The North American development model is an unprecedented experience. For thousands of years, humans around the world have constructed their habitats in similar ways, at similar scales, in patterns that are still familiar.
Following the Great Depression and World War II, settlement patterns on the North American continent were completely overhauled. From top to bottom, we have transformed everything in the way we live, rejecting centuries of accumulated wisdom in a metaphorical blink of an eye.
It’s hard for us to think of the modern American city as a massive experience because, for most of us, this set of border roads, big box stores, malls, cul-de-sac, franchise restaurants and single family homes are all we’ve known.
Still, take an ancient Roman and drop it off in a 1920 American town and they’d likely be in awe of the awe-inspiring, yet familiar surroundings. Drop them off in a typical 2020 American city and they’d be completely disoriented.
Many would argue that the automobile is the reason for the transformation, but other cultures around the world make wide use of automobiles without such a dramatic change of arrangement. Instead, the real inspiration for the American experimental approach was financial. We responded to the economic difficulties of the 1930s and 1940s by radically modifying our development model in order to generate growth, create jobs and quickly build a middle class.
The automobile was an instrument of transformation, but the federal government’s support for this change was even greater. Programs to promote large-scale home ownership, investments in infrastructure, and rationalization of fiscal and financial structures to achieve macroeconomic efficiency made this experience a coordinated project at the national level, to which each community was involved. participated.
And it worked. When we measure economic statistics at the national level, the decades immediately following World War II were a golden age. Wages have risen while unemployment has fallen. Economic growth has been robust. The middle class has started to grow. While many were left behind or not included in this national project, many Americans still look nostalgically at the prosperity of this period today.
Over the following decades, we have come to understand that the underlying financing mechanisms of the suburban era operate like a classic pyramid scheme, with ever-increasing growth rates needed to support the accumulation of long-term liabilities. term.
Since the end of WWII, our towns and villages have experienced local economic growth using three main mechanisms:
- Government-to-government transfer payments, where the federal or state government invests directly in growth at the local level, such as funding an expansion of the water or sewer system.
- Transportation expenditure, where the transportation infrastructure is used to improve access to a site which can then be developed.
- Public and private debt, where cities, developers, businesses and individuals fall into debt as part of the development process, whether during construction or through the assumption of a mortgage.
In each of them, the local government unit immediately benefits from all permit fees, utility costs and increased tax collection. It is real money that provides income for the current budget. Cities are also taking long-term responsibility for the upkeep and maintenance of all new infrastructure, a promise that will not be realized for decades. This exchange, a short-term cash benefit for a long-term financial obligation, is one element of a Ponzi scheme.
The other is the realization that the income collected over time is not enough to cover the costs of meeting these long-term obligations. Facilities spread over a large area are very expensive to maintain. Over a lifecycle, a city often receives only a penny or two of revenue for every dollar of responsibility, a ridiculously low level of financial productivity.
Decades after this experiment began, American cities have a ticking time bomb of unfunded liability for infrastructure maintenance. The American Society of Civil Engineers (ASCE) estimates deferred maintenance at several trillions of dollars, but that only applies to major infrastructure, not the local streets, sidewalks, boardwalks, and pipes that directly serve our homes. Every mature city has a deferred maintenance backlog, a growing list of promises with no discernible path to keep them.
We have responded to this challenge in two ways that compound the tragedy. First, as with any pyramid-shaped financial structure, cities have tried to overcome insolvency by growing faster. This alleviates immediate budgetary difficulties, but only increases future difficulties. The successive bubbles over the past four decades in residential and commercial real estate bear witness to the collateral damage of trying to get out of this problem using the same experimental model of construction.
The other response has been to rely more and more on debt to close budget gaps and stimulate growth. From the 1970s, corresponding to the transition to the second generation of this experience, Americans financed new growth by borrowing huge sums, both in the public and private sectors. By the time we moved into the third generation and got caught up in the foreclosure crisis, our funding mechanisms had, by necessity, become exotic, even predatory.
We misdiagnosed the problem. Our problem was not, and is not, a lack of economic growth. Our central problem is 70 years of unproductive growth, a model of building and assembling America that has buried our local communities in financial debt. We are now forced to grow faster and faster lest everything collapse. It is economic growth as desperation, not as a credible strategy for success.
The American model of development creates the illusion of wealth. Today we are seeing that illusion destroyed, and with it the prosperity we take for granted. The signs of decline are now too obvious and too prevalent to be ignored or dismissed.
Something is broken and we all know it. The pervasive fragility that this experience created in American society has resulted in a combustible level of instability. Cities are on the front line in the face of this ordeal. They desperately need a new model of prosperity, one that meets the urgent needs of people within their communities.
The Strong Towns approach is that model of prosperity. I originally wrote The Ponzi Growth Program more than ten years ago, at the very beginning of the strong city movement. Since then, we have been able to share this message with millions of people around the world. This is, by far, our most viewed and cited article.
It is empowering to clearly recognize the underlying causes of our distress, to know that none of us are alone in this struggle. You are not wrong in believing that scapegoating attempts or senseless calls for more spending on growth are just distractions from the work that needs to be done.
With the Strong Towns approach, every city in America has the resources and the capacity to become stronger and more prosperous. All. Alone. A. For years we have seen people respond to our message. In this time of unprecedented change, we are grateful that we can build this movement with you and help our communities achieve the stable and prosperous future we all deserve.