The growth Ponzi scheme, part 5 (finale)

Charles Marohn, New Urban Network

We need to wring more value out of our places and that is only going to happen if we understand how to create value in the first place.

There is a fine line one walks when doing a series like this, and I struggle with it myself. On one side of the line, there is a tremendous problem we've identified, it has dramatic consequences that we are largely unaware of as a culture, and I want to yelp at the top of my lungs to make people aware. On the other side of the line is an awareness that the world does not want to listen to a sky-is-falling, doom-and-gloom, pessimist. We tend to call such people "crazy" and, in time, zone them out.

In this regard, I am certain that some people felt my last comment yesterday was unnecessarily provocative.

Our national economy is "all in" on the suburban experiment. We cannot sustain the trajectory we are on, but we've gone too far down the path to turn back. None of our dominant political ideologies can solve this problem. In fact, there is no solution.

I feel bad, but I am not trying to be provocative. There truly is no solution. This may be disappointing to those of you that have hung with this series — or by the hit counts on our site, joined mid-week —  because I have no magic bullet, no series of policies and no simple course correction that solves our current financial spiral. There truly is no solution.

Let me pass on an analogy I have used here before. Let's say that a person gets in a car accident. For whatever reason, they are seriously injured — maybe even disabled — and they don't have insurance of any type. They are unemployed and have no savings. What's the solution? There really isn't one. But looking at the situation, there are responses that a third-party observer would call "rational" and "irrational."

America is in a slow-motion car wreck. Lots of people are being hurt by it, some very badly. We've long lost our insurance by accumulating so much debt. We've also relinquished our production capacity. And we have little savings to speak of. What's the solution?

I wish I had one. I really do. I would be a very popular person, indeed. Unfortunately, all I can offer are rational and irrational responses.

For me, the rational response starts with this picture.

This is my hometown as it appeared in 1894. Today this street looks like Dresden in 1945, an empty wasteland of parking lots and low-value, partially-abandoned buildings. But in 1894, this place rocked. Look at it! Look at those buildings — we'd give anything to have that here today.

Now ask yourself how this existed in the first place. How did we build such an amazing place before the home mortgage interest deduction? How did we accomplish this before zoning? Before the International Building Code? What created this place before we had state and federal subsidies of local water and sewer systems? Before HUD? Before DOT? Before the state highway system? Before Fannie and Freddie and subprime mortgages and collateralized debt obligations? How did we ever accomplish this before tax abatement, tax increment financing, SBA and local economic development? Heck, we did this before the advent of the 30-year mortgage!

Here's the answer, and the key to the correction we need to make: We built places that financially sustained themselves. Do you know how I know this? Simple. If this place did not financially sustain itself, it would have gone away. In 1894, nothing was going to artificially prop it up.

This is not an anti-government argument. In fact, just the opposite. To pull off what my ancestors created — a successful town in the center of the deep woods of Minnesota — they had to have excellent government. Their future depended on it.

They had to organize themselves and use their collective resources very wisely. I look at the pictures of the beautiful way in which they maintained our now decrepit parks, the purposeful way in which they placed grand public buildings, the way in which they regulated the public realm and it is clearly evident to my trained eye that these people understood how to wring every penny of value they could out of their built environment. They knew the art of placemaking.

Today we have largely relegated this art to Disneyland and isolated parts of the faux-downtowns we are trying to "revive." We have the New Urbanists to thank for resurrecting the lost knowledge of placemaking, much the same way engineers of the Renaissance recaptured the knowledge of the Roman bridges and aqueducts, an understanding literally lost for centuries. The transition in our understanding has been no less dramatic.

So there's the primary supporting strategy: placemaking. We need to wring more value out of our places and that is only going to happen if we understand how to create value in the first place. This is a monumental task because for two generations we have built our places without bothering to consider how they would be sustained (or whether they would even be worth sustaining). None of our public officials has ever asked the question: Will this public project generate enough tax revenue to sustain its maintenance over multiple life cycles? Try asking that — you will be amazed.

So a rational response is to start insisting that our places show a positive financial return. That will require a completely different approach to building our cities along with a completely different understanding of growth. If you need help getting started on this, check out our Starter Strategies for a Strong Town as well as our Strong Towns Placemaking Principles

In addition to this, there are two irrational responses that we need to acknowledge. The first irrational response is to simply continue the present course until we are forced to change.

I'm astonished and more than a little depressed at the shallow nature of the public debate we are having over this crisis. Do we cut the budget or spend more? Do we raise taxes or reduce them? Does raising the debt ceiling signal fiscal responsibility or a lack of restraint? Do we build rail lines or highways? How do we restore housing values? How do we lower unemployment? And this is a sampling of the more intelligent lines of thought going on amidst the salacious and the ridiculous.

Nobody has acknowledged that a) the bubble economies of tech and housing were not financially real, b) we can not "recover" to a condition that was not financially real in the first place, and therefore c) we need to start focusing on a transition to something close to reality, which is a long ways from where we currently are.

This brings me to the second irrational response; Clinging to the belief that nothing needs to really change. 

Yesterday I had someone tell me, "Chuck, I think you are right. I can't argue with a thing you say. But I believe in the ability of the American people to adapt and innovate and overcome any challenge we face."

Let me interpret this statement because I hear it all the time. "Chuck, I think you are right, but I believe that someone, somewhere is going to come up with some trick or gadget that will solve this mess and keep me from having to change my lifestyle too much." I wonder if the Americans of 1870 or 1930 had this same belief (or the inhabitants of Easter Island).

I firmly believe that we have the ability to adapt, innovate and overcome. We will emerge from this a better people. But I don't see a way through this that allows us to keep the same lifestyle, the same living pattern and the same lack of productivity in our places. Like our innovative and resourceful ancestors before us, we'll find a way. But like those ancestors, it is going to involve a lot of painful change. Wishing for a miracle is fine, but depending on a miracle is irrational.

The Growth Ponzi Scheme

Charles Marohn is a Professional Engineer licensed in the State of Minnesota and a member of the American Institute of Certified Planners. He is president of Strong Towns, a non-partisan, non-profit organization that advocates for changes in development patterns and a complete understanding of the full costs of methods of growth. Strong Towns is seeking tax-deductable, $25 donations from 100 readers to create a video version of its Curbside Chat presentation.