Ponzi Acres: How Sprawl Is Like Bernie Madoff
Image credit Daquella manera
Kaid Benfield makes the point that talking about infrastructure is like watching paint dry. He describes a "dinner conversation that won't happen often: "hey - c'mon over and we'll talk infrastructure costs!" So he tries to make the conversation more comprehensible by inviting Bernie to the table, to explain Charles Marohn's thesis that American post-WWII suburban development is a giant Ponzi scheme.
Marohn himself summarizes his thesis in Grist stating:
What we have found is that the underlying financing mechanisms of the suburban era -- our post-World War II pattern of development -- operates like a classic Ponzi scheme, with ever-increasing rates of growth necessary to sustain long-term liabilities.... the local unit of government benefits from the enhanced revenues associated with new growth. But it also typically assumes the long-term liability for maintaining the new infrastructure. This exchange -- a near-term cash advantage for a long-term financial obligation -- is one element of a Ponzi scheme.
At first I was not convinced that suburban development was any more of a Ponzi scheme than the entire American economy, which, to paraphrase Kunstler, appears to have been composed entirely of making and financing the only thing too big to be offshored, housing, building big box stores to sell stuff to fill the houses, and cars to get between the house and the big box store. But then I read the five articles that Marohn wrote in Strong Towns, and find that he is saying the same thing, including the Kunstler references. From Part 4:
The first generation of suburbia we built on savings and investment, but we built the second -- and maintained the first -- using debt. Unprecedented levels of debt.
And in the process, we transformed our industrial economy into one based on consumption. As James Kunstler has noted quite often, when you take away the suburban-growth-related jobs from our economy, what you are left with is "heart surgery and KFC workers."
Marohn concludes in Grist:
We need to end our investments in the suburban pattern of development, along with the multitude of direct and indirect subsidies that make it all possible. Further, we need to intentionally return to our traditional pattern of development, one based on creating neighborhoods of value, scaled to actual people. When we do this, we will inevitably rediscover our traditional values of prudence and thrift as well as the value of community and place.
I would add that if we are going to rebuild our economies, we have to rebuild our cities. As Jane Jacobs wrote in the Economy of Cities,
Whenever and wherever societies have flourished and prospered rather than stagnated and decayed, creative and workable cities have been at the core of the phenomenon. Decaying cities, declining economies, and mounting social troubles travel together. The combination is not coincidental.
I think that Kaid is wrong, that this would make a fine topic for a dinner party conversation. Read all 5 parts at Strong Towns:
The Mechanisms of Growth - Trading near-term cash for long-term obligations.
Case studies that show how our places do not create, but destroy, our wealth.
The Ponzi scheme revealed - How new development is used to pay for old development.
How we've sustained the unsustainable by going "all in" on the suburban pattern of development.
The Growth Ponzi Scheme, Part 5 (finale)