Chicago: A Microcosm of Public Policy Failure. Treating the symptom.

If you're an auto mechanic, and you want to fix a problem, you need to diagnose the source of said problem. It doesn't make any sense to simply mask the symptom. But treating the symptom is an all too easy trap to fall in to.
Public policy is a great example of this, but this is so obvious at the federal level that it's not even worth discussing here. Nonetheless, this is where sound economics should ideally come in to help guide public policy. Except many modern economists, and especially those in politics, have unwisely fallen prey to fallacious enthusiasm for top down decisions. This by its very nature treats the symptom, because the true source of the problem is likely government 'problem solving' itself. But those in power have a god-like belief in their wisdom, and thus make the assumption that any problem with the economy must be private in nature. Wrong.

But less the general economics talk, the city of Chicago is a veritable microcosm of bad decisions and public policy disaster. The city is a living, breathing testament to the vitality of private activity and the life sapping drain of public power. .. if only bureaucrats would look past their overgrown noses.

I will soon order a book on a hundred years of land values in Chicago, ending in 1933 when it was published. It was exhaustively researched by a man called Homer Hoyt, who would soon be a successful real estate investor and urban economics academic. The maps and charts are hand drawn, and most of the data collected from the basement of the Cook County Recorder of Deeds, or the Assessor's Office.

It documents the land values, the real estate cycles, and the factors leading to what has to be one of the largest, swiftest urban population explosions in history. The growth of this city was remarkable. And what is amazing about this book is that it chronicles the reasons WHY the city grew in the particular ways it did, why certain areas came to certain uses.

Looking at his maps, at the Chicago of 1930, at the centers of high land value vs the city today, one is struck by the particular nature of the differences. In 1930 and before, intersections in Englewood and in Uptown had particularly high land values, being near major transportation networks and having grown in to satellite centers of business. The saddest thing is that in many, many places in the midwest it is the areas with the most important history and most magnificent architecture that are the most devastated.

In my view there isn't a lot of mystery as to the reasons for this devastation. If they're looking for answers, policy makers need only look in the mirror. It's hard to admit credit for the urban hell holes that are ghettos, for fields of empty grass that once held bustling business, brick apartment buildings, or mansions. Unintended consequences; one stubborn and universal economic law.

Major business centers were once connected via an extensive street car system. It seems to me that the major events leading to urban blight are:

1. The take over of the street car companies by the CTA, a public agency that cut service and dismantled the system under budget constraints. Less the public monopoly, the system would have responded to actual market demand more properly. Portions of the system would have gone down, but not in the same way.

2. The automobile.

3. The use of imminent domain for the federal highway system, which cut neighborhoods to pieces and made it possible to live outside the city while enjoying its benefits. It made owning a car more advantageous than mass transit because the latter still involves pay per use. The costs of owning a car are socialized, and unfairly levied upon those who were forced to sell property for 'public good.'

4. The use of imminent domain to clear out vast areas of 'blight,' or areas that white politicians did not like. The subsequent failure of public housing sent Chicago to some of the highest crime rates in the country. The city literally began rotting from within, with crime spreading to the areas around and essentially forced population shift out of and in to areas. With government indirectly manipulating land value so wantonly, creating huge problems, and conducting a huge racist social experiment at the expense of the 'benefactors' and everyone around them, a huge dis-incentive to city dwelling was created. The urban fabric created by private owners was ripped apart and rent in to ribbons, and the city barely resembled its former self. If the neighborhood is so sharply changed by political factors, families lose stock in the future of their area. By consolidating land ownership, those who care about the neighborhood are drawn down. History of ownership is powerful.

5. The exodus of manufacturing jobs. Truth be told, manufacturing in America is not endangered. But manufacturing jobs are constantly drawn down as more efficient methods of production are invented. This is exacerbated by the far higher taxes during the last century, during which the disinvestment in cities has occurred. Or rather regulations and price/wage controls, if you will. I particularly refer to programs affecting industrial jobs, the regulation of which grew at an unreasonable pace during the great depression. These programs, especially those strengthening labor, made hiring another employee less attractive. The corresponding and predictable loss of jobs hits especially hard for America's manufacturing and transportation capital.
Additionally, taxes on investment, which were up during the same time, hurt funds allowing these businesses to thrive and expand. Not hiring as many workers removes the main incentive for existing in a major population center -- that is, the availability of cheap and talented labor.

5. The war on drugs. With the exodus of manufacturing jobs, and the artificially increased marginal utility of mechanized solutions over human ones, jobs still existing in the city tended to stay in the hands of those who increasingly lived outside of the city. With little job creation, inner city areas held few jobs for residents.
The war on drugs incentivizes illegal business over legal. It makes it very profitable to break the law. Without prohibition (and wage/price controls), alternative jobs would have to, and then would, be created by those most in need of them, or by somebody who recognized the opportunity.
This illegal activity further destroys local commercial activity, communication with outside areas, and landlord building maintenance. Crime rises and the city festers in its own filth. Areas dependent on illegal drugs for their only income have few other options. But in a free market only legal establishments would exist because illegal options couldn't compete with a streamlined production process. Crime would be down and the city would begin to heal.

6. The compounding effect of job loss. The frenetic pace of construction was greatly slowed with much lower gross economic activity. After the fire construction and design talent was drawn from around the country to rebuild the city. With the loss of jobs in the great depression and ever after lower rates of recovery and job creation, the construction industry built cheaper buildings. Midcentury buildings stretch for miles upon miles, but they are small and cheap. Skilled labor was no longer in demand, and centerpiece corner buildings, urban and larger, were largely a thing of the past. Construction pace pushed out of stratospheric levels has a substantial effect on all other economic activity.
But more than that, as companies strove to make housing more and more affordable for the new middle class suburban resident, the average wealth of home owners continued to drop. And to provide for these people, land had to be cheap. Increases in purchasing power during midcentury were due not to increased average earnings, but rather to decreased price of middling quality goods better suited for a middle class. Cheap land and cheap materials are a big part of this.

7. Chicago's derelict property policies. The city under Washington and then Daley has a fast track demolition program which hastily demolishes buildings from which illegal activity comes or which are neglected by landlords or delinquent on taxes. The problems only spread to the next buildings, and this again treats a symptom not a root cause. Not to even mention the demolition company campaign contributions -- these neighborhoods are devastated beyond recovery. In many areas the prairie has returned. What was once a bustling neighborhood filled with stores, flats, and even mansions has only a few odd buildings per block anymore. And the policy continues... Areas cannot recover if their main resource -- their built environment -- doesn't even exist anymore.

8. Continuing unintended consequences.
The CTA loses lots of taxpayer money every year. The public transportation get progressively worse. And yet city leaders are unwilling to make people pay for living in the city. If you want to drive a car to work in downtown, you should logically pay for the infrastructure getting you there and housing your car -- as directly as possible. Right now there is little trade off between car and mass transit. The city has a new zoning code providing provisions for developers requiring parking. But they don't realize that it is this code itself that removes the incentive which would keep CTA viable, and therefore provide the advantage of city over suburbs -- that is, good and cheap transportation. Cars that do make it to the city would pay more at city parking facilities as well. Supply and demand. But the city is currently artificially forcing supply up above equilibrium, which is where developers would keep it were they given the option. Parking should be as expensive as it needs to be for it to be viable to build parking instead of units or commercial space.
The current policy destroys the urban character of prospective development and the viability and attractiveness of inner city neighborhoods. Further, it deprives the city of income as well as a profitable and viable public transportation system.

Drivers should have to pay for highways directly as well. Were imminent domain not used, then highways would be expensive to build through areas of high population where land values are high. But a private company could buy air rights, or rights underground, or progressively and strategically buy land on the market. Eventually one highway would be built, and fees would be high. Cost to users would be direct. Highways would cut a path through the least private land possible. In Chicago, this would probably be lake shore drive, as it is built on a lot of former rail yards.
Were this policy adopted, mass transit would again be in what is closer to fair competition as highways would directly cost money. Right now a driver has little incentive to switch to mass transit when he is already paying tax dollars for the highways.
Privatize highways! They are losing money. Privately maintained highways charging per use would use price as a means of finding traffic equilibrium. Highly maintained highways, and more reasonable levels of auto use, would result. Further, mass transit would become more viable and service would increase. The inner city would regain what was one of its crucial advantages.

One can see how public policy gaffes together create a logical and even likely set of diagnoses of various problems leading to the seen symptoms in Chicago. It is sad that they are purposely overlooked. It is even more sad that many of these gaffes would have been avoided had our federal government respected its charter.