Dag Detter: Cash-strapped cities – sweat your own assets
Dag Detter offers us a unique idea which will revolutionise the way we think of public finance, be it for a national government or a city.
The idea of the public wealth of nations identifies a problem that few people had realised exists. It shatters the tired categories of left and right. And it suggests a relatively pain-free way of boosting economic growth.
In both rich and poor countries, most cities are strapped for cash. Many investments in infrastructure, public facilities and city development have to wait, even when they are well worth their costs.
A mounting backlog of public investment can lead to poor transport, congestion, a degraded water supply and, apart from those practicalities, an unattractive and deteriorating city environment. In fact, some cities end up in a vicious cycle where dilapidation induces employers to move elsewhere.
With limits to how much money can be raised through local taxes, many cities invite the private sector to help finance vital infrastructure investments. While this may give access to immediate financing, it does not always lower total costs in the long run. Asking the private sector to fund an investment always comes with a price tag. The private sector only helps out when it can either make a profit and/or is supported by a government guarantee to raise the necessary finance at the same cheap rate available to the public sector.