Cities are the locomotives of economic progress but not all are successful.
Some are what we call ’treadmill towns’ that fail where ’turbo-cities succeed. Successful cities focus intelligently on developing their long-term assets. They build economic, social and human wealth.
Cities too often struggle just to keep the lights on, much less make valuable long-term investments, yet we contend that every city is sitting on a gold mine of assets.
Our book, The Public Wealth of Cities, describes how cities can manage public assets more professionally and at arms’ length from political whims so their value accrues to residents.
This contrasts with privatization schemes or public private partnerships that disproportionately pass public wealth to the private sector. Our five recommendations are:
- Know your assets. The first step in creating a proper balance sheet is an annual review of the market value and yield of a local government’s real estate, commercial activities and financial assets.
- Measure also social assets and human assets. There are techniques that make it simple and easy for city administrators to assess the value of social assets, and answer questions such as: what is a social investment in 6-year-olds worth that results in a pay-off in the form of lower crime rates by the time they are 15 years old?
- More professional and independent management of city assets. Commercial assets should be moved into what we call an ‘urban wealth fund’, where these assets are governed by professionals with some independence from day-to-day politics.
- Even social and human assets stand a much greater chance of flourishing if city politicians devolve responsibility to professional governance. That gives politicians much greater leeway to formulate citizens’ requirements rather than meddling with operational details. Democracy will actually improve.
- Shift expenditure from consumption to investment. Cities that invest in the future of their citizens – in schooling and skilling, quality social interaction, and in enduring infrastructure to move people, goods, and energy – see their revenues rise and their costs fall.
In sum, cities can be nations’ locomotives if they build their assets and make them pay off, or millstones around a nation’s neck if they fail to invest themselves out of the treadmill.
Dag Detter, managing director, Detter & Co and Stefan Fölster, director of the Reform Institute, Sweden – co-authors of The Public Wealth of Cities