Downtown Detroit: local government has failed in the city
Can Britain go too far in empowering local governments? Strong mayors can be innovators who better understand the needs of their diverse constituencies, but the American experience demonstrates the downside of devolution as well as the upside.
In a sense, the American revolution was an early attempt to devolve power from London to local jurisdictions, and since 1783, the United States has typically had far more local authority than Britain. Our local jurisdictions typically play a key role providing, and often funding, some of the most critical services, including schools and police. Many of our cities have extremely strong mayors, such as Michael Bloomberg in New York City or, in the past, the two Richard Daleys (father and son) in Chicago.
The American experience illustrates many of the benefits of local control. Eighty years ago, a Supreme Court justice referred to the states as “laboratories of democracy,” and we still see governmental innovations appearing in enterprising cities and states. Milwaukee pioneered a school voucher programme in 1990, helping generate support for choice throughout the country. Boston and New York today have crowd sourcing apps that can improve interactions with the public sector. The state of California has been a pioneer on green issues.
Moreover, smaller jurisdictions often face limits, like balanced budget rules and the threat of companies leaving the area, which compel them to be more pragmatic than national government. While Democrats and Republicans do different things in Congress and the White House, Joseph Gyourko and Fernando Ferreira of the University of Pennsylvania find that leaders from the two parties enact essentially identical budgets in cities.
But there are downsides to local control. Often cities and towns act parochially. The rail service between Boston and New York is far slower than it should be because Connecticut refused to allow the rail lines to be made more direct. Localities often bar housing developments allowing outsiders to move in, especially if these might house the poor. And when localities are financed with federal dollars, they often spend wastefully because someone else is footing the bill. Detroit’s Monorail, which glides over essentially empty streets, is the legacy of funding local transit systems with national taxes.
Yet there are also grave problems with expecting localities to pay for all of their services. Like Britain, America is a nation of great economic inequality. Poorer places often need to spend more on schooling and policing, because of the social problems that so often accompany economic deprivation. Yet these poorer places lack the resources to fund high-quality services.
When localities have too much responsibility for basic services, a vicious spiral can emerge where economic decline leads to declines in the quality of government which leads to an exodus of companies and wealth. In the 1950s, the largest American industrial sector was garment production in New York. It was then decimated by increasing competition from low-wage areas both in the US and elsewhere. As New York’s economy faltered, the city found it increasingly difficult to fund its expensive services, which created a huge economic crisis in the 1970s.
New York rebounded, like London, largely because of financial services. Other erstwhile industrial cities have not recovered. Countries can play Robin Hood, and redistribute from rich to poor, because leaving one’s homeland is a serious undertaking. But leaving a city for the suburbs is a far easier trip, and high city taxes can easily induce wealthy citizens and profitable companies to flee. The net result can be an economic doughnut, where the outer urban ring is full of economic energy, but the inner city is economically empty. Employment decentralisation is particularly common in the Midwest, which has abundant transport infrastructure and where too many mayors have tried to get away with high taxes and low public services.
Detroit was also hit by globalisation, and crime rates rose and school quality declined. The failures of its public sector repels would-be entrepreneurs, and Detroit has lost 25 per cent of its population over the last decade. Detroit’s problems were compounded by what I’ve called the Curley Effect, named after Boston mayor James Michael Curley. His support came from poor Irish-Americans and he did all he could to encourage the wealthier Yankee residents, who opposed him, to leave. Detroit’s Mayor Coleman Young also picked fights with the city’s wealthier residents—his electoral success benefited from having a city that was overwhelmingly poor and African-American. This effect can make local leaders forces for urban decline.
Britain is extremely centralised, and the move towards more local control is probably helpful. But the American experience illustrates that devolution should be done slowly and intelligently, with safeguards to ensure that localities continue to have the resources and incentives to provide strong public services.
Can Britain go too far in empowering local governments? Strong mayors can be innovators who better understand the needs of their diverse constituencies, but the American experience demonstrates the downside of devolution as well as the upside.
In a sense, the American revolution was an early attempt to devolve power from London to local jurisdictions, and since 1783, the United States has typically had far more local authority than Britain. Our local jurisdictions typically play a key role providing, and often funding, some of the most critical services, including schools and police. Many of our cities have extremely strong mayors, such as Michael Bloomberg in New York City or, in the past, the two Richard Daleys (father and son) in Chicago.
The American experience illustrates many of the benefits of local control. Eighty years ago, a Supreme Court justice referred to the states as “laboratories of democracy,” and we still see governmental innovations appearing in enterprising cities and states. Milwaukee pioneered a school voucher programme in 1990, helping generate support for choice throughout the country. Boston and New York today have crowd sourcing apps that can improve interactions with the public sector. The state of California has been a pioneer on green issues.
Moreover, smaller jurisdictions often face limits, like balanced budget rules and the threat of companies leaving the area, which compel them to be more pragmatic than national government. While Democrats and Republicans do different things in Congress and the White House, Joseph Gyourko and Fernando Ferreira of the University of Pennsylvania find that leaders from the two parties enact essentially identical budgets in cities.
But there are downsides to local control. Often cities and towns act parochially. The rail service between Boston and New York is far slower than it should be because Connecticut refused to allow the rail lines to be made more direct. Localities often bar housing developments allowing outsiders to move in, especially if these might house the poor. And when localities are financed with federal dollars, they often spend wastefully because someone else is footing the bill. Detroit’s Monorail, which glides over essentially empty streets, is the legacy of funding local transit systems with national taxes.
Yet there are also grave problems with expecting localities to pay for all of their services. Like Britain, America is a nation of great economic inequality. Poorer places often need to spend more on schooling and policing, because of the social problems that so often accompany economic deprivation. Yet these poorer places lack the resources to fund high-quality services.
When localities have too much responsibility for basic services, a vicious spiral can emerge where economic decline leads to declines in the quality of government which leads to an exodus of companies and wealth. In the 1950s, the largest American industrial sector was garment production in New York. It was then decimated by increasing competition from low-wage areas both in the US and elsewhere. As New York’s economy faltered, the city found it increasingly difficult to fund its expensive services, which created a huge economic crisis in the 1970s.
New York rebounded, like London, largely because of financial services. Other erstwhile industrial cities have not recovered. Countries can play Robin Hood, and redistribute from rich to poor, because leaving one’s homeland is a serious undertaking. But leaving a city for the suburbs is a far easier trip, and high city taxes can easily induce wealthy citizens and profitable companies to flee. The net result can be an economic doughnut, where the outer urban ring is full of economic energy, but the inner city is economically empty. Employment decentralisation is particularly common in the Midwest, which has abundant transport infrastructure and where too many mayors have tried to get away with high taxes and low public services.
Detroit was also hit by globalisation, and crime rates rose and school quality declined. The failures of its public sector repels would-be entrepreneurs, and Detroit has lost 25 per cent of its population over the last decade. Detroit’s problems were compounded by what I’ve called the Curley Effect, named after Boston mayor James Michael Curley. His support came from poor Irish-Americans and he did all he could to encourage the wealthier Yankee residents, who opposed him, to leave. Detroit’s Mayor Coleman Young also picked fights with the city’s wealthier residents—his electoral success benefited from having a city that was overwhelmingly poor and African-American. This effect can make local leaders forces for urban decline.
Britain is extremely centralised, and the move towards more local control is probably helpful. But the American experience illustrates that devolution should be done slowly and intelligently, with safeguards to ensure that localities continue to have the resources and incentives to provide strong public services.
