In her recent Next American City article, “An IPO for Cities”, Diana Lind proposes employing the financial mechanisms of Wall Street to fund urban development and maintain public infrastructure. This would be fundamentally dangerous to already fragile municipal finance systems.
Is it possible that, now four years in, we still haven’t learned anything from Depression 2.0? Is Wall Street, the cause celebre of our financial system’s downslide, really a good model for funding our cities? Would this go over well in Europe?
Cities are struggling, but raising capital through a financial tool designed to infuse cash into corporations is not the answer. Cities neither function like publicly-traded corporations nor were they intended to perform in such manner.
One would think that if this IPO idea was good for cities it would have been implemented long ago. After all, IPO’s and other finance tools have been around for a long time. There are good reasons why this hasn’t been suggested at city council meetings across the land. Primarily because it would be too risky and would further exacerbate the divides between the wealthy and the rest of us.
The goals of cities are inherently different from private corporations. And they should aspire to different things. This is one way the distinction between government (flawed as it is) and the world of profit-seeking business (flawed as it is) remains somewhat intact. A city IPO is one way the lines between these realms could become even more dangerously blurred than they already are. This is why cities use things like municipal bonds and taxation (flawed as they are) instead.
Ms. Lind, by valorizing the insane wealth of Facebook and it’s now billionaire CEO as a model for generating revenue for cities is blurring this line between government and business even more. She doesn’t want privatization of the public realm but she is suggesting that citizens “have a greater financial, and therefore personal, stake in the city.” In other words, citizens have to pay to play. People would have to invest money in different services, like the school system, say. She adds that “if your kid graduates, you’d get the amount back with interest.” I’m thinking this argument requires a lot more research to prove and that her city sounds more like a risky too good to be true investment scheme than a place to raise children.
Cities are not profit-generating machines in the narrow sense of corporations. They are conceived and built over time to serve and support citizens as they go about their cultural, social, and economic lives. They are complicated constructs of public and private interests, woven through with government, legal systems, cultures and economies. We are in serious trouble—even worse than we might have thought—if offering IPO’s is the way to save our cities. What I think is at work here is the shock of contrast between the world of extreme wealth generation and the world most of us inhabit that is being left behind.
What is needed is not for cities to “take calculated risks and to experiment with new financial strategies”, as she suggests, but for fundamental municipal systems to be restructured and adjusted through smart governance and financial regulation. Wall Street engaged in a lot of “experimental” and “innovative” finance strategies. Look where that got us. Moreover, look at JP Morgan Chase’s latest $2 billion bet gone wrong.
What cities need are policies and tax codes that support and strengthen the lower and middle classes in ways that enable the regeneration of public revenue streams. The cities are suffering in part because their citizens are suffering under the pressures of the recession. Besides, even if this were a good idea, if people don’t have money to contribute in the conventional ways how are they supposed to get the cash together to jump into an IPO?