Monday, January 10, 2005

“Smart Growth” is just dumb economics

Thank you to Kim Ainslie for allowing us to reproduce this article, which first appeared in Scene Magazine (April 29, 2004). Although this piece was originally published almost a year ago, City Council has not abandoned any of the misguided socialist principles that have stifled growth and creativity and raised taxes in the London market. It is now budget time again at City Hall, and the London Fog will be trying to hold the feet of Council to the fire. Dr. Ainslie's article is a well-researched and articulated piece of criticism, and it is still very timely. (Please check out a previous piece by him that we have published: City Hall's Cynical Budget Politics

Dr. Ainslie is President of Nordex Research in London, a private, public policy and market development research organization serving clients across North America.

“Smart Growth” Is Just Dumb Economics

The “smart growth” policy mantra is becoming firmly entrenched at London city hall these days, and it is being led the city’s planning committee. Chairwoman and ward 2 councillor Joni Baechler, and her soul sister, ward 1 councillor Judy Bryant are the leading advocates. They are being aided and abetted by top bureaucrats in the city’s planning department. These folks have jumped on the “smart growth” bandwagon by seeking to restrict residential and commercial growth by on the city’s suburban periphery and elsewhere. But this putative, smart growth strategy will have dumb results for London’s economic development.

Baechler’s and Bryant’s clarion call is: “growth doesn’t pay for itself.” The B&B twins’ argument goes like this: residential development and growth on London’s suburban fringes is wasteful for the city because the city cannot recoup the infrastructure investment costs in new roads, curbs & gutters, sewers, street lighting and the like. Theirs is a kind of a post-modern argument where growth is really anti-growth.

But the argument suffers.

First, nothing government does “pays” for itself. Government spending is always a net loss for taxpayers. And, notwithstanding the absconded rhetoric of left-wing media commentators, government offers us no monetary return on investment in this spending. There is no ROI.

Indeed, developed nations for decades have decided that they will pay for widely-delivered infrastructure services, because typically most citizens benefit from these works, as sooner or later we all use them. These infrastructure services, in public finance economics theory, are regarded more or less as “pure public goods.”

That’s the economic theory, but let’s address this as a practical issue. We might ask the B&B twins: “Who paid for the services that were installed in and surrounding your suburban homes in north and northwest London before you arrived on the scene?” The answer is: the rest of us. So in the end, our “smart growth” twins have got themselves twisted around on the economics of their assertions; they are really practising dog-in-the-manger economics. They’ve got theirs; newcomers can take the hindmost. But that’s, of course, what socialists do. These folks are not happy unless they are regulating or redistributing other people’s property and wealth.

Let’s move on to the economic damage that the city planning department is pursuing for the same purposes.

In January 2004, in keeping with the “smart growth” strategy, top officials in the department called for a limit on the availability of commercial zoning across the city. They said: the “[r]e-use and reformatting of [vacant commercial floor space and existing malls] … becomes less viable when too much commercial land is supplied in ‘greenfield’ locations.” Translation: we’re going to reduce the flow of zoned commercial land across the city, and we’re going to regulate business proposers into re-developing existing commercial space, notwithstanding the presence of contrary location, price, distribution, transportation and consumer demand in the marketplace. The idea here is to force new commercial developments into old and abandoned commercial space, just so the planners can run around saying they do not have “excess” commercial land supply.

The problem is: this too is bad for economic development. Why? The anticipated answer from commercial development proposers to the city will be: “Go pound salt. We won’t come into London.”

The fundamental problem is these planners are seeking to regulate and in some cases freeze commercial land supply, instead of stimulating demand for it. And on the question of previously used and vacant commercial space, the real solution lies in fiscal incentives going to redevelopers of vacant commercial space -- just like the city recently offered to a London developer of a downtown residential high rise.

Even post-modern socialists, i.e. neo-socialists, have figured out that the developmental state has to work hand in glove with business in order to produce positive development outcomes. The old Galbraithian, anti-corporate posturing is just passé and unproductive.

The planning department and the B&B twins need to abandon this feckless “smart growth” fad, and start focussing on what works for growth and jobs. That way we all prosper, and there’ll be no more need for silly talk about development freezes.

Story by Kimble Ainslie
Originally published in Scene Magazine, April 29, 2004


Jay Jardine said...

The Reason Public Policy Institute has a ton of resources on Sprawl -

I find them a little too willing to overlook the direct and indirect subsidies that contribute to tract housing and big box stores, but they are a useful counter to the "command and control" smart growth dogma that many socialists espouse.

Bob said...

The last paragraph says it... a 'fad'. An old one at that. B&B don't think, they just tout the party line without undertsanding what they say. They are professional planners, or engineers, or whatever they need to be at that moment in time where debate, in their mind, requires a contrarian view. They are NIMBY-ites... they would ferociously deny it, but that is exactly what they are... i.e. I've got mine, you can't have yours. Children, that, in the end, cost the City more money than their proposals espouse to save. How much money do you suppose is spent in countering their lunacy... I mean City staff responding to their wish lists and socialist-babble. If they were not here, there is a lineup behind them of crackpots willing to steup up to the plate. I assume Sandly Levin is still the puppeteer in all of this?

MapMaster said...

Jay, it is always a pleasure to hear from you, so get posting!

Jamie, good luck with your new blog -- I will certainly check in again on it judging from the first post. And thanks for your comment. No, Sandy Levin is no longer the master puppeteer -- that job has apparently fallen to Tom Gosnell, the deputy mayor and head of Board of Control. You'd think he was the mayor; Anne Marie de Cicco has apparently abandoned her post and thinks she is the Governor General. Other reckless types include Susan Eagle, the most dangerous woman in London, Sandy White, the most dangerously stupid woman in London, David Winninger, Harold Usher and Joni Baechler. The others are only slightly more innocuous. The only one of our governors that seems to have any sense is Paul van Meerbergen, who needless to say gets hardly any press. We hope to rectify that shortly...

Bob said...

MapMaster,,, thanks - hope you do visit the site. Hope I actually use it to do the venting that relieves me... By the way - your LondonFog site (older version) was one of the first weblogs I discovered that actually interested me. Am glad to have the opportunity to post my drivel here... I apologize in advance for the inevitable nonsense comments I'll provide here in future!!!!

Lisa Turner said...

Thanks Jamie for checking out our blog ...your comments are most welcomed and appreciated. I will be sure to keep on eye on your blog. Cheers!