Equity and the deployment of public assets
A previous post looked at how global patterns indicate that higher density is more often than not associated with greater equity.
Greater equity can be achieved through efforts of either the private sector or the public sector. This post considers what is being done via the public sector and considers factors determining its efficacy.
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The government of a country or city is the public sector equivalent to the private sector’s board of directors of a company.
Following this analogy, the act of governing should be thought of as an act of managing and deploying the public’s assets to achieve a return.
Public assets are tangible or intangible: the natural realm, land, infrastructure, powers, skills, mandates, civic identity and organisational structures.
The definition of return in any measurement framework depends as always on the philosophical underpinnings of that framework. As governments serve their voters and address their concerns, the public’s assets should be deployed to address these concerns. Social inequality and unemployment (a proxy for economic inequity) come in joint second place behind corruption as the major issues worrying global voters. Following this line of reasoning, a government’s deployment of public assets should therefore be assessed by its performance in:
- eliminating corruption and
- improving and maintaining equity.
Regarding the second metric, we previously saw that that improvements in equity can be represented by changes in indicators such as population density (spatial equity), GINI (economic equity), life expectancy at birth (social equity) and CO2 emissions (environmental equity).
However, rather than setting out the analysis of global trends in these indicators, I’ll consider example initiatives that represent both good (equity enhancing) and bad (equity destroying) public asset management.
Public asset deployment #1: public parks
Public parks can improve social and environmental equity.
At Mexico City’s “ecological oasis” of Bosque de Chapultepec, the government recognises this park’s functioning as green lungs and has recently embarked on a revitalisation and investment programme.
The government of polluted and densely populated Istanbul planned the disposal of Gezi Park in Taksim Square in 2013. The park’s planned demolition and replacement with a shopping mall — which coincided in a change in the law giving shopping malls an exemption from environmental impact assessments — drew robust protests to this corrupt proposal which would remove a social and environmental resource in the inner city, and was eventually shelved.
Public asset deployment #2: utilities, and the power to extend licenses
Guaranteed provision of basic services such as sanitation, power, waste collection, green space provision and communication can help rebalance social and/or economic inequity.
To this end, governments can provide a robust oversight capacity as is the case in Denmark where the Danish Energy Agency sets all rates and provides coordinated supervision over the provision of energy, water, broadband and waste collection and processing.
A lack of government control and oversight opens the door to private utility providers to raise prices indiscriminately, penalise those too remote to connect to or who who cannot afford to pay, and generally provide a substandard service — as was the case in a trial arrangement in South Africa involving multinational corporates Biwater, Suez and Saur, and Tanzania where Biwater was eventually stripped of its contract.
Furthermore, poor stewardship of utilities in Latin American countries has led to detrimental impact on social equity, as evidenced by deteriorating public health for the poor. In South Africa (again!), corruption drives the abysmal performance of the state power company, Eskom, with above-inflation increases in electricity prices exacerbating urban poverty and economic inequity.
Public authorities can use their power to compel providers to deliver utilities more sustainably, thus improving environmental equity. The Danish Energy Agency has overseen some of the most environmentally and socially equitable outcomes in that by 2020, Denmark’s electricity is anticipated to be 50% wind-powered and Denmark will have achieved a 40% reduction in greenhouse gas emissions over 1990 levels. Furthermore, coordinated joint management of utilities by the public authority can yield synergy benefits from initiatives such as power generation from waste or water resources (hydroelectric).
In Denmark, the strength and confidence of government to implement its strategy of maintaining environmental and social equity enables it to control the manner in which utility provision is outsourced to the markets. It also shows that central government can be the best place from which to regulate utilities and promote the improvement of equity in the country.
In South Africa, it’s pretty clear that although the intentions of government are to improve equity, the poor implementation of this strategy inevitably works counter to achieving equity.
Public asset deployment #3: The power to raise taxes
The municipality of Medellin has used its tax base to finance business support centres, which, combined with the Banco de las Oportunidades’s microfinance to entrepreneurs, has been successful in improving economic equity.
In contrast, the South African government’s decentralisation agenda resulted in the withdrawal of the tax base used to assist in improving social and economic equity through economic development stimuli. It forced cities like Cape Town to enter into Private Public Partnerships which it was ill-equipped to steward. Under these PPPs, tax breaks were used to drive investment in already privileged wealthy districts in the city, therefore not achieving socioeconomic redistribution.
Public asset deployment #4: The power to assign decision-making
Central government’s ability to use its power to legislate the devolution of decision-making to regions and cities has often resulted in initiatives that improve equity.
The city of Malmo used its devolved power to change the focus of its economy from shipbuilding to sustainability innovation, thereby improving economic wellbeing of its population and contributing to environmental equity. London has used its power to develop initiatives such as the central Congestion Charging Zone and Ultra Low Emission Zone to improve environmental and spatial equity (discouraging congestion and pollution in the centre of the city).
Where power has remained centralised, efforts to reduce inequity have been frustrated, such as the city of Leeds’s lack of mandate and funding to implement its sustainability strategy.
A further example of devolved power at work towards greater environmental equity is the C40 Cities initiative in which the largest global cities commit to action on climate change that in many instances exceeds any initiative by those cities’ national governments.
As a corollary to this, whereas national governments have the financial clout to fund emergency responses to the symptoms of climate change such as catastrophic weather events, they are less able than cities to tackle the causes of climate change. City governments feel a proportionally greater pressure from their voters than national governments as city voters feel the impact of the causes of climate change — through pollution and overheating — more severely than voters in the countryside.
Public asset deployment #5: Public transport real estate
Public authorities can deploy their infrastructure assets to improve economic and social equity.
Hong Kong’s transport authority develops the land above its stations to generate revenue to for example keep fares down and generate further network expansion, enhancing access across the city for all its inhabitants.
Transport for London (TfL) is also developing its land to generate funds from land disposal to be reinvested in its tube and bus network. Disappointingly, TfL’s involvement in such schemes is limited to retaining a minority ownership in such deals after selling the majority share off to investors. TfL is large enough to have an in-house property development and management operation which would enable it to hold on to lucrative long term gains from developing the staggering 2300 hectares of land it deploys on behalf of the public, and use the future revenues to fund transport operations and reduce ticket prices.
Public asset deployment #6: Planning powers
With the power that city planning departments have to set and enforce regional and local plans comes the potent ability to change equity.
In the 1960s, Jaime Lerner, the dictatorial but public-minded Mayor of Curitiba in Brazil, enacted a sustainable compact city planning policy emphasising public transport and mixed use development. Curitiba contributes to global environmental equity with a significantly lower CO2 per capita output — it was awarded the 2010 Global Sustainable City Award. Its Human Development Index is well above the Brazilian average, which demonstrates the city planning regime’s contribution to improving the city’s social and economic equity.
As far as the impact of dictators goes, Curitiba is an outlier. In New York City in the 1930s – 1960s one powerful and corrupt autocrat, Robert Moses, was able to abuse planning powers and mismanage public assets to further his own megalomaniacal interests, in the process enriching many private individuals and destroying vast amounts of equity. I highly recommend The Power Broker, Robert Caro’s biography of Robert Moses, which chronicles how city planning powers should never be deployed.
Evaluation: equity impact vs strategy and tactics
To evaluate these examples as a whole, I use a simple predictive model of impact on equity of different government strategies and tactics that I put together:
| Aspect of ‘deployment of public assets’ (a.k.a.‘government’) | ACHIEVING EQUITY More likely | ACHIEVING EQUITY Neither more nor less likely | ACHIEVING EQUITY Less likely |
|---|---|---|---|
| STRATEGIC | |||
| S1 Political stance | Left wing | Centrist | Right wing |
| S2 Law making | Aimed at strengthening the public interest | Favour neither public nor private interests | Aimed at strengthening the private interest |
| S3 Assigning power to regions/cities | Devolved to local government | Part-devolved | Centralised |
| TACTICAL | |||
| T1 Outsourcing (or disposal) of public assets | Retain in-house | Outsourced, monopoly | Outsourced, free market |
| T2 Level of resourcing (funding, skills) | Adequately resourced | Some resource restrictions | Under-resourced |
| T3 Use of mandate | Ethical and accountable | Mixed | Corrupt and unaccountable |
| T4 Law enforcement | Strong and unbiased | Average | Weak and biased |
| T5 Process of outsourcing to private entities | Transparently and competently managed and audited | Some transparency and competence | Opaquely and/or incompetently managed, unaudited |
Predictive model: Likely impact on achieving equity for different aspects of ‘deployment of the public’s assets’ — a.k.a. ‘government’
To test how the examples followed my predictive model, I tabulated each example of public asset deployment in the table below. On the left of the dashed line are the equity enhancing examples (green flags), on the right are those that destroy equity (red flags). Each example is evaluated on each of the aspects of government identified earlier.
The first obvious thing to spot is my apparent bias in selecting examples: for most of the examples, the predictive model’s strategic aspects (lines S1, S2 and S3) expect an ‘increase in equity’ outcome (green flags in S1 to S3).
Secondly, the examples show that it is not possible to rely solely on the government’s strategic aspects — political stance (S1), law making (S2) and assigning power to regions and cities (S3) — to give a reliable prediction of the outcome of its initiatives: even though for most examples the flags are green for the strategic aspects of government, the outcomes for only half the initiatives result in an increase in equity.
The reason it does not for the other half of the examples appears to be that most tactical aspects of implementation of a government strategies — level of resourcing (T2), use of mandate (T3), law enforcement (T4) process of outsourcing to private entities (T5) — are stronger determinants of the equity outcome than the strategic aspects. Initiatives by poorly resourced, unaccountable, weak, biased and opaque governments are more likely to destroy equity (red flags in T2 to T5) even if the strategic aspects predict an equitable outcome (green flags in S1 to S3).
This accords with voters ranking corruption as the issue they worry most about — in the examples corruption, lack of proper funding and skills, and related dysfunction are the main drivers impacting the equity outcome of any government initiative to deploy public assets. Without accountability, transparency and proper resourcing in the deployment of public assets, strategies for improving equity are bound to fail.
Thirdly, some outlier examples are worth noting.
Denmark proves that with a robust set of equity-boosting tactics backing up equity-boosting strategic principles, it can easily absorb a likely equity destroying aspect of granting licenses for utility provision to the free market and turn it into an overall equity boosting outcome.
Hong Kong’s staunchly capitalist stance has resulted in the authority running public transport property like profitable real estate, to benefit its shareholders, the public.
TfL could take a leaf out of Hong Kong’s book and better exploit the value of its real estate rather than passing it off to developers focused on short term returns. With a long term “develop and hold” strategy it is more likely to secure high long term returns on its assets whilst growing social, environmental and economic equity, such as is being pursued by property funds such as the Crown Estate, which at the time of writing aims to achieve a 50% carbon reduction by 2022.
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To sum up: the key to achieving a strategy of greater equity deploying public assets — a.k.a. ‘government’ —appears to be in ensuring right the tactical implementation as set out in the above predictive model.