On Redistribution

In the United States people hate the idea of redistribution. I was remarking the other day while reading a political science journal article that American culture operates with a background sense that using public policy to improve ones economic fortunes is illegitimate. The only legitimate way, in American culture, to improve ones economic standing is through hard work in the traditional labor market.

 

This is one contributing factor to why redistribution is viewed so negatively in our country. To be seen as deserving, one has to be seen as hardworking, and hardworking and economically successful are tied in the way we think about people in our country. We use a heuristic to tell ourselves that rich people are hard working and that poor people are lazy because it is easier than considering the alternative, and it also confirms to how we want the world to work, at least if we are relatively well off or see ourselves as becoming more financially successful in the future. We want to believe that our good economic standing and future earnings potential reflect our own industriousness and not just a set of favorable circumstances beyond our control.

 

In their book The New Localism, Bruce Katz and Jeremy Nowak look at our behavior around redistribution and consider how it fits with the framework for local action that they develop. Redistribution is an area where they find an interesting split between the role of federal and local governments.

 

“Major redistributive policies, such as the earned income tax credit, are best pursued at the federal level. Federal redistribution is more effective than more local efforts because the federal government has a larger pool of income from which to draw and there is less capacity to opt out. Federal redistribution is largely people based. State redistribution is generally linked to providing support for public goods in jurisdictions with taxing capacity disadvantages.”

 

I find it really interesting to think that the federal government’s redistribution programs are more people-based than local programs, but I think I understand why that might be. At the local level, we become upset when we see a person in our community who is accepting some form of assistance from the government while simultaneously driving a new car or leaving a nail salon. In some way, when we see an actual person who is benefiting from a redistributive program and using their resources in a way we find inappropriate given what we judge their priorities to be, we feel cheated. We feel that the economic assistance provided to them should have been spent on other local pressing problems rather than on supporting someone who using the financial aid unwisely. This makes local adoption of redistributive programs for individuals more challenging. At a national level, the quote from Katz and Nowak seems to suggest, we likely won’t recall as many of these hyper-local context examples, or just won’t be as aware of the aid, and won’t be as keen to notice the effects of a redistributive policy.

 

Another local level wrinkle that influences the policy appraoches from Katz and Nowak’s quote is that we don’t want to live in a city or region that is known for its slums. Those of us who are affluent enough will likely make efforts to avoid local trailer home regions and find ways around the lower socioeconomic parts of town. We won’t want to acknowledge these regions because they make our entire community look worse, especially from the outside or when commented on by national media. These pressures may make us more willing to have government take action to “clean-up” these economically depressed regions. We see a personal benefit to ourselves in having our city invest more in economically weak regions. We don’t see the same personal benefit from redistributive programs that help other individuals.

A Public Purpose Mandate

In The New Localism Bruce Katz and Jeremy Nowak advocate for new governance structures to help encourage innovation and lead to dynamic growth for cities and metropolitan regions. Katz and Nowak believe that current structures and institutions are inadequate to respond to global challenges that demand multisectoral action, technological innovation, and network approaches to problem-solving.

 

One of the recommendations from the authors is to produce new systems and structures for the effective management, use, and development of public assets. The authors are critical of public management strategies that often lead to politicized decision-making and cronyism. At the same time, the authors don’t suggest that public assets should simply be sold to the highest bidder from the private sector for their own profit maximization. Public assets can play a huge role in city revitalization and growth if managed properly, and the authors recommend that cities and metros look to Copenhagen for examples of better public asset management.

 

The City of Copenhagen has created publicly owned private corporations for the management of public assets and economic development spaces. An insulated private company is responsible for maximizing public benefit through the use of the city’s assets. In regard to transferring this system to cities in the United States, the authors write, “The United States also has to come to terms with the fact that public assets can be effectively managed by the same private systems and principles that build private wealth and productivity, but with a public purpose mandate.”

 

We like to think that there are either public systems, like say the DMV, or private businesses. Our debates and discussions generally center around the pros and cons of each, with people trying to reach an impossible conclusion that one system is inherently better than the other. Katz and Nowak show that Copenhagen took a different path, looking at how a private corporation could be established with public ownership and an ultimate purpose of maximizing public returns rather than private financial returns. The result has been an entity that can think long term, coordinate with both public and private organizations for responsible and equitable growth, and make decisions that focus on improving the city of Copenhagen in a realistic way that responds to actual economic trends, pressures, and forecasts. This blend of public and private is more robust than either pure private development or public management. The result of finding a third path is a new structure that can actually address problems in rational manners and sidestep the pitfalls that are so common in American city governance.

How Our Poorly Evolved Brains Contribute to Political Dysfunction

One of my beliefs about human beings is that we are currently operating in a world that has far outpaced the realities that our brains were evolved to live within. We are social creatures that operate in political tribes, and the social and political situations of our ancestors lives have pushed our brains to be bigger and pushed us to be smarter, but have not necessarily pushed us to be more adapt at understanding reality or seeing the world in a clear and honest way. This has happened in our brain, however, while we have maintained the basic hardware and default mechanisms which were originally developed for the purpose of survival on a savanna or in a jungle. Our brains are still built for making quick decisions between safe and threatening, but we have layered on great intelligence through social and political games that require smarter and more deceptively cunning intelligence. The result is that our brains are powerful, but deeply flawed and inadequately evolved for current circumstances.

 

This is important because we live in a world that is incredibly complex and requires that we make decisions among noise and competing values with varying levels of social and political consequences. Our world is filled with decisions that must balance multiple variables, but at their base, our brains really just want to make a quick decision between two variables: safety or threat.

 

I see so many situations in my own thinking where I reduce the world to one or the other. Someone is either a great person because they gave me plenty of space in their car while I was riding my bike, or they are an evil human being who couldn’t move over for me. Someone is either lazy and dumb, or hard working and brilliant. Considerations of the middle ground are complex, and as a result I default to an either-or mindset when looking at the world. For most of my daily interactions and situations this doesn’t matter much, but when we layer these tendencies up throughout society, it becomes dangerous and is a contributing factor to the political dysfunction and social unrest we see around us today.

 

In their book The New Localism, authors Bruce Katz and Jeremy Nowak hit on this point. About our political disagreements between Democrats and Republicans (the authors use Left versus Right which I disagree with for other more complicated reasons) they write,

 

“The battle between these two choices in public asset management [public ownership and provision as favored by Democrats versus the undeterred use of market forces as favored by Republicans] has contributed to political partisanship by posing a false choice between management mediocrity and the loss of ownership rights. These choices, driven by fallacies that are supported by old ideologies, contribute to political dysfunction.”

 

Katz and Nowak argue that we make huge political decisions in our country based on outdated models that feel comfortable for our brains (as our brains scan for safety versus threat) but that don’t really reflect reality. Good public management, the authors argue, in today’s age requires a merger of public and private asset management strategies. Public ownership cannot be absolute because it can lead to politically biased decisions with elected officials acting as arbitrary gatekeepers. Open markets, however, can leave people out and be leave us with greater inequality rather than provide us solutions to pressing problems.

 

One solution the challenge above might look like public ownership a of a private corporation, adding a layer to reduce political influence and bias, and using experts to maximize public benefit as opposed to using business insiders to maximize shareholder value. This is just one example of a third approach to a problem that our brains would rather see as a choice between two variables. We want to see the world as good versus evil, because that is how our brains have evolved. It didn’t matter if there was some nuance to our early ancestors about eating mushrooms, running from animals, or traversing down a steep cliff. What mattered was survival and having an innate sense of safety versus threat was advantageous. Today however, that same innate sense is at play (even though we don’t recognize it) and is holding us back and creating chaos rather than helping us successfully reproduce.

New Considerations for the Public vs Private Discussion

In the past I wrote about the importance of privacy in our politics from the point of view of Jonathan Rauch and his book Political Realism. We have almost no trust in government, and we frequently say things like, “sunshine is the best disinfectant,” but the reality is that politics is made much more complex when it is in the open. Difficult negotiations, compromises, and sacrifices are hard to do in open and public meetings, but can be a little easier when the cameras are turned off and political figures who disagree can have open and honest discussions without the fear of their own words and negotiations being used against them in the future.

 

In The New Localism, Bruce Katz and Jeremy Nowak acknowledge the difficulties faced by governments when open meeting laws force any discussion to be public. The laws come from a good place, but for local governments that need to move fast, make smart decisions, and negotiate with private and civic sectors to spur innovation and development, public meetings can lead to stagnation and gridlock. A solution proposed by Katz and Nowak is for local governments to authorize private corporations overseen by public bodies and boards to operate economic development areas and to take ownership of public asset management.

 

They describe how the city of Copenhagen has used this approach, “Copenhagen has found that by managing transactions through a publicly owned, privately driven corporation, operations run faster and more efficiently in comparison to how local government traditionally tackled public development projects.”

 

The private corporation running local development is publicly owned. It is still accountable to the local elected officials who are ultimately still accountable to the voters. But, the decisions are private, the finances are managed privately, and negotiations are not subject to public meeting laws. While the corporation has to demonstrate that it is acting in the public interest, free of corruption, it can engage with other public, private, and civic organizations in a more free and flexible manner to accomplish its goals. Leveraging the strengths of the private sector, publicly owned private corporations that put local assets to work can help drive change and innovation.

 

Directly calling back Jonathan Rauch’s ideas, these corporations create space for negotiations that would be publicly damning for an elected official. They also prevent elected officials from having undue influence in development and public asset management, preventing them from stonewalling a project that might be overwhelmingly popular in general, but unpopular with a narrow and vocal segment of their electorate. This prevents public officials from pursuing a good sounding but ineffective use of public resources to signal loyalty or virtue to constituents. Removing transparency and making the system appear less democratic, as Rauch suggests, might just make the whole system operate more smoothly and work better in terms of the outcomes our cities actually need.

A Fresh Take on Public Asset Management

An area that I did not understand very well, since I have no real experience with city government, from Bruce Katz and Jeremy Nowak’s book The New Localism has to do with the management of publicly owned assets. According to Katz and Nowak, public infrastructure, public land, and locally owned buildings and spaces are underutilized and the value of these assets is poorly managed. Part of the reason for this is that much of government is split and segmented. One agency has control over a piece of land, and another agency has ownership of another near by asset. This fragmentation makes it hard for the city government to consider unified programs or projects that would utilize both of the nearby assets in a uniform manner.

 

Another issue the authors discuss with public asset management is elected political officials holding veto power over the use of public assets. Daniel Kahneman in his book Thinking Fast and Slow describes our risk avoidance tendencies, and I think these tendencies can easily be viewed in our elected officials and their veto power. Elected officials, like everyone else, is more worried about potential losses than they are excited about potential gains from the use or sale of assets. What is worse with elected officials however is that they ware worried about the loss of an electoral base, and the loss of a job from decisions regarding the use of public assets.

 

The authors write, “The removal of the political class from public asset management has a salutary effect on democracy by transitioning politicians from asset gatekeepers to consumer and citizen advocates on behalf of public asset productivity and quality.”

 

Instead of having elected officials be the ones in control of public assets, the authors suggest transferring ownership to quasi-governmental organizations that blend public, private, and civic actors. The authors envision new forms of port authorities or development organizations that would control public assets with a focus on maximizing public benefit. Elected officials would then be responsible for helping develop innovative uses for public assets rather than being responsible for the failure of projects and programs that use public assets. This is the essence of the point  that the authors make in removing the political class from public asset management. A rational organization that controls such assets can defragment them, and put them to better and more productive uses.

Cities Suffer From Loss Aversion

“Many U.S. cities are, in essence, a fact-free zone when it comes to public assets. They have little knowledge of the assets they own and the market value of those assets, either under current or altered zoning regimes. Ironically, U.S. cities know what they owe (such as pension liabilities) but not what they own. Rectifying that disconnect is the first step toward sane and sensible public finance,” write Bruce Katz and Jeremy Nowak in their book The New Localism.

 

Katz and Nowak highlight the ways that local and regional governments in cities and metropolitan areas are establishing new networks to develop innovative solutions to global problems that have vexed state and national governments since the early 2000’s. Cities are reinventing ideas of governance and finding ways to adjust to the challenges they face in a way that larger governments seem to be unable to do. One area that is holding most city governments back, however, is financing.

 

Local government financing does well when the economy is strong and when people are moving to the area to create and fill jobs. However, when the economy is weak and people are moving away, local governments cannot keep up. Cycles of strong and weak economies have lead to the situation that Katz and Nowak described in the quote I used to open this post. Cities focus on their liabilities and worry about the costs and expenses that pile up and become major obstacles whenever the economy turns south. The authors argue that these pressures can become a singular focus for local government officials, preventing them from thinking clearly about the opportunities they face while limiting their creativity to adjust to new economic conditions and develop innovative solutions.

 

I don’t find it too surprising that city governments are more worried about what they owe than what they own. I am currently reading Daniel Kahneman’s book Thinking Fast and Slow and his descriptions about the way people respond to potential losses seems to be right in line with the behavior that Katz and Nowak describe for our city governments. We feel a loss of $100 as equal in terms of pain as we feel joy from a gain of $200. That means our losses are twice as painful as a gain is joyous. Mayors, city managers, and elected officials have their jobs on the line and can be held responsible for economic forces that are far beyond their control. This is likely a big part of what leads to this risk aversion among our local governments, and why so many of them are focused on what they owe and what could go wrong in a downturn. The narrow focus that this creates for governments, however, is likely to exacerbate any economic shocks that they do experience. By failing to plan and think big, city governments are failing to get the most out of the assets they do have, and are failing to build a buffer of protection for themselves and their residents if an economic shock occurs.

 

The solution that Katz and Nowak provide is a structure of new networked governance, where governments are able to provide the authority and base funding for projects and ideas, but private organizations can manage public assets and capitalize on charitable and foundation giving for more risky projects. This opens an avenue for bold movement that risk averse elected officials and public agencies could not approach. It allows cities to maximize their assets, rather than forget about them altogether.

The Complement of Networked Governance

The last few weeks I have been writing about governance ideas presented in Bruce Katz and Jeremy Nowak’s book The New Localism. One idea I have brought up multiple times is the idea of new institutions at the local level formed from networks of public, private, and civic actors. Katz and Nowak argue that these networks are crucial for the development of plans and strategies to help cities grow, adapt, and thrive in a globalized economy. New institutions include structures and frameworks that bring together public, private, and civic leaders who have the ability to mobilize energy, capital, and people to actually get things done, rather than to just talk about doing things.

 

Katz and Nowak are clear, however, that these new network governance structures are not something they suggest as a replacement to traditional government structures and agencies. In their book they write, “In the end, however, networked governance is a complement to functioning government, not a substitution. As responsibilities shift downward in societies, capable local governments become a necessary component of problem solving and leadership.”

 

I previously wrote about the ways in which our denigration of government in some ways create a self-fulfilling prophecy, where talented and motivated people are afraid of the stigma of government work and chose to work in the private sector, leaving government with less capable and dynamic talent. A lot of rhetoric says that government is the problem and not a solution, but Katz and Nowak show that government has to be part of the solution.

 

City and local governments create the structures that can organize private and civic groups. They create the forums through which stakeholders can deliberate and discuss the problems that people in the region face. Agencies play a role in ensuring that projects and programs taken on with the support of private and civic groups follow legal precedent and sound administrative practices in an equitable manner. Without a competent public sector, the plans from governance networks would have nothing to graft onto, and could not be implemented nor developed.

 

New governance approaches through networks are efficient and effective because they bring in the people who have the expertise in a given area and invite them to be part of a larger solution than just maximizing their bottom line. They engage community members and actors in place-making, helping the region grow in a way that will in turn benefit each member of the network. The network fills the gaps in public action and strengthens the weakest parts of the public sector. Together, a competent local government combined with the nimble and expert private and civic sectors has a great advantage in the field of problem solving.

Cities Building from Strengths

I really like the ideas presented in The New Localism by Bruce Katz and Jeremy Nowak because they provide a road-map for getting stuff done in a local context where our hyper polarized tendencies can be put aside. The ideas presented in the book focus on engaging local community members and groups to take real action against our most pressing challenges. It doesn’t simply present a best case scenario of local policy-making, but demonstrates real examples of local place-making alongside realistic decision-making.

 

Cities have the power to lead on many issues that we face today because of their abilities to create networks to pull people together. It is the strengths of cities that propels them to be the solution engines that they can be in our world today. The authors write, “Cities unveil and tap hidden strengths by aggregating public, corporate, philanthropic, and university stakeholders into networks that work together to tackle hard challenges and leverage distinctive opportunities.”  It is the people, the companies, the groups, and the local environment that allow cities to be diverse, dynamic, and successful in developing real responses to social, economic, and security threats. By understanding and connecting these resources, cities can build coalitions with the power and energy to transform cities in the face of obstacles.

 

Katz and Nowak continue (emphasis in original), “The best networks have a smart recipe:  Build from strength to address needs rather than build from needs to address strength. This enables cities to realize the full value of latent assets, whether they are sector based … or geographic …”

 

Cities cannot identify who they want to be, and then try to engineer the strengths that would help them bring about the transformations they want to see. Cities have to be able to honestly look at themselves and see what they can be. There is plenty or room for imagination and visionary leadership in this model, even if it feels limiting. Cities cannot invent strengths out of no where, but they can identify, coordinate, and combine the resources that produce existing strengths to further develop new industries and sectors, or to capitalize on existing advantages. Building from strengths takes the existing pieces and encourages them to grow, expand, and recombine in novel ways. It requires organic communication and networking along with new institutions to help streamline the decision-making process to implement the programs and policies to help propel cities forward.

Implementation Matters

One party in the United States seems to continually chide any public sector misstep and only seems to be able to complain about the problems and waste of public sector projects and programs when discussing what the government actually does. While there are undoubtedly challenges and problems in public administration, continually complaining about and criticizing any public agency operation can have further costs to society. Good implementation in public policy matters, and one fear that seems reasonable to me, is that the constant denigration of public service will drive out creative and hard-working individuals, and worsen the very situations being criticized.

 

In The New Localism, authors Bruce Katz and Jeremy Nowak write about the importance of implementation, and how they view it differently in their system of New Localism. They write,

 

“At a Brookings Institution forum in 2000, [Richard] Shatten stated that, ‘being right is irrelevant to the growth of cities and metropolitan areas. Good ideas are critical, but they have impact only when they are implemented thoughtfully and effectively. And sound implementation only happens when a community develops a civic, corporate, and political culture that can translate good ideas into action and execute with discipline and imagination.'”

 

Two things really stand out from this quote to me. The first is that good implementation is everything. Public agencies need to think about and study what will make the implementation of a program successful and need to be thoughtful of how they do the things they have been tasked with doing. Poor implementation of the perfect solution can ruin public support for that solution and can create even worse problems and greater barriers to achieving the outcomes society wants to see.

 

Second, good implementation relies on a strong political culture that accepts government action and helps align non-governmental actors to make implementation successful. It is not enough for private sector organizations and thought leaders to say that a policy needs to be put in place or run a certain way, they actually need to use their resources, skills, and expertise to be part of implementation. Good ideas require community efforts to become successful policy, and if a group simply stands apart, refuses to help, and cries foul at every opportunity, then implementation will of course fail, as if it were a self-fulfilling prophecy of ineptitude. There is room for criticism of government and the failures of implementation should be discussed, but we should not hinder the implementation of a program out of a prejudice against public action. Ultimately, the public action on its own, as the quote suggests, is not enough. We can’t just criticize from the sidelines, we actually need to find ways for more organizations and groups to be involved in the implementation of new programs, specifically tailored to meet the local needs of populations, businesses, and environments. Standing apart and criticizing only snowballs problems. Collaboration and cooperation among civic, private, and public organizations is the only way governance and development will be possible in the future.

Culture Busting

In The New Localism Bruce Katz and Jeremy Nowak call for culture busting among city leaders who want to find new solutions to pressing problems. One of the challenges we face is that in general, the public doesn’t understand governance well. We operate with set ideas about what governance is, who sets rules and regulations, and the roles that private companies, local community groups, and formal government agencies play. In the future, as problem solving becomes more local and as we try to tackle major challenges we will need to get beyond these simple models from our high school civics classes.

 

This is what Katz and Nowak call culture busting, “culture busting is a form of risk taking and a fundamental shift in understanding that many responsibilities in a city and metropolis lie with the community broadly rather than with the government narrowly.” The role of government, the role of businesses, and the role of everyday citizens needs to change if we are to truly address the big problems in our societies. If we want to tackle climate change, if we want to reduce healthcare spending, and if we want to spark economic development, we have to realize how interconnected all of the challenges we face are, and we have to develop a community focused action plan to make the necessary changes. Thinking that problem solving is the role of government or that economic development is purely a free market phenomenon will not help us jump to be dynamic leaders in a globalized economy.

 

Part of what culture busting calls for is more education around governance and part of it is a reemergence of community action. A major failure of suburban life is that we drive from our homes to our places of work or commerce, and rarely interact with anyone else along the way. We let others deal with problems unless they happen to be unavoidably right in front of our face. We might get out for a sporting event or a conference, but otherwise we are just as content to watch Disney+ at home. Culture busting replaces this individual isolation with networks that want to see real change and are willing to own part of that change.

 

Culture busting requires that we re-imagine what is possible for governments and redefine the role of businesses and civic organizations. It requires that we think about the challenges our communities face, and ask ourselves what resources and advantages do we have that we can use to make a difference. Rather than waiting for government to make a decision, it requires civic and private energy to clear the path and display a public will for government to direct resources in the direction that the populace already wants to move. It shifts leadership from government back to the people and aligns actors to make the community a better place.