Is American city/infrastructure growth a Ponzi scheme?
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  Is American city/infrastructure growth a Ponzi scheme?
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Author Topic: Is American city/infrastructure growth a Ponzi scheme?  (Read 594 times)
John Dule
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« on: July 30, 2021, 09:10:59 PM »

This is what Charles Marohn alleges in Strong Towns, a book which I'm reading at the moment, which functions as a companion to a blog that he's run since 2008. This guy is a land-use planner and engineer who, through his work, came to the conclusion that new suburban infrastructure development is gradually bankrupting American cities. I can't speak to the veracity of 100% of his evidence (I'm looking into some of his claims on my own), but from what I've read, his argument makes intuitive sense.

The argument essentially proceeds as follows:

1) In the 1920s to the 1940s, American cities switched from an incremental, sustainable growth pattern to the modern suburban growth pattern we see today. The sustainable pattern, which was the norm for human history up until this point, involved individual private investors building businesses and homes in new locations, gradually establishing a tax base, and then developing infrastructure as the town grew. The new pattern involves city/county governments speculating on land value-- developers are invited in to build entire neighborhoods, and then the city assumes responsibility for the maintenance of the infrastructure.

2) Because this new pattern of growth is driven primarily by government and not private enterprise, the usual careful prudence involved in investing large sums of money flies out the window. Cities have begun to take responsibility for maintaining far-reaching pieces of suburban infrastructure that are not paying for themselves. Because this land is being used to build only single-family homes, there is not a large enough tax base in these towns to pay for the required maintenance on all the aging infrastructure. City managers consider all this new infrastructure an asset rather than a liability, and therefore they do not properly account for it when they balance their town's budget.

3) As infrastructure ages, towns require new short-term sources of revenue to pay their debts. They turn to even more new developments, which provide a temporary influx of cash while new people move in. Over time, however, this process creates huge swathes of inefficiently used land covered in a thin layer of detached single-family homes. These millions of homes have pipes, roads, electrical lines, and gas mains running to them, as well as fire/police/education services. Due to the nature of the car-dependent suburban sprawl, we have created suburbs that are huge drains on municipal budgets.

4) As the city's infrastructure deteriorates, it eventually goes broke. This is what happened in Detroit-- the first city to experiment with the suburban sprawl-- and it will happen to other cities too. Perhaps the reason why we need massive federal omnibus infrastructure bills is because our citizens are spread thinly throughout huge suburban neighborhoods, yet they still expect the amenities and services afforded to city-dwellers. Fixing this by encouraging denser city housing is the only way to proceed, but while Detroit has tried to reinvigorate its downtown block by block, its suburbs have decayed and the city has become unable to pay to keep basic utilities running in some neighborhoods.



Marohn's contention is that this will happen elsewhere. Detroit's collapse was hastened by the simultaneous rise in automation, but most major American cities are modeled on Detroit's style of development, and they will eventually reach a point where they can no longer sustain the short-term growth necessary to pay for their inefficient infrastructure.

What does Atlas think of this assessment?
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« Reply #1 on: August 02, 2021, 11:06:23 PM »

Makes certain good points and raises interesting questions
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Absentee Voting Ghost of Ruin
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« Reply #2 on: August 04, 2021, 01:07:03 AM »

I've run across Strong Towns before. It makes sense as presented, and matches much of what I see in, for example, the awful suburban sprawl of Denver (and the inadequate attempts to keep up with it). It also echoes much of what I think has gone wrong with our society, where we've let corporations and market forces shape us in ways they find convenient, but which are not beneficial to us as individuals or as a collective. (To be very clear, I'm am not suggesting any sort of deliberate conspiracy, just that we've been too eager to follow "the money" while ignoring the impacts that doing so has.)

So it's certainly appealing to me, and its not obviously wrong (yet), but I haven't personally seen the evidence for it being right the way I have with, for example,  global warming, vaccines or opposing Republicans.
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« Reply #3 on: August 04, 2021, 07:47:40 PM »

I essentially agree with everything except this:

Because this new pattern of growth is driven primarily by government and not private enterprise, the usual careful prudence involved in investing large sums of money flies out the window.

Effectively, all systems that rely on infinite growth on this finite planet, whether due to imperialistic (see the great land reform crises of the Roman Republic) or capitalistic (as in this case) motives, are bound to self-destruct. I don't have any trust that private enterprise, which itself thrives on the "growth economy" myth, would act any more responsibly than governments that are also indirectly beholden to those ideas and the whims of private contractors, which is where this leads me in a socialist direction rather than a libertarian direction. Market economies have no means of establishing homeostasis and are thus inevitably a series of bubbles and collapses that cause great material harm to all that they exploit and harvest. This is why the emergence of nominally "culturally left" figures who want to "save capitalism from itself" and restore its gee-whiz founding mythology like Ro Khanna and Andrew Yang has been so chilling for me, as it's their desire to take all teeth away from any movement away from these destructive falsehoods and instead rebrand "end of history" perpetual motion nonsense as progressive.

What machinations of capitalism aren't Ponzi schemes, then?
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John Dule
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« Reply #4 on: August 05, 2021, 07:17:15 PM »

I essentially agree with everything except this:

Because this new pattern of growth is driven primarily by government and not private enterprise, the usual careful prudence involved in investing large sums of money flies out the window.

Effectively, all systems that rely on infinite growth on this finite planet, whether due to imperialistic (see the great land reform crises of the Roman Republic) or capitalistic (as in this case) motives, are bound to self-destruct. I don't have any trust that private enterprise, which itself thrives on the "growth economy" myth, would act any more responsibly than governments that are also indirectly beholden to those ideas and the whims of private contractors, which is where this leads me in a socialist direction rather than a libertarian direction. Market economies have no means of establishing homeostasis and are thus inevitably a series of bubbles and collapses that cause great material harm to all that they exploit and harvest. This is why the emergence of nominally "culturally left" figures who want to "save capitalism from itself" and restore its gee-whiz founding mythology like Ro Khanna and Andrew Yang has been so chilling for me, as it's their desire to take all teeth away from any movement away from these destructive falsehoods and instead rebrand "end of history" perpetual motion nonsense as progressive.

What machinations of capitalism aren't Ponzi schemes, then?

To say that this growth pattern is "the fault of capitalism" is quite reductive. Indeed, I'll agree that private influences in the government are largely responsible for spurring this kind of growth-- the best and most obvious example is probably how the car companies killed public transportation in LA. But ultimately, it takes two to tango. You can't blame private enterprise for lobbying the government unless you also blame the government for bending to that influence. When these two forces work in concert with one another, I'll be the first to agree that the average American gets screwed.

The way towns used to grow was incremental because it was driven by small-scale interests. A family built a small house on the edge of town. A baker opened a shop on the main street. People gradually invested their own money piecemeal over time, until the town eventually grew large enough to sustain a moderate tax base. This model of growth probably isn't possible anymore, but when it was the norm, it was sustainable. It did not rely on "infinite growth," as it did not expand wildly beyond its means. So to imply that private investment banks on "infinite growth" is wrong. A private investor could be anyone from a multinational developer to the aforementioned small family or baker.

The reason why we now have this problem is because city governments are too focused on growth-- at the expense of all else. Here's how (and why) this fails:

1) A developer comes to a town with a plan to build a new suburb. The developer presents the town with a deal in which the developer will build the new infrastructure (roads, pipes, etc) if the town then agrees to maintain this infrastructure in the future.

2) The town then accepts this deal. Again, cities don't have to do this. If we had responsible leaders, they would ask serious questions such as "Do we have a large enough tax base to pay for the maintenance of this new infrastructure?" or "Is this really the most efficient way we can use this land?" But the prospect of a few hundred million dollars worth of investment in their towns blinds them. They are happy to sign off on any project that "induces growth."

As you can see, the problem here is private enterprise and government working in tandem. When a business invests in a new building, it has disincentives that prevent it from expanding beyond its means. Private interests want to keep costs as low as possible, so each step in growing the business is taken with care. The aforementioned baker would not build a massive three-story bakery as his first step if he hadn't proven that he could sustain enough business to make that investment worth it. But when a business knows it can build a huge project, make a short-term profit, and then pass the buck to taxpayers later down the road, it creates perverse incentives that give us wasteful and inefficient infrastructure.

The law is about providing people with the proper incentives to create a functioning society, but when government decides to shoulder the risk of private enterprise, businesses no longer feel any need to act with prudence. It is this interaction between the private and public sectors that causes problems like this, not the private sector alone.
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Spark
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« Reply #5 on: August 18, 2021, 07:37:47 PM »

Yes, Bernie Madoff perpetuated it.
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Southern Senator North Carolina Yankee
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« Reply #6 on: August 21, 2021, 08:45:31 PM »

I came across this myself over the last couple of weeks on YouTube, from mostly left leaning urban planning/transportation related content creators (City Beautiful, Alan Fisher, Not Just Bikes).

Once you start peeling apart the onion, you realize the rise of the sunbelt, the rise of the suburban sprawl and the rise of the car culture/highways are all massively unsustainable long term in regards to both financially maintaining it and also in terms of environmental impact.
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