Consolidation is the wrong response


Consolidation is the current least-painful way to avoid dealing with the underlying financial problems of our cities and towns. But like consolidation in the banking sector, municipal consolidation will only amplify the underlying fragilities inherent in our development pattern. A better solution would be to embrace the innovations - and failures - that would come from thousands of local experiments in adapting to our current financial situation.

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Our state and local governments are in a bit of a pickle. The gravy train from Washington - which was not all that great, really - has stopped running. The good old days - which weren't really all that good, in retrospect - are long gone. "Recovery" seems a distant dream. And on top of it all, the electorate (that's us) seems mad as hell and unwilling to wait for any type of long-term "transformation" to take place. What's a decent local politician to do?

The first thing to try is to borrow money, spend the rainy day fund and cook the books a little hoping this whole thing will blow over soon. Been there and done that.

The next thing is to borrow seriously more money, try some "stimulus" in the form of more spending and/or less taxes, and basically inject some adrenaline into the heart of the economy to try and bring it back to life. Charging....clear.....charging....clear....

Now we are at the point where we start to talk about changing the way we do things. In other words, we've come kicking and screaming into the "transformation" phase. But this is the early transformation phase, that part of the cycle of decline where we try and change without really having to actually change. And what better way to make non-substantive change than consolidation.

Consolidation is a response to the notion that our problem is essentially one of efficiency. The idea is that local governments are not efficient enough and therefore we can increase efficiency by combining them into fewer governments. Like the banking sector, fewer players means more efficiency.

And like banks, fewer players will amplify fragility.

Take school consolidation as an example. Consolidating schools is something that has been going on since the early 1900's, but it became one of the "solutions" to the budget problems of the late 1970's and early 1980's. And while there is little argument that consolidation of schools allows for greater efficiency, it comes at a cost.

Many of today's school districts are geographically huge, especially in rural areas. Increased size means more bureaucracy and more red tape, increasing the distance between teacher and administrator, between classroom and parent. Multi-million dollar bonds to construct large, centralized facilities made more sense before $4+ gas. The reality today is that, no matter how high fuel costs go, we'll be busing kids for miles each way, unable to walk away from these massive investments we've made (no pun intended). We have exploding childhood obesity and, again, no way to avoid forcing our children into hours of sedentary bus riding each day.

And most importantly, by consolidating schools, we traded innovation for efficiency. In a day when we desperately need innovation in how we educate our kids, our schools systems seem calcified, unable to change course in any substantive way, despite the fact that we are falling behind in many key areas.

The need for innovation is the key reason why we should not be seeking the consolidation of local governments.

Lack of efficiency is not our problem. Lack of innovation is. And not the type of innovation that manifests itself in saving a few dollars on paper clips. What we need is the type of innovation that provides different responses to the same stresses.

Our biggest problem as a nation right now is that our places are generally all vulnerable to the same things. That is because we have all used the same cookbook (standard zoning) and the same Mechanisms of Growth (government transfers, transportation spending and debt) to get to where we are now. Fundamentally, our cities are all pretty much the same. When gas prices rise, our cities struggle. When growth slows or stalls, our cities go into decline. When government aid goes away, our places start to implode. This lack of resilience will only be covered up by consolidation, the day of reckoning pushed off and made more difficult as a result.

Instead of consolidation, we should embrace the core strength of our system; an ability to innovate. This means loosening the controls we have placed on our cities and towns thus allowing local officials to try different solutions to the problems they face. The correct response is not to become more parochial, it is to become less.

So why can't we do this? The reason is clear: we can't deal with failure. We hear the report about the one city that does something really stupid and we rush to pass legislation to ensure it never happens anywhere again. We see a senseless policy outcome and we create all kinds of rules to deal with it. We see a city near failure and we feel obligated to bail them out. We currently have no mechanism to wring success out of failure.

But clearly, if we want innovation, we have to embrace failure. After all, what percentage of businesses fail? What percentage of species fail? Natural systems - like economic systems - evolve, adapt and create only in an environment where failure is allowed. If we want innovation, we have to allow failure.

Does this mean we have to let some cities fail? Yes, but that need not mean that a percentage of our people are condemned to live in ruin. What if we took failing cities and put them in a sort of receivership? What if we gave a bonus to the communities that were most successful if they agreed to "adopt" one of the failing communities and walk them through a restructuring? This is just one idea - there are certainly more.

Consolidation will not get at the core problems that our cities face. The near-term increases in efficiency will mask the lack of innovation and the homogeneous outcomes that make all our cities vulnerable to the same Black Swans. If we want to build resilience and find solutions to our problems, we need to embrace the chaos - the innovation along with the failure - of natural systems and create a framework where local governments can experiment with responses to the current crisis.

 

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