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The Developer Crony Mantra – If you’re not growing, you’re dying

If you’re not growing, you’re dying. This is an exact statement made to me recently by a business owner in a small town. It is conventional wisdom, especially amongst the small town business community. And it is a belief based on observation. Indeed, when you look generally across the landscape, towns that are not growing are dying.

This points out the fragility of our current model of growth and development: Cities that don’t grow, die.

Today I would like you to ponder two things about that statement. First, why is that a reality for so many places? And second, what does this say about the future of America’s cities and towns?

Growth as we know it today is driven primarily by four mechanisms, which we have discussed in detail previously but which I will mention briefly again.

“The gains here are not real in the sense that they foretell some new age of prosperity. The growing simply allows you to not be dying for a little bit longer.”

They are:

Transfer payments between governments.
Demand-driven transportation spending.
Debt, both public and private.
The Growth Ponzi Scheme.

What all these mechanisms share is that they create short-term financial benefits for a community, but almost always generate even greater long-term financial burdens. The long-term imbalance is due to the auto-oriented, spread out nature of our development pattern. When the true cost of development is masked, there is little incentive to think about the unsustainable long-term maintenance expenses inherent in this way of building.

But the short-term benefits are real and, in our dominant pattern of development, they’re necessary to the very existence of what we build. You see, the notion that if you are not growing, you are dying is persuasive precisely because those short-term financial gains do happen—and they need to happen in order to make up for the failings of the prior bad investments the new (bad) development is meant to replace.

Our pattern of development is one big Ponzi scheme. We must grow or die the same way Bernie Madoff needed to grow his portfolio of new investors to pay off older investors. Or the same way interest-only mortgage holders needed housing prices to continue to climb so they could cover their debts. The gains here are not real in the sense that they foretell some new age of prosperity. The growing simply allows you to not be dying for a little bit longer.

So long as a community can continue to get grants, direct aid, low interest loans and other subsidies from the state and/or federal governments, in ever increasing amounts, all simply to build and build, it can avoid “dying.” So long as they can continue to borrow money to finance infrastructure, or at least induce outside developers to build new infrastructure, it can enjoy a kind of faux-prosperity, and it can avoid “dying.” That is the reality for most American cities and towns.

But what does this mean for our future? Clearly, it means some very difficult times ahead. Like Madoff and the interest-only mortgage holder, our cities rely on growth. And not just growth, but ever compounding rates of growth. The more you have to maintain at a loss, the more new growth you need to have to cover that spread. Even without a financial slowdown and the looming end of the four mechanisms of growth, this way of doing business will run its course. We cannot continue to invest at a loss forever.

There is only one real answer to this problem: change the way we grow and develop. We cannot continue to sink money into this Ponzi scheme. We need a Strong Towns approach that generates a higher return on our public investments. Our towns and neighborhoods need to become more financially viable.

We can’t wait around for the state and federal governments to do this. Our leaders at the local government level need to face the reality of the Ponzi scheme they operate in, stop digging their hole deeper and then start putting strategies in place to transform their towns. The ones that do this will be the success stories of the next generation. Those that don’t will not only not be growing, as was reiterated to me last week. They will be dying.

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