Privatization and Other Policy Reads

Why Chicago is now the Fourth City behind New York, Los Angeles, and… Washington D.C.?; the European model of infrastructure privatization and why they’re so much better at it than us; and more

Chicago spire hole

 

* Did Chicago (and Indiana) go about privatization all wrong? Brad Plumer takes a look at European infrastructure privatization versus American (something I have a longstanding interest in):

There’s some evidence that privately operated infrastructure projects can get built more quickly — and for less money — than projects wholly overseen by the government. One 2007 study (pdf) from Allen Consulting and the University of Melbourne looked at 54 large infrastructure projects in Australia and found that the privately financed ones had smaller cost overruns and were more likely to be finished on schedule than those financed through traditional public-sector methods.

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But before getting too excited about the magical powers of private firms, experts warn that there are potential pitfalls to these arrangements. For one, as Robert Puentes of Brookings noted in a recent paper (pdf), these are complicated multi-decade financial arrangements. And “many states,” he notes, “lack the technical capacity and expertise to consider such deals and fully protect the public interest.”

* “The Stagnant City: How Urban Politics Are Stalling Growth and Pushing Rents Up”: At Forbes, Chicagoan Mark Bergen talks with Georgetown University law prof David Schleicher (in two parts) about civic land use, housing costs, and more:

The only explanation is that zoning rules stop supply from increasing in the face of rising demand. (In case you are wondering, this not a bubble phenomenon—this happened in many cities before the housing bubble, and the behavior of housing markets during and after the crisis is completely consistent with a story about big city housing supply constraints.)  And it’s not like real estate developers suddenly became political weaklings. What gives?

This, I thought, was particularly interesting; it’s not like Chicago has a lock on one-party rule:

The key to my story is that urban legislatures don’t have competitive local parties—we don’t see big city legislatures divided between Republicans and Democrats, each trying to create a localized brand for competence on local issues. Instead, most local legislatures are either non-partisan or dominated by one party.

I was intrigued by the Tom Swiss gambit, but given that he lost to Derrick Smith, the local GOP will have to try something else.

* Aaron Renn has a fantastic post on Chicago as the Fourth City, putting us behind New York and Los Angeles, obviously, and then… Washington D.C. Which he actually ranks ahead of Los Angeles:

Reading this, it once again strikes me that the old urban hierarchy is being reordered by globalization and the dramatic expansion of the US federal government, to the disadvantage of Chicago and other cities. This, I believe, helps account for its recent struggle.

Joel Kotkin has tirelessly documented the remorseless rise of Washington, DC, rain or shine, in a manner defiant of business cycles. Washington, once a sort of commercial backwater, is now becoming much more a national capital of the type other countries have had.

D.C. has grown fast in terms of both money and people. It’s also basically the only major American city to have survived the burst of the housing bubble unscathed. Steven Perlstein thinks this will hit a wall soon enough:

Any reasonable scenario for the future would surely project federal spending on salaries and procurement to grow very little, if at all. Given the region’s lopsided reliance on those types of federal spending, it’s a pretty good bet that the regional Washington economy will grow slower than the rest of the country for an extended period of time.

But I’m skeptical. Even if Perlstein is right that the federal government will cut down on employees and salaries—pay freezes, for instance—it doesn’t account for the growth of the lobbying industry and its recession-defying nature:

“Lobbying appears recession proof,” said Sheila Krumholz, the Center’s executive director. “Even when companies are scaling back other operations, many view lobbying as a critical tool in protecting their future interests, particularly when Congress is preparing to take action on issues that could seriously affect their bottom lines.”

On one hand, the federal pot getting smaller means less money to go around. On the other, it makes that money more precious. And lobbying isn’t just a hunt for money; it’s just as much about regulation as it is contracts.

Renn’s post, with its focus on globalization, is an excellent example of why Chicago and Illinois have been so willing to do business with the CME Group: futures is one of the world-is-flat industries that Chicago can claim to be well-established in.

 

Photograph: Marcin Wichary (CC by 2.0)

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