January 15, 2000

Our panelists--Robert Kaplan, Saskia Sassen, and Manuel Castells--are all seeing not a crowded, thirsty world, but a crisis of urban governance. We are becoming an urban world. Cities require a lot of public services to function well. And our panelists seem to have no confidence in the ability of city governments in emerging market economies to deliver services--police, electricity, roads, schools.

Now to some degree this forecast of government failure is well-founded. Fifty years ago many of our predecessors were very confident of the future of social democracy in the third world. Governments would, people thought, fund rapid infrastructure programs, use tariffs and subsidies to push economic activity into industries of emerging comparative advantage, invest in their people, and use national-level tax and transfer programs to preserve an acceptable distribution of income.

But tariffs and subsidies turned out, more often than not, to be tools not for economic growth but for diverting income to the husband of the niece of the Vice Minister of Finance; infrastructure turned out often to become a full-employment program for political clients rather than a way of boosting national productivity, a lack of administrative reach allowed massive tax evasion. Large-scale not market but government failure.

Hence over the past two decades we have, collectively, reacted by betting the future of the world--made what we might as well call the neoliberal bet that privatization, deregulation, free trade, and international economic integration will reduce the damage done by government failure and increase the wealth generated by the market. And that perhaps in a generation emerging market economies can begin to successfully build the public services and soft--or hard--social democracy we are used to in the north.

It seems that our panelists may be saying that the peculiar needs of cities mean that we don't have time for this neoliberal bet to pay off...