All Commentary
Wednesday, July 1, 1998

The Twenty-First Century City

Cities Can Solve Their Own Problems Through Common Sense and Reliance on the Market

Books by politicians. Seldom worth reading and rarely even worthy of the appellation “book,” they are usually tedious pastiches of campaign blather, clichés, flattering photos, and anything else designed to help enhance election prospects. Don’t waste your time.

But every now and then a politician writes a book that is not a waste of time, one that challenges rather than merely regurgitates accepted wisdom. Stephen Goldsmith, the mayor of Indianapolis, has done so in The Twenty-First Century City. The accepted wisdom among many Americans—and especially big-city mayors—is that cities cannot survive without costly “Marshall Plans” with Washington or the state capitals ladling in money to “solve” the crime problem, the educational problem, the transportation problem, and so on. Taxpayers have been mulcted for billions in urban aid over the last three decades, and yet most urban politicians cry for more.

But Goldsmith doesn’t buy the accepted wisdom. On assuming the mayorship in 1992, he set about to demonstrate that cities can solve their own problems through common sense and reliance on the market. He built his administration around five principles:

  • People know better than government what is in their best interest.
  • Monopolies are inefficient, government monopolies particularly so.
  • Wealth needs to be created, not distributed.
  • Government should do a few things well.
  • Cities must not raise taxes or price themselves out of competition with excessive regulations.

Acceptance of these ideas necessitates a drastic downsizing of city (and, in fact, all) government. Early on, Goldsmith instituted the “Yellow Pages Test,” namely, if the city was doing something also done by companies advertising in the yellow pages, it should stop. Applying that test, he got Indianapolis out of the printing, window-washing, and nursery businesses (growing trees, that is–not the kind of government nursery our national nannies have in mind), among others.

But that was relatively easy. Goldsmith’s real insight was in seeing that it would be possible to make a market where none existed so that taxpayers could reap the benefits of competition. He emphasizes repeatedly that it is not necessarily privatization but competition that enhances efficiency. Consider, for example, the towing of abandoned cars. It was a city monopoly. A look in the yellow pages found no firms doing it. Goldsmith wasn’t satisfied with merely trying to get the city monopoly to become a bit more efficient. He decided to throw it open to bids from anyone with experience in the disposing of used cars.

The winning bid came from ADESA Auctions, which knew very well the business of selling used vehicles. The results were excellent. In the last year before competition, the city had towed 900 vehicles for a net loss of $174,000. In the first two years of the ADESA contract, the company towed over 2,300 abandoned vehicles, sold them, and paid the city $500,000. Competition works.

Harder cases: what about welfare and “public” education? Goldsmith calls for “An End to Social Programs;” but this chapter title doesn’t exactly convey the book’s message. Ending social programs would entail the repeal of government handouts, relying completely on voluntary efforts to assist needy people. Goldsmith writes, “Welfare as a social program must cease to exist. In its place should be transitional help, job placement and family rebuilding . . . . Public assistance will be the bottom rung of a ladder toward self-sufficiency.” No doubt that would be better than the status quo, but why accept the “need” for even bottom-rung public assistance? Why cave in to the idea that government at any level must be responsible for providing transitional help? We shouldn’t.

On the subject of education, Goldsmith also stops short of the real solution. Unfortunately, mayors can neither change the state and federal laws that have so thoroughly mangled the market for education nor drop out of the system. But they are free to advocate the return to a free market. Goldsmith doesn’t. He speaks favorably of the private Choice Trust scholarship program to help poor parents afford the tuition at private schools (a great idea that ought to be pushed from coast to coast), but is apparently willing to live with “public education” (government schools, as Milton Friedman insisted to him) as long as it contracts out noninstructional services to concentrate on “their core service.” Education is just no business of the government and needs to be pulled out by the roots. If Mayor Goldsmith understands this, he didn’t say it.

Nevertheless, there is a lot of good in this book. If you live in or near a city administered by politicians who are in the thrall of the accepted wisdom on urban policy (almost every one of them), I suggest buying it and then using it to do everything you can to make life miserable for your mayor.