to five of the eight fastest-growing U.S. cities.
  • Audio

    Audio

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Texas is a land contrasts. Both conservative and modern, its Republican brand of low-taxation and low government regulation is attracting companies from all over the world. The Lone Star State is booming.

Texan Robert Wise owns his business and among managers, he is a renegade.

Mr. Wise is the founder of Hydrogen-XT, a startup that wants to kit out the United States with hydrogen filling stations. At meetings, he flaunts his cowboy attitude in the khaki shorts and outsize T-shirts he wears.

Like his clothing, his opinions are also unconventional in this part of the country. “Climate change is real. We have to say goodbye to oil in the long-term,” he said.

These are fighting words in oil-rich Texas. Times are changing – gradually.

In the past, Mr. Wise worked for oil giant BP. But now he is certain that cars with gasoline engines have no future. This is most apparent in the the state’s largest city Houston, he said, walking to his office window. “The skyline would be more visible if we didn’t have so much smog,” he said.

His compatriots call him a “climate change nutcase” but Mr. Wise is determined to install hydrogen fuel pumps at filling stations and plans to install 500 such pumps in the coming years.

But he is not a green warrior; he sees himself as a partner to the large energy firms and not as an enemy. He needs their natural gas, after all. “Low oil prices are a huge opportunity for Texas,” he said. “The state could prove that it doesn’t need oil.”

But the Lone Star State’s dependence on black gold is real for many. Since mid-2014 when oil prices started to collapse, Houston-based multinationals shed 99,000 jobs in Texas alone. It was a brutal blow but not a deadly one. The economy continues to grow and unemployment rates remain steady at just under 5 percent. That’s less than the U.S. average.

It isn’t just oil that makes Texas so robust. It diversified long ago, like its spiritual cousin Bavaria, which moved on from being a farming idyll way back. Over the past 20 years, hundreds of biotech, IT and environmental technology companies have sprung up in Germany’s southern-most state.

The cowboy state quietly modernized thanks to low costs, little regulation, efficient bureaucracy and more investment in infrastructure. This way, lawmakers have created an environment that’s attracted companies from all over the world – from IT giants to start-ups and mechanical engineers to pharmaceutical firms, creating a heady cocktail of laptops and rodeos in a region whose landscape was once dominated by oil pumps.

“Businesses are seen as partners in Texas,” Mr. Wise said. “The government supports us. In other states, like California, they hamper us.” In Texas, a company car costs around $60 to register. On the Pacific Coast, it’s more than $400. It took nine months to register three employees in California, he said. “Here it happens in no time.” Further, unlike most other states, Texas doesn’t collect a state income tax alongside the federal one.

The state shows its pro-business side in other ways too. In Houston, companies can set up shop where they want, including in residential areas or beside schools. “We want to defend the freedom of the individual and believe that we can best create growth and jobs, if we take a load off citizens and companies,” said Texas’ Republican Senator Ted Cruz.

This policy is plain to be seen: in an industrial area filled with delivery centers and factories on the outskirts of Houston along Interstate 10, people were busy hammering, painting and welding. Yellow cranes maneuvered heavy steel beams through the air, creating a giant filling station with 100 pumps.

One of the people investing in the new structure is Thomas Bond, a manager at the family company Pepperl+Fuchs in Mannheim. Mr. Bond wants to open a new delivery center here in the summer to the tune of $25 million.

The company has its U.S. headquarters in Ohio but Texas is becoming ever more important. Pepperl+Fuchs manufactures components for the car industry, as well as for chemical plants and oil rigs. Cheap land, numerous qualified staff and speedy planning approval procedures made the decision to plump for Katy an easy one.

The German company wants to create 110 jobs on its new premises. Mr. Bond and his colleagues know from experience that unlike in many other parts of the U.S., it won’t be a problem to find employees here. Two days after posting the job ad, 10 applications lay on the table before him.

Texas is home to five of the eight fastest-growing U.S. cities. “People move to where they see the best chances. That’s Texas,” says Jeremi Suri, a history professor at the University of Texas in Austin. Thanks to decent incomes, low tax burdens and cheap property prices, anyone with the right qualifications can buy a house and garden of a size that would make Americans in other big cities green with envy. A home in Houston or Dallas costs on average between US$340,000 and US$370,000 – half the price in Boston, New York or Los Angeles. “In Texas the American dream is still alive,” Mr. Suri said.

Republicans agree. For them, Texas is proof that their policies work. Since 1993, the Grand Old Party has ruled the state uninterrupted. It’s little wonder that Mr. Cruz says: “America would be doing much better if Washington looked to Texas.”

Still, for all its economic success, Texas lags behind when it comes to socio-political questions. It’s legal to carry weapons openly. The state has the dubious honor of executing the most people in the U.S. and 91 people have been executed here since 2010.

But immigration could change attitudes and modernize the state. “Cities like Austin or San Antonio are liberal and cultural strongholds. From there stems a desire for social change,” Mr. Suri said. It could take 10 more years, but even in Texas there will soon be no majority vote against abortion or same-sex marriage – not to mention for the death penalty. To Mr. Suri’s mind, “Texas is becoming more progressive with each year.”

In this election, it’s apparent how little public support Republican presidential candidate Donald Trump enjoys. Pro-Republican signs in gardens are the exception. Instead, trucks with Hillary Clinton stickers cruise along the highways. According to the polls, Mr. Trump is just four percentage points ahead of his Democratic rival Ms. Clinton. Four years ago, Republican Mitt Romney took Texas with a 16 percent lead on Barack Obama.

Mr. Wise isn’t surprised. “Trump is not a Republican and he doesn’t have a concept for the future,” he said. His energy policy is a “bad joke.” From business to political questions, this Texan cowboy is looking to the future.

 

This article originally appeared in WirtschaftsWoche. To contact the author: tim.rahmann@wiwo.de

 

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