L[i/o]ving cities

Archive for the ‘governance’ Category

SOCIAL OR ENVIRONMENTAL PRODUCTION

Hello Cityliners, it´s been a long time since the last City Lines post, but holidays is not the best time for writing, although it is a great time for thinking. Formerly, we have written about the planned obsolescence and we have made some criticising about the usual means of production and sale. Now we want to go beyond that post with some more reflections about the implications of the planned obsolescence.

One of the things that could be surprising about planned obsolescence is the first time that it was mentioned. It is a concept that was formulated in 1932, when Bernard London wrote, “Ending the Depression through Planned Obsolescence”, in which he blamed the Great Depression on consumers who use “their old cars, their old radios and their old clothing much longer than statisticians had expected”.

So, we can assume that planned obsolescence was some kind of countercyclical measure expressed during the great depression to promote more employment. The lack of it was the real consequence of the 1929 crash, and some of these economic measures and a world war made possible to get a lot of people employed during the next years.

Nowadays, we are suffering some kind of similar situation as the one in the early 30s. But, in contrast, we have the problem that we are using a lot more amounts of natural resources than before, so it seems to be difficult to go beyond in this “planned obsolescence” tactic. Therefore, it also seems that we have to reduce our natural resources spending for a more cohesive world.

All this argumentation suggests that, on the one hand, the “planned obsolescence” tactic can promote more employment but, environmentally, the consequences are terrible. On the other hand, although resigning the “planned obsolescence” tactic will improve our environment, it will have really bad consequences upon employment and social cohesion.

Summarizing, we can see how we have not reached the equation that links environment and employment in a sustainable way. I expect that we will be able to find more technical solutions that approximate both variables, because otherwise we will have to choose between a social and an environmental production. I really expect that technical solutions…

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#SPANISHREVOLUTION

In City Lines I have supported different policies and strategies to have better governance and planning for our cities. So, I am happy to celebrate and to participate with this post in the #spanishrevolution movement (also called #acampadasol, #globalcamp, #nonosvamos, etc.), because it goes straight into the core of the democratic system. For a non-Spanish reader, some of the main demands are:

  • Non-appearance of politics with opened investigations or trials in the electoral lists.
  • Clear difference between the politic and the judicial powers.
  • Open lists in the elections.
  • More transparency in the income and possessions of the politics.

I really think that these and other proposals are very important to change the incentives that rule the system and must be assumed by the political parties. But they are not assuming that, so it is a great time to demonstrate our thoughts in the street, as Hessel show in his “Indignez vous!” book.

These are the facts that are now happening, but I want to go further so I will take my crystal ball for the next months. The first thing to say is that the Spanish politics are forced to meet the deficit commitment of the European Union, and probably, it will require more welfare cuts in a lot of issues that concern the Autonomic Governments. So, it is possible that the new Regional Governments will proceed to cut some services related with Health (that consumes 1/3 of their budget) or Education. As an example of this, we can take a look at the new Catalonian Government acts, who advanced their election to the last autumn.

The second important thing is that the Regional Governments could not have into account their deficit and debt in the proper way, as the Financial Times suggests in his article “Hidden debt raises Spain bond fear”. So this is another fact that suggests more budget restrictions in the next months.

Summarizing, on the one hand #spanishrevolution are seeking for a better democracy framework and, on the other hand, we have the different Spanish governments trying to fix their deficit. As a consequence, equity is going to crash with all those efficiency speeches that do not mind if the field does not represent the players. So, my crystal ball suggest a restless new autumn.

PUBLIC VS PRIVATE SECTOR, IS IT AN EFFICIENCY QUESTION?

This crisis time has brought to Spain and to other countries the need to talk about public and private sector. The great recession has turned the public budget with more outcomes and less incomes, so deficit and debt has arrived to an allegedly sane economy. This background has been quickly taken for public sector critics to praise the efficiency of private sector managing services.

So, here we have two main subjects to consider that I think that can be linked: public services and efficiency. Firstly, in one hand we have to be conscious about the definition of what services have to be public. This should be a political decision, but, at least in Europe and I agree with this, there is a wide accord about education, health services and assistance services, or what is the same the welfare state.

But in the other hand, we have to be also conscious that democracies were born in the XVIII century not to offer services, they born just to promote equality, freedom, security, etc. So we have two main guidelines for public actuation, offer public services and offer equality conditions.

These two guidelines need different organization to work. While equality conditions require non removable civil servants as judges, public prosecutors, policemen and a fix structure that assure the impartiality needed, public services requires movable civil servants and flexible structures that can set services to the instant demand.

So, public services have been planned more with effectiveness criteria as with efficiency criteria, and that is a problem when society has evolve into an economic entity that wants to digest all those public services that can not be provided efficiently because of the public administration organization.

Summarizing, we have to be really cautious when we talk about efficiency in the public sector, because the key is not efficiency, the key is organization.

THE NEW MEANING OF LOCAL

During the thirty four years of my existence I have been living in six cities in two different countries. In all those cities I met people with whom, luckily, I am still in touch and who allowed me to build my own personality with their points of view and actions. All these natural comes and goes in a young adult life could be considered as a utopia for my parents and much more for my grandparents.

The possibility of this kind of life, so individual and so far away from that static groups of people who influenced us during our whole life, is not casual. Fortunately, nowadays we have facebook, twitter, linkedin, skype, mobile phones, e-mail, low-cost transport and all the tools that are to come and that, for the first time in history, allow us to connect our relations in real time and not to lose them in our memory.

This entire new real world that is emerging in the last years, as François Ascher explains in his book “Les Nouveaux Compromis urbains”, is pushing us to rethink about the nature of what local means. Nowadays, we have several transport technologies that have blurred distances between goods and people and, we also have, the information technologies that allow us to share knowledge around the world. Therefore, in my point of view, the meaning of local, which historically was focused in territorial aspects, has to go forward to be focused in the relational aspects.

It is a fact that the territorial aspect was, is and is going to be a key factor on the generation of links and relations between people, but, nowadays, that is not the only place for relations. An example of this is that people swap things and have personal or professional relations with other people who have never seen. Therefore, this new way for relations has to have its consequences in territorial organizations and in the possibility of letting people participate in local policies.

At this point come up new possibilities that have to be studied, developed and could be incorporated in our democracies to improve their own acceptance. As examples I can add, in the first place, the possibility of a territorial weighting of votes depending on the implication of people with different territories (eg. for people who live in two cities simultaneously) or, in the second place, the possibility of participation on particular issues for people who have a relation with the place of the issue although it is not a residence place.

On the other hand, it seems that tools as the local census or as the vote in fixed districts according with the residence place are becoming a bit restricted in this global word of relations that we are creating. As one friend of mine said: “globalization beyond economy: citizenship and public spirit are key concepts”.

If somebody asks me, I will say that home is the place where people that value me are, but, just now, I do not know where they are.

BERLANGA, TUPILÁN´S BUTTER HELICOPTER AND THE IRISH CRISIS

If a few days ago I went on economic and governance issues, associated to the rescue of some Spanish motorway concessions, now I think back on the same kind of issues. It is hard not to do that, because we are real time viewers of the Irish bailout. To this new crisis, it comes to my mind two quite synthetic images of the situation.

On one hand, there is the image of the recently deceased Spanish filmmaker Luis García Berlanga and his film called “Plácido”. I remember one movie scene in which there is an auction, for a beggar as a prize, with a banner who says “A poor at your table”. In this case you know who the beggar is, and how their neighbours, richer than him, have invited him to dinner to wash their consciences and their souls in an attempt to be good Christians and so, of course, to earn Heaven, which is what really matters. This first idea has the stakeholders of the crisis.

On the second image that I imagine, appear the methods in use. In the 80´s, there was a very popular ad on Spanish TV where a helicopter, loaded with tons of butter, came down to public schools and swimming pools to hand out this delicious cream (for free). The butter brand was called Tulipán. In this case, the European helicopter will provide resources to the Irish state.

All these issues are starting to seem as surreal as a Berlanga movie, as we see how the states are willing to help everyone, banks, countries, car manufacturers, infrastructure concessionaries, etc.. Everyone except the individual citizens. Let’s see some data, the amount of Ireland’s rescue is not clear and it seems to be between 50,000 and 100,000 million euros. We can suppose that it’s going to be 80,000 million euros. This money is going to be given to pay the debt left by the Irish housing crisis, which has caused the devaluation of the housing assets.

On the other hand, we have 4,500,000 Irish, implying that the bailout of banks is equivalent to distribute 17,700 € to each of the Irish citizens, this figure is surprising though there are other sources that say that it could be 60,000 € for each Irish person. So, with these numbers, a doubt rises, supposing that it’s necessary to pass the money helicopter, why not distribute it directly to the mortgages owners, rather than on banks in terms of book value of mortgages? Perhaps it is nonsense, but you could give 17,700 € to each Irish person, and you can push them to amortize their mortgages in price, not in time.

This way of doing things would get some positive impacts, like money entering into the banks improving their financial results. There would also be a minor underestimation of mortgage assets because it would help people on not having to sell their homes, which would result in a lower supply of housing, which in turn would keep housing prices and thus there would be a smaller impact on banks accounting.

In addition, this would introduce a greater volume of money supply in the economy. Suppose a mortgage of 150,000 € and 25 years for paying it. Eliminating 17,700 € of principal would make available 75 € to every citizen each month, what could have a great impact to consumption and to taxes. As a requirement, to avoid speculation, I think that housing assistance should lead to a commitment for not selling it in the long run. That period could be the mortgage term; in addition it’s necessary to implement the much announced reform in bank systems.

Obviously, this raises an equity issue, because those who have not purchased a home are not enjoying such support. I think that governments could compensate these people through an equivalent sum of money in education services. This would also help to lead productive factors into new sectors with quality jobs.

Summing up, this whole post is to polemicize a bit, since I think that growth model based on debt seems to be outdated and that the capitalism of the benefits and the communism of the losses are becoming very unpopular.

THE RESCUE OF SPANISH MOTORWAY CONCESSIONS

The economic crisis has blown up several mantras that had been repeated in recent times in Spain. There is no doubt about the first mantra, the one that says that the price of housing never lowers, just a short drive away is the one that ensures that the traffic estimates always fall short.

However, assuming these two topics have generated two situations hardly affordable by those who invested in assets related to housing and infrastructure. Thus, without addressing the causes that led to such investments, the need for concessions or the traffic calculation methods, we observe quite different consequences in the decision being taken to both problems.

Let us start with housing, we have two main stakeholders, mortgage holders and borrowers, which are citizens and financial institutions respectively. In this case, as it is well known, the Spanish mortgages have had to pay its debt under the possibility of losing the ownership of its assets in the event of default, also assuming, in most cases, an underestimation on the market prices of their assets.

Let us continue with infrastructure concessions, we already have two key stakeholders, concessionaires / construction companies and the state. In this case there is underestimation of investments due to lower traffic levels in the concessions and, therefore, the state is going to rescue several concessions (http://urlcut.com/1xvha). In this case, the state seems to be paying for the initial mispricing made. This payment, in one way or another, seems that must be settled by generating more national debt, and we already know who finally pays for it. It should be noted that in this case, there seems to be a surprising parliamentary consensus about the need for rescuing the concessions.

As we can see, we are confronted with two quite different ways to proceed with two similar problems of undervaluation of assets and lack of income to debt payments. However, in my opinion, the headline comes now. Even if we understand the concessions rescue, what will happen with the ownership of the infrastructure assets? In the case of housing, as seems reasonable, the property passes to the ones who finally take over the debt. This is not the case for infrastructures. The argument put forward is that when you are talking about concessions, the infrastructure is public in itself, since it will finally reverse as a public property, therefore, little can be done on the subject property.

To that argument, I venture to point out that the concessionaires have a market value which reflects the value of their investments in infrastructures. Thus, if the concessions are doing well, their stocks go up and if concessions are doing badly, their stocks go down. Therefore, I understand that it is fully justified to enter in the capital of the concessionaries, which are the organizations that are supporting the concession, because, as I explained above, you cannot enter in the property of the infrastructure.

This can be defended through three points that reinforce the central idea. Firstly, the concessionaries paid dividends to shareholders regardless of whether the money comes from profits or form the rescue of the concession (Link to information on the provision of dividends of companies in the Spanish IBEX35 in 2010 http://urlcut.com/1xvkp). Secondly, the concessionaires have the “healthy habit” to renegotiate each concessions independently, i.e., if one goes wrong, they renegotiated that concession regardless of the overall balance of their entire investment that may well be positive (suppose we have three factories, one is wrong and the other two are well. Well, we could try to collect benefits from the factories that do well and raise money from the government for the factory that goes wrong).Thirdly, no one remembers Gordon Brown nowadays, but neither the acclaimed Obama, Merkel or Sarkozy dared to do what this leader did during the banking crisis. He provided capital to financial institutions, but in return the British government became part of the shareholders of the banks that were intervened, reaching, for example, up to 70% of the shares of Royal Bank of Scotland (http://urlcut.com/1xvhd).

Summarizing what we said, it seems that we are paying even we bet to both red and black.

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