Blog #27 – The Alternatives for Sandy: Banker’s Socialism,, the Private Market, Equity, Planning


Blog #27 – The Alternatives for Sandy: Banker’s Socialism,, the Private Market, Equity — and Planning

Three very different principles might be used to guide responses to the devastation wrought by a disaster such as Sandy – and might be applicable to responses to any disaster.

First, what might be called Bankers’ Socialism Approach: the assumption by government of all of the costs not only of the repair of the damage caused by the disaster, but of all costs of preventing similar damage from similar disasters in the future. One might call this the deprivatization of disaster response, placing the entire burden of the response on the public and exonarating the private sector of all costs.

Second, at the opposite extreme, what might be called the Private Market Approach: leaving it to each person or entity affected by the disaster to do whatsoever they wished, with their own resources, to repair the damages caused and prevent recurrences, subject to very limited government regulation. Because any significant private action is likely to rely on some level of public infrastructure provision, this approach will likely involve some element of Bankers’ Socialism also.

Third, what might be called the Equity Approach: using public assistance to ameliorate the damage caused by the disaster, taking into account the needs and resources of those affected, and seeking to return them to approximately their position before the disaster, not necessarily by restoring to the same conditions as preceded the events, and and then taking appropriate measures to prevent recurrence, assessing costs and benefits of both equitably. Thus, giving priority to the needs of lower-income households, and reducing inequalities of resources.

Of course, the three can be mixed, and details will be very dependent on the local facts on the ground; the discussion that follows is only of each as ideal types. In each case, the key questions are who bears the costs of the approach and what their magnitude, and who benefits from the approach and to what extent.

Planning is confronted with difficult issues, both technical and ethical, in providing answers. There are some tentative suggestions.

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The Bankers’ Socialism Approach is so-called, with tongue somewhat in cheek,[i.] because it is the assumption by government of all of the costs of the actions taken, without consideration of whether the consequent benefits flowing disproportionately to property owners, investors, and financial interests, the larger their financial interests, the greater the benefits. The costs are borne by government, in most cases overwhelmingly the federal government,, but with participation at state and local levels, and thus of course by all taxpayers with whatever distribution of costs the structure of tax codes and revenue-generating measures of government established.

Example: Governor Cuomo, Mayor Bloomberg, and Governor Christie have all vowed: “We’re rebuilding.”[ii] “We” is not always defined, but from the description of what is planned, it will clearly be overwhelmingly government. It includes an Outer Harbor Gateway, across New York harbor between New York State and New Jersey, “a belt of landfill, stone and reinforced concrete… thirty-foot high sand berms would be piled on Sandy Hook and the Rockaways to prevent flood waters from circumventing the gateway. Another gate, this one a mile long, would be built in the upper East River to prevent surges coming in from the Long Island Sound.” The estimated cost is $23,000,000,000 (twenty-three billion dollars). The Army Corps of Engineers would conduct a feasibility study for the project, which itself might cost $20,000,000. It would be a joint Federal and State project.

What would the consequence be? The decision as to the amounts of public funding have not been made as this is written, and the likelihood that the full-scale Sea Gate proposal will be implemented seems dim. But whatever is enacted at the Federal level, it will be large, measured in the billions; the bill pending in Congress is for $50.1 billion; of that $3.8 billion would go to the Army Corps of Engineers, and $6.5 billion to transportation agencies, all as mitigation to reduce future dangers, not disaster relief. The estimate is that by 2080 the metropolitan area affected will contain about $2,150,000,000,000 (two trillion one hundred and fifty million dollars) that could be damaged by an extreme storm.[iii.] That is a substantial amount, of which the proportion accounted for by the amount of resident-owned housing along the coast-line damaged by Sandy would be a trivial part.

The bulk of the benefit from the billions of public funds to be spent would thus likely go to the property owners protected, whose property values would be sky-rocket, now being protected from the environmental risks of climate change in locations already uniquely valuable because of the location at the center of a dense metropolitan region with an intricate web of transportation and communication links and commercial investments second to few other regions in the world. The New York Times reports houses in the Rockaways listing, after storm damages, in the millions; the Private Market approach would undoubtedly be adequate in such cases, without public aid. Benefit will undoubtedly also trickle down to less wealthy individual residents of the region, as an Equity approach would require, and there would be some increase in tax revenues to government resulting from the increase in private real estate value, but it is unlikely to even come close to the billions of dollars publicly invested or to capture very much of the trillions of private benefit produced.

The difficulty is that analysis of governmental appropriations looking at the distributional impact of costs and benefits, the equity implications, of the funding, is strikingly missing.

[As an aside: The prevailing ethos seems to be to privatize as many public services as possible: schools, security, railroads, mail. Might one speak of “de-privatizing” the costs of disasters?]

The Private Market Approach is the diametric opposite of the Bankers’ Socialist approach: it would essentially leave the government out of the decision-making process of what should be done either to remedy damages done by a disaster or to prevent future damages, and leave it to ther private market to allocate costs and benefits.. Each of those affected would be left to their own devices, to use such resources as they had to achieve such repairs or avoid such risks as they were able to afford. The distributional consequences of such an approach are clear: those with the fewest resources would be the worst off, those with the most, the best off. The disparities are likely to be greater after a disaster than before, because at least before the actual disaster the poor had the amenities of at-risk locations – the pleasures of the sea shore, the advantages of access, whereas under the Private Market approach they bear the full burden of the damages, with none of the offsetting amenities.

By contrast, those amenities can be garnered by those with the resources privately to protect themselves from the risks or to recover from damages that may be caused. It will be the rich who have had the private insurance needed to compensate for costs inflicted, and who have the resources to weather-proof their structures, provide means of escape, provide for themselves privately that which had been publicly made available but destroyed.

Examples: Hotels and mansions can be privately built along the waters’ edge, office towers can be constructed, maintained, reinforced, provided with insulated sources of power and escape, and the amenities of location will be further concentrated in the hands of those able privately to afford them, driving out those with less income who by reason of historical circumstances had had some enjoyment of those amenities before. It will be the one and two family homes in Breezy Point and the Rockaways whose residents will be further disadvantaged, and only the wealthier will be able to have the benefits and protect themselves from the risks that those accompany those locations. Building codes, zoning codes, health and safety requirements will no doubt be imposed at higher standards that before, for the general protection of life and property; again, only those with sufficient resources to pay the higher costs imposed will be able to obtain their benefits. And the normal accompaniment to new and more expensive development, in terms of supportive infrastructure a standard obligation of government, will be a cost born generally by government, not only those privately benefiting.

What would the consequence be? Existing inequalities of wealth would be sharply reflected in the net differences between the conditions prior to the disaster and those following it.

The Equity Approach combines some element both of the socialism approach, but not for bankers, and some element of the private approach, but not based only on the pre-existing resources of those involved. In trying to achieve social equity, it takes into account differences in needs resources of those damaged by the disaster and exposed to future similar risks, and attempts to distribute the costs and benefits of doing so equitably among the population. Unfortunately, detailed studies of how those costs and benefits are today distributed are not yet adequately done and available; one major such study, that of Jeroen Aerts, asked whether the impact of alternatives on New York City’s 41% poor had been considered, said “That’s a new issue. We didn’t discuss it, no.” [iv.]

Example: The damage caused by Sandy can be readily mapped, and overlayed on demographic data for the affected neighborhoods. They are likely to reveal a disproportionate damage to lower income households, consuming proportionately more of their resources, and with proportionately less private assets with which to make up for the losses. The costs of compensating them for their losses, generally replacing housing completely destroyed, washed away, sometimes burnt out, are generally accepted as an appropriate obligation of government. The extent to which differing needs are taken into account has historically varied. For instance, the poor who lost lives in Katrina in New Orleans, received far less compensation per person than the wealthy killed by the 9/11 attack on the World Trade Center in New York, because different standards of compensation were used in the two cases, but that equity was a criteria was generally accepted in both. [v.]

In spreading both the costs and benefits of public action equitably, a distinction might well have to be faced. Rebuilding, in the same form as existed before the disaster, is hardly desirable; it would expose to the same risks and loses all over again, or perhaps even more severely. To rebuild to the same level but with full protection might be feasible for those have the ability to do so in the private market, but whether it is a sensible use of public resources might well be debated. But an effort might well be made to provide, net, the same level of quality after as before, if in a different mixture or a different location, that is with a different but equivalent mix of locational benefit, amenity, and space. Thus, if it is feasible to rebuild in the same location, keeping the locational and amenity and social community advantages of before, it might be done at a higher density, sacrificing some of the individually-occupied space in favor of greater multi-family forms. In any case, priority would be given to the needs of lower-income households, and reducing inequalities of resources.

What would the consequence be? Since key, in the Equity Approach, is the concern with giving priority to the needs and desires of those needing assistance from the approach: the lower income, generally the elderly, those with uninsured health problems, etc. The outcome will depend on the separate facts of each case, but in the planning and decision-making process the requirements of equity should lead to a reduction, not an increase, in inequality. It should also lead to a fair distribution of access to and ability to enjoy the benefits of the locations targeted for assistance, so that, for instance, the advantages of a shore-front location are equitably shared. The attention paid to repairing, protecting, and/or fully replacing the extensive public housing damaged by Sandy may be some indicator of the extent to which equity will be a consideration in the case of Sandy. In residential areas in which community solidarity has been a vita tradition, participation in the planning process, decisions on funding, and implementation should be made with real participation by those affected.Solid research assessing the relationship between economic position and damages from the disaster would be a welcome addition to our knowledge of how such a balance of costs and benefits might look.

****

Conclusion: Deciding how to deal with the dangers of disasters is a difficult and complex task in a democracy. It calls on careful consideration of all the the known and foreseeable facts, matters requiring careful studies in geography, geology, economics, engineering, the physical and social sciences. But it also requires careful consideration of the values involved, how different groups of the population are affected, how the costs and benefits of each alternative are measured and evaluated. Certainly considerations of equity ought to place high in those deliberations, more than is presently the case.[vi.]

Planning needs to go beyond simply thinking about resilience, as Paul Farmer recently pointed out. [vii.] Resilience can simply mean ignoring the causes of the problem, from climate change to heedless development, accepting those as inevitable, and simply mitigating their consequence. Rather, serious planning needs to be long range in time and spatial scope, well beyond most current practices. The basic question needs to be honestly confronted: which of the three alternate approaches described above should be applied to communities within the endangered flood plain, including confronting squarely the question of who is benefited and at whose costs, and making an ethical distinction between risks to life (and what risks) and risks to property (and of what social nature). Serious land use planning should be at the center of what is needed, and it poses difficult choices. For residential lower and moderate income communities in danger, for instance, planning without participation will not work. Equity planning will inevitably involve some form of public investment, not for the benefit of bankers, but of residents. Perhaps the choice will be between staying in place but at higher and more efficient densities, or relocating inland, perhaps on a community basis, with the waterfront dedicated to open public enjoyment. Real community involvement is a sine qua non, but the issues are also regional. The challenges are both technical and ethical, and inevitably political. They need to be faced.

Peter Marcuse February 11, 2012

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i. Although it bears thought: did not likewise the banks’ bailout at the beginning of the current crisis have some analogies to what socialist policy would have done, the big exception being that it was socialism for private bankers, not for government banks?
ii. Facts are taken from an excellent summary of the situation in New York by Arun Gupta, “Disaster Capitalism Hits New York,,” In These Times, February, 2013, pp.24-27, but the basic facts are well known and not controversial, although details may vary. Quotes are from that article unless otherwise noted.
iii. The estimate by Professor Aerts, a risk management and climate change expert from Amsterdam asked by the city to provide an estimate. See Mireya Navarro, “Weighing Sea Barriers as Protection for New York,” published: November 7, 2012 available at http://www.nytimes.com/2012/11/08/nyregion/after-hurricane-sandy-debating-costly-sea-barriers-in-new-york-area.html?pagewanted=all&_r=0
iv. Arun Gupta, op. cit., p. 25.
v. See Marcuse, Peter. 2011. “Ignoring Justice In Disaster Planning: An Agenda For Research On 9/11, Katrina, And Social Policy,” in Merlin Chowkwanyun and Randa Serhan, eds., American Democracy and the Pursuit of Equality: Essays in Honor of Herbert J. Gans (Boulder, CO: Paradigm Publishers, 2011), pp. 132-161. Slightly different version in: “Ignoring injustice in disaster planning: an agenda for research on 9/11 and Katrina” In Urban Reinventors, November, 2009. http://www.urbanreinventors.net/paper.php?issue=3&author=marcuse

vi. It is remarkable how little considerations of equity have been taken into account in discussions of alterative responses to Sandy, See, for instance their complete absence in Protecting the City, Before Next Time By ALAN FEUER, New York Times,: November 3, 2012, available at http://www.nytimes.com/2012/11/04/nyregion/protecting-new-york-city-before-next-time.html?pagewanted=all. Or see the debate at http://www.nytimes.com/roomfordebate/2012/11/01/should-new-york-build-sea-gates/big-storm-projects-will-cause-big-problems-so-think-small. For one of the few exceptions see Tom Angotti, “On the Waterfront,” The Indypendent #181, November 8, 2012 Indypendent available at http://disc.yourwebapps.com/discussion.cgi?disc=243054;article=2342. For an early piece raising some of the issues here, see my Blog #21 – Sandy, Katrina, and the World Trade Center: Are There Social Justice Issues? At pmarcuse.wordpress.com.

vii.“Now Sandy,” Planning, The Journal of the American Planning Association, December, 2012, p. 3.

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About pmarcuse

Just starting this blog, for short pieces on current issues. Suggestions for improvement, via e-mail, very welcome. pm35@columbia.edu
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11 Responses to Blog #27 – The Alternatives for Sandy: Banker’s Socialism,, the Private Market, Equity, Planning

  1. Harold Marcuse says:

    I’m thinking that over the longer term many areas will become uninhabitable because of climate change–beyond the rescue of such measures as sea gates and the like. We’ve already seen this in Alaska, where whole villages have been resettled as the permafrost melts and the coastline changes, and in flood plains along rivers (although not necessarily due to global climate change). I wonder whether there are any studies of how the relocation decisions were made in such cases: gov’t mandate, commercial pressures (insurers unwilling to reinsure or having clauses excluding certain claims), individual initiative, etc. Looking at past cases might help to guide the decision-making process in the future.

  2. pmarcuse says:

    An interesting question. I’m familiar with many discussions of the resettlement by squatters from riverside flood plains to safer ground, but generally occupying thenew sites illegally as well. Many of those incidents occurred, not out of concern for the flood plain’s residents sefety, but outof concern for ecological conditions, the purity of the water, etc., especially where the area settled was at a reservoir site.
    I haven’t come across the Alaska case. Would be an interesting study, if anyone nows one.

    Peter

  3. aaronmk says:

    How is the Equity Approach different from the Bankers’ Socialism Approach? It seems to me both involve the government doing all the rebuilding. Maybe it would make sense to redefine the Equity Approach as having the government help the poorest first?

  4. pmarcuse says:

    I think if you read the text the big difference is in who the targeted beneficiaries are. In the Banker’s socialist approach, government assistance is based on the extent of damage, which will be greater for those that have more; hence “bankers’ socialism.” In the Equity approach, benefits will be based on need, which in any equitable evaluation will be highest for those that have the least and have proportionately lost the most.
    Perhaps could be clearer, but the mere fact of confronting the alternative approaches I think would move the debates about what to do forward in the right direction.

    • aaronmk says:

      OK, thanks! It might make sense to summarize the definitions at the beginning of the blog post, to make it clear.

      > In the Banker’s socialist approach, government assistance is based on the extent of damage
      > In the Equity approach, benefits will be based on need

      I think the important distinction is that given *limited* government resources, who should be helped first? With *unlimited* government resources, both approaches are the same, because both have the government providing all the help.

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