Market Economy and Urban Change: Impacts in the Developing World
Dedicated to Cedric Pugh
Market Economy and Urban Change: Impacts in the Developing World
Edited by Roger Zetter and Mohamed Hamza
London • Sterling, VA
First published by Earthscan in the UK and USA in 2004 Copyright © Roger Zetter and Mohamed Hamza, 2004 All rights reserved ISBN: 1-85383-784-9 paperback 1-85383-783-0 hardback Typesetting by Composition and Design Services, Belarus Printed and bound in the UK by Bath Press, Bath Cover design by Danny Gillespie For a full list of publications please contact: Earthscan 8–12 Camden High Street London, NW1 0JH, UK Tel: +44 (0)20 7387 8558 Fax: +44 (0)20 7387 8998 Email:
[email protected] Web: www.earthscan.co.uk 22883 Quicksilver Drive, Sterling, VA 20166–2012, USA Earthscan publishes in association with WWF-UK and the International Institute for Environment and Development A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Market economy and urban change: impacts in the developing world / edited by Roger Zetter and Mohamed Hamza. p. cm. Includes bibliographical references and index. ISBN 1-85383-783-0 (hardback) — ISBN 1-85383-784-9 (pbk.) 1. Urban policy–Developing countries. 2. Urban poor–Developing countries. 3. Urban economics–Developing countries. I. Zetter, Roger. II. Hamza, Mohamed. HT149.5.M37 2004 307.76’09172’4–dc22 2004016420 Printed on elemental chlorine-free paper
Contents
List of Contributors Dedication Preface List of Acronyms and Abbreviations 1 Market Enablement and the Urban Sector Roger Zetter 2 Developmental Welfare and Political Economy: Reflections on Policy-conditioned Aid and Strategic Redirections of International Housing and Urban Policies, 1960–2000 Cedric Pugh 3 The State, Foreign Aid and the Political Economy of Shelter in Egypt Mohamed Hamza 4 Tackling Urban Poverty: Principles and Practice in Project and Programme Design in Kenya Carole Rakodi 5 Bridging the Rural–Urban Divide: What Can the Urban Learn from the Rural? Reflections on the Case of Mexico Gareth A. Jones 6 Between Command and Market Economies: The Changing Roles of Public and Private Housing Sectors in Transitional Economies Geoffrey Payne and Richard Grover 7 Urban Land Tenure in Brazil: From Centralized State to Market Processes of Housing Land Delivery Flávio de Souza and Roger Zetter 8 Market Enablement and the Reconfiguration of Urban Structure in Colombia Andrés Ortiz-Gómez and Roger Zetter Index
vi x xi xiii
1
41 77 97 123 147 163 185 205
List of Contributors
FLÁVIO DE SOUZA Flávio de Souza is professor of urban studies at Universidade Federal de Alagoas, Brazil, where he also coordinates the Urban Issues Study Group. His main research interests are low-income housing land markets and public policy. He has published extensively in Geoforum, International Planning Studies, Storia Urbana and Habitat International, where he was ‘runner-up’ for the Jorge Hardoy Memorial Prize for the Best Paper by a Researcher from a Developing Country (2000).
RICHARD GROVER Richard Grover is assistant dean (finance and resources) in the School of Built Environment at Oxford Brookes University. He is a chartered surveyor and economist. He has a particular interest in the development of the property markets in the transitional economies of Central and Eastern Europe and has undertaken a number of projects in the region for bodies such as the World Bank, the United Nations Food and Agriculture Organization (FAO), the UK Know-How Fund and the Department for International Development, and the Russian and Romanian governments.
MOHAMED HAMZA Mohamed Hamza is an urban development, training and disaster management consultant. He has extensive experience with international development organizations – the World Bank, the United Nations Development Programme (UNDP), United States Agency for International Development (USAID) and the Near East Foundation – managing programmes and providing consultancy in Sudan, Jordan, India, Eritrea, Pakistan, Afghanistan and Egypt. Recently he has been an adviser to the United Nations Mine Action Programme on management training and capacity-building of the indigenous Afghani non-governmental organizations (NGOs) working under the UN umbrella in Afghanistan, and to the United Nations Assistance Mission in Afghanistan (UNAMA) on developing national disaster management capacity. He is also a visiting fellow at Cranfield University, UK, and is responsible for coordinating Cranfield Mine Action and Disaster Management Centre’s research and studies programme. His research, teaching and
List of Contributors
vii
publishing interests focus on urban development; urban vulnerability to disasters due to forces created by structural adjustment and economic globalization; and the impact of political economy, foreign aid, economic reform and structural adjustment programmes on shelter policies in the developing world. Mohamed Hamza has previously taught and carried out research at Oxford Brookes University and Cranfield University, UK.
GARETH A. JONES Gareth A. Jones is senior lecturer in development geography at the London School of Economics and Political Science. He is the editor of four books on land markets, housing finance and state reform, and is currently working on a book manuscript of land, law and institutional change in Mexico. He has been a consultant to the United Nations Centre for Human Settlements (UNCHS) and, most recently, for a review of the South Africa National Department of Housing proposed policy and research agenda. In 2004 he held a Leverhulme Study Abroad Fellowship at the University of Texas in Austin.
ANDRÉS ORTIZ-GÓMEZ Andrés Ortiz-Gómez studied at Oxford Brookes University, UK, and has been a lecturer in urban and regional planning at the Pontificia Universidad Javeriana in Bogotá, Colombia, since 2000. He also works as a consultant architect in Colombia, engaging in a wide range of projects and research, which include land tenure issues in Bogotá, public–private interaction in the provision of housing for the urban poor, market enablement effects on urban structure, and urban planning and land valorization.
GEOFFREY PAYNE Geoffrey Payne is a housing and urban development consultant with over 30 years’ experience. He has undertaken research, teaching, training and consultancy assignments throughout the world for the World Bank, the Inter-American Development Bank, the Department for International Development (DFID), UN-Habitat (formerly UNCHS) and various universities and NGOs. His specializations include land tenure and property rights, reviews of regulatory guidelines for affordable shelter, public–private partnerships and participatory project design. He has recently directed a major research project on regulatory guidelines for new housing development in six countries and is directing a project to introduce innovative forms of secure tenure for the urban poor in Phnom Penh, Cambodia. Geoffrey Payne has written or contributed to many books and academic journals. Recent edited books include The Urban Housing Manual: Making Regulatory Frameworks Work for the Poor (Payne and Majale, Earthscan Publications, 2004); Land, Rights and Innovation:
viii
Market Economy and Urban Change
Improving Tenure Security for the Urban Poor (IT Publications, 2002); Making Common Ground: Public–Private Partnerships in Land for Housing (ITDG Publications, 2000); and Urban Projects Manual (Liverpool University Press, 2000). He was also a consultant for the documentary film Land Rites transmitted on BBC World Television during the World Urban Forum in June 2001.
CEDRIC PUGH Cedric Pugh was professor in Urban Economic Development at Sheffield Hallam University at the time of his death in 2001. He was a development economist who had lived and researched in Europe, Latin America, Asia and Australasia. In a wide-ranging career he undertook research for the United Nations and wrote extensively on housing, urbanization and development in major journals in the field such as Urban Studies, Habitat International and Third World Planning Review. His major recent books include: Housing and Urbanisation: A Study of India (Sage, 1991), Sustainability, the Environment and Urbanisation (Earthscan, 1996) and Sustainable Cities in the Developing World which he edited for Earthscan in 2000.
CAROLE RAKODI Carole Rakodi is professor of international urban development in the International Development Department, School of Public Policy, University of Birmingham. Until recently, she was a professor in the Department of City and Regional Planning, Cardiff University. She is a geographer and town planner, with professional experience in Zambia and Kenya. Her main research interests are in urban planning and management, land and housing markets and policy, and urban poverty and livelihoods. She has carried out research in Zambia, Zimbabwe, Kenya, Ghana and India and published widely. Her books include The Urban Challenge in Africa: Growth and Management of its Large Cities (United Nations University Press, 1997); Urban Livelihoods: A People-centred Approach to Reducing Poverty (Rakodi and Lloyd-Jones, Earthscan, 2002) and Building Sustainable Urban Settlements (Rakodi and Romaya, Intermediate Technology Publications, 2002). She has also edited a policy arena section of the Journal of International Development (vol 13, no 7, 2001), a special issue of International Planning Studies (vol 5, no 4, 2001) and an issue of Insights Development Research (no 38, 2001) on urban poverty and governance, and produced a publication on Sustainable Urbanisation: Achieving Agenda 21 (Rakodi, Nunan and McCallum, UN-Habitat and DFID, 2002).
ROGER ZETTER Roger Zetter is professor and deputy head of the Department of Planning in the School of Built Environment at Oxford Brookes University. His research, teaching and publishing interests are in urban-sector aid policies, housing and environmental
List of Contributors
ix
policies for low-income urban dwellers, with a particular interest in informal land markets, land tenure and urban land policies, mainly in the context of sub-Saharan Africa and, more recently, in Brazil. He also has extensive research and consultancy experience on refugees, asylum seeking and forced migration. His books include Planning in Cities: Sustainability and Growth in the Developing World (Zetter and White, IT Publications, 2002) and The Reception and Integration of Asylum Seekers and Refugees in Europe: Convergence or Divergence? (Zetter and Griffiths, Macmillan/Palgrave, forthcoming 2005), and he is currently editing Designing Sustainable Cities in the Developing World (Ashgate Publishing) for publication in 2005.
Dedication
My late father, Cedric Pugh, was born in London in 1938. He then experienced the world, with its various colours, before returning to England where he spent his last years in his beloved cottage in the Peak District. Cedric died in 2001 after a noble struggle with a rare disease called dermatomyositis. At the time of his death, Cedric was based at Sheffield Hallam University, where he was professor of urban economic development. Cedric was a prolific writer and researcher. He was the author of numerous books, international journal articles and commissioned reports. His academic work sought to advance welfare rights in developing countries, and to influence policies for the masses in poverty. As an international social and urban economist, he was engaged in many projects, and he travelled, worked and lived in many countries. His efforts won him much acclaim and some prestigious awards. Those who have visited Cedric’s cottage will remember it filled with guests of all nationalities enjoying conversation, music, food and wine. They will also remember that every surface was covered with Cedric’s research papers dedicated to a world free of oppression – a lovely, and appropriate, way for Cedric to be remembered, as is this book dedicated to his memory. Tania Pugh April, 2004
Preface
Those driven by the ever-increasing demands of higher education in the UK will empathize with the protracted time that it has taken to complete this book. Roger Zetter acknowledges that it is largely through the persistence of the co-editor, Mohamed Hamza, that the book has seen the light of day. The origins lie in a small round-table seminar which we convened at Oxford Brookes University several years ago. Entitled ‘From Welfare to Market’, the seminar examined the reconfiguration of the political economy of urban policy that had been taking place across much of the developing world during the preceding decade or so. The thematic concern was to investigate the links between international development agendas; local impacts on the urban sector in terms of critical variables such as housing and land policies; poverty alleviation and urban restructuring; and, finally, the mediating role of the state operating through national urban development strategies and policies. The macro-to-micro objective of our analysis attempted to bridge the gap in the literature, as we saw it, between political economy research on the urban sector and the welter of programmatic and project-based evaluation, which dominated the shelter and land sector. The interaction between external as well as internal forces driving urban-sector policies was what engaged us. From these beginnings the book gradually took shape. The lengthy period since we first started exploring the issues has, at least, enabled the original contributors to that seminar – Cedric Pugh, Geoffrey Payne, Gareth A. Jones, Carole Rakodi and Mohamed Hamza – to review and develop new perspectives on their earlier papers to form chapters in this book. We have added new material from other researchers. In reconfiguring the material, we have retained the macro-tomicro perspective that we elaborated upon and refined at our original seminar; but, at the same time, we have integrated the book more closely within the neoliberal, market-enablement development paradigm, thus addressing a limitation of the earlier seminar. We have also reinforced and widened our substantive perspective. We have included new material on transitional economies (see Chapter 6), more detailed analysis of the processes of urban restructuring (see Chapter 8) and have reinforced the focus on the mediating role of the state (see Chapter 7). We are privileged to dedicate this book to the memory of Cedric Pugh, with the permission of his daughter, Tania. Cedric provided, as usual, a searching and powerful discourse at our original seminar. Little did we realize that this was one of the last papers he was to write before his untimely death in 2001. Cedric’s contribution to urban-sector research is prodigious in both quantity and the influence that he has had on the way in which so many scholars and policy-makers
xii Market Economy and Urban Change
think about the sector, and housing and shelter, in particular. Although his last published book was Sustainable Cities in Developing Countries (Earthscan, 2000), it seems probable that the paper he presented at the seminar was one of the last pieces he was working on. We have not edited his paper; it remains as he presented it to the original seminar with only minor proofing and citation corrections. Roger Zetter and Mohamed Hamza March 2004
List of Acronyms and Abbreviations
ADB AIADMK ANC BNH CAP CBO CEF COFOPRI CPF DAPD DFID EC ERSAP EU FAO FDI FGTS GDI GDP GNP GRO HDP IADB IDA IMF JAL LP/R MNC NGO NIE ODA PA PAR PB PCT PL
Asian Development Bank All India Anna Dravida Munnetra Kazhagam Party African National Congress Brazilian National Housing Bank community action planning community-based organization Brazilian Federal Saving Bank Comisión de Formalización de la Propiedad Informal Central Provident Fund Colombian planning office (Departmento Administrativo de Planeacion Distrital) UK Department for International Development European Commission economic reform and structural adjustment programme European Union United Nations Food and Agriculture Organization foreign direct investment Brazilian Guaranteed Employment Fund gross domestic investment gross domestic product gross national product grassroots organizations Singapore Housing and Development Board Inter-American Development Bank international development assistance International Monetary Fund Colombian local municipality (junta administration local) land pooling/readjustment multinational corporations non-governmental organization New Institutional Economics UK Overseas Development Administration (now DFID) participatory appraisal Brazilian Housing Lease Programme (Programa de Arrendamento Residencial) participatory budgeting (orçamento participativo) public choice theory poverty line
xiv Market Economy and Urban Change POT PREZEIS PROFORM PRSP PT PUA RFPs SAL SBERBANK SCR SDR SFH TNC UK UN UNAMA UNCHS (Habitat) UNDP UNICEF UNP US USAID USSR WTO ZEIS
Plan de Ordenamiento Territorial ZEIS Regularization Plan (Plano de Regularização das ZEIS) property formalization system Poverty Reduction Strategy Paper Brazilian Workers’ party (Partido dos Trabalhadores) participatory urban appraisal requests for proposals structural adjustment and lending policy Russian Federation Savings Bank Shopping Centre Recife standard drawing right Brazilian Federal Housing Bank (Sistema Finaceiro da Habitação) transnational corporation United Kingdom United Nations United Nations Assistance Mission in Afghanistan United Nations Centre for Human Settlements (Habitat) (now UN-Habitat) United Nations Development Programme United Nations International Children’s Fund United National Party, Sri Lanka United States United States Agency for International Development Union of Soviet Socialist Republics World Trade Organization Social Interest Development Zones (Zonas Especiais de Interesse Social, Brazil)
Chapter 1
Market Enablement and the Urban Sector
Roger Zetter
INTRODUCTION This book explores and evaluates urban-sector and development policies in the context of market enablement. By articulating the linkages between this development paradigm and the way in which policy responses are enacted by different actors in the urban sector, the book provides an understanding of both the factors driving this policy framework and the impacts of these policies on urban-sector policies and programmes. Thus, while the substantive focus of this book is on the urban sector in the developing world, this provides a window on the wider world of the political economy of urban development under conditions of the neoliberal development agenda. This is a policy environment driven by globalization, the neo-liberal macro-economic package of market enablement and structural adjustment, and its associated instruments of urban management reform, decentralization and ‘good’ governance programmes: these constitute the underlying themes of the book. This development paradigm has dominated the dynamics of urbanization and the spatial, social and economic patterns of urban development for nearly two decades. Despite the mediating outcomes of United Nations (UN) Habitat II and the emergence, in 1999, of poverty alleviation strategies and ‘propoor’ development policies aimed at mitigating the adverse impacts of market enablement, multilateral and bilateral development agencies and donors continue to promote the relevance and enduring necessity of this agenda. Cities, as the leading sector for economic development, provide the main platform upon which this paradigm is enacted; but since cities are also where concentrations of poverty and where the challenge of access to land, shelter and basic infrastructure are at their most acute, the urban sector displays the impacts of the paradigm
2
Market Economy and Urban Change
most dramatically. Urban land and shelter provision constitute much of the subject matter of the book. Urban economies and urban needs and policies are driven by external, as well as internal, forces. The interplay between domestic and international agendas (foreign, state, local interests), crucial in determining policies and outcomes, is also a central theme that the book explores. Externally, governments in the developing world have been compelled to respond to the neo-liberal policy agenda of donors and its institutional apparatus – for example, aid conditionality, diminution of the public sector’s role in regulating development in the urban sector, and expansion of the private provision of public goods. These pressures have vied with domestic interests, such as the need to retain state credibility and legitimacy while simultaneously resisting the potential threats to existing power structures, which externally generated radical reform of the urban sector could induce. The book examines the role of the state – at both national and city/municipal levels – as the mediator between these often-conflicting external and domestic agendas. Within this context, the book has twin objectives that structure the content. First, we attempt to link concepts to policy and practice. Here we seek to explore how changes in development theory – from welfare to market enablement – political economy and institutional frameworks have redefined the role of the state vis-à-vis the urban sector, and how policies within the sector (for example, for shelter and land) are determined and influenced by these factors. Second, in exploring the interplay between the current development paradigm, the policy apparatus and the lessons learned from practice, the book explores the disjunctive relationships between policy expectations and outcomes in the urban sector. In seeking to articulate the relationship between external and state interests in urban-sector development strategies, much research on urban development has tended to reinforce the dichotomy rather than to bridge it. On the one hand, political economy analyses tend to conceive of the relationship in a political or social vacuum, concentrating on internal domestic factors, such as the realities of established power structures, while underplaying the impact of external factors, such as international development agendas, or vice versa. These perspectives have tended to emphasize social class and state power at a domestic level, or geopolitical and macro-economic variables in the international context. On the other hand, distinct from these attempts to conceptualize the relationship between the urban sector and political economy, the literature is dominated by micro-level and technocratic evaluations of foreign aid-funded projects. Taking these contrasting perspectives into account, the book argues that in order to provide a more penetrating understanding of critical urban policy processes and dynamics, such as in the shelter sector, these do, indeed, have to be located in a broader socio-economic and political context. Policies and outcomes generally reflect technocratic responses to problems that are largely structural in nature. This gap between the structural and technocratic explanations of policymaking and implementation is, thus, a central theme in the book. At the same time the book also recognizes that, important though structural changes are – for example, in terms of development paradigms, institutional reform or political
Market Enablement and the Urban Sector 3
transformation – they may not always appear to be the sole determinants of policy shifts in urban-sector programmes and policies. At times it may be that a combination of short-term and pragmatic international objectives and the domestic interests of the state are equally instrumental in policy shifts and modifications in approaches. Nevertheless, the interplay between the structural, the technocratic and the pragmatic remains core to the purpose of the book. A brief review of the phenomenon of rapid urbanization follows. The chapter then turns to the principal themes that underpin the book and examines their significance in the context of the urban sector; this comprises two main parts. First, the development of the neo-liberal agenda of market enablement and globalization is outlined, focusing on the developing world. The next section turns to cities in the developing world to explore, at a general level, some of the principal impacts of the market enablement paradigm on the urban sector. The final section outlines the substantive chapters and their connection to the overall themes of the book.
RAPID URBANIZATION IN THE DEVELOPING WORLD Although estimates vary, between 10 and 13 per cent of the world’s population lived in cities in 1900. Yet, a century later, soon into the new millennium, half the world’s population will be living in cities: this is anticipated around 2005. In the year 2000, there existed 28 mega-cities with more than 8 million inhabitants in each. The population of the mega-cities alone (at nearly 300 million inhabitants), almost equates to the total urban population of the world at the beginning of the last century. The phenomenon of urbanization is perhaps one of the most profound and significant changes of the last century. Despite the drive to urbanization during the last century, less developed parts of the world, those with the steepest demographic curves, have yet to fully experience that process. Thus, in another 20 years, by 2025 if current urbanization trends continue, over 60 per cent of the world’s population (or about 5.2 billion people) will be living in cities: this, despite the fact that, globally, urbanization trends are slowing worldwide (UNCHS, 2001a). A second and perhaps even more striking characteristic is the changing distribution of the world’s urban population. Whereas, in the developed world, both the overall population levels and the very high proportion living in urban areas are relatively stable, it is in developing countries where by far the largest proportion of the growth of urban population has and will continue to take place. During the 50 years leading up to the end of the 20th century, the urban population in the developing world increased from about 300 million to nearly 2 billion. This figure will double again by 2025, when nearly three-quarters of the world’s 5.2 billion urban dwellers will be living in the developing world. Whereas there were only 31 millionaire cities in the developing world in 1951, by 2000 there were over 400. Of the 28 mega-cities in 2000, 22 were in the developing world. By 2010, 21 of the 26 cities of 10 million plus will be in the developing
4
Market Economy and Urban Change
world and 21 of the 33 cities with populations in excess of 5 million will be in the developing world. While it is easy to overemphasize the phenomenon of megacities, what they do illustrate is the tendency towards high degrees of urban primacy as another problematic characteristic of the distribution of urban population in developing countries. But if there is a dynamic of cities, there is also the dynamic in cities. With some cities (for example, Lagos) doubling their size perhaps every 10 to 12 years, and some evidence to suggest that, until recently, so called ‘secondary cities’ (often low on the development agenda) were expanding at an even faster rate, urbanization is perhaps one of the most problematic outcomes of the development process. This scale of growth compounds the problem in cities. With cities in the developing world often accommodating the majority of their populations in informal and squatter settlements, offering limited or non-existent basic urban services and deteriorating environmental conditions, the rapidity of development renders irrelevant most planning strategies and regulatory instruments. Currently, UN Habitat estimates that nearly 1 billion urban dwellers – one sixth of the world’s population, one quarter of the world’s urban population and almost one half of the urban population in the developing world – live in urban locations, which are often illegal, but always characterized by severely impoverished physical, environmental and social conditions. Of course, the distribution is critical here: only 2 per cent of the urban population of the 30 richest countries is estimated to inhabit such localities, in comparison with 80 per cent of city dwellers in the 30 least developed countries (UNCHS, 2003). In the informal settlements of Nairobi, Mumbai, Karachi and Dhaka, alone, the populations approach 1 million in each case. If present predictions are sustained, one in three of the world’s population will live in similar conditions of urban impoverishment in 30 years’ time. Driving urban growth is the diversity and concentration of economic activity in cities, which ensures that they are the leading sector of macro-economic development. For example, São Paulo contributes 40 per cent of Brazil’s gross domestic product (GDP), while estimates suggest that 80 per cent of the GDP of countries in the developing world is generated in cities. The urban housing sector is crucial. Typically, housing investment may account for between 8 per cent (UNCHS, 1993) and 20 per cent of gross national product (GNP) (Malpezzi et al, 1990), representing up to 50 per cent in some situations. Whether in the formal or the informal sector, urban housing investment is a significant multiplier, creates substantial forward and backward linkages, stimulates small-scale enterprises, increases inter-household income transfers (Spence et al, 1993) and adds significantly to capital formation in the national economy by up to 30 per cent (UNCHS, 1984, 1993; World Bank, 1993, pp62–64). But this privileged and vital role is problematic in equal measure. The necessity for intervention on social and environmental grounds is counterbalanced by the commensurate need not to compromise the economic productivity and potential of cities – the nub of the market enablement reform package for cities clearly
Market Enablement and the Urban Sector 5
set out in the World Bank’s policy statement on Urban Policy and Economic Development: An Agenda for the 1990s (World Bank, 1991). In short, the problems of cities and within cities are set to increase. These contemporary processes and patterns of urbanization raise fundamental questions about equity and the impact of development. Highly skewed patterns in the spatial and social distribution of poverty and wealth ensure that poverty levels remain very high and are deteriorating further in many cities. As the United Nations Development Programme’s (UNDP’s) work on human development indicators illustrates, cities in the developing world are very unequal places. Issues of sustainability, efficiency and high externalities, notably in environmental terms (Zetter and Moataz Hassan, 2002b), also raise questions of great significance, which provide the agenda for the Habitat report on cities (UNCHS 2001a, 2003). Yet, despite the attendant problems that this process produces, it remains all but impossible to restrain either the growth or the inequality of cities in the developing world. There is little evidence that intervention at any level has done much to manage the process of rapid urbanization in a more equitable way or to achieve development that satisfies broader conceptions of efficiency, equity or sustainability (for example, in terms of employment generation, physical and social infrastructure and the ecological footprint of cities). The legacy of ineffective planning systems and instruments, limited institutional capacity and weak state legitimacy to intervene are persistent features of the urban landscape in much of the developing world. Cities are the engines of growth for developing countries. The imperative of economic growth and current market enablement models continue to drive the spontaneous, unplanned growth of cities at an unprecedented scale. It seems likely, therefore, that many of these processes will continue, irrespective of planning or political intervention (Zetter, 2002; Zetter and White, 2002).
THE NEO-LIBERAL AGENDA: MARKET ENABLEMENT AND GLOBALIZATION This chapter turns, now, from a brief contextual overview of the scale and scope of urbanization in the developing world to explore the structural determinants of these processes. The political economy of urban-sector development is examined in order to elaborate the principal themes of the book.
The emergence of the new orthodoxy During the last 15 to 20 years, the process of rapid urbanization in the developing world has entered a new and more dynamic phase. Underpinned by a number of structural factors, but largely propelled by the economic reform programme encompassing the related strategies of structural adjustment, market enablement and economic globalization, the impact of this new development agenda on the urban sector of the developing world has been profound. The outcome of the
6
Market Economy and Urban Change
so-called neo-liberal orthodoxy has simultaneously accelerated the spatial and economic transformation of cities, intensified the incidence of poverty, and highlighted the incapacity of urban systems and land-use patterns to adapt to the scale of growth and spatial and social restructuring now taking place (Hamza and Zetter, 2000). The adverse performance of cities in terms of declining environmental quality, living conditions and public services, on the one hand, and increasing poverty, on the other, challenge the dominance of these economic imperatives, as we shall see later. Yet, they show little sign of relenting and it is pertinent to note that, despite these outcomes, UN-Habitat makes extensive use of the rhetoric of market enablement in its landmark report on Cities in a Globalizing World (UNCHS, 2001a). Neo-liberal economic development strategies predicate the economic performance of cities over the competing arena of physical and social priorities enabled by a strong public sector. The latter dominated the preceding growth-with-equity development paradigm and its affordability–cost recovery–replicability implementation model of public-sector social investment: this was widely deployed in urban-sector shelter programmes for upgrading and sites and services, and associated urban infrastructure development. At the macro level, the limitations of urban-sector policies, framed within the growth-with-equity ideology, were symptomatic of the wider structural failure of developing economies, which were dramatically highlighted in the debt crisis of the 1980s. At the micro level, rapidly rising supply-side costs, notably in urban land, and also urban-sector production costs, severely limited the impact of shelter policies and programmes as the principal instrument with which to reduce high levels of urban poverty. To understand these outcomes and their impact on the urban sector, we need to review the ascendancy and the main characteristics of the neo-liberal economic agenda. Whether responsibility for the economic crisis from the mid 1970s to the mid 1980s lies with the developing countries and the poor management of their domestic economies under a failing growth-with-equity paradigm, or whether it resulted from structural failings in the world economy, is arguable. However, the genesis of the transformation from managed economy to market economy lies in a combination of factors that contributed to the turmoil in the world economy during this period. The oil crises of 1973–1974 and 1978–1979, combined with the growing magnitude of indebtedness mainly to cover the soaring costs of oil imports and public-sector spending, impacted most severely upon the countries of the developing world. In their public sectors, rising domestic budget deficits, escalating interest rates on development investment and inflation were paralleled by the flight of foreign investment capital, the sharp reduction in development lending by both bilateral and multilateral donors, rising external debt funded by corporate finance and a world trade recession, which adversely affected export prices for primary commodity producers. After the second oil crisis in 1978–1979, when the inability of many developing countries to honour their international financial obligations to both donors and commercial banks1 became critical, the World Bank and the International Monetary Fund (IMF) stepped in a second
Market Enablement and the Urban Sector 7
time. Again, these shocks, largely externally induced, had produced balance-ofpayments crises, escalating fiscal deficits and the crumbling exchange values of already weak currencies. These conditions were particularly acute in the most indebted developing countries, though not necessarily the poorest – Mexico is the classic case. In effect, this unchallenged intervention in response to the global debt crisis and economic meltdown signalled the end of the mixed-economy development model and the orthodoxy of growth with equity, which had dominated development thinking and practice since the early 1960s. Leading the transformation to market enablement have been the World Bank and the IMF. Constituting, along with the US government, what has come to be called the ‘Washington consensus’, they have exercised a profound influence in elaborating the philosophy, the instruments and the institutionalization of the new paradigm of development.
Structural adjustment In response to these unprecedented conditions and the potential economic collapse of many countries in the developing world, but primarily to tackle the wider potential impact of indebtedness and default on debt repayment, the World Bank and IMF provided heavily conditioned loan facilities through the imposition of structural adjustment and lending policies (SALs) (Stewart, 1995; Dasgupta, 1998; Mohan et al, 2000). Fundamentally a means to debt relief, SALs were predicated on an indebted recipient country adopting two interrelated portfolios of measures: an economic stabilization programme and restructuring of the national economy. In the first place, the IMF obliged recipient countries to adopt short-term austerity programmes aimed at restoring macro-economic stability (and, thus, the capacity to repay development loans). The basis of the programmes was aggressive short-run demand and supply-side management, and fiscal and monetary reform typically including debt rescheduling to tackle the external borrowing crisis; reform of debt-servicing machinery to alleviate chronic balance-ofpayments shortfalls; tax reform and severe reductions in public expenditure to overcome public-sector fiscal deficits; liberalizing international and domestic trade by removing foreign exchange controls (in effect, enforcing heavy devaluation through floating exchange rates); and other trade barriers such as protective tariffs and regulated prices of staple commodities (notably, basic foods). Punitive conditions applied if countries defaulted on the SAL terms. Once the stabilization package was in place, structural adjustment then entered the reform stage, enacted by the World Bank. This aimed at longer-term restructuring of the economy and enhancing its productivity and competitiveness by reducing market distortions and mobilizing resources. Among the instruments to achieve this objective are productivity measures to increase efficiency; adopting structural measures to liberalize trade; privatizing state enterprises; and reconfiguring the roles of, and relationships between, private and public sectors in development and the provision of services. The next section discusses this framework more fully.
8
Market Economy and Urban Change
In practice, the short-term/long-term roles of the IMF and the World Bank, respectively, became blurred. The IMF became involved in structural lending, while the World Bank became more involved in negotiating short-term credit facilities. Other multilateral and bilateral donors also closely followed the World Bank and IMF market stabilization reform packages in their own lending programmes and policies.
Market enablement: Stage two Destructive though their impact was, we can now see that by the late 1980s SAL policies were not an end in themselves, but a component in what was emerging as a much broader, though loosely coordinated, framework of concepts, policies and strategies to reformulate the structure of both national economies and their articulation into a radically new framework for the world economy. Arguably, the World Bank’s structural reform programme was both the experiment for and the precursor of this second phase. It combined a domestic economic reform agenda in the first phase with a much bolder agenda to embrace the economies of the developing world within an international framework. Based on public choice theory of market behaviour, drawing on the seminal neo-liberal economic theorists such as Friedman (1963) and Hayek (1979), and driven by the major economies of the developed world, market enablement entered a second and more farreaching stage of institutionalization: the apparatus of a fully developed market economy paradigm of development. For the countries of the developing world, conditionality for loans and other assistance from the World Bank and other donors was based on the key instruments of market enablement: economic liberalization, privatization and governance reform. On the one hand, this second generation of market enablement was an opportunistic reaction to the sudden collapse of the communist regimes. The elimination of a competing geo-strategic development ideology created a vacuum, which was rapidly filled by a ‘new world order’ dominated by market economy nations, who now had the monopoly in the discourse on development concepts and practice. In this new milieu, globalization (trade liberalization, open economies, free movement of capital, abetting the expansion of transnational corporations, or TNCs) has been deployed, at a macro level to stimulate economic growth and development. These tools replicate, reinforce and expand the earlier framework of the World Bank’s structural reform packages. On the other hand, a number of structural variables were also instrumental in enabling the transformation to this new transnational phase of world economic development (Castells, 1996; Burgess et al, 1997; Hardt and Negri, 2000). Thus, alongside SALs, three key variables underpin the implementation of market enablement, which have impacted upon developing countries and their urban sectors with particular force. First, there is the drive to privatization involving policies to: reduce state intervention in the development process; dispense with equity-based and redistributional
Market Enablement and the Urban Sector 9
strategies; and deregulate state controls over development. The last initiative is particularly critical in the context of this book through the privatization of public enterprises and urban service providers, the promotion of private-sector delivery of housing, the removal of public subsidies, and the reduction in powers to regulate and manage urban spatial development. Paralleling the diminution of state intervention has been the governance and institutional reform package. Conceptually and in practice, this package buttresses the economic imperatives inherent in both market enablement and globalization (discussed below). Governance reform replaces the ‘public service and provision’ model, embedded in the growth-with-equity paradigm, with communitarian and stakeholder models of democratic decision-making. The structural purpose is to manage diversity by atomizing it and then integrating it within a consensus on the irreducibility of global capitalism (Hardt and Negri, 2000). Government decentralization and the development of a stakeholder model of local democratic control are the principal instruments for this reform, and they are discussed in more detail in the section on ‘Market enablement: The role of cities and impacts upon the urban sector’. These two public-sector administrative reform strategies, together with tax and structural reforms, are designed to encourage productive efficiency, and private and foreign investment, and thus to boost market-led economic growth. The third variable is aid conditionality and the strategic targeting of bilateral aid agreements. These initiatives have been deployed by the donor community of the ‘North’ as the main instruments and levers to mediate – or enforce compliance with – market enablement, governance reform and deregulation. The neo-liberal agenda now dominates the discourse of global capitalism. It has promoted not only a new set of economic relationships between states, but, perhaps more importantly for this book, a new set of relationships between the market forces of international capital, the state, society and the political and institutional arrangements mediating this interaction in the cities of the developing world. Because the urban arena provides the dynamic for economic development and change, and because this is where production and consumption are concentrated, it is the urban sector that must be fully articulated into the world economy if the neo-liberal agenda is to be sustained. Thus, from the urban perspective of this book, we can see how, early on, cities and the urban sector became the focus for embedding the new development paradigm. It is no coincidence that the inception of the second stage of the paradigm was demarcated by publication of the World Bank report Urban Policy and Economic Development (World Bank, 1991), closely followed by the more sector-specific Enabling Housing Markets to Work (World Bank, 1993). These reports laid out the credo of the World Bank and clearly established the significance of the urban sector as the motor force for, and main target of, market enablement strategies.
10 Market Economy and Urban Change
Structural adjustment and market enablement: Poverty and social equity Refinements to the neo-liberal development paradigm took place as it evolved during this second stage. Perhaps to mitigate both the increasingly severe impacts of SAL programmes and market enablement policies on the developing world economies, as well as the growing social unrest evident in their cities (discussed below), the World Bank and IMF have twice shifted the emphasis, but not the overall ideological rationale or the apparatus of the new paradigm. During the late 1980s, the call for ‘adjustment with a human face’ (Cornia et al, 1988) highlighted the negative social impacts and the declining living standards that structural adjustment policies were producing, especially for the most vulnerable. Apart from the increasing incidence of poverty, which differentially affected the poorest, the evidence pointed to the damaging short- and long-term socioeconomic effects – for example, through rising levels of malnutrition as a result of withdrawal of food subsidies; declining public transfers to households in terms of expenditure on social care, which was bringing about the withdrawal of children from education; and the declining affordability of healthcare. These costs could not be discounted from the short-term economic stabilization equation (Kakwani, 1995; Killick, 1995). As a result, the World Bank and IMF started to consider the equity issues raised by adjustment through the introduction of social safety nets in countries such as Ghana, followed by similar social action and recovery programmes in other least developed countries, such as Uganda, Malawi and Zambia, in order to mitigate the social costs of adjustment. But these were largely pragmatic responses to a much wider systemic problem. The failure of these early compensatory policies to alleviate the negative social costs of adjustment became evident in the intensifying impact of market enablement strategies on poor households. Adapting rural-sector concepts to the urban sector, research on livelihood security and assets-based management strategies highlighted the way in which massive numbers of impoverished households in the cities of the developing world were struggling to cope with their increasing economic vulnerability and powerlessness in the face of macro-economic reform (Sanderson, 2002). The experiences provided the impetus for a new policy initiative that was intended to be more strategic in approach and more targeted in intervention. In 1999, the World Bank and IMF introduced the concept of Poverty Reduction Strategy Papers (PRSPs). Their aim is to link debt-relief programmes, for highly indebted poor countries (approximately 40, in total), to specifically targeted measures designed to reduce the incidence of poverty experienced by the poorest people and those directly impoverished by adjustment programmes (IMF, 1999; McGee, 2000). The intention is that PSRPs should identify public action priorities that will impact most on reducing the prevalence of poverty. Arguably, the increasing poverty which PSRPs are designed to tackle is precisely the outcome of SALs and the wider reform programmes in the first place. Poverty has increased because of the following:
Market Enablement and the Urban Sector
• •
11
Public-sector goods and services have contracted when the demand for social transfers caused by SAL programmes has increased. Accelerating unemployment is caused by restructuring the urban labour market, which leads to declining resources to buy into the growth-based strategy of market enablement.
These negative impacts, and the growing impoverishment of urban populations, are compounded by the time lag between the introduction of stabilization and adjustment programmes and the potential benefits that restructured economies should deliver. For many sub-Saharan countries, exports as a percentage of GDP are still falling: debt servicing has been substituted for debt relief, eroding the revenue base. As a result, basic goods and services are unaffordable to consumers and public-sector suppliers. PRSPs are project-based and social-policy oriented. Project interventions aim to harmonize social service delivery with income and employment generation. Typically, this might include, for example, environmental and waste collection improvements, water and sanitation schemes, and improvements to food security for the most vulnerable households. The policy dimension aims at research, public education and awareness-raising initiatives for low-income households related to poverty alleviation, health and sanitation. Problems of implementation – underfunding; short time horizons; poor targeting of vulnerable groups; centralization rather than ‘community ownership’; limited dissemination of information; inadequate monitoring; and limited sustainability – have been endemic in these poverty alleviation measures. Significantly and ironically, PRSPs further bind developing countries into the web of external domination under the guise of liberalization and open economies. Thus, as with SALs, conditionality is attached to PRSPs. PRSPs have to be prepared prior to obtaining debt relief: goals and strategies have to be established and countries have to indicate progress before funds are released. In addition, PRSPs are used as an instrument to implement another part of the structural reform agenda – governance reform. Governments must prepare PRSPs using participatory processes and stakeholder partnership with the emerging agencies of civil society to design, manage and implement poverty reduction programmes. Indeed, the PRSPs must contain, inter alia, not just projects and actions, but institutional reform programmes as well. The argument here is not with the modalities of PRSPs – problematic though they are – but with the conditionality of the process. Again, like the core strategy of structural reform, the PRSP initiative has also been promulgated and adopted across the donor community: for example, the UK Department for International Development (DFID), has recently adopted a poverty reduction agenda as a key criterion in its international development strategy.
Globalization The international and interdependent characteristics of market enablement policies manifest themselves in the growing competitive interaction between forces
12 Market Economy and Urban Change
of supply and demand, production, and investment on a global stage. Globalization, a process of integrating national and local economies within an international framework, marks a new and dynamic stage in the development of the world’s economy. It is a powerful manifestation of the new world order (Hoogvelt, 1997). Its apparatus embeds the global sovereignty of capitalism, or empire – in Hardt and Negri’s – terminology through different moments of incorporation2 (Hardt and Negri, 2000), such that globalization and market enablement are co-existing and interdependent processes. Despite the tendency for ‘neo-liberal convergence’, globalization, like market enablement, is not, of course, a homogenous process in time or space; therefore, different theoretical positions have been articulated concerning the impacts of globalization on national policies and institutions. Nordhaug (2002) reviews the contested theoretical and empirical evidence that revolves around the extent to which the national political and economic institutions mediate and condition transnational forces.3 While theoretical consensus is lacking regarding the processes and determinants of globalization, there is broad agreement on some of the main characteristics; this permits us to draw some conclusions about the consequences for, and impacts on, the urban sector. By using their comparative advantages to increase their participation in international trade, the integration of developing countries within a globalizing economy is promoted as both the salvation for their currently failing economies and the route to future prosperity. Despite the mounting evidence that the benefits of globalization are unevenly distributed, a number of strategies have been advocated for countries undergoing structural adjustment in the developing world in order to enhance their global presence. Besides being urged to adopt these policy initiatives, developing countries have been obliged and encouraged to make available an attractive environment for foreign direct investment (FDI), including multinational enterprises, and have been required to liberalize protective trade barriers. The aim is to increase the mobility of factors of production which, theoretically at least, should favour the developing world. Pressure from the World Trade Organization (WTO), despite failure in Cancun in 2003 to accomplish another major stage in opening international trade, has been instrumental in this process. And where these approaches meet increasing resistance, bilateral trade and aid agreements, invariably favouring the donor country, break down the unanimity of the developing countries. Increasingly, we see the pattern of developed countries either individually, or through intergovernmental institutions such as the EC, invoking unilateral protective pricing/subsidies for their domestic producers, which ironically discriminate against cheaper producers in the developing world. Alongside these open-door policies, the reduction in state regulation of development is required – for example, through urban planning and environmental controls. Privatization of public services is another strategy, which mainly favours international corporate investment that is often in harmony with World Bank structural reform programmes. These outcomes prise open the economies of the developing world, seeking to integrate them within a globalized economy, but on largely unfavourable terms
Market Enablement and the Urban Sector
13
that diminish the autonomy and instrumentality which governments had, in the past, to manage and direct their development strategies. Cities in the developing world play a key role in a globalizing world, mediating the processes of economic globalization, on the one hand, and domestic human and economic development, on the other. Their unique qualities and resources provide competitive advantages, enabling them to act both as engines of economic growth and agents of social change – as discussed earlier in this chapter. At the same time, the process of globalization provides major challenges to the spatial, social and economic structure of cities, ‘forcing them to act as protagonists in the international arena’ (Brand, 2002, p86; Hamza and Zetter, 2000), while calling into question their sustainability as environmental conditions continue to deteriorate (Zetter, 2002; Zetter and Moataz Hassan, 2002a). These contradictory outcomes are discussed in more detail below. Castells (1996) points to the reinforcing apparatus of this globalized, neoliberal economic model. He identifies, first, how globalization resonates with the extraordinary growth in communications and exchange networks: this facilitates the international flow of goods, services, capital and, to a lesser extent, labour. Simultaneously, this also shifts sovereignty and power from the nation state to unaccountable transnational corporations (TNCs) who have become hugely instrumental in structuring urban economic and spatial change, notably in the developing world where the competitive advantages of cheap labour and low or ineffectual regulation are especially conducive attractions to FDI by TNCs. Second, Castells observes the asymmetrical power relations between the developed and the developing world. These demand that developing countries either accept stringent and highly disadvantageous membership rules – SAL, market deregulation, open economies and access for FDI, reduction in state management of development, and so on – or run the risk of marginalization, perhaps total exclusion altogether, for the weakest economies (for example, in Africa) from the new world order.
MARKET ENABLEMENT: THE ROLE OF CITIES AND IMPACTS UPON THE URBAN SECTOR As we have seen, evidence increasingly points to the negative socio-economic (Mohan et al, 2000) and environmental impacts (see, for example, Reed 1992; Richardson 1996; ODI, 1996) of SAL programmes and the market enablement regime on developing countries. The stringent conditions are manifest in: high social costs caused by reduced budget allocations for health and education; rising prices for basic foodstuffs as subsidies are abolished; the re-pricing of public services such as water and transport; and the demise of equity-based policy-making. Given the very limited success of market enablement policies in achieving their objectives to date, the benefits of economic stability seem to be offset by the costs of increasing political instability. Significantly, these protests at the impact of SALs and market enablement policies are urban based – for example, the water
14 Market Economy and Urban Change
wars in Bolivia (Crespo Flores, 2002) and the food riots in Morocco, Zambia, Indonesia and Ecuador (Mohan et al, 2000) – hence, the introduction of mitigating policies for poverty alleviation. More specifically, then, what does this development paradigm mean for the urban sector in the developing world? What are the impacts on cities and their spatial and social structures? The chapters in this book explore these questions in detail. Here, the intention is to provide a more general overview, while recognizing that there are widely differing impacts between and within cities of the developing world. To the extent that market enablement favours the developing world, not all cities – or, indeed, countries – have benefited from increasing integration within a global economy, notably in sub-Saharan Africa. The differential impact on households and classes within the countries and cities of the developing world is a key theme of current policy-making and research (UNCHS, 2001a, 2001b).
The role of cities and the new urban agenda In 1991, the World Bank set out the pivotal role for cities in its now landmark policy statement. This encapsulated and gave substance to the shift in urban-sector policy-making under conditions of market enablement. Rejecting the large-scale public-sector role and the project-driven model of the earlier era, the strategy favoured ‘urban operations on city-wide reform, institutional development and high priority investments, and puts development assistance in the urban sector in the context of broader objectives of economic development and macro-economic performance’ (World Bank, 1991, p4, emphasis added). In short, from the 1990s onwards, the urban agenda has been the market enablement agenda. This reconfiguration recognizes that cities are a fundamental instrument for delivering the macroeconomic objectives of globalization and market enablement. With their comparative advantages and their potential for export-led growth, cities in the developing world are both a crucial development resource and the leading sector in these processes, as elaborated in the discussion on the dynamics of cities earlier in this chapter. The market enablement agenda has, therefore, been pursued with particular vigour in the urban arena. Just as the overall objectives of market enablement have been to increase the productivity and competitiveness of national economies, of paramount importance to the delivery of this agenda has been the objective of increasing urban productivity in order for developing world cities to better access the transnational global economy, while reducing their costs of production, which are mainly attributed to high social overheads. In other words, cities provide the contested territory between the social welfare function of public-sector investment and management, on the one hand, and public choice theory and private-sector productivity objectives, on the other. However, macro-economic imperatives were not the only justification for reforming the urban sector. This argument was buttressed by asserting the ‘failure of the state’, on the one hand, and the emerging debates on urban governance, on the other. Thus, by 1997, taking the issue of the state in a changing world as the
Market Enablement and the Urban Sector
15
theme for its annual review (but missing the irony of its position), the World Bank asserted the reasons for the crisis in statehood: declining state capability and credibility in the eyes of its citizens (World Bank, 1997). Without acknowledging the extent to which macro-economic reform might have orchestrated ‘this institutional vacuum of significant proportions’ (World Bank, 1997, p162), the review re-endorsed its already well-established but simplistic prescriptions for redefining the role and functioning of the state within a ‘governance and management’ agenda. In radically reshaping the role and development of cities, market enablement provides the economic instrumentality for implementing public choice theory, while reform of urban governance provides the institutional instrumentality necessary for its implementation. Whether consciously or not, this neo-liberal orthodoxy borrows from North’s holistic theory of institutional economics (North, 1986) because it is the joint package of macro-economic and governance reform that is so significant to what is happening in the urban arena. Defending the inherent contradictions in their position here, neo-classicists accept intervention strictly on the condition that it will correct market failures. Thus, as the main indicator of failing urban governance and the urban sector’s poor performance, the low productivity of cities was attributed to supply-side blockages and market distortions, largely blamed on the long reach of an inflated public sector and the rigidity of the regulatory instruments of urban administrations. By asserting that these factors inhibited the private sector as the engine of market enablement at the urban level, such an assessment, of course, replicated the macro-economic analysis at the national level. Among the evidence cited for these conditions was: failing or inefficient infrastructure systems and urban services; inadequate land supply and development practices, creating uncertainty and inhibiting both commercial and residential investment; regulatory machinery constraining private investment and FDI, especially in exportoriented production; a burden of local taxation that fell heavily on the formal productive sector; and inadequate housing investment. While some of these failings contributed to low labour productivity – for example, poor housing and urban transport – others impacted more directly upon private-sector investment and productivity – for example, through tax burdens, costs of regulation and distribution costs.
Managing cities under conditions of market enablement The perceived challenge, then, was to remove these constraints and unlock the urban sector’s investment potential and opportunities. In order for cities to deliver the market enablement paradigm, the apparatus of city development and management has been radically reconceived over the last decade. Two interrelated aspects are considered here: the modes and tools of intervention and management; and the modes of governance, including the agencies and institutional structures for administering, managing and developing cities. The unifying characteristic, consonant with the neo-liberal agenda and public choice theory, is the progressive disaggregation of the powers, resources and capabilities found in the
16 Market Economy and Urban Change
orthodox Weberian model of public-sector urban administration, and their replacement by a more diffuse, pluralistic and, ultimately, less accountable model. In restructuring the relations between the state and society, two concurrent strategies have been deployed to transform the approaches to city development and management. First, the World Bank’s global urban management programme (see, for example, Davey, 1994; World Bank, 2000), provided a framework of initiatives that was embarked upon during the early 1990s, alongside its urban policy agenda. Second, this framework was elaborated and promulgated through lending and adjustment policies, where conditionality increasingly drove the urbansector reform programme. Thus, both the components of the urban-sector reform programme and the instrumental way in which these reforms have been enacted are remarkably consistent with the characteristics of the structural economic reforms at the national level. The extent to which these reforms signal the demise of the Weberian model of public-sector bureaucracies as the global model of urban governance and administration remains to be seen. In terms of the modes of intervention, urban government is increasingly cast in the role as an ‘enabler’ and decreasingly in the role as the supplier or regulator of public goods, such as land and housing, services and infrastructure. Indeed, one of the basic characteristics of the neo-liberal state is to separate policy-making from implementation, and to isolate the production and provision of urban public services from public control. Although it is being dismantled, the conventional city government public-sector role is unlikely to diminish entirely. However, the emerging function of urban administrations is to act as an agent for the city as a productive and utility-maximizing economic asset. The contrast between the city as a business and the city as a social entity in which its urban institutions respond to the needs of its citizens could not be more striking. This transformation has far-reaching practical implications for tackling the complex dynamics of urban growth and the spatial structure of cities in the developing world. Privatization separates the production and provision of key urban services, such as land and water supply, from the wider institutional, spatial and social policy framework. This loosens the already limited regulatory capacity of urban governments to: direct the overall spatial strategy of city-building; phase and coordinate development; and implement equity-based urban development policies. By restraining the direct modes of intervention, market enablement displaces the capacity of urban administrations to tackle not only this traditional agenda, but also the highly regressive social, environmental and economic patterns of urbanization generated by the dynamics of market-led city growth. Privatizing urban infrastructure separates the agencies responsible for making urban policy and those implementing urban development: this might be termed the ‘sectoral transformation’ of urban policy and development. By exposing the contradiction between a service provision concept of public goods and short-run ‘productivity’ indicators such as profit maximization, privatization empowers the interests and objectives of private providers – for example, by deregulating user charges – over the wider interests of public agencies to coordinate and manage urban growth.
Market Enablement and the Urban Sector
17
Furthermore, reconceptualizing the modes of intervention and service provision as market-led priorities diminishes the significance of the wider agenda of how cities are managed and developed, and favours more narrowly conceived objectives of profitability and productivity. This marginalizes poor households in terms of the access and affordability of vital urban commodities such as housing, land and water supply. These are critical urban policy issues in most cities of the developing world. Conversely, the enablement mode of intervention stresses the dominance of market-priced public services and user charges, which satisfy the primary objectives of profit-maximizing corporate investors. These outcomes radically reposition the function and purpose of urban policy-making. A declining emphasis on regulating the production of the physical environment in order to mediate competing demands within a spatial strategy is increasingly substituted by a public-sector role whose primary task is limited to coordinating urban development processes in order to enhance urban productivity and efficiency in the interests of the powerful city-building stakeholders. At the same time, this model of urban management becomes less able to challenge the regressive spatial and social effects of globalization (Burgess et al, 1997; Brand, 2002). The argument here is not to resurrect largely discredited control models of city planning. Rather, it is to make the point that the neo-liberal agenda promotes an ‘a-spatial’ concept of city building and commensurately reduces the capacity to mediate city-building processes and spatial structures within a wider conceptualization of the public interest. It is increasingly difficult to find where these stillvalid and vital objectives of urban public policy fit into the new apparatus. The modes of governance of cities – developing civil society, in the current idiom – is the second area where the paradigm of market enablement has determined a reconceptualization of how cities should be administered, managed and developed. Two complementary processes are evident in what might be characterized as a shift from government to governance: restructuring the machinery and role of local government, and decentralization. As noted above, in much of the developing world a significant proportion of city-building has always been informal and community based, taking place without the formal structures of the urban government or the market. However, under conditions of market enablement, the concept of autonomy and diversity of decision-makers is legitimized as the new form of governance.4 Directly ‘enabling’ popular and community-based social movements and enhancing the role of nongovernmental organizations (NGOs) (Abbot, 1996; Fowler and Edwards, 2002) and other stakeholders has introduced a radically new framework of agencies and institutions responsible for urban governance. Conceptualized in this way, these stakeholders no longer constitute the object of policy-making and intervention by urban administrations, but are partners in complex networks of interests that are ‘negotiating’ (Abbot, 1996) the processes of city-building. Thus, the traditional role of the public sector, predicated on a monopolistic view of urban governments as strategists, regulators and providers, is replaced by a pluralistic model of urban policy-making, development and management. While direct accountability may be reduced, conversely, enablement is a vehicle with which stakeholders,
18 Market Economy and Urban Change
such as NGOs and communities, can take firmer control and responsibility for the way in which their environments develop and their urban needs are satisfied. To the extent that many interest groups were marginalized in the past, governance reform appears to offers a more inclusive structure of urban government and decision-making. Localizing development empowers communities and potentially mobilizes previously untapped resources. Governance reform also resonates with the wider rights-based discourse that surrounds development debates. But concepts of community and the concept of governance as enablement and empowerment are inherently problematic (Jenkins, 2001). In this new and disaggregated form of organizing urban administration and development, representative citizen democracy is replaced by modes of governance enacted through networks of semi-public, joint-venture, private corporate and community bodies. Rather than through large, locally elected and accountable local authorities, citybuilding is undertaken by different communities and interest groups with different perspectives on the processes, resources and capacities that can influence outcomes. Strategies for urban development and the modalities of decision-making tend to be fragmented, rather than coordinated. It might be concluded that new modes of governance have redefined agencies and communities as collectives of consumers bargaining in the urban marketplace of public goods and services. The outcome, as Hoogvelt (1997), among others, argues, is not necessarily that paternalistic and ‘clientelist’ models of government are removed – rather, that they are reformed and institutionalized within a new framework of diffuse stakeholders who have limited accountability to the urban poor and with whom the urban poor have little bargaining power. It remains to be seen whether institutionalizing the innovative energies of low-income communities within new frameworks of governance simply co-opts and neutralizes their capacity, leaving them as powerless as in the past. Empowerment introduces an uneasy tension between business and social entities in how the city should be developed, serviced and managed, and there is persuasive evidence that poor urban communities are being impoverished rather than empowered by these reforms. Indeed, by documenting the apparent failure of the ‘new governance’ model to deliver more effective and accountable services that address the needs of low-income dwellers, UNHabitat is now claiming that a policy vacuum has developed because government agencies have no access to these slum areas (UNCHS, 2003). As a result, the economic, environmental and social conditions of the mass of urban dwellers in the developing world are deteriorating. These damaging outcomes contradict, of course, expectations. Not only are they a poignant reflection on the irreversible diminution of the public-sector role in urban development, but also an ironic comment on UN-Habitat’s own endorsement of the governance agenda at Habitat II in Istanbul in 1996. By highlighting this evidence, UN-Habitat now appears to be breaking ranks with the market enablement/governance reform paradigm. The second component of governance reform has been decentralization – the intended redistribution of financial resources, administrative capacity and revenueraising powers from central to local urban governments. Decentralization has been the counterpart to both the restructuring of local government and the wider
Market Enablement and the Urban Sector
19
agenda of enhancing urban productivity and competitiveness. Decentralization has been promoted as the means by which local management can be enhanced through building representative and democratically accountable structures closer to the point of decision-making on urban services and strategies. Superficially, the case for decentralization is plausible, and in these terms it is clearly a central plank in governance reform; but its execution is proving to be a rather more intractable part of the governance and economic enablement agenda. First, decentralization potentially makes far more challenging the already difficult task of designing, implementing and coordinating national and regional settlement strategies and urban development programmes. There are implications for establishing the coherent spatial distribution of economic development if cities are more autonomous and aggressive in their growth plans. Urban productivity objectives could be impaired if, for example, inter- and intra-regional infrastructure is poorly coordinated with more independently developed cities. Within cities, decentralization may benefit individual communities, enabling them to achieve definable gains in their physical and social surroundings. But Brand in Colombia (2002) and de la Macorra in Mexico (1999), for example, illustrate how local innovation also heightens the organized competition for scarce urban resources, and accentuates the disaggregation of decision-making, resource allocation and service delivery. These outcomes militate against strategic urban planning processes and the strategic provision of urban services. In these examples, decentralization accomplishes micro-level empowerment at the expense of reduced efficacy of macro-level urban strategy. Next, shifting the balance between central state and local control is predicated on capacity-building, which the World Bank has promoted in its urban management programme. But, if previous governmental models were hopelessly over-optimistic about the powers and capacities of urban administrations, decentralization of powers to manage the complex processes of rapid urban growth under the current reform package has been equally retarded by the lack of institutional capacity and appropriate regulatory instruments and machinery at the local level. Notable shortfalls are in the capacity to manage the urban development process and to provide an effective fiscal base for cities to manage themselves in any more autonomous or accountable ways. Negotiating innovative financial packages and partnerships to manage land and housing development, or working within a contract and compliance framework of service delivery, requires new professional skills and experience that are in short supply, especially where municipalities only had responsibility for a limited range of functions in the past. These outcomes are creating a vacuum that is being filled by both old and new coalitions of urban interests who are assuming power for the future city at a local level. Elite groups appropriate and consolidate power, as they always have, through formal and informal structures at the urban level, exemplified in countries as wide apart as Egypt (Zetter and Hamza, 1998; Dorman, 2002), Colombia (Brand, 2002; see also Chapter 8 in this volume), Guatemala (Grant, 2002) and Brazil (see Chapter 6 in this volume; Lima, 2002). These interests are benefiting from twin opportunities provided by macro-economic reform policies and
20 Market Economy and Urban Change
the decentralization/deregulation of development and service provision at the micro level. These processes enable powerful coalitions to reinforce their interests and legitimize their control by investing in potentially lucrative privatized urban services. At the same time, decentralization is creating essentially weak and underresourced public administrations that are less empowered to manage change in an environment of competing stakeholders and privatized infrastructure.
Impacts As concentrations of development and power, ironically, cities in the developing world are perhaps most prone to the adverse impacts of this agenda of market and governance enablement. The combined pressures of urbanization, structural reform packages and economic globalization are contributing to a decline in living and environmental standards, and are pushing cities in the developing world into a new era of social and economic turbulence. Urban dwellers, and particularly the urban poor, have been adversely affected by the results of market enablement: increasing prices of basic commodities such as food and access to land; declining real incomes; rising unemployment in the formal sector, notably from privatization and the retrenchment of public administration; reduction in public expenditure and investment; and declining affordability of privatized public goods and basic services such as water, electricity, transport and waste disposal. In the developing world, especially in Latin America, there is now widespread evidence of a correlation between indicators such as increasing poverty levels, decreasing real wages and declining share of national income by the poorest quartiles and periods of economic recession and the introduction of SALs (Oxfam, 1995; Tulchin and Garland, 2000). As Rakodi argues, the results of adjustment and enablement policies have, at best, been slow to manifest themselves; at worst, the incidence of urban poverty remains unacceptably high and, in some countries, continues to rise (Rakodi, 2002). For example, during the five-year period from 1993 to 1998, the incidence of poverty in Nairobi has risen from 20.8 per cent to 30 per cent of households living in absolute poverty, while in Lomé the increase is from 12 per cent to 25 per cent (UNCHS, 2000); these data appear to be typical. More generally, levels of poverty have only recently regained the levels that existed during the 1980s.The number of people living in absolute poverty is rising and could double in the next 15 years (World Bank, 1999), while the annual UNDP reports show that a substantial number of the already poor countries are getting poorer on a ‘rolling decade’ basis. It is neither coincidental that urban social movements have been at the forefront in resisting reform policies, as noted above, nor surprising that the design of poverty alleviation measures, such as PRSPs, have been mainly aimed at urban dwellers whose households’ consumption and expenditure patterns have been hardest hit by the economic reform programmes. The expanding presence of the marginalized ‘informal city’ in the developing world – notably represented by the informal nature of the shelter and employment sectors – provides the most obvious evidence of the negative outcomes of neo-liberal policies. With regard to the restructuring of the urban labour market,
Market Enablement and the Urban Sector
21
privatizing the provision of public goods and the retrenchment of urban government and parastatal agencies has directly contributed to formal-sector unemployment. Conversely, because formal-sector employment growth in the private sector has been so slow, it has not been able to absorb redundant workers from the public sector or the natural expansion of the labour force – typically, labour force growth rates in many developing countries expand at more than twice the rate of employment creation in the formal sector. By driving down the capacity of the wage economy to sustain the livelihoods of the majority of urban dwellers and by driving up the price of public goods, such as water, and welfare services, health and education,5 it is hardly surprising that SAL policies force poor city dwellers – including redundant or poorly paid middle-class, public-sector employees – to turn to the informal sector of the urban economy. Informal sector growth rates of 10 per cent per annum in countries such as Kenya are probably not untypical (Republic of Kenya, 2000). Paradoxically, given the intention of market enablement policies to enhance urban productivity, the outcome of this hostile economic climate has been to enlarge the informal sector, where productivity rates are very uneven. With regard to the shelter sector, market enablement policies offer no alternative beyond the profit-maximizing strategies of providers. The approach is predicated on a housing market model that is neither affordable, because formalsector provision pushes up the price of land and services, nor necessarily the choice of the majority of the urban poor for whom other related housing needs, such as security of tenure, might be provided as a perceived rather than open market commodity. Running counter to the intended objectives of market enablement, perhaps the predicted expansion of the informal city, as the predominant form of urbanization in the developing world (Fernandes and Varley, 1997; UNCHS, 2003), is ironically not so much a failure of market enablement but the rational process of people exercising choice in the urban marketplace. As these two sectors illustrate, urban populations are highly vulnerable to the impacts of market enablement. Because their levels and the patterns of expenditure are complex, rising prices, inflation and declining incomes caused by rising unemployment make urban populations much more susceptible to price shocks introduced by market enablement policies. Moreover, at least in the short term, open market prices and declining wages render many basic urban services unaffordable just when the demand for social transfers is rising. The introduction of PRSPs as a safety valve indicates that the accelerating levels of urban poverty are a very problematic outcome of the new paradigm. There is evident potential for an increase in the social and economic turbulence so far witnessed in a few cities. Paradoxically, the concept of the state embodied in market enablement has displaced the welfare aspirations of the growth-with-equity paradigm precisely at a time when greater public intervention and social transfers are demanded to remedy the regressive and unequal patterns of urban development that it has caused (Hamza and Zetter, 2000). At the same time for the urban economy as a whole, these outcomes introduce demand- and supply-side constraints that potentially hamper the drive to
22 Market Economy and Urban Change
increase urban productivity, competitiveness and export-led growth. Reduced purchasing power, caused by open market and competitive (that is, low) wage rates, suppresses demand. Simultaneously, where there is a potential market for locally manufactured goods, short-term supply-side constraints in a liberalized economy – for example, poor labour productivity caused by inadequate education, unhealthy living conditions and bad transport – merely accelerate a growth in imports and a worsening balance-of-payments deficit. Governance reform by shifting power for the management and development of cities towards diverse groups of stakeholders increasingly highlights the tensions between economic productivity and environmental sustainability. The dilemma for urban authorities is to produce spatial strategies and regulatory frameworks that consolidate the comparative advantages of their cities, yet defend the entitlements of low-income urban poor to reasonable housing, improved access to urban services and reduced environmental degradation. The shift from centralized, stateled regulatory planning frameworks to a more flexible, market-oriented model also shifts the balance towards developing cities which are neither economically sustainable nor environmentally sustainable. The prolonged economic crisis in the developing world, as much because of, rather than despite, the aspirations of market enablement, continues to have dramatic impacts on the cities of the developing world in terms of the widespread incidence of poverty, escalating growth of informal settlements (UNCHS, 2003), growing inequality, and declining environmental and living standards. These outcomes are paralleled by the commensurate decline in the capability of public institutions to negotiate and mediate conflicting interests in the urban arena. For most, if not all, developing countries, the ambition now is not so much to build entrepreneurial cities connected to the global economy; rather, what is at stake is the basic survival of the cities in an era of declining social, economic and environmental conditions and the legitimacy of government to protect the needs and livelihoods of its citizens. Given these pessimistic conditions, it could be argued that the impact of market enablement and new modes of urban governance have accentuated rather than diminished the demand for public control at the same time as the power of the urban governments has withered (Zetter, 2002). The Weberian model of administrative structure and accountability is not the only model called into question by market enablement and new conceptions of urban governance. Arguably, the decline in state legitimacy at the urban level (in the context of this book), brings with it the decline in the Hobbesian social contract between government and the governed. It remains an open question whether the enablement reform agenda, with its combined strategies for urban governance and macro-economic performance, will be sufficiently resilient and progressive to manage both the increasing economic and social instability of cities in the developing world and their growing unsustainability in environmental and spatial terms.
Market Enablement and the Urban Sector
23
FROM DISCOURSE TO EXPOSITION The book, then, explores the interplay between market enablement and policy outcomes in the urban sector, and the often disjunctive relationship between policy expectations and their impacts. Chapters 2 to 4 – Cedric Pugh on the relationship between welfare and development, Mohamed Hamza on the relationships between the state and foreign aid in development, and Carole Rakodi on poverty alleviation and development – develop the discourse of market enablement by addressing how these three structural issues have reformulated the political economy of development. The chapters discuss how these structural changes in development theory and practice have redefined the role of the state vis-à-vis the urban sector and the urban policy-making process. They demonstrate that although these structural changes are often assumed to be both necessary and unproblematic, they challenge the neoliberal conceptualization of development and produce unintended and disjunctive outcomes. Chapters 5 to 8 focus on key urban-sector policy areas of land, development and housing, drawing their evidence from country-specific studies – Gareth Jones mainly on Mexico, Geoffrey Payne and Richard Grover on the so-called ‘transitional economies’, Flávio de Souza and Zetter on Brazil and Andrés OrtizGómez and Zetter on Colombia. Adding to the case study approach of Hamza on Egypt and Rakodi on Kenya, the objective here is twofold. Through an exploration of specific operational contexts, these case studies both elaborate upon and provide significant insights into the theoretical discourse surrounding the enablement development paradigm played out in the developing world. Then, from this applied perspective, the case studies demonstrate the inherently contradictory tensions between urban policy and outcomes within the enablement paradigm. They argue that key objectives embodied in enablement, such as urban productivity, land delivery for low-income dwellers, housing programmes, poverty alleviation, improvements in living standards and participatory development strategies, are rarely delivered. These analyses highlight the distinctiveness of individual countries’ responses to the market enablement paradigm, providing a counterbalance to what often appears as a relentlessly homogenous set of conditions.
The chapters Chapter 2, by the late Cedric Pugh, is a wide-ranging discourse on the shifting philosophical and conceptual core of the development debate around the themes of welfare and political economy, an explanation of the succession of these ideas, and an evaluation of their significance in the context of housing policy. It offers a fittingly broad canvas not only to the themes of the book, but also as an epitaph to Pugh’s own prodigious and penetrating critique of urban policy-making over several decades. Pugh’s thesis in this chapter has two pillars that bear directly on the themes of the book. First, taking as his starting point Sen’s reasoning that development is about promoting capabilities, choices and freedom (Sen, 1985; Drèze and Sen,
24 Market Economy and Urban Change
1995), Pugh develops a conceptualization of (housing) welfare that is value-based rather than more narrowly focused on material standards such as poverty alleviation or basic needs, or urban productivity. From this wider philosophical perspective, and in an often dialectical discussion, Pugh’s argument is that while it may often be assumed that unified links bind together ideological precepts, theoretical and actual policies, and welfare, this is scarcely ever true either in principle or in practice. Second, he argues that a monopolistic ideological position is both philosophically and socially self-limiting since all three competing ideologies – in simple terms caricatured as the market, the state and householders – can produce inequality as much as enhancing opportunity and equity. His analysis thus occupies the ‘middle ground’ of the book: he would probably have contested the firmly ‘rejectionist’ stance against the neo-liberal project that I have used in this introduction, while similarly pointing out the often regressive outcomes of growth with equity. But his thesis is not secular or ideologically neutral. Pugh’s thesis strongly resonates with the theoretical (or ideological) propositions of structuration articulated by Giddens (1998) over the last decade, and its application in the so-called ‘third way’ of current British political practice. Relating his thesis to housing, this is, of course, a developmental sector that pre-eminently challenges us to think critically about the discourse on development concepts and policies. Housing welfare is more than about material conditions or maximizing productivity: it gives way to wider philosophical and moral obligations of widening social and economic opportunities, and the generation of wealth, human capital and capabilities. At the same time, the rapidity of socioeconomic and institutional change in the urban arena, the urban reform programme of market enablement and the forces of globalization have profound impacts on the housing sector. Deploying his thesis to investigate the political economy of housing policy, Pugh considers two concepts that dominate policy: the welfare function of housing and alleviating housing inequality. These constitute, perhaps, the most contested areas of theory and policy, nowhere more so than in the developing world. Pugh’s central purpose is to reconcile the competing ideological positions taken on these two contested variables. Providing both theoretical argument and empirical evidence, he advances a general thesis in which the ideologies of the market, state and householder can co-exist in expanding social and economic opportunities. Comparative evaluation demonstrates that those countries which have most successfully developed their housing sectors are those where state, market and household (self-help) ideologies have been unconventionally combined. Despite their ideological diversity, Singapore and Chile are cited as examples of this thesis. Thus, while acknowledging that the housing sector is, indeed, contested territory in theory and in policy, a persistent theme of Chapter 2 is to caution against partisan ideologies and to seek what Pugh calls a ‘blended’ view. This is not the pragmatist’s escape, but an empirically based and philosophically justified position in which successful policies and practices resist unique ideological explanations. Within the terms of his thesis, Pugh contends that what he calls a ‘whole housing-sector’ approach is the key: his framework is echoed later in Chapter 6
Market Enablement and the Urban Sector
25
by Payne and Grover, but also refers back to Currie’s rather neglected work some 30 years or more ago (Currie, 1966, 1976). Such an approach: combines the competing characteristics of private, public and self-help (that is, household) sectors; depends upon integral developments in land policy and housing finance; provides an environment where these roles and variables merge and are practised within an embedded institutional capacity; locates the saving-investment function largely within the domestic economy rather than external borrowing and agencies; and integrates housing within the national development framework of macro-economic policy, capable public administration and institutional reform. This ‘middle way’, of course, recognizes the persuasiveness of the macro-economic/institutional reform axis of the neo-liberals, yet endorses the critique of many of the ideological strictures of the enablement programme discussed earlier in this chapter. With regard to distributional inequalities in the housing sector and the mixed experience of the remedial impact of subsidies, Pugh makes two crucial points that are consistent with his general thesis. The issue of subsidies cannot be defined and operated in an economically or politically neutral way as market enablement might contend: housing subsidies are the proxy for inequalities in the distribution of a fundamental urban resource that markets cannot correct independently. The argument, thus, turns on Pugh’s second, and more crucial, point that sectoral inequalities such as these cannot be separated from the wider incidence of poverty and pre-existing inequalities in the distribution of income. In other words, as Rakodi argues in Chapter 4, we need to identify the diversity and the persistence of structural causes of impoverishment, not simply attempt to moderate poverty on the basis of the selective and targeted intervention inherent in the PRSPs discussed above. In short, ‘success’ in the housing sector, measured in terms of enhancing the aggregate performance in efficiency, equity and capability welfare, depends less upon a universalistic or monopolistic developmental paradigm, whether leftist, rightist or centrist. Rather, it depends upon the interplay between different political economies, which may be both cooperative and competitive in different circumstances, localities and time periods. With regard to the housing sector, what makes the crucial difference, in Pugh’s view, are institutional configurations and capacities, particularly at a national level. To the extent that his own thesis offers a way forward in reconciling the competing ideologies, Pugh contends that we can judge how best to combine them. Conceptual frameworks and principles exist that can reveal the economic and social costs, as well as the opportunities inherent in different models, from the level of the household, as well as in relationship to the wider economy. Good governance should, in theory, be able to optimize the combination. Pugh’s conclusions are pessimistic for neo-liberals and ‘welfarists’ alike, who seek the instrumentality of their position in terms of the performance of housing policy. Pugh does not find theoretical or empirical evidence for the link between ideology, policy and implementation to ‘good’ welfare. In any case, as his analysis of international housing policies makes clear, it is simplistic to cast approaches as either neo-liberal or social. Rather, policy tilts in different directions according to
26 Market Economy and Urban Change
different paradigms. Currently, the World Bank and other international aid agencies favour a ‘thin’ state, a ‘thick’ market and ‘thickening’ community development roles. In Chapter 3, Mohamed Hamza, taking the case of Egypt, shifts the perspective from a theoretical elaboration of the political economy of welfare to a discussion of the relationship between international assistance and state interests within a political economy framework. The chapter examines the macro-level impacts of the shift from a welfare and growth-with-equity paradigm to market enablement on the micro level of policy delivery and outcomes for shelter provision. The core of Hamza’s argument is not so much that the paradigm shift has generated negative and unfulfilled aspirations. Rather, the full significance of these consequences can best be appreciated by examining the interplay between the macro-level setting for policy-making within an enablement context, and micro-level implementation and technical considerations. Critical to his analysis is the mediating role of the state and the compliant stance that it has taken to satisfy not only its domestic objectives but the wider economic and geopolitical interests of international donors. Perhaps uniquely, for a protracted period Egypt was successful in resisting the most pernicious impacts of enablement policies and the structural changes that they demand. Yet, in the end, as Hamza shows, this resilience has contracted against the imperatives of enablement and the internal political contradictions of the country. From the 1950s, the Egyptian government assumed a more central role in development processes, with a firm social policy orientation. Since then, at a macropolitical level, dramatic changes have taken place as the country has opened up its economy. However, as Hamza shows, so far as the shelter needs of the country have been concerned, these changes have not been reflected in practice because they have not been accompanied by reform of the structural or institutional frameworks within which these shelter programmes have been developed and implemented. To establish more precisely the relationship between macro-level policy-making and micro-level intervention, a conceptual framework that explores the effects of the role and nature of the state, foreign aid (primarily from United States Agency for International Development (USAID)) and economic reform (IMF/World Bank) is utilized. This framework is deployed to investigate the interaction between these three key elements and how they affected shifts and changes in shelter policies in Egypt. The chapter argues that an understanding of the housing question can only be derived by putting it within this broader socio-economic and political context of development. By investigating the perceptions, priorities and criteria that drive the decision-making of key actors, and the state’s central role in mediating between external and internal interests, Hamza shows how the policy outcomes reflect essentially technocratic answers to the country’s severe housing problem, which is, in fact, largely structural in nature. This gap between the political and technocratic levels of policy-making and implementation is a central theme in the chapter. Over a protracted period, the distinctive responses to the shelter question in
Market Enablement and the Urban Sector
27
Egypt, at both levels, and under a highly complex and rapidly changing political environment, are reflected in the disjunctive outcomes that the chapter outlines. As discussed earlier, a key challenge to the market enablement paradigm has been the extent to which the neo-liberal policy agenda has been instrumental in the escalating extent of urban poverty, and the impact of remedial programmes, such as PRSPs, to alleviate these conditions. In Chapter 4, Carole Rakodi explores these critical issues, advocating, like Cedric Pugh, substantial changes in concepts and practices if we are to move from remedial to structural impacts on poverty. She argues that lessons from the limitations of an earlier generation of urban shelter interventions, on the one hand, together with recent experience drawn from rural poverty studies, on the other, have improved our understanding of the nature of urban poverty and its multidimensional characteristics. The chapter draws on this evidence to derive a series of principles upon which to base the design for a new generation of projects and programmes that might more successfully reduce urban poverty while adopting more collaborative and beneficiary-centred modalities. So far as the experience of earlier urban-shelter interventions is concerned, market enablers can represent sites and services and squatter upgrading programmes as archetypal examples of the failings of the growth-with-equity paradigm. While not gainsaying their limitations, Rakodi draws on the experience to maximize the potential learning for new initiatives for poverty reduction. Within this context, she highlights not just the well-documented technical inadequacies; more significant lessons are the political naivety that they expose in terms of their failure to provide effective local ownership of externally driven policy, and in their susceptibility to high levels of patronage and clientelism. Rakodi stresses how the lack of beneficiary involvement in both project design and evaluation ensured that neither the aspirations of the poor, nor the impacts perceived as critical by the poor, were taken into account. These important lessons resonate with the governance reform agenda, of course, but demand close attention if the current drive to develop poverty alleviation policies is to be more effective than these predecessors. Recent research conceptualizing the nature of rural poverty is potentially more fruitful for urban policy. Rakodi identifies some similar limitations – notably, that poverty is usually defined by outsiders and neglects people’s own definitions and direct experiences. The significant point she makes, in the context of current urban-sector policy-making for poverty alleviation, is to identify key methodological challenges: understanding the diversity of causes and the persistence of impoverishment (or improved well-being) for individuals, households and communities; establishing measures of the dimensions of poverty experienced by the urban poor; and recognizing that the poor are not passive recipients of external interventions, but people capable of adopting positive strategies for coping with impoverishment and using their assets to defend, if not to improve, their well-being. Although their challenge in escaping poverty is essential structural and not procedural, the importance of enhancing access to a range of assets – tenured land, financial services, social capital and safety nets, for example – is crucial in mitigating poverty impacts. The important conclusion that Rakodi draws on the extent to which macro-economic policy might be instrumental in
28 Market Economy and Urban Change
poverty alleviation is this: potentially positive labour market impacts of economic policy have clear pro-poor objectives that must be delivered – this requires greater sophistication than is currently evident – while negative human-capital side effects, such as reductions in health, education and training, must be averted. Rakodi also points to the problematic tension between national policy determinants and local circumstances. From this experience and understanding gained from these lessons, and drawing on current research and practice, Rakodi proposes a series of principles for urban poverty reduction projects and programmes. Among the key variables she identifies are: political legitimacy and participation; effective articulation with the needs and priorities of the poor; governance objectives, including local policy ownership, partnership between different actors and agencies, and planning, project design and delivery that are effectively institutionalized; and participatory monitoring and evaluation. Her principles are premised on collaborative design and implementation, reflecting the primacy of local stakeholders’ perceptions of the extent to which interventions have achieved agreed objectives, not merely externally defined criteria. The successful application of these principles requires rethinking traditional approaches to planning and policy formulation and the instruments for programme and project. Using her recent experience in Kenya, Rakodi discusses the implementation of these principles in response to the needs of poor urban people through the selection of key project components, among which she identifies: preparing a poverty profile of the city; local stakeholder consultation; establishing a local steering mechanism to ‘own’ the process; provision for poor residents to voice their experience of poverty, and to identify and prioritize their needs; and a forum for agreement to be reached on project proposals. Developing the project components into an operational process is not without problems. In the Kenyan case, Rakodi notes the challenges to successful collaboration, the desire by local authorities to retain a ‘controlling interest’ despite the lack of trust by other stakeholders, and the tension between professionals and politicians. For pro-poor policies and poverty alleviation measures to be effective, Rakodi suggests a number of conceptual and practical issues that need to be resolved on the basis of her interim findings. Many of these issues speak directly to the governance reform agenda. She argues the need for stronger political commitment, at the urban and national levels, to pro-poor policy and decision-making, and a willingness to listen to poor people’s analysis of their situation, priorities and solutions. For governance reformers, she makes the crucial point that unevenness of stakeholder bargaining power and negotiating capacity can undermine the ability of the poor to articulate and promote their interests, while also recognizing at the same time that collaborative structures need to capture the highly differentiated character of ‘communities’ – they are not homogenous entities. In terms of technical developments, donor support, project design and capacity-strengthening, as well as developing innovative funding mechanisms, all require major upgrading if they are to enhance poverty alleviation rather then be obstacles to implementation.
Market Enablement and the Urban Sector
29
As argued earlier, separating the production and provision of key urban services from the wider institutional, spatial and social policy framework runs the risk of disaggregating rather than coordinating urban policy and development. Rakodi points to a similar danger of ‘sectoralization’ in poverty alleviation interventions. For pro-poor policy and practice to be effective, this dramatically increases the need for effective inter-organizational networks, institutional collaboration and multi-sectoral coordination, while accepting room for manoeuvre between the actors, agencies and donors. These characteristics, in turn, require a level of political and democratic maturity that may not be available. In Chapter 5, Gareth Jones introduces a rather different perspective on the implications of market enablement for the urban sector, by reviewing what urban policy-makers can learn from rural contexts. Yet, because poverty alleviation is the underlying theme of his chapter, in many respects it complements Carole Rakodi’s discussion. Like Rakodi, Jones draws on rural experience. The lens for his analysis, however, is land – as a concept but also as a commodity and an asset, which, under conditions of market enablement, raises complex questions for policymakers and researchers about access, rights, distribution of ownership, investment and productivity. Jones challenges the typology that differentiates urban and rural space, arguing that we have much to learn from the (physically and intellectually) contested territory of the urban/rural or the peri-urban. After all, it is largely through the urbanization of the rural hinterland (to introduce a third definitional category) that the phenomenon of city growth is manifest – a figure of 500,000 hectares per year is presented. Noting that the concepts of urban/rural and peri-urban have been picked up as an emerging policy issue by such agencies as the World Bank and DFID, we know little about the peri-urban conversion process under recent conditions of market enablement in the developing world. This chapter remedies this deficit by rejecting the ‘spatialization’ of development thinking, proposing, instead, a multi-spatial alternative that bridges the rural–urban divide and seeks to understand the complex spatial and thematic dynamics that take place in this environment. The essence of Jones’s argument is that while land use, land markets and land conversion are central to urban policy-making, nowhere more so than where they are most dynamic in peri-urban space, these processes cross predefined rural and urban categories. A rigidity of thinking in spatial terms constrains policy-makers from thinking imaginatively about problems such as ‘illegal’ land conversion and social exclusion. As he points out, recent World Bank (2000) and DFID (2000) policy statements exemplify the limited and often contradictory thinking upon which much current policy-making is based. Each report promisingly recognizes the potential for fostering rural–urban synergies, and the importance of the interdependent markets of the ‘urban’ and the ‘rural’ that link the exchange of people, goods, services, capital and social transactions. Yet, at the same time, these reports propose discreet policy initiatives that betray binary thinking. As Jones asks, to what extent are urban and rural developmental problems predetermined by, for example, policies affecting agrarian or customary land tenure
30 Market Economy and Urban Change
or programmes of social development in rural areas, or, conversely, by the failure to realize why the ‘urban’ poor (and, more often, urban elites) act as predators on impoverished rural dwellers who capitalize land assets in what is essentially a rapidly urbanizing marketplace. In World Bank and DFID policy, the poor are replaced by preconceived actors in preconceived spaces. Yet, it matters less that they are either rural or urban than the fact that both are poor and are compelled to adopt market strategies that will impoverish them further. In a policy divide, both are asset losers and both are exploited by wealthy elites who mediate the transfer from cheap rural farmland to expensive, and frequently illegally, developed urban land. The rural dwellers probably undervalue their land assets, while the urban poor struggle for a foothold in unregulated land markets where prices accelerate out of their reach. From a rural perspective, basing policies on the assumption that because farmers feed cities and urban residents buy food, both populations will benefit from a strategy that commercializes agricultural production yet reduces the staple food prices for urban households by unregulated competition, grossly oversimplifies the interaction. Conversely, from an urban perspective, market-led housing policies and urban spatial strategies invariably pre-empt the peri-urban areas as the marketplace for urban development. Simultaneously, and in contradiction, rural land reform constrains the capitalization of agrarian land as an urban resource to reduce landlessness and increase the productive capacity of the rural to feed the urban. Regularization projects may produce shadow pricing effects on land anticipated for future regularization; but this may be classified as ‘rural’ land and, thus, ‘off limits’ to a particular urban policy agency. In these examples, the land market is neither precisely urban nor rural in spatial terms, but can only be conceived as a resource in a marketplace where different actors and interests compete. In a dynamic marketplace, this questions the extent to which market enablement policies either enhance urban productivity or alleviate poverty in the terms required by the neo-liberal agenda; the outcomes are neither spatially nor economically efficient, while social and spatial inequalities are accentuated. In the end, the essence of debate and, thus, of policy-making for urban/rural or peri-urban land lies not in the visible process of spatial/physical conversion per se, but the invisible processes of who holds the land and, for the mass of urban poor in this marketplace, how tenure security is embedded. The telling point which Jones makes about the World Bank’s drive to tenure security as a key plank in market enablement is that most tenure programmes neglect the spatial dynamics that they create, overlook the poorest of the poor and ignore the impacts on their marginality. Yet, while policy-making may be disjunctive, the impacts clearly demonstrate the connectivity between two segments of the same market in which the impacts of intervention are not spatially differentiated. Moreover, spatially fragmented policy ignores the fact that rural land is susceptible to the same catalogue of problems as is urban land: squatting; contested claims; inappropriate regulation; eviction; and highly skewed and unequal distribution of ownership.
Market Enablement and the Urban Sector
31
In bridging the urban–rural divide Jones, like Rakodi, draws on concepts, policies and reforms in the rural setting to highlight implications for urban land reform. He reviews the extensive research on the key building blocks for urban land market enablement policies: governance; formalized legal protection of rights; the relationship between land titling, investment and rising productivity; security and collateral borrowing; and price effects and social exclusion impacts of land market and property rights reform. In all of these aspects, the findings are ambivalent. At best, the supporting evidence for market-led reform is muted; at worst, the prognosis for improving the productivity, efficiency and social equity of urban land markets is disconcerting. The case for locally adaptive, rather than radically new ‘replacement’, systems of tenure emerges strongly. The significance here is to question, as Payne and Grover do in Chapter 6, the World Bank’s drive for conventional and weakly differentiated tenure systems to replace the variety of informal mechanisms, even though they, too, are problematic. On the other hand, Jones also warns against placing too high expectations on community-based arrangements, which Payne and Grover advocate. These are not necessarily more egalitarian; they are contingent upon asymmetrical power relations, and their obligations may disadvantage marginal members of the community – for example, the elderly and women. On balance, Jones shows (endorsed by de Souza and Zetter in Chapter 7) that de facto as much as de jure title security seems to be the key variable. Although the neo-liberal reform process persists in demanding de jure systems, legalized tenure may not be cost effective because it drives up the price and use costs of land. Moreover, like de Souza and Zetter, Jones demonstrates that enforcing rights through formal judicial systems can increase land disputes; but, equally, collaborative land rights systems can be abused because powerful individuals have vested interests in dispute outcomes. These are pertinent reflections for reform in the urban setting, which are largely following the same template. As de Souza and Zetter bear out in Chapter 7 with regard to the price effects and social exclusion impacts of land market and property rights reform, Jones confirms the inevitably of rising land prices and regressive and exclusionary outcomes for the poor and landless. To the extent that security and collateral borrowing are linked, the larger constraints are: availability of lending channels; differential access that groups and individuals have; high transaction costs involved in formal-sector lending; and the remarkable resilience of informal though exploitative lending institutions. This evidence seems to corroborate the experience in the urban setting, pointing to the need to ensure that market-led policies designed to stimulate innovative and progressive measures do, indeed, support the needs of the poor. Overall, the conclusion points to the need to avoid the doctrinaire land reforms that market enablement demands; instead, approaches should be developed that benefit the poor through more innovative, and incrementally and socially acceptable, systems that resonate with the way in which property rights are formed and maintained.
32 Market Economy and Urban Change
These crucial conclusions also constitute the theme of Chapter 6, in which Geoffrey Payne and Richard Grover use the experience, and subsequent collapse, of command economies as a viable model for housing provision in order to explore alternative and, essentially, hybrid approaches to satisfying housing demand. The chapter contextualizes the discussion by recognizing the importance of the public sector – whether as zealously and ideologically driven as the communist model or not – as a means of meeting the shelter needs of all citizens, or at least of those unable to satisfy their needs and aspirations within commercially driven markets. It explores in some detail the experience of socialist countries. Despite, or perhaps because of, the pre-eminence of the state in determining the spatial and social allocation of resources, such as housing and land, in accordance with officially determined policies, targets, standards and procedures, the supply-driven approach failed to deliver its aspirations. Even if housing production itself was not a state monopoly, many countries adopted socialist approaches to other critical urban development resources. For example, in half of the 40 sub-Saharan countries, the state also nationalized all land, thereby increasing its monopolistic control over urban development. Payne and Grover show how command economies failed in housing, as in many other sectors, partly because provision gradually became driven by political and technical considerations, instead of being based on social needs or resources, partly because the concept of ‘value for money’ was absent and because of the internal inefficiency and the burden of costs on the national economies. But it was not only internal contradictions that caused the model to implode. The collapse has been accelerated by external forces, especially through the insistence by the IMF and World Bank on market reform policies as the condition for international investment. The World Bank and USAID have encouraged the privatization of the public housing stock and the emergence of private land and housing markets. Nevertheless, as Payne and Grover demonstrate, the legacy and consequences of the command model have impacted on the newly imposed marketdriven provision in the so-called transitional economies. Many pitfalls have been encountered in the rapid retreat from state control to market-oriented strategies. In Armenia, for example, internal conflicts between the ‘old guard’ who obstruct innovative policies (vested interests, as well as principles) and the younger, new professionals who are often unable to put new ideas into local practice have created a bipolar approach that runs the risk of rendering public bodies even more ineffective and discrediting new approaches before they have been given a chance to prove themselves. Recognizing, equally, the limitations of an unregulated market enablement model as the means of satisfactorily fulfilling housing needs (its crude and rapid imposition has been particularly problematic), Chapter 6 examines various approaches to breaking the impasse at either local or national level. In order to overcome both the antipathy between public- and private-sector interests, and the constraints that this has imposed on opportunities for innovation, the authors make a powerful advocacy for the emerging and experimental practices involving different forms of collaborative partnership between public and private sectors.
Market Enablement and the Urban Sector
33
Using examples from contrasting locations and countries – such as Ankara, Moscow, Nepal, Pakistan and Lesotho – they show that between the two extremes, the public sector can play a variety of facilitative and proactive roles in supporting urban land development and housing provision. Such approaches are enabling, in the literal sense: the state (without being directly involved as developer or producer) plays a critical catalytic role. The chapter argues that these less ideologically extreme, more pragmatic, responses offer a potentially more responsive and valuable way of providing housing for the mass of the urban poor in fast growing cities than either cumbersome bureaucratic archetypes or marginalizing neoliberal systems. The last two chapters are country-specific case studies – Brazil and Colombia – that provide empirical evidence of the micro-level impacts of market enablement on, respectively, urban land supply and urban restructuring. In Chapter 7, Flávio de Souza and Roger Zetter complement and further develop the study of land and housing supply processes discussed in Chapters 5 and 6. De Souza and Zetter provide evidence from Recife in Brazil to show how the state’s current market orientation essentially endorses, or accedes to (perhaps by neglect as much as by explicit policy design), a market-driven process of land delivery. Taking a key area of the urban policy enablement agenda – tenure security – the chapter shows how this process is resulting not in decreasing inequality, but in continued insecurity and marginalization of the urban poor, an enduring affordability crisis and the continued polarization of social classes. Brazil, of course, provides a celebrated example of the transformation of the policy apparatus, notably in the urban and housing sectors, from a notoriously centralized, interventionist and regulated state (most evident during the military regime from 1964 to 1979 and the subsequent democratic transition period), through economic collapse and SALs to a market-led economy in which the state increasingly assumes a peripheral role. Although other Central and Latin American countries have followed the same trajectory, Brazil, and perhaps Mexico, too, provide prime examples, largely because of the size of their economies and the extent of their indebtedness during the 1980s. Much of the evidence from the growth-with-equity period in Brazil, as de Souza and Zetter recall, was of a failing state in so far as housing supply was concerned. Despite considerable output, the hugely ambitious target to meet an estimated housing deficit of 8 million units was never remotely achieved. The same is true of most sectors of public policy intervention. In the outturn, large state agencies (such as the much researched National Housing Bank, or BNH) were responsible for mass housing construction, which supported and co-opted the interests of the prevailing elite instead of targeting the urban poor who commodified their homes in reaction to the downward raiding pressures of middle-income groups. To this extent, the experience endorses the inefficiencies and structural weaknesses widely attributed to the welfare paradigm. The particular interest in Brazil, so far as this book is concerned, is whether the transformation from the archetypal, but clearly failing, growth-with-equity model to a radically new
34 Market Economy and Urban Change
development paradigm has been any more successful in tackling the highly inequitable distribution of key urban resources, such a land for low-income group housing. Between 1979 and 1986 democratic transition took place. The centralized state collapsed, and in the new democratic climate the foundations for market mechanisms and decentralization were established. In the field of housing for the poor, new mechanisms to deliver housing and services were set up through the establishment of Social Interest Development Zones (Zonas Especiais de Interesse Social, or ZEIS). The ZEIS programme was designed to serve the dual purpose of promoting land tenure security through the legalization of squatter settlements and upgrading the living conditions of existing informal settlements. By shifting from a direct intervention approach to community-based initiatives, the goal of ZEIS was to secure tenure for residents through partial governmental control of the housing market in these circumscribed areas of the city. However, from the evidence in Recife, neither tenure security nor the overall living conditions of the poor living in Recife’s 600 squatter settlements have improved. While the ZEIS designation represents a process for recognizing squatters’ rights to occupied land, the potential for tenure security under these arrangements has not been realized. A crucial reason is that the transferral of property rights from landowners to possessors (illegal occupants of land) has been far less efficient than necessary. The declaration of ZEIS areas is the initial turning point towards security; but the municipality lacks the capacity to make the declaration legally binding. More significantly, the ZEIS mechanism has not matched the expectations of the illegal residents because the process has produced ambiguous consequences. Households’ perceptions of tenure security do not appear to increase; indeed, the process introduces a new platform for insecurity that is displayed through disputes in court from which households still face the possibility of eviction. Against the background of the inelastic supply of urban land in preferred locations (where job opportunities exist) and soaring land prices because of the overall scarcity of land available for housing, access and regularization are increasingly disputed processes. This leads to violent clashes not only between landowner and invader, but also between invaders themselves. The key point that de Souza and Zetter emphasize is that formal housing provision, either through state or market mechanisms, introduces economic, political and technological dependency for low-income urban dwellers and the collapse of the informal housing networks, which are critical to their survival. Moreover, new forms of governance and partnership are not sufficient to improve the conditions of impoverishment. The deficiencies in land tenure security in the present climate are reminiscent of the highly unjust tenure arrangements promoted during the authoritarian welfare state. These apparently contradictory outcomes reflect the contradictions inherent in the contextual environment of the development paradigms. Paradoxically, these appear to form a continuum in space and time where the prevailing elite benefit most. By neglect or by design, the poor and the needy have been excluded from the urban agenda. At best, the poor are on the periphery, suffering from the consequential insecurity and marginalization of state policies.
Market Enablement and the Urban Sector
35
Chapter 8 is the second country-specific, micro-level investigation of the impacts of market enablement, in this case on the urban restructuring of Bogotá. Despite the dramatic impacts of globalization and market enablement policies on urban structure, this subject has received less attention than the processes that are shaping urban development. Where the transformation of city structure in developing countries has been studied, this has mainly been at the macro level. However, market enablement policies also have potentially enormous impacts at a more localized spatial scale, and the fact that little attention has been given to this scale provides the opening for Chapter 8. Andrés Ortiz-Gómez’s and Roger Zetter’s subject of spatial change complements Chapter 5; but the peri-urban locational focus of the latter study contrasts with the authors’ concern with the intermediate urban areas or districts – essentially, the city’s main middle-order sub-centres with a mix of businesses and commercial functions, larger recreational and educations facilities, and established residential areas that surround and support them. The micro-level study of the reconfiguration of these neighbourhoods raises a set of policy issues and research themes which, although clearly subsumed within the macro-level neo-liberal urban reform agenda, have particular characteristics and dramatic implications. Taking four local land uses – enclosed condominium housing; shopping centres and hypermarkets; parks and urban recreation; and elementary and high schools – Ortiz-Gómez and Zetter show how a simultaneous process of atomization and fusion has taken place in providing these services and functions, as well as the form of urban development traditionally found at this intermediate urban level. These processes have exerted a powerful influence on the redistribution of these land uses and the pattern of urban services. As a result, the spatial configuration of the city has been restructured. Thus, while some services and functions have been displaced to a more local level (what the chapter terms ‘atomization to the micro level’), others have been displaced to the metropolitan level, mainly on the urban periphery (‘fusion at the macro level’). This has produced the near elimination of the intermediate or neighbourhood level as a fundamental component of urban life, recalling Webber’s classic analysis of the emerging ‘non-place urban realm’ of the 1960s’ US West Coast (Webber, 1964). Ortiz-Gómez and Zetter describe how the unregulated redevelopment of residential areas in Bogotá in exclusive, secure condominiums is having two effects. On the one hand, it is leading to the atomization and piecemeal redevelopment of previously integrated neighbourhoods. On the other hand, following the planning standards and regulations for open space provision, the process of building condominiums is, in effect, privatizing public open space by incorporating these areas within the redevelopments. The major relocation and growth of private education – accounting for half of the city’s school-age children – is taking place by capitalizing on the sale of existing high-value sites within the city and relocation on cheap peripheral land in the north of the city. Given the city-wide catchment areas for the schools, the resulting congestion impacts are severe. Finally, the global reach of retailing multinational corporations (MNCs) is reconstructing Bogotá’s provision on
36 Market Economy and Urban Change
much the same lines as in Europe and North America: the closure of neighbourhood stores in the intermediate centres and the development of peripheral hypermarkets. Chapter 8 explains these outcomes in terms of the increasing ‘privatization’ of social and planning responsibilities, combined with an unregulated, entrepreneurial development regime. The government has followed the orthodoxy of the enablement and governance reform agenda. Municipal decentralization was enacted in 1986 within the city, while peripheral authorities have retained their autonomy. These reforms have substantially impeded the potential for developing an integrated, metropolitan-wide strategy to tackle the atomization of the city. At the same time, reform of the planning machinery has introduced new norms based on the incorporation of new development land and the redevelopment of the existing fabric concentrated exclusively in the hands of the private sector. The failure to adapt the city’s planning policies, instruments and institutional capacity to the changing conditions and processes of urban space has not just fragmented the city, it has also created the conditions in which such an outcome was inevitable. But the more disturbing consequences for residents and policy-makers alike, as Ortiz-Gómez and Zetter show, are that by causing the ‘extinction’ of Bogotá’s urban intermediate level (the neighbourhood), these processes have contributed to the disintegration of community structures and a disaggregated pattern of urban development that is, ultimately, unsustainable. Restructuring the city under conditions of market enablement and globalization has had profound social, spatial and environmental impacts. This micro-level study of the spatial reconfiguration of the city, therefore, intriguingly opens a window onto a macro-level set of urban processes and relationships concerning the rationale of the market, which are at the core of the book. Ortiz-Gómez and Zetter are pessimistic about whether or not the demise of the urban neighbourhood can be reversed. Rather, their argument is that we need to understand more fully how and why cities are being restructured before we can develop strategies to manage this new reality in a sustainable way. From varied perspectives – theory to practice, macro to micro, state to global, poverty to prosperity, autonomy to collaborative action – this book provides detailed insights into how the urban sector in the developing world has responded to the neo-liberal agenda of market enablement and its associated processes of globalization, structural adjustment and urban management reform. Because cities are the main platform upon which this paradigm is developed, they also reveal the often disjunctive impacts of this paradigm most powerfully.
NOTES 1
By the mid 1970s, as the IMF reduced its lending to developing countries, commercial banks had stepped into the frame in order to recycle petro-dollars, while for the least developed countries and non-oil exporting developing countries, this became an attractive borrowing channel to ease their balance of payments deficits (Reed, 1992; Dasgupta, 1998).
Market Enablement and the Urban Sector 2
3
4
5
37
The three moments are the inclusive, differential and managerial. In the last moment, differences are acknowledged, but are arranged and managed to marginalize dissent within a consensus supporting the general model of global capitalism (Hardt and Negri, 2000). Nordhaug (2002) posits three main theoretical positions: economic globalization from below (transnational globalization through economic organization, capital flows, etc); globalization scepticism (indicating a more autonomous capacity for national mediation of global forces); and Marxist – globalization from above (transnational institutional, organizational and class alliances). There is an inherent contradiction in the neo-liberal position. Theoretically, it promotes individual choice and autonomy, thus logically distrusting collective and associative organization (Bourdieu, 1998); but, in practice, neo-liberalism promotes a governance and urban management agenda that advocates associative processes in a stakeholder society. To the extent that this contradiction can be resolved, it is because communitarian models of government simultaneously atomize control and drive towards consensus around market-led development (Held, 1995; see also note 2). In this way the articulation and coexistence of contradictory interests can be accommodated in tension. Thus different interests do not, in the end, obstruct the logic of the market as state-run urban management is claimed to have done. Government budget allocations fell by about 4 per cent for education between 1975 (before adjustment) and 1988 (after adjustment) as an average of 19 adjustment countries (from 16.3 per cent to 12.2 per cent of total government expenditure). This compares with an average increase in expenditure of over 2 per cent in 12 non-adjusting countries. For the health sector over the same time series, the figures show a 1 per cent decline (from 5.8 per cent to 4.7 per cent of government expenditure, compared with a 0.3 per cent decline for the sample of non-adjustment poor countries; Watt, 2000).
REFERENCES Abbot, J (1996) Sharing the City: Community Participation in Urban Management, London, Earthscan Bourdieu, P (1998) Acts of Resistance: Against the New Myths of our Time, Cambridge, Pluto Press Brand, P (2002) ‘Environments of harmony and social conflict: The role of the environment in defusing urban violence in Medellin, Colombia’, in Rakodi, C and Romaya, S (eds) Building Sustainable Urban Settlements: Approaches and Case Studies in the Developing World, London, IT Publications Burgess, R, Carmona, A and Kolstee, T (eds) (1997) The Challenge of Sustainable Cities: Neoliberalism and Urban Strategies in Developing Countries, London, Zed Books Castells, M (1996) The Network Society: The Information Age: Economy, Society and Culture, Oxford, Blackwell Cornia, G A, Richards, J and Stewart, F (1988) Adjustment with a Human Face: A Study by UNICEF, 2 volumes, Oxford, Clarendon Press Crespo Flores, C (2002) ‘Structural adjustment and water supply in Bolivia: Managing diversity, reproducing inequality’, in Zetter, R and White, R (eds) Planning in Cities: Sustainability and Growth in the Developing World, London, IT Publications Currie, L (1966) Accelerating Economic Development: The Necessity and the Means, New York, McGraw Hill
38 Market Economy and Urban Change Currie, L (1976) Taming the Megalopolis, Oxford, Pergamon Dasgupta, B (1998) Structural Adjustment, Global Trade and the New Political Economy of Development, London, Zed Books Davey, K (1994) Elements of urban management, World Bank Discussion Paper 11, Washington, DC, World Bank de la Macorra, C M (1999) Innovative Community Projects and their Role in the Urban Development of Mexico City, Unpublished PhD thesis, Oxford, Oxford Brookes University DFID (2000) Consultation Document: Mapping the Challenge of Urban Poverty, London, DFID Dorman, W J (2002) ‘Authoritarianism and sustainability in Cairo: What failed urban development projects tell us about Egyptian politics’, in Zetter, R and White, R (eds) Planning in Cities: Sustainability and Growth in the Developing World, London, IT Publications Drèze J and Sen, A (1995) India’s Economic Development and Social Opportunity, Oxford, Clarendon Press Fernandes, E and Varley, A (1997) Illegal Cities: Law and Urban Change in Developing Countries, London, Zed Books Fowler, A and Edwards, M (eds) (2002) The Earthscan Reader on NGO Management, London, Earthscan Friedman, M (1963) Capitalism and Freedom, Chicago, Chicago University Press Giddens, A (1998) The Third Way, Cambridge, Pluto Press Grant, E (2002) ‘The sustainability of community development in El Mezquital, Guatemala City’, in Zetter, R and White, R (eds) Planning in Cities: Sustainability and Growth in the Developing World, London, IT Publications Hamza, M and Zetter, R (2000) ‘Reconceiving the knowledge base of planning education in the developing world’, Third Word Planning Review, vol 22, no 4, pp433–455 Hardt, M and Negri, A (2000) Empire, Cambridge, Massachusetts, Harvard University Press Hayek, F (1979) ‘Towards a free market monetary system’, Journal of Libertarian Studies, vol 3, no 1, pp1–8 Held, D (1995) Democracy and the Global Order: From the Modern State to Cosmopolitan Governance, Cambridge, Polity Press Hoogvelt, A (1997) Globalisation and the Postcolonial World: The New Political Economy of Development, Basingstoke, Macmillan IMF (International Monetary Fund) (1999) Poverty Reduction Strategy Papers and Next Steps, www.imf.org/external/np/pdr/prsp/status.htm, accessed on 22 February 2004 Jenkins, P (2001) ‘The state, the market and community: An analytical framework for community self-development’, in Cowley, M, Jenkins, P and Smith, H (eds) Urban Development and Civil Society: The Role of Communities in Sustainable Development, London, Earthscan Kakwani, N (1995) ‘Structural adjustment and the performance of living standards in developing countries’, Development and Change, vol 26, pp469–502 Killick, A (1995) ‘Structural adjustment and poverty alleviation: An interpretative survey’, Development and Change, vol 26, pp305–331 Lima, J J (2002) ‘Property taxation, public finance and sustainable development in Belém, Brazil’, in Zetter, R and White, R (eds) Planning in Cities: Sustainability and Growth in the Developing World, London, IT Publications
Market Enablement and the Urban Sector
39
Malpezzi, S J, Tipple, A G and Willis, K G (1990) Costs and Benefits of Rent Control: A Case Study of Kumasi, World Bank Discussion Paper No 74, Washington, DC, World Bank McGee, R (2000) Participation in poverty reduction strategies: A synthesis of experience with participatory approaches to policy design, implementation and monitoring, IDS Working Paper No 109, Brighton, IDS, University of Sussex Mohan, G, Brown, E, Milward, B and Zack-Williams, A B (2000) Structural Adjustment: Theory, Practice and Impacts, London, Routledge Nordhaug, K (2002) ‘Globalisation and the state: Theoretical paradigms’, The European Journal of Development Research, vol 14, no 1, pp5–28 North, D (1986) ‘The new institutional economics’, Journal of Institutional and Theoretical Economics, vol 14 no 2, pp230–237 ODI (Overseas Development Institute) (1996) Adjustment in Africa: Lessons from Ghana, ODI Briefing Paper (3), London, Overseas Development Institute Oxfam (1995) A Case for Reform: Fifty Years of the IMF and the World Bank, Oxford, Oxfam Rakodi, C (2002) ‘Building sustainable capacity for urban poverty reduction’, in Rakodi, C and Romaya, S (eds) Building Sustainable Urban Settlements: Approaches and Case Studies in the Developing World, London, IT Publications Reed, D (1992) Structural Adjustment and the Environment, London, Earthscan Republic of Kenya (2000) Economic Survey, Nairobi, Government of the Republic of Kenya, Central Bureau of Statistics Richardson, J A (1996) Structural Adjustment and Environmental Linkages, a Case Study of Kenya, London, Overseas Development Institute Sanderson, D (2002) ‘Urban livelihoods, shocks and stresses’, in Zetter, R and White, R (eds) Planning in Cities: Sustainability and Growth in the Developing World, London, IT Publications Sen, A (1985) ‘Wellbeing, agency and freedom: The Dewey lectures 1984’, The Journal of Philosophy, vol LXXII, no 4, pp169–221 Spence, R, Wells, J and Dudley, E (1993) Jobs from Housing: Employment, Building Materials and Enabling Strategies for Urban Development, London, IT Publications/ ODA Stewart, F (1995) Adjustment and Poverty: Options and Choices, London, Routledge Tulchin, J S and Garland, A M (2000) Social Development in Latin America, London, Lynne Rienne Publishers UNCHS (1984) The Construction Industry in Developing Countries, Volume 1, Contributions to Economic Growth, Nairobi, United Nations Centre for Human Settlements UNCHS (1993) ‘Underemployment, unemployment and shelter provision’, Habitat News, vol 15, no 2, pp9–12, Nairobi, United Nations Centre for Human Settlements (Habitat) UNCHS (Habitat) (2000) Habitat Debate Urbanisation of Poverty, vol 6, no 4, Nairobi, United Nations Centre for Human Settlements (Habitat) UNCHS (Habitat) (2001a) Cities in a Globalizing World, London, Earthscan UNCHS, (Habitat) (2001b) The State of the World’s Cities, Nairobi, United Nations Centre for Human Settlements (Habitat) UNCHS (Habitat) (2003) The Challenge of Slums – UN-Habitat’s New Global Report on Human Settlements, www.unhabitat.org/global_report.asp, last accessed on 22 February 2004
40 Market Economy and Urban Change Watt, P (2000) Social Investment and Economic Growth: A Strategy to Eradicate Poverty, Oxford, Oxfam Webber, M M (1964) ‘The urban place and the nonplace urban realm’, in Webber M M (ed) Explorations into Urban Structure, Philadelphia, University of Philadelphia Press World Bank (1991) Urban Policy and Economic Development: An Agenda for the 1990s, Washington, DC, World Bank World Bank (1993) Enabling Housing Markets to Work, Washington, DC, World Bank World Bank (1997) World Development Report 1997: The State in a Changing World, Washington, DC, World Bank World Bank (1999) World Development Report 1999: The State in a Changing World, Washington, DC, World Bank World Bank (2000) Global Urban and Local Government Strategy, Washington, DC, World Bank Zetter, R (2002) ‘Market enablement or sustainable development? The conflicting paradigms of urbanisation’, in Zetter, R and White, R (eds) Planning in Cities: Sustainability and Growth in the Developing World, London, IT Publications Zetter, R and Hamza, M (1998) ‘Egypt: The state, foreign aid and community participation in urban shelter projects’, International Planning Studies, vol 3, no 4, pp185– 205 Zetter, R and Moataz Hassan A L (2002a) ‘Urban economy or environmental policy? The case of Egypt’, Journal of Environmental Policy and Planning, vol 4, no 2, pp169–184 Zetter, R and Moataz Hassan, A L (2002b) ‘Sustainable development: Between development and environmental agendas in the developing world’, in Zetter, R and White, R (eds) Planning in Cities: Sustainability and Growth in the Developing World, London, IT Publications Zetter, R and White, R (eds) (2002) Planning in Cities: Sustainability and Growth in the Developing World, London, IT Publications
Chapter 2
Developmental Welfare and Political Economy: Reflections on Policy-conditioned Aid and Strategic Redirections of International Housing and Urban Policies, 1960–2000
Cedric Pugh
INTRODUCTION Conceptualizations of welfare and advocated political economies have been significant among both intellectuals and those policy-makers who provide policyconditioned aid to developing countries. The invasion and succession of new ideas is a general characteristic in the social science of policy studies, but sometimes with only sparse overall evaluation and explanation. For their part, aid agencies are interested in advocacy for their vision of welfare and political economy, on the one hand, and for transforming general principles into operational programmes in varied socio-economic and political contexts in developing countries, on the other hand. In the broad historical perspective from the 1960s to the beginning of the third millennium, international housing and urban policies have been influenced by historical change, by ‘learning by doing’ in programme application, by greater or lesser incremental adaptation and by some basic redirections of policy. This would be true of the United Nations (UN) agencies, the World Bank, the International Monetary Fund (IMF), and of national bilateral agencies and voluntary aid groups. In both explicit and implicit terms, it is clear that change has
42 Market Economy and Urban Change
dimensions of theory, ideology and response to underlying social, economic and political conditions. This chapter evaluates and interprets change, including welfare, political economy, housing subsidies, underlying socio-economic conditions, and the post-1980 reconfigurations of roles by states, markets, voluntary organizations and households. Although it is sometimes assumed that unified links bind together ideological precepts, theoretical and actual policies, and welfare, in this chapter it is argued that this is scarcely ever true either in principle or in practice.
CONCEPTUALIZATION OF ‘CAPABILITY’ WELFARE Although Armatya Sen, the 1998 Nobel prize winner in economics, has not written directly and extensively on housing or urban-sector development, his theory of development and welfare has relevance for urban intellectuals and policy-makers. At the level of overall development, Drèze and Sen (1995) indicate that, in many instances, economic growth promotes human capabilities, which in their turn add to future social and economic development, but that capabilities and freedoms are good in their own right, not just as instruments for continual economic growth. This proceeds from a conceptualization of welfare that follows ancient traditions in Aristotle (Nussbaum, 1988), making it the central duty of legislators to allocate and distribute the city’s resources so that individuals have enhanced capabilities for choosing what they value in life. Capability is, accordingly, a matter of individual choice, but with dependence upon the policy and institutional conditions that give all people the opportunities and scope to exercise capability. Stated in this way, the political economy of housing and urban policies for developing countries is about improving valued capabilities, and instrumentally about economic growth and social development, which more or less expand capability and opportunity sets. The conceptualizations of welfare, which are based upon capability, differ from those that are set in a more restrictive focus – for example, on poverty, basic needs or inequality. Capability welfare has much to say about the concerns of these other conceptualizations; but its ends are for freedom and pursuing lives of value, not for the material per se. Furthermore, the capability approach is more inclusive of the positive and enhancing roles of markets, the state, the voluntary sector and households. The several roles, in combination, can be mutually enhancing. Again, the economic, political and philosophical flavour of this has been well stated and argued by Drèze and Sen (1995). Poverty is socially wrong because it is a deprivation of capability. Economic growth and the expansion of markets, within appropriate contingent conditions, expand social opportunities. Accordingly, the ‘social’ and the ‘economic’ are not divided in any simple way, except, perhaps, in some university lecture theatres and tutorial rooms. Basic education and health promote capability and choice, and along with other factors, including some state roles, they may lead to patterns of growth that reduce poverty and some inequalities. Gender inequalities reduce freedom and capability: they should be a central part of development studies. State roles can be market-exclusionary or market-complementary,
Developmental Welfare and Political Economy 43
and each may be assessed in terms of their impacts upon social opportunity. Furthermore, the state is not universally or inherently good: it can infringe upon human rights, eliminate freedoms and act with excess bureaucratic zeal. Capability welfare derives from choices by individuals, households and civic associations, as well as from markets and states. Drèze and Sen (1995) also provide illuminating commentary on economics and governance. Useful debates about government and authority are likely to centre upon the type of governance, rather than whether there should be more or less government. From the perspective of development, it is appropriate to explore varieties of orthodox and heterodox economic theory, rather than to focus on a limited offering. Thus, the post-1980 liberalization of trade in many developing countries has more to do with achieving specialization and economies of scale (including agglomeration economies) than exploiting comparative advantage.1 The battle lines on structural adjustment programmes are drawn too narrowly when they are confined to liberalization: the agenda should widen to social policy and to housing and urban policy. Research should proceed on the capability and social development impacts of different growth patterns (for example, in distribution), as well as different rates of growth. New (endogenous) growth theories open up the general development debates because they accord greater significance to education, health and opportunities to further economies of scale.2 The urban is significant because some growth and expansion of capabilities is within path dependence from historically situated agglomeration economies.3 Finally, ‘endemic but quiet deprivations are often much harder to bring to public attention than sensational events such as famine or natural disaster’ (Drèze and Sen, 1995, p173). Quiet deprivations occur in widowhood, high occupancy rates in housing, some expressions of child labour, and in various institutional impediments to economic and political activity. The section has conveyed various perspectives on, and attitudes towards, economic and political development. Drèze and Sen (1995), for example, caution against partisan commitment to ideology, whether – like neo-Marxist or dependency theory – it is pro-state and for fundamental political reform, or whether it is for narrowly based pro-market ideology. Instead, they favour a wide-ranging evaluation of social, economic and political realities, especially since these realities might enhance social opportunities and capabilities. The exploration of social realities is guided by the principles of ‘capability welfare’. That is to say, both individuals and society influence the creation and achievement of capability. Individuals choose their values and take some responsibility in educating themselves, and the policy frameworks and institutions in society have primary significance in creating opportunities. Whether choices and opportunities are good is an ethical question, and for social science the question requires relevant information and the study of reality and political proposals – for example, in relation to growth, poverty, inequality and human development (Sen, 1985; Nussbaum, 1988; Drèze and Sen, 1995). In terms of housing and urban policy, this suggests that evaluations should include comparative studies, aspects of poverty and inequality, selective theory, and how housing might contribute to capability and opportunity. Accordingly, this defines the themes and content of what follows in this chapter.
44 Market Economy and Urban Change
IDEOLOGICAL LIMITATION AND THE VALUE OF COMPARATIVE STUDIES The housing and urban literature on policy in developing countries includes various ideological approaches, sometimes in direct contention with each other. Examples include the neo-Marxism of Burgess (1982, 1990), and the adapted dependency theory of Simon (1997) and of Ward and Macoloo (1992). In neo-Marxist understanding, housing represents class exploitation, inequality and the perversities of market capitalism. Accordingly, state-aided self-help in housing is commercially assimilated within capitalist contradictions, offering, at best, only apparent solutions – not the real solutions that would come under state socialism. Dependency theory has deep and varied roots in Latin American countries (Kay, 1989). Its central ideology is an interactive coincidence of two non-egalitarian exploitations, one in the power of developed countries over developing countries and the other in the class and social divisions within developing countries. The theory has versatile application and its language has been used during the 1990s in explanations of development performance and transitions in housing. For Ward and Macoloo (1992), self-help housing and its association to policies by governments and international aid organizations represents the articulation of market power, ideology and various shortcomings on non-egalitarian grounds. In a broader, more general perspective on developmental performance and urbanization in Africa, Simon (1997) adopts the ‘peripheral’ thesis from dependency theory.4 Accordingly, largescale poverty, squalor and inadequacies in basic infrastructure and housing are related to underdevelopment and shallow integration with advanced economies. The relevant indicators are undeveloped finance capital markets, low levels of trade (and unfavourable terms of trade), comparatively sparse foreign direct investment and slower transitions from rural to urban dominance in development. The ideology and language of market efficiencies are also displayed in closed, deductive forms of reasoning in housing studies. For example, Olsen (1969) argues that housing should be dominantly provided by markets, with only minimal roles for the state. Although ideological advocacies and explanations have some value and relevance, they are self-limiting in their scope and evaluation. This can be shown in various ways, including empirical refutation, evaluations of their significant omissions, comparative studies, and critiques of the theories of state socialism, markets, housing transitions in developing countries and excesses of advocacy. A suitable starting point is to look briefly at the evidence from various national case studies, set in comparative terms. This can include both housing and urban studies, on the one hand, and general development studies, on the other. Can we rely on the dominance of markets, even conceding their virtues in efficiency, in expanding some social opportunities, and in creating employment and the formation of skills and capabilities? Limitations can readily be found. The financial crisis in some Asian countries during 1997–1998 extended into a social and economic crisis, leading to unemployment, falling wages, cyclical poverty, and disruption
Developmental Welfare and Political Economy 45
for both market and state housing programmes (World Bank, 1998; Firman, 1999; Pugh, 1999). The precipitating cause of the crisis was distorted exchange rates, along with volatility and the hypermobility of finance capital in international markets. Recovery will take some three or more years (more than this in Indonesia), and the recovery programme is characterized by a continuing dialectic between economic, social, political and environmental elements. This will imply a package of programmes that synthesize market, state, voluntary sector and international organization roles, including the International Monetary Fund (IMF), the World Bank and the Asian Development Bank (ADB). In another widely significant example, housing-sector development in developing countries includes the improvement of squatter and informal settlements. Private self-help decisions, along with more or (usually) less legal land-broking created the settlements. But the provision of land titles, basic infrastructure services and social planning facilities requires collective action by organized residents, state agencies and non-governmental organizations (NGOs). In this context, ‘housing’ is a blend of market, self-help and state roles in planning, managing and resourcing the improvements. All of this, of course, widens social and economic opportunities, and it frequently generates growth in wealth, human capital and capabilities (Abelson, 1996). Abelson used comprehensive and rigorous methodologies to reveal the benefits for the upgrading of squatter settlements in Visakhapatnam, India. The social and economic returns were evident in increased land values, raised incomes, enhanced training programmes for women and others and improved health. Average incomes rose 50 per cent during 1988–1991, and the value of housing and land assets rose 82 per cent, reflecting the capitalized value of improved economic efficiency, wider social capability and social effectiveness in basic needs. Both examples are congruent with the principles from Drèze and Sen (1995), especially their arguments that welfare derives from various interacting institutions, with developmental imperatives to expand both market and governance roles. Governance can be used in housing and other sectors to steer useful change in state–market–household relationships and to consolidate useful institutional arrangements. As with the narrow advocacies for market provision for expanded dominance in housing, so, too, do advocacies for state socialism in all housing present dilemmas. In the most general terms – with variations among socialist states – the housing sector has been under-allocated relative to industrial investment. This has led variously to crowded occupancy, inequalities favouring the managerialtechnocratic classes and the emergence of black markets (Morton, 1974). In Hungary during the years 1968 to 1989, the acceptance of market provisions expanded the supplies and social opportunities to the lower-income groups (Szelenyi and Manchin, 1987; Pugh and Lewin, 1991). The lower-income groups were the most adversely affected by under-allocated resourcing in state housing. Among developing countries, Lesbet (1990) reports various compromised solutions to the inadequacies of socialist housing policy in Algeria. Housing shortages were endemic, and policy reversals were undertaken to provide private plots, sales of public rental housing and the promotion of development companies. In other words,
46 Market Economy and Urban Change
individualism was used to rectify some inherent economic dilemmas in collective housing provision. Furthermore, during the post-1979 housing reforms in China, administrative social stratification and inequality have become embedded within the dominant allocation of work-unit housing. Work-unit housing is the main sector provider, relative to private and municipal housing (Logan et al, 1999). Socialist housing systems have tended to achieve some egalitarianism, but with large supply shortages and restrictive social opportunities for many households. For example, mass apartment blocks are designed for basic functional qualities, not for the use of the home to expand the self-development of children and adults. Housing welfare is more than low-rent material provision: it includes personal freedoms and the capability to enhance economic, personal and social opportunities. More is said about household choice and housing as generating capability in subsequent sections of this chapter. Comparative evaluation shows that some of the most successful countries have unconventionally ‘blended’ state, market and household self-help roles in whole-housing sector development. Chile and Singapore commenced their enablement approach many years before policy debates for developing countries highlighted the importance of institutions, governance and enablement frameworks to achieve high rates of supply and the redistribution of resources. The essentials of the Chilean housing reforms since 1973 have been well elaborated by Rojas (2001). Enablement for whole-sector housing development has been conceived in terms of economic, financial, institutional and political reform. As an end result of the reform period during 1973–1999, housing supply has increased at a greater rate than household formation. Housing subsidies have increasingly been tilted in favour of low-income groups within a framework of whole-sector resourcing by the private sector, the public sector (with variously designed subsidies) and by household self-help. The World Bank supported the low-income programme of national subsidies with a loan of some US$80 million during 1984–1988, taking the form of one-off capital subsidies for households (that is, earmarked vouchers). The guiding principles of the enablement framework are for sectoral development in finance, as well as for facilitating urban growth and spatial development. A major element of this has been the allocation of mandated pension funds to housing mortgage markets, growing from US$299 million in 1981 to US$1.1 billion by 1991. Subsidies are designed to achieve affordability in various programmes for low- and moderate-income groups. The programmes include core housing for self-help incremental addition, and the scaling of eligibilities to target various income groups. An elaborated discussion of housing subsidies is presented in the following section. The low-income housing has not been raided by higher-income groups because the private-sector financiers and developers increased their resourcing and building threefold during the 1992–1995 years. Unsubsidized production rose from 22 to 43 per cent during the years of 1990–1997. The reforms, as might be expected, contain some problems. Housing expansion has not been well coordinated with macro-spatial planning, and inefficiencies occur within the Ministry of Housing and Urbanization’s social-sector projects.
Developmental Welfare and Political Economy 47
Singapore’s whole-housing sector development has been even more impressive than Chile’s (Pugh, 1995; Phang, 2001). The island state has been transformed from a largely fetid slum in 1961, when the Housing and Development Board (HDB) was founded, into a city of new towns, massive HDB housing estates and continuously improved housing environments. Housing investment has been to a high level of 9 per cent of gross domestic product (GDP) in the 1976–1997 period, and HDB estates house some 86 per cent of the population. Singapore used its housing sector as part of its ‘development state’ roles. Apart from the high significance of housing in GDP, its ‘economic multipliers’ are in the order of 1.5–2.0; these are higher than in other sectors because the construction sector depends less upon imports than other sectors.5 Furthermore, the HDB has created institutional arrangements with contractors to encourage improvements in their factor productivities and access to building materials. Crosssubsidization occurs with HDB finances and especially favours the low-income groups in rental housing. Further subsidization is instituted in government grants to the HDB and in the terms upon which the Central Provident Fund (CPF) loans are made for home ownership in HDB and in private-sector housing. The CPF is a mandated social security fund, financed from employee and employer contributions into individualized accounts. In effect, as in Chile, the finance and housing sectors are interlinked and form part of sector development, as well as an urban development agency. The distributional characteristics of housing are relevant to the current income of households and to wealth formation. Public housing forms some 48 per cent of housing wealth, with an equalizing redistributive impact among middle-, moderate- and low-income groups. Housing wealth is a higher percentage of GDP than in the US or the UK. The whole housing sector approach can be viewed according to various perspectives (see Pugh, 2001). First, over time, it achieves more than in countries that have predominantly depended upon a small private sector, along with assisted sites-and-services/squatter upgrading projects. Second, the scheme of things depends upon integral developments in land policy and housing finance. In Singapore, the government owns 80 per cent of the land and is able to acquire land at prices that exclude development value attributed to public-sector development or speculation. Third, state, market and household roles are combined and practised within an embedded institutional harmony. Fourth, the saving investment is derived largely from the domestic economy; in Chile, saving investment is achieved with some World Bank support. For Singapore this means that foreign direct investment has largely been allocated to the development of industry and technology. Fifth, both countries have integrated general development and housing, relying upon export-led growth, timely macro-economic correctives, capable public administration and institutional reform for including private-, public- and household-sector roles. Economic peripherality has been avoided by securing long-term development policies that advance economic and social opportunities. By comparison, policies in sub-Saharan Africa and most Latin American countries have been based upon protectionism, reducing growth and increasing poverty in rural areas and in the urban informal sector (Pugh, 1996).
48 Market Economy and Urban Change
In other words, national development policies make a difference, an aspect which is often neglected by dependency theorists. Comparative studies of housing have value, but they do not say everything that needs to be said in analytical and evaluative perspectives. Their value is interrogative by raising questions about why some jurisdictions have more success than others. They are less valuable in providing theory. Policy-makers in Chile and Singapore have variously been militaristic and democratic (in Chile), and social democratic and meritocratic (in Singapore). Useful reform has not depended upon a dominant leftist, rightist or centrist political economy, but rather upon understanding that any formulation of states, markets and households can be more or less successful. More than this, their attributes can be used in both cooperation and competition to enhance aggregate performance in efficiency, equity and capability welfare. Path dependence is also important, selecting useful policy options at key periods of time. In Singapore this occurred during the 1960s when housing conditions and underemployment among the young were major social concerns. For Chile, it was a matter of reconstructing policies, following the heavyhanded militaristic removal of the Allende regime in 1973 by Pinochet. Other countries have not imagined the possibilities of being heterodox in housing and urban policies. Accordingly, they are constrained by the explosion of population growth in the demographic transition, and by dealing with mass poverty – in particular, affordable squatter settlement improvement and sites-and-services approaches. It takes something quite different to begin expressing social idealism and economic opportunity in housing by starting with public benefit in land policies and creating productive circuits in housing and finance. The theory of the heterodox approach was well written by Currie (1966, 1976), but much neglected among both national and aid agency policy-makers. Currie’s theory, written as operational guidelines, is as follows. Link housingsector development to overall development policies. Rely upon the export sectors to transform from underdevelopment to modernization, using the housing sector to absorb expanding labour supplies and to achieve necessary urban development. Use ‘centring’ within cities to achieve efficient and socially effective macro-spatial forms.6 Assess the developmental worth of the finance sector: it develops skills in investment appraisal and can be linked to the large capital needs of housing, factories, offices and infrastructure. Overall, the theory is about an integrated developmental transition in industrialization, urbanization, upgraded skills and the use of housing to expand social and economic activities. It is, of course, possible to add other theories and lessons from empirical research to Currie’s theory. One useful empirical study by Raj (1985–1986) is suggestive of the ways in which improved access to home ownership among low-income households enhance capabilities and ‘productive’ consumption. The housing opportunities induced added employment and saving. Expenditures were reallocated in favour of education and study space for children, improved diet and greater egalitarianism in terms of women’s and children’s interests. As argued by Drèze and Sen (1995), to open up one appropriate social and economic opportunity, then, quite frequently, others are also opened up. Singaporean policy-makers know this according to a broader
Developmental Welfare and Political Economy 49
scale. Their housing estates are served by high-quality primary and secondary schools that educate for capabilities in an expanding economy. By 1999, Singapore had the fourth highest per capita standard of living in the world. The discussions of comparative housing and development policies have suggested that the ideologically based approaches have some inadequacies. They omit much when they are pro-market and anti-state or pro-state and anti-market. Furthermore, the actual comparative development of nations cannot be explained in any simple way by the dependency theory with its attachment to peripherality. The performance of nations has depended upon macro-economic policies; open trade relations; following the general public interest rather than sectional interests; capability in public administration; and institutional reforms that enhance state, market and societal roles. In other words, the variations in economic and social development policy make a difference (Lindenberg, 1993; Drèze and Sen, 1995). Higher performers have enhanced markets and state roles in education and health, compared with lower performers who are deficient in one or other of market and state roles. For example, Sri Lanka and Kerala (India) have high performance in social development indicators, but low levels of economic growth that reduce both social and economic opportunities. By contrast, Singapore, Hong Kong (China), and Taiwan have promoted an interactive and continuous interdependence between growth, human capital formation and social development. This can be pursued further in various ways. In the following sections three topics will be taken up to advance the themes and arguments of this chapter. First, further consideration will be given to the idea of ‘housing inequity’ and state roles in subsidies. Second, general principles of economics, politics and philosophy are discussed. Third, the effects of policy-conditioned aid are examined.
HOUSING (IN)EQUITY AND THE QUESTION OF SUBSIDIES Although the housing literature on inequity and subsidies is substantial for developed countries, it is rather sparse and fragmented for developing countries. This is surprising because many developing countries have implemented (and continue to implement) subsidies (see Aldrich and Sandhu, 1995). Nevertheless, it is possible to find reasons for the gaps in the literature for developing countries. Economists have been less active than geographers, town planners, political scientists and sociologists. Until the early 1990s, much preoccupation was with self-help housing, and it took the World Bank and other aid agencies some ten years, during 1983–1993, to develop policies for whole-housing sector development. Wholehousing sector policies place more emphasis upon the development of housing finance, including mortgage loan markets, loans for construction, subsidies and general principles of affordability among low-income groups. All of this adds relevance to significance, especially because the theory and practice of housing subsidies deal with major aspects of social (in)justice in housing. The political economy of housing subsidies has its own created terminology, concepts and principles. These need to be established before reviewing policy and practice in case examples from developing countries.
50 Market Economy and Urban Change
Inequity in housing has theoretical and practical dimensions. In theory, it can often be viewed in terms of political economy as an aspect of social science, and for developing countries as related to various theories of economic growth and development. Furthermore, as argued earlier, housing is an important part of capability welfare, basic needs, poverty and inequality. The visual presence of varying standards, ranging from palaces to unsanitary squatter settlements, arouses moral sensitivities and intellectual thought about social justice. In developing countries, the matters at stake are life and death, high rates of child mortality and appallingly unsatisfactory conditions of life, including under-nutrition and reduced capacity to work and to participate in personal and social development activities (Ravallion, 1990; Fogel, 1994; WHO, 1998). Accordingly, equity issues in housing are very significant to upgrading squatter settlements, which form some 30 to 70 per cent of the housing stock in many city regions in developing countries. According to this perspective, there is no clearer example where housing issues link ethics, political economy, programmatic action and the urgency for reform. Within the thematic arguments of this chapter, the links occur through the way in which property rights are expressed in housing, in the institutional conditions that prevail in housing systems, and in the role that ‘home’ plays in local cultures. Housing systems can be understood as compromising production, consumption, allocations to occupiers, maintenance, finance and various industries that supply resources for housing and the occupancy of housing. Of course, the character and operation of housing systems differ according to whether they operate in subsistence economies, in state socialist or transitional economies, in mixed market-state economies or in other economic systems. By the 1990s, most economies in the world had become mixed market-state based and, though highly variable, their housing systems involved a mix of state resourcing, market allocation, voluntary expression and household self-help in saving, construction, maintenance, management and so on. The specific institutional settings, and especially the way in which financial conditions are structured, largely determine price access to housing. Price access is related to the distribution of household income. And, in developing countries, finance can be derived from any formal-system bankers and financiers, subsidies, family savings and wealth, and informal moneylenders. In entering a sub-market or tenure sector, households face opportunity sets that define and constrain their choice; but it is important to bear in mind that urban dynamics, policy reform and income growth or recession alter the opportunity sets. Relevant examples here are the reforms in Chile and Singapore and the macro-economic austerity phases in the stabilization phases of structural adjustment programmes of the 1980s and 1990s, as well as the recovery plans for countries in Asia that were affected by the global–regional financial crisis during 1997– 1998. Feasible choices are those that are ‘affordable’. Affordability involves three interacting factors. The first is the household’s income in relation to its capacity to save, both in the immediate period and in the medium term prior to and beyond the immediate period. This medium-term income will be conditioned by capability and national economic growth rates with their varied patterns of distribution. Economies with stable growth rates and patterns that improve the absolute
Developmental Welfare and Political Economy 51
and relative positions of households in the bottom 40 per cent of the distribution of income are likely to have less intense affordability problems than those which have lower growth and greater inequality in growth incomes. Econometric research by Ravallion et al (1991) shows that headcounts of poverty within the range of US$24 to US$31 monthly can reduce significantly with equally distributed growth in GDP, but increase significantly with recession and an increased inequality that favours non-poor groups. Urban property dynamics and the design of housing policies also have relevance to price access. The second factor is the way in which housing finance is provisioned and structured. This includes mortgage and credit instruments, levels and designs of subsidies, and their ultimate results in rent-toincome and housing payment-to-income ratios. Macro-economic fluctuations have destabilizing impacts upon affordability, with housing and property price fluctuations generally lagging behind the general macro-economic price fluctuations (Wheaton, 1987; Dehesh and Pugh, 1999). Changing affordability in housing where there are macro-economic fluctuations is caused by internal economic factors (for example, changes in income, interest rates, prices and flows of funds); but affordability does not coincide in time with these precipitating causes. A third factor that influences affordability is the medium-term trend in housing costs. These may be conveniently expressed as an index in comparison with retail prices, in general. Various inferences can be drawn from these examples. The degree of inequality and inequity in the prior distribution of income – including the volumes and intensities of poverty among the lower parts of the distribution – will have a large determining influence on current housing inequalities and inequities. The structuring of housing systems by international aid agencies and governments in developing countries may endorse the prior income distribution, increase the inequalities or moderate the inequalities and inequities. As revealed earlier, policies in Chile and Singapore have moderated poverty and inequality, whereas those in Kenya and Brazil have largely endorsed the prior inequalities (Aldrich and Sandhu, 1995). In addition, whole-sector housing policies, which are structured to open up price access in the bottom 40 per cent of the distribution of household income, and to integrate appropriate land and finance to increase housing supply at high annual rates, will tend to be pro-welfare and redistributive. Furthermore, as indicated above, housing equity is significantly related to improving squatter settlements. Appearances alone do not provide good diagnoses or foundations upon which to formulate policies. For example, in the former socialist countries of Eastern and Central Europe, and in the People’s Republic of China, rent-to-income ratios have been very low, suggesting that household outlays on housing would also be low. However, under the full consideration of housing’s connection to socialist economics, this was not the case. Housing outlays can be paid in hidden ways – for example, by cost recovery in the price of goods produced by enterprises that provide housing for employees, by suppressed wages and by the tax-transfer system in public budgets. Examples among developing countries include China (Logan et al, 1999; Zhu, 1999) and Cuba (Mathey, 1995). Taking another example, some forms of subsidy in developed and developing countries – including
52 Market Economy and Urban Change
subsidized rates of interest and grants to providers of social housing – although apparently improving price access for low-income households, can lead to horizontal and vertical inequity. Horizontal inequity occurs where households with similar incomes and needs pay unequal amounts for their housing or have significantly differing housing standards. Vertical inequity occurs when higher-income groups pay less in their housing outlays than lower-income housing groups. These inequities are evident in social housing for formal-sector worker group housing in Mexico (Pezzoli, 1995) and in employee housing in sub-Saharan African countries (Schlyter, 1995). Informal-sector households were ineligible for worker group housing in Mexico, and similarly in sub-Saharan Africa employee housing is restricted to a few sections of the formal sector, with eligibility open to middleincome groups. Accordingly, the associated subsidies in these contexts are regressive, not progressive. Among housing policy objectives, it is important to distinguish anti-poverty, egalitarian and housing poverty-alleviation principles. Egalitarianism is about the ‘goodness’ of the whole distribution of income and the way in which housing is related to it. Anti-poverty is about the bottom sections of the distribution of income. In developing countries, these can be in the range of some 25 to 40 per cent of urban households, as is the case in India’s cities and towns. More than this, within poverty there are thresholds where small decreases in income can increase the headcounts of under-nutrition significantly (Ravallion, 1990). The poorest of the poor spend over 80 per cent of household budgets on food, and housing policies need to relate to this reality, especially in squatter settlements. This, again, indicates the significance of housing poverty, which relates to substandard conditions, environmentally associated communicable diseases, undernutrition (poverty, low energy intake in food and necessary energy output in work and living) and crowding. It is, of course, possible to be income sufficient but ‘housing poor’ because in the tightest urban housing markets some moderateand middle-income households live in slum conditions. Inequity and inequality are closely aligned, but are not the same thing. Principles of equity also include considerations of merit, effort and productive contribution. Inequity in housing centrally relates to institutional frameworks and to the nature of property rights, whether legally formal, informal or within the conventions of practice. Hence, in housing, inequity includes aspects of tenure, use rights, occupancy rights, transfer rights, financial obligations in credit, and conditions that influence the operation of rental markets. These rights will be articulated in state, market, voluntary and social processes in society. Ultimately, what is deemed to be socially acceptable in inequality and inequity in a given society is a question of social values in that society, values upon which there is unlikely to be universal accord. Housing subsidies sometimes prescriptively and nominally express preferred social values; but, in practice, they may have counterproductive effects. An example is subsidies, which are designed to increase demand or lower supply price at the point of consumption, but may, instead, in tight housing markets increase price and capitalize the value of some of the subsidies into price. Clearly, the question of subsidies merits more attention.
Developmental Welfare and Political Economy 53
Subsidies cannot be defined and operated in an economically or politically neutral way. However, the general principle is to measure them by reference to market value, expressed variously in terms of rental value or the value of the dwelling. Sometimes the value of the dwelling is referred to replacement value, which can be above or below market value according to the characteristics of local housing sub-markets. Subsidies can be explicit or implicit. Examples of explicit subsidies are grants or loans at below-market rates of interest to developers or social housing organizations. Implicit subsidies include the difference between market rents and regulated rents, or social housing rents that are set at lower than market rates. Another implicit or hidden subsidy is tax remissions on mortgage rates of interest payments in home ownership, known in economics as ‘tax expenditures’ because their economic effect in public finance is the same as the expansion of public expenditure. Many subsidies are ‘off-budget’ rather than ‘on budget’ in the sense that they lie outside government budgets. Examples include the written-down costs of land, soft-interest loan finance, rent controls and some forms of aid from international agencies. In many circumstances, the aggregate value of ‘off-budget’ subsidies is greater, and with more economic distortion, than ‘on-budget’ subsidies. Some subsidies are demand side, such as housing allowances to low-income households and remissions of tax for mortgage interest payments, and others are supply side, such as grants and soft loans to developers. The economic and social effects vary among different forms of subsidy, and in terms of distribution they can be either regressive or progressive in themselves. Sometimes subsidies are designed with their probable effects analysed technically and sometimes they are introduced without much care in design or technical analyses. This section now turns to policy issues surrounding subsidies in the housing systems of developing countries. As noted above, various sorts of subsidies occur within national housing systems. But these have not been extensively analysed and evaluated in order to indicate their measured distributive impact. However, some fragmentary information is available on various programmes that have been financed by the World Bank and, occasionally, by other international aid agencies. In their evaluative review of the 1972–1983 sites-and-services projects, Mayo and Gross (1985) comment that the issue of subsidies had not been rationally addressed. They do not explore the principles or techniques that would be necessary to address the comparative efficiency and social effectiveness of housing subsidies. Various authors (de Salvo, 1971, 1973, 1976; Murray, 1975; Barton and Olsen, 1976; Pugh and Catt, 1984) have examined applied policy contexts to establish cost-benefit ratios and social impact in demand- and supply-side subsidies in social housing programmes. Within a developed country context of the 1970s and 1980s, demand-side subsidies that directly influence household budget levels were found to have greater efficiency and effectiveness. Subsidy issues in the developing countries during the 1990s were, as might be expected, different because the relevant context was gross undersupplies of urban (standard) housing and mass poverty, along with high volumes of squatter settlement. Mayo and Gross (1985) observed that in the sites-and-services programmes inducement subsidies, up to some 90 per cent of total costs would be necessary to attract typical target
54 Market Economy and Urban Change
groups in the poorest countries. In some successful projects, for example in Chennai, India, cross-subsidization within projects enabled distributional allocation to reach down to the ninth percentile of household income distribution. Of course, more generally, and especially in squatter upgrading projects, subsidies occurred in a large and unplanned way because cost recovery was normally much less than full. As argued above, the levels and designs of subsidies should be related to shortand medium-term affordability from a social justice perspective. Some basic empirical factors are known from statistical/econometric studies. In any particular city in developing countries, the willingness to pay for housing decreases as income decreases. This reflects two factors. First, spending on housing tends to increase as household income increases, but for many households spending is relatively insensitive to small price changes in housing. In economic terminology, the income elasticity of housing is positive, but not as high as many other commodities. And the price elasticity of demand is unity, meaning that as prices increase, households spend the same amounts as before the price increases, as long as income is constant. As a second explanation, all of this means that owing to higher priorities for nutrition, lower-income groups have a smaller income elasticity of demand for housing than higher-income groups. When housing expenditure is viewed across cities that have different levels of land and housing prices, then the expenditure increases. This means that as economic growth increases, with spreading among social groups, then housing standards improve. These points have been partially recognized in some housing finance provisions by the World Bank, United States Agency for International Development (USAID) and other international agencies. In 1977 the United National Party (UNP) government in Sri Lanka commenced its rapid expansion of its mass small loans programme, supported by loan finance from USAID (Pugh, 1995). The loans were available with a number of options, some of which had implicit subsidies in the form of below-market rates of interest. USAID advocated reform, favouring one-off capital grants for the poorest. The USAID policy-makers used orthodox economic arguments in support of this form of subsidy. Its virtues were seen as having transparency, as indicating pro-poor targeting and as being limited in terms of future liabilities in public expenditure. This form of subsidy has also been favoured by the World Bank, the Inter-American Development Bank and Chilean governments in the development of their whole-housing sector reforms (Rojas, 2001). The World Bank finance was provided to beneficiaries in the lowincome ‘Basic Housing Programme’, taking the form of a housing voucher (a capital grant). The Basic Housing Programme also had affordable loans and small amounts of household savings: the housing was built by government under contract and bidding procedures. The Inter-American Development Bank provided financial assistance to the Progressive Housing Programme, which was available to organized groups such as employers and NGOs which developed low-income housing. The Progressive Housing Programme included sites-and-services projects with the subsidy adding housing improvement to the initial core-housing unit. In effect, the subsidy design made immediate housing improvements affordable. Initially, the Chilean government expected the private-sector developers and financiers
Developmental Welfare and Political Economy 55
to provide these two low-income housing programmes, but they did not respond and the government provided instead. Beyond the role of international aid agencies, in Singapore subsidies come in the form of discounted prices for home ownership in government housing, slightly reduced rates of interest on loans (relative to commercial banks) and crosssubsidized rents. The prices of government housing are fixed in relation to affordability among various household income groupings. More generally, in developing countries, in analysing issues of tenure choice, Daniere (1992) advocates subsidies for low-income rental housing and for sites-and-services housing for new households. Daniere’s studies were conducted in Cairo and Manila, and he found that squatter settlement tended to be the preference of large low-income households where the alternatives were renting and legal owning. Finally, some perspectives on subsidies in housing can be obtained from the broad post-1970 history of housing in the developed countries. During the 1970s and 1980s, following a substantial reduction of supply shortages, subsidies tended to be more targeted, moving from supply- to demand-side forms, and to be contested in terms of tenurerelated equity (Pugh, 1980; Priemus and Dieleman, 1997). Some of the contested issues related to state vis-à-vis private-sector roles where subsidies had regressive elements – for example, in support for home ownership. More recently, MacLennan and More (1997) have suggested that such a polarized contest is obsolescent. The real issues centre upon specific needs in localized markets where the requirements, occasionally, are for increases in social rental housing or, alternatively, for increases in private renting and home ownership. In any event, non-market provision has a range of options for institutional–organizational form. All of this falls within the thematic arguments of this chapter, and it is relevant for developing countries. Chile, Singapore and Sri Lanka have performed comparatively well in low-income housing, using different institutional–organizational forms. Furthermore, the literature on housing economics has techniques and methods for assessing the comparative cost-benefit efficiencies and the social effectiveness of different forms of subsidy. The theory and practice of subsidies is part of a larger political economy of state, market and household roles, and the following section discusses these broader issues.
THE ECONOMICS, POLITICS AND PHILOSOPHY OF APPROACHES TO SOCIAL AND ECONOMIC DEVELOPMENT This section examines significant principles that are congruent with the positions adopted by Drèze and Sen (1995) on governance, welfare and the developmentally useful relations between states, markets, households and society. Numerous authors have warned against the evaluation of economic and social issues from narrow ideological bases or from closed deductive systems of reasoning. In discussing the central questions of philosophy, Ayer (1993, p11) writes: ‘it is surely obvious there
56 Market Economy and Urban Change
is something amiss with the attempt to incorporate the world into a deductive system in which everything follows logically from a set of first principles’. This can, of course, refer to elements of Marxism, the neo-classical economics of markets, dependency theory and so on. Ayer would, of course, recognize the value of theoretical persuasion for reducing some inequalities and for improving efficiency in resource allocation, as well as in perceiving the relevance of economic and political power in relations between some developed and some developing countries. His caution is against taking a limited one-eyed view of economic and social reality. Winch (1958) argues that better approaches can be taken in the relationships between social science and philosophy. Social science is for Winch primarily about conceptual questions, clarifying understanding of social and economic behaviour in specific social settings. An emphasis upon concepts and ideas can create new ways of looking at a problem. Furthermore, institutional appreciation is important for Winch because it embodies ways of thinking. In this approach, ideology and some logically deductive theories are seen as self-limiting. Hayek (1998) goes further, arguing that the impact of theories and ideas on society can be unbalanced and produce bias. He pitches his case against ‘intellectuals’ (dealers in fashionable ideas) who ‘judge all particular issues exclusively in the light of certain general ideas’ (Hayek, 1998, p15), adding that they can produce a ‘climate of opinion’ that has error and infeasibility. Hayek is against socialism and for liberty, but his argument can equally be applied to advocates of neoliberalism, dependency theory and social democracy. In terms of housing and urban relevance, the emphasis given by Winch (1958) to new conceptualizations and new ideas is significant for the post-1980 period. As seen in subsequent sections, rapid urban change in terms of structural economic conditions, governance, and the redirection of strategic housing and urban policies requires new ideas and concepts. The emphasis upon change and adopting new approaches to the politics of developing countries is endorsed by a number of political scientists writing during the 1990s. Manor (1991) writes about an unfolding and unresolved drama connecting new economics and old politics, now occurring in developing countries. He dismisses ideological paradigms and partisanship for them as undermining an understanding of how things actually work in practice and in institutional conditions. Smith (1996) agrees with Manor, suggesting that modernization and dependency theories have little association with reality in global–regional macroeconomic crises, environmentalism and the globalization of finance capital. In his empirical studies of political transitions, Haynes (1997) observes that environmental issues, structural adjustment programmes and the intensification of participatory self-help in social and urban programmes are altering relations between the state and society. The transitions are taking varied paths – sometimes featuring the authoritarianism and patron–client relations of the past; at other times featuring the elements of civic association and democracy of the present. However, this does not imply that there is any clear logical or socio-political interdependence between democracy, accountability and participatory governance (Polidano and Hulme, 1997). Participatory self-help programmes can occur in authoritarian
Developmental Welfare and Political Economy 57
regimes; democracy can have inadequate public accountability; and qualities of governance hinge upon the adaptation and reform of institutions. As indicated earlier, much of the passion and controversy for the dominance of intellectual paradigms is concerned with welfare, the relative roles of the state and markets in resource allocation, and the impact of development on poverty and inequality. A useful alternative to ideological interpretation is to analyse cross-country comparative data to ascertain the contributions of economic growth and markets, on the one hand, and state expenditure on health, education, and social development, on the other. Anand and Ravallion (1993) have undertaken such an empirical study. As a starting point they observe that as average income increases, life expectancy also grows. However, the growth in incomes may be carrying hidden related causes, such as incidence of poverty and state spending on public health. Accordingly, in the next analytical step they regress for these two factors, finding that the income–life expectancy function virtually vanishes. The general finding is that economic growth has relevance; but this depends upon the way in which the growth income is distributed. Some important human development indicators are improved when growth reduces the incidence of poverty and expands the public provision of health services. In more general terms, usually poverty is reduced with growth; but the elasticity of response varies from nation to nation and through time. It is lower in sub-Saharan African countries than in other global regions (World Bank, 1997). The relevance of this to housing is in consideration of the distribution of income and income growth to households, influencing their price access to various sub-sectors in housing systems. Affordability in housing, as discussed earlier, is a matter of short- and medium-term household income and the opportunities provided in private- and public-sector resourcing and finance in housing. Furthermore, rates of growth are disturbed and sometimes become temporarily negative in macro-economic stabilization programmes and in significant economic crises, such as the triple financial, economic and social crises in some Asian countries during the years 1997 to 1999, and continuing. Overall, the Anand and Ravallion (1993) econometrics support Drèze and Sen (1995) in that social opportunity and capability are supported by growth, market expansion and effective state roles in basic elements of social development. As noted above, Manor (1991) refers to a drama in development studies: connecting old politics to new economics. Three Nobel prize winners in economics, James Buchanan, Ronald Coase and Douglass North, have created some of the main elements of the new economics. Taken together, the ideas and theories of these economists have widened the boundaries of economics, especially in going beyond inherited neo-classical orthodoxy to explore relationships between economics, politics and institutions. Their work has been influencing other social sciences, particularly political science, law, sociology and some elements of geography. To some extent this is because the ideas and theories have increasing relevance to environmentalism, development performance, political economy, enablement policies, and housing and urban-sector development. One innovation is that state roles are seen to extend beyond tax-transfer systems to property rights, institutional–organizational design and the multi-institutional roles of markets, states,
58 Market Economy and Urban Change
the voluntary sector and households. This means that the real questions are not so much about the expansion of markets at the expense of state allocations as about enhancing their useful interdependent roles and about realizing that governance is as significant as government. As noted earlier, governance is about steering and guiding institutions, and discovering better ways of achieving state–society relations for enhancing capability welfare. The discussion that follows sets out the main elements in the theories and ideas of some Nobel prize winners in relation to housing-sector development.
Housing-sector development Buchanan won the Nobel prize for economics in 1986 with his theory of ‘public goods’ (goods with diffused third-party benefits beyond individualized private benefits) and gains from political exchange. Although his work was prominent in the case for state roles, Buchanan argued for limitation on state allocations, theoretically bounded by constitutional rules (Buchanan and Tullock, 1962; Buchanan, 1968, 1975, 1977). In building up his public choice theory (PCT), Buchanan elaborated upon the reasons for political decision-making related to traditional neo-classical economics. The PCT had some affinities with methodological individualism in economic orthodoxy, especially in its inclusion of political and individual self-interest. The insertion of constitutional roles and limitations in resource allocation among markets and states places emphasis upon the rules where, in a political context, the act of seeking comprehensive mutual advantages among all members of society adds to budget costs and public-sector encroachment on markets. Under Buchanan’s scheme of social contract, if public-sector allocations depended upon unanimous agreement, then any individual could adopt a stubborn holdout position, seeking personal advantage in having his or her own preferences conceded and thereby adding significantly to public-sector costs. Of course, the ‘social contract’ is only a theoretical construct, used for abstraction, not for real-world political economy. Niskanan (1971, 1994) extended PCT, arguing that bureaucrats act opportunistically to increase their budgets and discretionary expenditure. Politicians fail to check this because they are weak and uninformed in critical scrutiny, thereby being passive sponsors of bureaucrats. For Niskanan, the solution was to insert institutional incentives to achieve public interest rather than bureaucratic interest. This has influenced the arguments for transparency and good governance during the 1990s. As will be discussed, modern housing and environmental improvement programmes are being influenced by rules of contract and procedures for establishing priorities within limited budgets. And, although PCT has mixed positive and negative perspectives on state socioeconomic roles, it illuminates the notion that the state should not expect all individuals to act for the societal interest, nor should individuals expect all politicians to practise social idealism regardless of their own or sectional interests. Ronald Coase (1960), the 1991 Nobel prize winner in economics, changed economic, social and political perspectives on institutions. Institutions were brought centrally into analytical theory and assessed in terms of the comparative efficiencies
Developmental Welfare and Political Economy 59
and socio-political effectiveness of choice among market, state, voluntary-sector and household roles. Institutions are socially created rules, laws, norms, conventions and behaviours that structure interaction. For Coase, the major economic understanding of institutions proceeds from the existence of transactions costs. Transactions costs are the costs of designing, monitoring and enforcing agreements. In markets these are comparatively low. By contrast, where there are mixed private and social costs or benefits – as, for example, in pollution, health, education and urban land development – then transaction costs can be high. This is so because of the ‘free rider’, ‘prisoner’s dilemma’ and ‘tragedy of the commons’ circumstances. The ‘free rider’ scenario explains why individuals would, in theory, tactically understate their true demands for goods with social benefits, thereby (mistakenly) hoping that others will correctly state their preferences without distortion and thereby pay for the collective goods, which become ‘free’ to the tactically selfish. In the ‘prisoner’s dilemma’, involving, for example, neighbourhood housing/environmental improvement schemes, individuals are materially better off if they do not incur the costs of improvement as their property values rise when their neighbours improve their own properties. The unimproved housing receives ‘externality’ value from the surrounding improvements (Davis and Whinston, 1961). The ‘tragedy of the commons’ occurs when there are no regulations or social agreements to control the appropriation, monitoring and replenishment of valued natural resources, such as forests, fisheries and urban amenities. The rules can sometimes be stated and implemented by well-led and organized communities and/or by government agencies (Ostrom et al, 1993; Choguill and Choguill, 1996). The general importance of institutional–organizational form and choice is that variations in contractual arrangements, financial structure, and corporate and societal governance can be analysed, explained and reformed for efficiency and effectiveness. Applications in the housing sector and urban development are numerous. Examples include relational contracting in slum upgrading schemes, using urban development corporations to internalize the otherwise external costs of bargaining, and designing partnerships for aspects of urban development. Partnerships can theoretically capture the comparative advantages of various institutions. In partnerships, markets can provide efficiency and technology, states can overcome ‘free rider’ problems and introduce redistributive elements, the voluntary sector can mediate with officialdom on behalf of residents, and households can develop self-help in labour, some resourcing, and planning and management. Overall, the prevalence of institutions indicates the presence of transaction costs in markets, the necessities of social cooperation and, occasionally, the requirements for expanding social and economic capabilities in multi-institutional frameworks. As might be expected, in practice, sometimes partnerships are captured for sectional rather than general public benefit. For example, in an evaluation of self-help housing improvements in Jordan during the 1970s, Raed (1998) found that this occurred in projects where conflicting heterogeneous groups sought to tilt public-sector and World Bank and UN resourcing in their favour. The principles of institutional– organizational form are as relevant to socialism as to mixed market-state regimes. The first thing that policy-makers in the Union of Soviet Socialist Republics (USSR)
60 Market Economy and Urban Change
and the People’s Republic of China had to decide following revolutionary success was the basic institutional–organizational form of society and its socio-economic units. Marx had offered no blueprint, perhaps because he thought that institutions are not basic, but derive from the economic mode of production. Theorists for social democratic idealism – for example, Tawney (1964) and Rawls (1973) – have been more positive and inclusive of the importance of institutions, suggesting that these are important in achieving some egalitarian results. The main points about the relationships between institutions and (in)equality run along the following lines. Once inequality is initiated – for example, by markets or by capitalist or socialist states – it can be perpetuated by institutional arrangements, and this may appear to be the result of given human endowments. According to Drèze and Sen (1995), institutions can then control both the distribution of income and some aspects of endowments. But – as revealed in earlier sections on Chilean and Singaporean housing, along with commentaries on housing (in)equity – appropriately embedded state, market, and self-help institutions can produce some limited, though significant, redistributed welfare in household income. It should also be noted that ideological prescriptions for both markets in capitalism and states in socialism (and capitalism) have routinely created housing inequalities in the housing sector. Self-help housing in developing countries appears as a consequence of prior inequalities, the low stage of development of societies, and the burdensome realities of demographic transitions in their explosive stages of demographic growth. Another part of their reality is that self-build and self-help represent savings and the creation of assets, sometimes on some of the most highly increasing values of urban real estate. Policies for occupancy rights, tenure and protection against eviction for redevelopment can serve to redistribute assets and income, notwithstanding that the occupiers will then pay property taxes and sometimes have to buy their land. Douglass North, the 1993 Nobel prize winner in economics, has evaluated the role that institutions play in economic growth and development. Along with Coase, North has developed the New Institutional Economics (NIE), which has characteristics that extend neo-classical orthodoxy and depart from it in some important respects. The elemental departures are to add the political and societal to economics, consequently reducing the neo-classical preoccupations with methodological individualism and the ‘rational choice’ approach that is based upon the maximization of utility (North, 1981, 1990, 1996). North’s central propositions are that institutional reform often depends upon quests for better economic production and productivity; that institutional conditions largely account for comparative performance in growth and development; and that, along with Coase, property rights for market and collective functioning matter. North’s methods in research have been based upon a form of economic history that integrates economics, statistics, sociology and historical change. The evaluative content combines the quantitative and the qualitative, focusing upon the reasoning and timing of economic change. It is not surprising that the influence of North’s work grew rapidly during the 1980s and 1990s. The work still has relevance to structural economic change, the globalization of finance and technology, spatial redistributions of
Developmental Welfare and Political Economy 61
economic activities, and the impacts of global–regional macro-economic crises. More than this, it provides a theoretical underpinning for a distinctive theory of the state, for reforms in governance and for understanding that development is a dialectic between the economic, the social and the political (North, 1986, p237): It is for this reason that the whole development of the new institutional economics must be not only a theory of property rights and their evolution, but a theory of the political process, a theory of the state, and of the way in which the institutional structure of the state and its individuals specify and enforce property rights. This has direct relevance to housing. Various examples can be given in a context that property rights are broadly, not just legalistically, defined. They include formal, legal private and collective property rights, and informal and non-legal understandings that influence the way in which people interact with each other – for example, in developing squatter settlements. Authors such as Fernandes and Varley (1998) and McAuslan (1998) have addressed the pervasiveness of sociolegal issues in housing and land. In the informal context, the attitudes and conventions in land invasion, land development and the acquisition of infrastructure services (such as piped water) create various rights and immunities, some of which form a stage towards formal legalities and urban law. In other words, in a developmental perspective, property rights are beyond what the state does, pure and simple, and the rights are adapted in the light of experience. Beyond this, in squatter settlement upgrading projects, some potential conflicts and gaps in implementation can be avoided by setting out agreements or contracts in which partners and people have responsibilities for construction, resourcing (including selfhelp labour), financing, monitoring and maintaining the installations. Finally, the earlier evaluations of whole-housing sector development in Chile and Singapore can be seen as the creation of responsibilities and price-access rights through housing finance instruments, with their associated private and social property rights. North’s analyses of economic history have extended to the US, the UK, The Netherlands, Spain and Mexico. His findings run along the following lines. Trade and other external conditions may lead societies to set aside inhibitory institutions, replacing them with ones that achieve growth, profit and productivity gains. Demographic change and the recomposition of relative prices are fundamental. Institutional reforms and the (dis)incentives that they imply provide better explanations of change than innovations and technology would in themselves. Innovation and technological change are part of the wider growth process. North’s theories include the contributions of Coase in giving significance to institutional– organizational form. Taken together, and set in a post-1980 context of rapid, concentrated economic and political change, North and Coase continue to inspire new research agendas, producers of new ideas and identifiers of new problems. They add to the theory of state roles, beyond government budgets, to institutional reform and property rights. Furthermore, it is possible to integrate the capability welfare and socio-economic development principles from Drèze and Sen (1995). That is
62 Market Economy and Urban Change
to say, institutional effectiveness can be assessed in terms of capability, welfare, the creation and destruction of opportunity sets, and individual commitments and incentives towards the socially beneficial. In various direct and indirect ways, the ideas of Buchanan, Niskanan, Coase, North and Drèze and Sen have been influencing the development of policy-conditioned resource allocations from international organizations to developing countries.
POLICY-CONDITIONED AID Policy-conditioned aid can be financial and/or technical, and it occupies the spectrum between enforceable agreements and informal joint policy development between governments and international aid agencies. The development of housing vouchers in Chilean housing with the assistance of the World Bank and the Inter-American Development Bank is an example of the latter. International economic and aid institutions generally conduct their business within the precepts of ‘regime theory’ (Williams, 1995; Kapur et al, 1997). That is to say, they develop relationships with their clients, the governments and other organizations in terms of norms, persuasions, conditionalities in loans and exchanges of information. International organizations have comparative strengths and weaknesses relating to their mandates, their volumes and sources of finance, their research and technical capacity, and their performance in adapting to social, economic and political conditions. International organizations and their clients exhibit mutual interdependence and rely upon shared learning experience when negotiating programme conditionalities and political feasibilities. The outcomes vary in place and time, and therefore precise details of relationships depend upon research findings from particular historical and evaluation studies. At a general level, some examples can be given from a set of independent commissioned studies by the World Bank to mark its 50th anniversary in 1994 (Kapur et al, 1997). The World Bank was driven by environmental lobbyists and critics into ‘Green agenda’ environmentalism during the late 1980s (Wade, 1997); it developed urban and ‘Brown agenda’ environmentalism both incrementally and through several strategic redirections during 1972–1999; and its economic research and programmes have been slow (for example, in external debt, gender studies and cost-benefit studies), but innovatory and strategic (for example, in economic restructuring and in its country studies) (Stern and Ferreira, 1997). The World Bank found that in housing loan assistance it had to move away from limited geographically delineated projects to broader, more programmatic approaches with greater attention to institutional and policy reform. Internally, the World Bank is excessively bureaucratic in some sections, and has an impetus towards rushing projects into approval rather than fully supervising earlier committed projects. Nevertheless, the bank has enhanced developmental progress within many sectors and increased capability welfare and social opportunity. It is, of course, possible to interpret the political economy of relationships between international organizations and governments in developing countries in a variety of ways. Examples in the literature include the World Bank as a trans-
Developmental Welfare and Political Economy 63
mitter of imperialist capitalism (Burgess, 1982, 1990); the Egyptian state accepting needed policy-conditioned aid from USAID and the World Bank from precepts of market enablement, thereby constraining class-based interests within Egypt (see Chapter 3 in this volume; Zetter and Hamza, 1997, 1998); and a means whereby governments, the World Bank, and programme beneficiaries formed agreements to achieve redistributive and capability welfare in housing programmes in Chennai, India (Pugh, 1990a, 1997a). In Chennai various parties could claim legitimacy and a cause for welfare. The World Bank obtained loan repayment (and coverage of administrative costs in allocating subsidized international development assistance, or IDA, allocations). The government of India and the state-level Tamil Nadu government could claim the expansion of low-income housing, environmental improvement, and some useful redistribution of income and wealth as one effect of housing-sector reforms. Professionals were able to use the (then) new methods in sites-and-services and related squatter upgrading projects. Furthermore, programme beneficiaries improved their housing choices, sometimes later selling their housing and adding to their assets and capabilities. The World Bank and USAID operate and finance some of their activities from bond purchases in international capital markets, vigilantly watching their credit ratings and acceptability to investors. Nevertheless, capitalist finance can, in some circumstances, be used to secure some redistributive welfare. Egyptian and Tamil Nadu low-income groups were situated in very different political, cultural and social contexts, with variation in the socio-economic impact of policy-conditioned aid. In Tamil Nadu, the ruling All India Anna Dravida Munnetra Kazhagam (AIADMK) party of the 1970s and 1980s was reformist, seeing its role as serving the wider public interest in expanding social and economic opportunity, and in ensuring capability in public administration. It did not have a comprehensive programme that would spread beyond the designated projects, and thus the housing reforms were limited. However, the citizens were well informed that cost recovery in housing and transport – albeit with some cross-subsidization – was a necessity in sustainable housing and transport schemes. As argued earlier, financial design in mixed subsidized and unsubsidized allocations in the housing-sector development in Chile and Singapore have been important in achieving cost recovery in household, housing agency and public-sector budget accountabilities. Further reflections on policy-conditioned aid can be seen in a brief evaluation of international housing and urban policy.
INTERNATIONAL HOUSING POLICY This section summarizes earlier publications on international housing policy by Pugh (1997a, 1997b, 1997c) and the World Bank (Kessides, 1997; World Bank, 1983, 1993, 1994, 1999a, 1999b). International housing policy has been conceived and formulated by various aid agencies, including the World Bank, the United Nations Centre for Human Settlements (UNCHS, now UN-Habitat), USAID, the United Nations Development Programme (UNDP), ADB, the Inter-
64 Market Economy and Urban Change
American Development Foundation and the Ford Foundation. The aid agencies display some similarities in policy development, though with varying emphases they give to economic factors vis-à-vis social and political factors. The World Bank has been the most influential agency, primarily owing to widespread international scope and the power of its conditionality loan finance. The changing policy influences the policy-conditioned aid activities in more or less formally agreed ways within loan conditionalities and in other ways. Furthermore, it should be recognized that conditionalities are not always fulfilled for various reasons, including the power of some countries as important clients. Focus will be given to post1983 developments because these redirect strategic policies from geographically delineated projects towards ‘programmatic’, whole-sector development, and emphasize institutional capacity-building. To establish an overall perspective in political economy, the World Bank’s housing policies fall within enablement liberalism, favouring the combination of market, state, voluntary sector and household roles. This should be viewed more as a reconfiguration of state, market and other roles than any simple rolling away of the state. State roles, as argued thematically in this chapter have widened and deepened, and the medium-term general trend is for public finance to increase from its 20 to 30 per cent range in GDP. Of course, in short-term, macro-economic austerity phases, absolute public spending decreases, especially in countries that are very poor and with large external debt-to-GDP ratios. This can adversely affect capital expenditures on infrastructure. Many developing countries during the late 1980s and 1990s have increased their absolute and proportionate expenditures on the social sector. Policy performance has been varied in success–failure perspectives, depending upon matters to do with implementation, and political, social and cultural contexts among nations. In 1983 the World Bank was ready to reflect upon its housing policies (World Bank, 1983). It acknowledged that institutional support had to be improved from project management to general urban policy, increasing the range of programmes beyond sites-and-services and related squatter settlement improvement programmes. The restricted sites-and-services and squatter settlement improvement projects lacked the potential to be scaled up to support the economic and social development of urban areas as a whole. Furthermore, the World Bank had alternative approaches to advance its housing programmes, including the adaptation of USAID programmes, which channelled loans through national housing finance conduits. This approach disbursed funds more rapidly, but depended upon in situ housing finance systems: mainly in middle-income developing countries. By the late 1980s, the World Bank gradually reduced its direct sites-and-services projects; but these continued indirectly where countries ‘on-loaned’ funds to social housing programmes, as was the case in Chile during the years of 1984–1988. An important model for the new approach was Brazil’s Parana Market Towns Improvement Project during 1983–1988 (World Bank, 1994; Kessides, 1997). A set of municipalities, the state-level government and the World Bank agreed to create a revolving fund. World Bank conditionalities usefully required ‘sustainable finance’, represented in managing revenues, expenditures and cost recovery. Local governments engaged participatory community development to select priorities
Developmental Welfare and Political Economy 65
among sub-projects, including the improvement of squatter settlements. Compared with the pre-1983 approaches, the new ways were more ‘programmatic’ and were based upon institutional reform and the capacity of authorities to be effective in the complexities of managing housing and environmental improvement. The use of municipal development funds was appropriate in developing country context where bond and financial securities markets are underdeveloped. During the early 1990s, the World Bank redirected its strategic housing policy, extending its ‘learning by doing’ and its ‘programmatic’ approaches (World Bank, 1993). The more comprehensive policy framework included reforms in housing finance, infrastructure, the construction industry, institutions and deregulation, and targeted subsidies to the poorest. Although the World Bank’s strategic document was subtitled Enabling Markets to Work, it essentially also relied upon state roles in reforming policies, institutions and redistributional aims. In addition, household self-help was necessary in some sub-programmes. A focus upon households and their relationship to housing indicates that enablement housing reforms include much more than states and markets. On the one hand, large numbers of households are significant in policy, contributing self-help activities and adjusting their households’ budgets and savings plans for housing and environmental improvement. On the other hand, according to the capability welfare ideas of Drèze and Sen (1995), households express much of their personal and social capabilities and values in their home or domestic settings. The theory of the domestic sector has been elaborated by Stretton (1976) and Pugh (1990a; 1997d). This theory proceeds on the basis that economists have mistakenly confined their analyses of housing within narrow confines of market exchange value. Instead, it is possible to view housing as the central social and economic asset in the ‘domestic sector’, which is defined as part of the economy in which capital, resources, and time and energy are used for housework, cooking, subsistence work, child-rearing, neighbourhood socio-economic development, and so on. Economic and social exchanges occur within the domestic economy, and are influenced by cultural and religious conventions that influence gender, age and child-rearing roles. The greater the liberalization of women, the greater are the chances of adding to growth rates and the social effectiveness of development (Boone, 1996; Drèze and Sen, 1995). However, much of this production is not marketed, though child-rearing adds to future human capital and the development of capability welfare. As economic growth and social development proceed, the home is used for an expanding variety of leisure activities, including educational, social and recreational. The design and capaciousness of housing is itself important in providing opportunities and capability. This signifies the importance of housing rehabilitation and improvement in developing countries, especially among below-median income groups. Although the ‘domestic sector’ produces income, this can be measured only indirectly by inference from the value of time or products. But much of the production does not enter into direct market exchange and therefore the domestic sector cannot adequately raise finance from its own returns to resource itself. It does, of course, ‘subsidize’ the commercial sector by supplying human capital and economic capabilities. All of this provides one aspect of
66 Market Economy and Urban Change
housing-sector productivity and its role in social and personal development, signifying the importance of housing in development (for other dimensions of productivity see Abelson, 1996; Pugh, 1997a). The roles of households in developing international urban and housing policies was emphasized in the new development policies by the World Bank in 1999 (Stiglitz, 1998; Wolfensohn, 1999; World Bank, 1999a). The intention was to draw together the economic roles of urban development and the qualities of ‘liveable cities’ in terms of poverty reduction, improved environments and progress in housing and health. This ‘new directions’ approach was to make a break with the Washington consensus themes of the 1980s. The Washington consensus included the World Bank, the IMF and the US government, all favouring economic stabilization, export-led growth and market liberalization in Latin American countries. Although by the late 1980s the Washington consensus had evolved to include the rising significance of poverty and environmentalism, its conceptual and historical roots were very much part of the causes for macro-economic stabilization and market development of the 1982–1987 period. A strategic redirection was viewed as necessary in order to add social opportunity and structural change in economics (especially technological change and urban agglomeration economies) to the earlier focus upon finance and macro-economics. The limitations of the 1980s’ Washington consensus were especially conspicuous in the Asian financial crisis during 1997–1999, when some countries with sound macro-economic indicators were undermined by speculative surges in international flows of funds and by their fragile finance systems. These circumstances – among other adversities – led to wasteful property cycles and to the collapse of housing and housing finance markets in Thailand. Stiglitz (1998, 2000) argued for medium-term strategic development policies, centred upon the alleviation of poverty and socio-economic transformation. He also pointed out that surges in flows of international funds caused economic distortion and systemic crises in developing countries. The favoured solutions were the re-regulation of finance and the macro-economic sterilization of excess liquid funds by the government, selling short-dated securities. Furthermore, the emphasis was switched from the development of individual sectors towards crosssector, society-wide transformations. For example, good housing would reduce childhood disease and mortality, and improved health and housing would add to employment and income growth. Accordingly, development policy was viewed ‘holistically’ and considered to be ‘pragmatically’ related to social and economic realities in development and in the experiences of low-income households. The World Bank’s urban strategic review elaborated policy agendas in housing and quality of life issues, centring upon sustainability, the upgrading of squatter settlements and enhanced urban agglomeration economies (World Bank, 1999b). Practical realities may diverge from prescriptive intent in housing because during the late 1990s the World Bank reallocated and dispersed its housing specialists in management restructuring.
Developmental Welfare and Political Economy 67
EVALUATION AND PERSPECTIVES The foregoing discussions have ranged widely. They argue thematically for capability welfare and the expansion of economic and social opportunities. Although this is relevant to poverty, inequality and basic needs, it has a fuller welfare domain because capability is about all people and their freedom to pursue the lives that they value. When this principle is applied to social, economic and political realities, it is clear in principle, and empirically, that social and economic opportunities can be expanded variously by markets, states, the voluntary sector and households. Any of these can succeed or fail in capability welfare, and various new economic theories, including those of some of the Nobel prize winners during the 1986–1998 period, are in favour of multi-institutional approaches. Much of this, then, suggests that ideologically based assertions for, or against, states, markets, the voluntary sector or households miss important elements and are therefore self-limiting, on philosophical and social grounds. Those who advocate a better case for multi-institutional roles in growth and social development may, nevertheless, think that markets produce large inequalities of income and power. The theoretically and empirically circumspect would also know that the public spending of many states has regressive distributional elements in social- and housingsector allocations. This includes subsidies, infrastructure and various aspects of land development and redevelopment. But as shown in examples from comparative housing, within suitable institutional arrangements housing sectors can be resourced to achieve some limited, but important, redistributions of income and wealth. Of course, states, the voluntary sectors and households can produce and endorse inequalities. In terms of theory, conceptual frameworks and principles can be developed to establish the hidden production, productivities and social opportunities that are more or less evident in household resource allocation in the domestic sector. This has relevance to the interests of children and women who depend upon income generation and distribution in domestic-sector settings, as well as in relation to the wider economy. International housing policies are not neo-liberalist in any simple or straightforward way, and, of course, they are not social democratic or socialist. The World Bank and other international aid agencies favour state, market and (thin) community development roles. Their economics include state roles in social costs and benefits, institutional reform, policy-making, redistribution, and forming enablement partnerships (Pugh, 1997e). The practice and implementation of policy has mixed successes, failures, social inclusions, social exclusions and so on, depending largely upon national ways of implementation. Again, this does not mean that international housing policies cannot be improved on social and economic grounds. From theoretical perspectives, the ideas of Currie (1966, 1976) and Drèze and Sen (1995) give guidance for improved housing supply and some egalitarian distribution. In actual practice, Chile and Singapore have achieved significant social and economic development, but with some imperfections. Successful housing system development is marked more by encouraging the public’s goodwill towards reform and by pursuing the general public’s interest, rather than following
68 Market Economy and Urban Change
ideological prescription. Heterodoxy in economics, sociology and politics seems to be at least as useful in housing as orthodoxies and preconceived grand social theories. Housing policies also need to be related to the hard realities of pressing explosions of population growth in demographic transitions, macro-economic fluctuations in liberalized economics and medium-term developmental futures. Useful institutional reform is sometimes excruciatingly slow; but as indicated in North’s studies, change is stimulated by external demographic and economic pressures, especially in trade and structural–spatial change. Notwithstanding the foregoing, since the late 1990s there have been the beginnings of a revival in radical political economy. One example of this is Biel (2000), who argues that globalization expresses inequality, reduced performance in environmental improvement and even a new imperialism in the dominance of the North in North–South economic relations. Biel does not apply his ‘grand ideological narrative’ to empirical studies or to any particular social-sector analysis. His work is, rather, aimed more at giving scope to issues of inequality, power and persuasion for socio-political roles among NGOs in order to counterbalance the excesses of capitalist globalization. As argued above, in specific circumstances, such as in Singapore and Chile, housing sectors can be made more egalitarian and designed to spread social opportunities. A more moderated view for the structural socio-economic issues has been made by Gore (2000). He argues that the Washington consensus of the 1980s could usefully be redirected towards matters of poverty, inequality, environmentalism and social reform. The themes in this chapter show how various Nobel laureates and new policies can do this in important, but limited, ways. Finally, it is appropriate to draw upon the themes and arguments to discern what may be useful in housing research agendas. The discussions in this chapter show that housing research needs to be extended in several directions. First, more work on housing histories and comparative housing policy is important for a greater understanding of both policy impacts and the variable relations between international aid agencies, national governments and communities. Second, institutional–organizational form influences housing supply, distribution and welfare. Institutional–organizational form is related to selection among statutory corporations, local government agencies, joint private–public sector participants, and partnerships among government agencies, community-based organization and professionals. It can be assumed that comparative efficiencies and effectiveness will vary according to the nature of the task and the type of institutional–organizational form that is used. This accords with Coase’s theories on transactions costs and mixed market-state choices (Coase, 1960). The comparative impact of institutional–organizational form is relevant to upgrading squatter settlements, wholehousing sector development and the reduction of poverty. Poverty should be understood as comprising six elements that are more or less interdependent. First, cash or calorific poverty lines and distributions measure basic and antecedent poverties. Second, housing standards, including sanitary conditions and occupancy rates, influence health, indexes of under-nourishment, and capability to earn and be active in social development. Third, access to basic infrastructural
Developmental Welfare and Political Economy 69
services affects health, use of time (for example, queuing at standpipes) and welfare. In this, tenure affects possibilities to achieve asset growth and to more effectively plan savings and consumption over long periods. Thus, we see income poverty, housing poverty and urban poverty, or their respective non-poverties. Furthermore, as indicated in the research by Anand and Ravallion (1993), levels of poverty are influenced by economic growth and its mediation of spending on health and raising incomes in the lowest ranges of the distribution of income. Housing is therefore important in terms of sanitary standards and generating income. Fourth, research on the formation and distribution of housing wealth is undeveloped: this can be readily expanded. Fifth, following the principles of Drèze and Sen (1995), it is clear that intellectual progress can be achieved by taking down some of the barriers between the economic and the social. This means that housing researchers often need to unlearn some of their earlier training and read a wider range of work in economics, political science, sociology, law, town planning and geography. Housing does not have a unified social science theory. Each discipline pursues its own partial explanations, sometimes rejecting explanations drawn from others. Sixth, the subjects addressed by political economy, including poverty, inequality, development policies and welfare, also have their relevant technical– analytical elements. Examples given in this chapter included Anand and Ravallion’s (1993) study of the relationship between economic growth and life expectancy and the analyses of housing subsidies. The analytical–technical elements can be a good corrective to ideological assumption. In this case, both markets and states produce welfare and socio-economic opportunity. It is also important to develop new data sets and research methodologies that relate housing-sector development to post-1980 socio-economic change in urban contexts. Urban socio-economic change has deep impacts upon the housing sector because it stimulates institutional reform and redistributes incomes and the relative composition of productive activities. As argued here, in housing policy performance there is scarcely any reason or evidence why we should expect a close link between ideology, policy and good implementation to achieve unambiguously good welfare.
NOTES 1
2
Agglomeration economies are primarily about the increasing returns from locational concentration. As argued by Krugman (1991), this has much more to do with market structure than the geometric shape of ‘market areas’. Imperfect competition allows for continuing growth from locationally based external economies, which can, of course, become internal to the firm. Comparative advantage in trade is about differing relative prices of goods, allowing for specialization by virtue of gains from trade from exporting those goods that are produced at lesser opportunity cost (the cost of the goods with higher relative price). Krugman recognizes the validity of comparative advantage, but wishes to give emphasis to hitherto neglected dynamics of growth and external economies. Conventional growth theory accounted for growth in terms of factor contributions from land, labour and capital, but in empirical measurements usually revealed a large
70 Market Economy and Urban Change
3
4 5
6
unaccounted residual. The residual was variously attributed to, for example, entrepreneurship and human capital. What endogenous growth theory does is to internalize these residual attributions within the theoretical construct. This gives possibilities for continuously generated growth, rather than for restrictive diminishing returns. Endogenous growth is highly relevant to urbanists and to studies of development patterns in developing countries. Romer (1986, 1987) is the main author who created the new approach to growth theory. The idea of path dependence is derived from heterodox approaches to economic history. These approaches state that choices are often circumscribed at particular moments in history, leading to specific sets of policies, institutions and economic activities. These have long-term impacts because it is often easier and cheaper to adapt what exists rather than to begin completely from a new basis. This is clearly relevant in urban development because often new industries start from chance events and then generate their own circular cumulative causation for localized growth (Krugman, 1991; Myrdal, 1957). Core-peripherality theory has been developed in relation to urbanization, as well as to economic relations between developed and developing countries. The urbanization theory centres upon agglomeration (see Note 1). Economic multipliers expand income and employment through inter-sector buying and selling. For sectors that rely upon large import content in their use of resources, the spending leaks overseas and thereby expands income and employment in the overseas countries. Housing construction has very low import content in most countries. Centring achieves some localized economies in transport costs for shoppers and others, lessening the necessity to travel to dispersed locations to obtain goods and services. It will occur only in places where land and macro-spatial policies make provision and planning enforcement certain. Centring policies have occurred in Sweden, Norway, serving both Singapore and South Australia.
ACKNOWLEDGEMENTS The section on ‘Housing (in)equity and the question of subsidies’ draws from Pugh (1998). Thanks are expressed to Sage Publications for its use here.
REFERENCES Abelson, P (1996) ‘Evaluation of slum improvements: Case study in Visakhapatnam, India’, Cities, vol 13, no 2, pp97–108 Aldrich, B and Sandhu, R (eds) (1995) Housing the Urban Poor: Policy and Practice in Developing Countries, London, Zed Books Anand, S and Ravallion, M (1993) ‘Human development in poor countries: On the role of private incomes and public services’, Journal of Economic Perspectives, vol 7, no 1, pp133–150 Ayer, A (1993) Central Questions of Philosophy, Harmondsworth, Penguin Barton, D and Olsen, E (1976) The Benefits and Costs of Public Housing in New York City, Madison, Wisconsin, Institute for Research on Poverty Biel, R (2000) The New Imperialism: Crisis and Contradictions in North/South Relations, London, Zed Books
Developmental Welfare and Political Economy 71 Boone, P (1996) Political and Gender Oppression as a Cause of Poverty, Discussion Paper No 294, London, Centre for Economic Performance, London School of Economics Buchanan, J (1968) The Demand and Supply of Public Goods, Chicago, Rand McNally Buchanan, J (1975) The Limits of Liberty: Between Anarchy and Leviathan, Chicago, University of Chicago Press Buchanan, J (1977) Freedom in Constitutional Contract: Perspectives of a Political Economist, Texas, Texas A and M University Press, College Station Buchanan, J and Tullock, G (1962) The Calculus of Consent, Ann Arbor, University of Michigan Press Burgess, R (1982) ‘Self-help housing advocacy: A curious form of radicalism – A critique of the work of John F C Turner’, in Ward, P (ed) Self-Help Housing, Mansell, London, pp55–97 Burgess, R (1990) The State and Self-Help Building in Pereira, Colombia, Unpublished PhD thesis, London, University College London Choguill, C and Choguill, M (1996) ‘Towards sustainable infrastructure for low-income communities’, in Pugh, C (ed) Sustainability, the Environment and Urbanization, London, Earthscan Coase, R (1960) ‘The problem of social cost’, Journal of Law and Economics, vol 3, no 1, pp1–44 Currie, L (1966) Accelerating Economic Development: The Necessity and the Means, New York, McGraw Hill Currie, L (1976) Taming the Megalopolis, Oxford, Pergamon Daniere, A (1992) ‘Determinants of tenure choice in the third world: An empirical study of Cairo and Manila’, Journal of Housing Economics, vol 2, pp159–84 Davis, O and Whinston, A (1961) ‘The economics of urban renewal’, Law and Contemporary Problems, Winter, pp105–117 Dehesh, A and Pugh, C (1999) ‘The internationalization of post-1980 property cycles and the Japanese “bubble” economy, 1986–1996’, International Journal of Urban and Regional Research, vol 23, no 1, pp147–164 de Salvo, J (1971) ‘A methodology for evaluating housing programs’, Journal of Regional Science, vol 11, pp173–185 de Salvo, J (1973) A Rationale for Government Intervention in Housing: Housing as a Merit Good, Washington, DC, Department of Housing and Urban Development de Salvo, J (1976) ‘Housing subsidies: Do we know what we are doing?’ Policy Analysis, vol 2, pp39–60 Drèze, J and Sen, A (1995) India’s Economic Development and Social Opportunity, Oxford, Clarendon Fernandes, E and Varley, A (1998) ‘Law, the city and citizenship in developing countries: An introduction’, in Fernandes, E and Varley, A (eds) Illegal Cities: Law and Urban Change in Developing Countries, London, Zed Books, pp3–17 Firman, T (1999) ‘Indonesian cities under the “Krismon”: A great “urban crisis” in South East Asia’, Cities, vol 16, no 2, pp69–82 Fogel, R (1994) ‘Economic growth, population theory, and physiology: The bearing of long-term processes on the making of public policy’, American Economic Review, June, pp369–395 Gore, C (2000) ‘The rise and fall of the Washington consensus as a paradigm for developing countries’, World Development, vol 28, no 5, pp789–804 Hayek, F (1998) The Intellectuals and Socialism, London, Institute of Economic Affairs Haynes, J (1997) Democracy and Civil Society in the Third World, Cambridge, Polity Press
72 Market Economy and Urban Change Kapur D, Lewis, J and Webb, R (eds) (1997) The World Bank: Its First Half Century, Vol 2, Perspectives, Washington, DC, Brookings Institution Press Kay, C (1989) Latin American Theories of Development and Underdevelopment, London, Routledge Kessides, C (1997) World Bank Experience with the Provision of Infrastructure Services for the Urban Poor: Preliminary Identification and Review of Best Practices, TWU–0R8, Washington, DC, World Bank Krugman, P (1991) Geography and Trade, Cambridge Massachusetts, MIT Press Lesbet, D (1990) ‘Algeria’, in Mathéy, K (ed) Housing Policies in the Socialist Third World, London, Mansell Lindenberg, M (1993) The Human Development Race: Improving the Quality of Life in Developing Countries, San Francisco, International Center for Economic Growth, ICS Press Logan, J, Bian, Y and Bian, F (1999) ‘Housing inequality in urban China in the 1990s’, International Journal of Urban and Regional Research, vol 23, no 1, pp7–25 MacLennan, D and More, A (1997) ‘The future of social housing: Economic questions’, Housing Studies, vol 12, no 4, pp531–547 Manor, J (1991) Rethinking Third World Politics, London, Longman Mathéy, K (1995) ‘Informal and substandard housing in revolutionary Cuba’, in Aldrich, B and Sandhu, R (eds) Housing the Urban Poor: Policy and Practice in Developing Countries, London, Zed Books, pp245–260 Mayo, S and Gross, D (1985) Sites and Services – and Subsidies: The Economics of LowCost Housing in Developing Countries, Discussion Paper, Report No UDD–83, Washington, DC, Water Supply and Urban Development Department, Operations Policy Staff, World Bank McAuslan, P (1998) ‘Urbanization, law and development: A record of research’, in Fernandes, E and Varley, A (eds) Illegal Cities: Law and Urban Change in Developing Countries, London, Zed Books, pp18–52 Morton, H (1974) ‘What have the Soviet leaders done about the housing crisis?’ in Morton, H and Tokes, R (eds) Soviet Politics and Society in the 1970s, New York, Free Press Murray, M (1975) ‘The distribution of tenant benefits in public housing’, Econometrica, vol 43, no 4, pp771–787 Myrdal, G (1957) Economic Theory and Undeveloped Regions, London, Duckworth Niskanan, W (1971) Bureaucracy and Representative Government, Chicago, Aldine Atherton Niskanan, W (1994) Bureaucracy and Public Economics, Cheltenham, Elgar North, D (1981) Structure and Change in Economic History, New York, Norton North, D (1986) ‘The new institutional economics’, Journal of Institutional and Theoretical Economics, vol 14, no 2, pp230–237 North, D (1990) Institutions, Institutional Change and Economic Performance, Cambridge, Cambridge University Press North, D (1996) ‘Epilogue: Economic performance through time’, in Alston, L, Eggertsson, T and North, D (eds) Empirical Studies in Institutional Change, Cambridge, Cambridge University Press Nussbaum, M (1988) ‘Nature, function and capability: Aristotle on political distribution’, Oxford Studies in Ancient Philosophy, supplementary volume, pp145–182 Olsen, E (1969) ‘A competitive theory of the housing market’, American Economic Review, September, pp612–622
Developmental Welfare and Political Economy 73 Ostrom, E, Schroeder, L and Wynne, S (1993) Institutional Incentures and Sustainable Development: Infrastructure Policies in Perspective, Boulder, CO, Westview Press Pezzoli, K (1995) ‘Mexico’s urban housing environments: Economic and ecological challenges of the 1990s’, in Aldrich, B and Sandhu, R (eds) Housing the Urban Poor: Policy and Practice in Developing Countries, London, Zed Books, pp140–165 Phang, S-Y (2001) ‘Housing, housing wealth formation and the Singapore economy’, Housing Studies, vol 16, pp443–460 Polidano, C and Hulme, D (1997) ‘No magic wands: Accountability and governance in developing countries’, Regional Development Dialogue, vol 18, pp1–16 Priemus, H and Dieleman, F (1997) ‘Social rented housing: Recent changes in Western Europe’, Housing Studies, vol 12, no 4, pp421–425 Pugh, C (1980) Housing in Capitalist Countries, Farnborough, Gower Pugh, C (1990a) Housing and Urbanisation: A Study of India, New Delhi, Sage Publications Pugh, C (1990b) ‘A new approach to housing theory: Sex, gender and the domestic economy’, Housing Studies, vol 5, no 2, pp112–129 Pugh, C (1995) ‘International structural adjustment and its sectoral and spatial impacts’, Urban Studies, vol 32, no 2, pp261—285 Pugh, C (1996) Sustainability, the Environment and Urbanisation, London, Earthscan Pugh, C (1997a) ‘Poverty and progress? Reflections on housing and urban policies in developing countries, 1976–1996’, Urban Studies, vol 34, no 10, pp1547–1596 Pugh, C (1997b) ‘The changing role of self help housing and urban policies, 1950– 1996’, Third World Planning Review, vol 19, no 1, pp91–109 Pugh, C (1997c) ‘International urban and housing policy: A review of Cambridge studies, 1989–1995’, Environment and Planning, vol 29, pp149–167 Pugh, C (1997d) ‘The household, household economics, and housing’, Housing Studies, vol 12, no 3, pp383–391 Pugh, C (1997e) ‘The World Bank’s millennial theory of the state: Further attempts to reconcile the political and the economic’, Third World Planning Review, vol 19, no 3, ppiii–xiv Pugh, C (1998) ‘Housing inequity’ in van Vliet, W (ed) The Encyclopaedia of Housing, Thousand Oaks, California, Sage Publications, pp280–281 Pugh, C (1999) ‘The Asian financial crisis and its urban impacts’, Habitat International, vol 23, no 2, pp157–165 Pugh, C (2001) ‘The theory and practice of housing sector development for developing countries, 1950–1998’, Housing Studies, vol 16, pp399–424 Pugh, C and Catt, C (1984) ‘Cost-benefit and financial analyses of public housing in South Australia’, Urban Policy and Research, vol 2, no 2, pp27–33 Pugh, C and Lewin, S (1991) ‘Housing, gender and family policies in the Soviet Union under perestroika’, Netherlands Journal of Housing and the Built Environment, vol 6, no 1, pp47–55 Raed, H (1998) Public Participation and Community Organisation in the Low-income Housing Production: The Jordanian Experience, Unpublished PhD thesis, London, University College London, Development Planning Unit Raj, M (circa 1985–1986) Homeownership By the Poor and its Impact Upon Expenditure and Income: A Household Survey, New Delhi, Housing and Urban Development Corporation Ravallion, M (1990) ‘Income effects on undernutrition’, Economic Development and Cultural Change, vol 38, pp489–515
74 Market Economy and Urban Change Ravallion, M, Datt, G and Van de Walle, D (1991) ‘Quantifying absolute poverty in the developing world’, Review of Income and Wealth, vol 37, no 4, pp345–361 Rawls, J (1973) A Theory of Justice, Oxford, Oxford University Press Rojas, E (2001) ‘The long road to housing sector reforms: Lessons from the Chilean housing experience’, Housing Studies, vol 16, pp461–484 Romer, P (1986) ‘Increasing returns and long-run growth’, Journal of Political Economy, vol 94, pp1002–1038 Romer, P (1987) ‘Growth based on increasing returns due to specialization’, American Economic Review, vol 77, pp56–62 Schlyter, A (1995) ‘Squatter and slum settlements in Zambia’, in Aldrich, B and Sandhu, R (eds) Housing the Urban Poor: Policy and Practice in Developing Countries, London, Zed Books, pp317–338 Sen, A (1985) ‘Wellbeing, agency and freedom: The Dewey Lectures, 1984’, The Journal of Philosophy, vol LXXII, no 4, pp169–221 Simon, D (1997) ‘Urbanization, globalization and the urban crisis in Africa’, in Rakodi, C (ed) The Urban Challenge in Africa: Growth and Management in Large African Cities, Tokyo, UN University Press, pp74–108 Smith, B (1996) Understanding Third World Politics: Politics of Change and Development, Basingstoke, Macmillan Stern, N and Ferreira, F (1997) ‘The World Bank as “intellectual actor”’, in Kapur, D et al (eds) The World Bank: Its First Half Century, Volume 2, Perspectives, Washington, DC, Brookings Institution Press Stiglitz, J E (1998) ‘Towards a new paradigm for development: Strategies, policies and processes’, 9th Paul Prebisch Lecture, 19 October 1998, Palais de Nations, Geneva, UNCTAD Stiglitz, J E (2000) ‘Capital market liberalization, economic growth and instability’, World Development, vol 28, no 6, pp1075–1086 Stretton, H (1976) Capitalism, Socialism and the Environment, Cambridge, Cambridge University Press Szelenyi, I and Manchin, R (1987) ‘Social policy under state socialism: Market redistribution and social inequalities in East European countries’, in Rein, M et al (eds) Stagnation and Renewal in Social Policy: The Rise and Fall of Policy Regimes, New York, M E Sharpe Tawney, R (1964) Equality, London, George Allen and Unwin Wade, R (1997) ‘Greening the bank: The struggle for the environment, 1970–1993’, in Kapur, D et al (eds) The World Bank: Its First Half Century, Volume 2, Perspectives, Washington, DC, Brookings Institution Press Ward, P and Macoloo, G (1992) ‘Articulation theory and self-help housing practice in the 1990s’, International Journal of Urban and Regional Research, vol 6, pp60–80 Wheaton, W (1987) ‘The cyclic behaviour of the national office market’, American Real Estate and Urban Economics Association Journal, vol 15, pp281–299 WHO (World Health Organization) (1998) The World Health Report 1998: Life in the Twenty-First Century: A Vision for All, Geneva, WHO Williams, M (1995) ‘Role of multilateral agencies after the Earth Summit’, in Haq, M, Jolly, R and Haq, K (eds) The UN and the Bretton Woods Institutions: New Challenges for the Twenty-First Century, London, Macmillan Winch, P (1958) The Idea of a Social Science (and Its Relation to Philosophy), London, Routledge and Kegan Paul World Bank (1983) Learning by Doing, Washington, DC, World Bank
Developmental Welfare and Political Economy 75 World Bank (1993) Housing: Enabling Markets to Work, Washington, DC, World Bank World Bank (1994) Twenty Years of Lending for Urban Development, 1972–1992, Washington, DC, World Bank World Bank (1997) Taking Action to Reduce Poverty in Sub-Saharan Africa, Washington, DC, World Bank World Bank (1998) East Asia: The Road to Recovery, Washington, DC, World Bank World Bank (1999a) Entering the 21st Century: World Development Report 1999–2000, Washington, DC, World Bank World Bank (1999b) A Strategic View of Urban and Local Government Issues: Implications for the Bank, Washington, DC, Transport and Urban Development Department, Urban Development Division, World Bank Zetter, R and Hamza, M (1997) ‘The impact of foreign technical assistance on urban development projects in Egypt’, Habitat International, vol 21, no 2, pp153–166 Zetter, R and Hamza, M (1998) ‘Egypt: The state, foreign aid and community participation in urban shelter projects’, International Planning Studies, vol 3, no 2, pp185– 205 Zhu, J (1999) The Changing Mode of Housing Provision in Transitional China, Working Paper, Singapore, Department of Real Estate, National University of Singapore
Chapter 3
The State, Foreign Aid and the Political Economy of Shelter in Egypt
Mohamed Hamza
INTRODUCTION During the last three decades the complex relationship between national development strategies and shelter policies in the developing world has been recognized. Shelter provision appears to have been strongly driven by external, as well as internal, forces, neither impacting nor exerting pressure in isolation from the other. This interaction is crucial in determining policies and outcomes. In this context, the state became a mediator between external and domestic interests. Externally, it had to respond to international donors pressing agendas as a condition of financial assistance. These pressures vied with domestic interests of extending state legitimacy, but simultaneously resisting the potential threat that radical reform in the sector might constitute. On the other hand, regardless of the development paradigm, governments as well as international agencies have most often addressed housing through a pragmatic managerial approach, which attributes the housing problem to technological or production factors such as the use of inappropriate materials and standards or centralized bureaucratic organizations. This approach provides only second-level analysis, which fails to address the conceptual issues underlying the intervention processes. A structural approach is needed to place the housing question in the context of the state’s changing nature and role in accordance with the transition from welfare to market-based economies. This chapter examines policy-making within the shelter sector from the perspective of the impact of the macro-level political economy on micro-level
78 Market Economy and Urban Change
intervention. To establish this relationship more precisely, a framework, which explores the effects of the role and nature of the state, foreign aid and economic reform, is utilized. This framework is deployed to investigate the interaction between these three key elements and how they affected shifts and changes in shelter policies in Egypt from the 1950s. Egypt provides a valuable laboratory to explore these issues. External development assistance has constituted the major source of finance and has played a significant role in shaping the priorities and approaches for the housing sector. The period under study (1950s–1990s) witnessed many turning points in approaches to development and in human settlements policies: the shift of development paradigm from welfare to market enablement, as well as the massive injection of foreign aid in the Middle East to bind the Camp David accords and the Egyptian– Israeli peace treaty. These dynamics were, and still are, evident in Egypt’s development trajectory. By 1952 the Egyptian government assumed a more central role in service provision with its socialist orientation. On the macro-political level, dramatic changes have taken place since then; but, in effect, these have not been mirrored in appropriate reform on the structural or organizational levels with regard to tackling the shelter needs of the country. From the perspective of the shelter sector, the core of the chapter explores the role of the state as an interest mediator over four decades. This reveals that the shelter sector always formed an important investment priority, susceptible to both internal and external determinants. Internal determinants are related to domestic priorities influenced by changes in social structure, class interests and resource allocation. External determinants concern the roles played by international agencies in promoting development models in which the shelter sector plays an often uncertain role, or direct political pressure as a part of geo-strategic concerns. The state’s receptiveness and ability to mediate is constrained by the extent to which external agendas fit or conflict with the state’s development ideology, perceptions of equity, social justice and stability. The chapter argues that in order to provide a refined understanding of the urban shelter question, it has to be located in its broader socio-economic and political context. Outcomes have generally been technocratic; but the problems were largely structural in nature. The gap between the political and technocratic levels of policy-making and implementation is a central theme in the study. The starting point of this analysis is that the state’s macro-economic policies tend to release and generate forces, and to establish relationships and coalitions among interest groups, which have an impact upon the shelter question. This chapter advances two main propositions: • •
While the state may be receptive to external pressure for aid, this reciprocity is constrained by the extent to which external agendas fit domestic needs and the social contract between the state and various class interests.1 External assistance, aimed mainly at security objectives or balancing political interests, frequently has negative effects. The result has generally been distorted
The State, Foreign Aid and the Political Economy of Shelter in Egypt
79
and inconsistent policy shifts, questioning the state’s role in maintaining or producing inequality. Underlying the above propositions is the nature of policy-making in a developing country like Egypt. This is characterized by an ad hoc, remedial and reactionary approach.
THE STATE, DOMESTIC DETERMINANTS AND FOREIGN POLICY DURING THREE ERAS
The revolution: Socialism without socialists (1952–1970) The Egyptian revolution of 1952 was a copybook example of a developing world country’s challenge to imperialism and the delayed dependent development that resulted from it (Hinnebusch, 1990). The Liberating Free Officers Movement had ideals, but was not a political party with a clearly defined ideology, nor did it possess its own politico-technical cadre. A number of measures were implemented, which aimed to broaden opportunities and narrow class gaps, from open-university education and guaranteed state employment for graduates, to maximization of employment in state firms, rent reductions and price controls.2 All had serious implications, decades later, in limiting the ability of successive regimes to reform the associated policies of social equity, which depended upon such measures. The question of why the regime remained unwilling to adopt a radical socialist model reveals a trend that prevailed through successive regimes. One reason was that distributional policies were used to maintain political stability and as an instrument of control. Another reason was the fear of alienating the bourgeoisie upon which the regime depended. Egyptian ‘socialism’ was not so much the product of a revolutionary mass movement or a matter of ideological belief, as a pragmatic governmental solution to the problems of underdevelopment and a way of facing external international threats (Ayubi, 1980; Dessouki, 1982). The impact of such a developmental strategy was characterized by being ‘technical’ rather than ideological, organizational rather than socio-political, and excluded the concepts of ‘ideology’, ‘class’ and ‘party’. The lack of a clear ideological doctrine placed it in balance between communist and capitalist stances. A private sector entitled to a fair profit was to be preserved, while the state would plan, stimulate and direct development. In time, the state directly assumed functions of investment and production through a large public sector. Arguably, such characteristics interplayed with each other to produce a series of shifts in urban policy, in general, and housing, in particular. The inability to decide on a leading sector distorted market mechanisms and established the foundation for enduring and inherent problems in the shelter sector. During the Nasser era, international economic assistance paralleled Egypt’s internal political transformation. Relations with the US started to improve again
80 Market Economy and Urban Change
during 1959–1960 with the creation of a new aid bureaucracy in Washington.3 The chosen instrument of American economic aid policy was ‘food aid’, which exerted its influence on domestic stability.4 Relations deteriorated again with US President Johnson’s ‘short-leash’ policy. Nasser reactively strengthened Egypt’s ties to Moscow. Following the disastrous June 1967 war with Israel and the subsequent war of attrition, Egypt’s security concerns prompted greater reliance on the Soviet Union. Influenced by the social reform ideas of the Eastern Bloc, a humanitarian stance later developed and was reflected in a pattern of housing intervention characterized by public housing developments. The state acted in favour of low-income groups in order to gain political support and sustain the regime’s legitimacy (Soliman, 1992). The public sector made its greatest effort during the early 1960s. The 21,000 public-sector units built nationwide in 1962–1963 have never been matched.5 Despite this activity, private construction began to decline. During this period the government intervened in the housing market not only directly, as an agent, but also indirectly. The rent control acts, which reduced the rents to the advantage of tenants, discouraged private investment in housing. Thus, the average number of units built annually, by both the public and private sectors, declined from 52,000 during the period of 1952–1960 to 30,000 during 1961–1972 (Waterbury, 1982) – that is, from an average of over 4000 per annum to an average of under 3000 per annum during the second period. A government unable to keep up with rapid population growth and urbanization rates, or to contemplate massive involvement in subsidized public housing, resulted in an accumulated shortage of housing reaching its peak by the early 1970s. Under the notion of a welfare state, the policy geared to public housing provision appeared unworkable. The more serious implication of turbulent foreign relations was that urban dwellers had become accustomed to, and domestic peace was contingent upon, abundant, low-priced imported food products. This may, in addition, have contributed to the lack of reform in the urban sector and the retention of the socialist measures introduced earlier, such as price and rent controls. Resources diverted to rebuilding military capacity also reduced public investment in the urban sector (Mabro, 1974; Waterbury, 1976). The enduring twin legacy of Nasserism created the structural foundations of the authoritarian state. At the same time, Nasser also established a form of nationalist independence and populist obligation, which legitimized its authoritarian rule by appearing to incorporate the masses (for example, through food and rent subsidies). This largely illusory process of participatory government created a dilemma for Nasser’s successors: by reversing the existing policies that legitimized authoritarian rule, the government risked alienating the incorporated masses and jeopardizing its durability of power; yet, any policy shifts also had to consider the inherent mechanisms of class alliances and interests. These legacies were played out in the urban sector during later decades.
The State, Foreign Aid and the Political Economy of Shelter in Egypt
81
The open door: Redirection, looking outside and facing North/West (1970–1981) After the October 1973 war, Sadat used the political capital won in the war and the opportunities created to transform Egypt’s policy and economic strategy.6 The new policies helped to ensure Egypt’s creditworthiness with the International Monetary Fund (IMF), paving the way for its gradual reintegration within the world capitalist system. However, the social ramifications and the difficulties in absorbing new development complicated the quick pace of economic transformation (Weinbaum, 1983a). In the absence of adequate local savings and government budget surplus, Egypt had adopted a development strategy for which continuous flows of imported capital, commodities and technology were indispensable.7 Despite statements in 1974 and later about allowing the market to allocate resources and set prices, the state was never expected to withdraw from regulating and planning the economy. A continuing reliance on economic and technical aid from foreign governments and international agencies ensured the bureaucracy an active and permanent role (Weinbaum, 1983b). Internal political interests and foreign aid came together prominently during this period.8 US officials charged with formulating aid projects had to juggle three objectives: 1 2 3
the efforts needed to bolster Egypt’s short-term economic stability; setting in motion programmes for long-term economic growth and productivity; and the pursuit of these goals while the United States Agency for International Development (USAID) sought to avoid undermining earlier achievements in Nasser’s social and economic equity.9
These intertwined factors had a considerable influence on determining priorities and setting the agenda in the urban sector. Another source of substantial aid was the Arab states. However, despite a significantly high and unprecedented ratio of investment to gross domestic product (GDP), sustained at 29.4 per cent over the entire Arab assistance period, public and private investment was concentrated in the non-tradable sectors of the Egyptian economy – focusing primarily on commercial rather than productive expansion. Investment in luxury housing, luxury consumer imports, banking and tourist facilities limited the prospect for long-term income generation, employment, or exports (Handoussa, 1990; Abdel-Khalek, 1982; Amin, 1982; Ayubi, 1982). The conjuncture of foreign aid, international realignment and the domestic policy agendas in the Sadat era had important implications for the urban sector, a sector that had seen physical decline and deterioration under Nasser. In order to attract the foreign investment and capital upon which Sadat had based his opendoor policy, the strained Cairo USAID mission moved to identify projects that could quickly absorb generous amounts of US assistance.10 Arab investment, in addition, had fuelled conspicuous consumption, driving up demand for land, speculative activities in housing and building materials.
82 Market Economy and Urban Change
Implications for the urban sector were reflected on the macro and micro levels. On the macro level, the scale of the aid programme, usually politically motivated, determined the approaches adopted and the cost of projects funded. The Camp David Peace Treaty brought US$815 million in aid money each year. This had to be dispensed quickly within strict time limits. Appropriate low-cost, selffinancing or a long-term reform process, which incorporated significant institutional-building and community development, would have taken time to mobilize and was thus not pursued. Massive showpiece projects – the largest of their kind at the time – allowed for rapid dispensation of funds. Yet, the scale, novelty and complexity of these projects made them unmanageable and the root causes of the problem were neglected. Sadat’s regime, avoiding possible social instability, maintained the wellestablished social policies created by Nasser – food subsidies, job-guarantee scheme, price distortions, bureaucratic structure and attitude, tax system and, most importantly, rent control. On the one hand, the state appeared to adopt a radical reorientation towards liberalization through the open-door policy and a shift to the West; on the other hand, Nasser’s legacies were too strong and well established to alter. Sadat’s open-door policies may have reinforced an environment of capitalism, which was parasitic in character. Revitalization of the private sector created powerful interests with a stake in the regime. State contracts were in the hands of government officials. Widespread corrupt practices were a regular feature of the daily news. Were the state’s intervention efforts, urban development and the housing sector driven by the agenda and benefits of these new interest groups, leaving behind the less powerful sectors of the society? The explosion of conspicuous consumption by the wealthy elite represented ‘social provocation’ and fed a growing perception that class gaps were increasing. Thus, social cleavages widened, expanding the bases of political opposition, leading to antagonism and instability by low-income groups (Dessouki, 1982; Baker, 1978). All of this paralleled the mounting Islamic fundamentalist movement, born out of the economic crisis and hardship, and contributed to making Sadat the victim of his own policies on 6 October 1981.
The reform and structural adjustment (post-1981) Well before October 1981, there was growing concern about Egypt’s economic instability, the form and scope of private investment, and increasing corruption. The government acted to curb imports and exerted more control on the economy in terms of centralization and planning, though unannounced. On international aid and capital receipts, the government attempted to speed the inflow of assistance, removing bottlenecks to slowly maturing projects and sustaining resources.11 After 1982, when the international economic climate deteriorated, a major economic crisis enveloped Egypt and the government followed a modified strategy.12, 13 It merely sought incremental changes to domestic policies and continued to equivocate the legacies of Nasser and Sadat.14
The State, Foreign Aid and the Political Economy of Shelter in Egypt
83
The government implemented reforms at a pace, which, it believed, was compatible with its own strength and with the need to maintain social peace. At the same time, the strategy postponed the implementation of far-reaching reforms into the early 1990s.15 Under Mubarak’s government, there were growing concerns about aid programmes and Egypt’s control over basic economic decisions. The conflict centred on the role of the private sector in Egypt’s economic development and the contradictory forces of the country’s public-driven investments in housing and infrastructure. Behind this were international donors’ attempts to embed Egypt’s full return to a private economy. This posed serious threats to low-income groups, constituting a major source of social unrest. Such a goal contradicted the still pervasive Nasserist values of social justice and public ownership, but also threatened a bureaucratic elite deeply entrenched within the state organization. Paradoxically, the state’s intermediary role may have had to be boosted under the economic reform and structural adjustment programme (ERSAP). Foreign debt was probably the biggest challenge facing Egypt during the 1990s, raising serious questions about the country’s financial integrity.16 As Egypt’s debt grew larger, and the burden of servicing the debt more difficult to bear, the IMF stepped in. In May 1987, Egypt agreed an economic reform package, which provided a standard drawing right (SDR) US$250 million standby credit over 18 months (Butter, 1991). The price of these agreements has been the commitment to an economic reform and structural adjustment package, with an impact on almost all aspects of the Egyptian economic and social life, and subsequently potentially hazardous political implications. The 1991 ERSAP followed the earlier 1987 one, which fell short of proposing the reforms aiming at solving Egypt’s problems. Indeed, it took another decade after the programme was agreed upon for macro-economic stabilization to be under way. Thus, it can be argued that the significant balance-of-payment improvement may be primarily due to increased capital inflow induced by the IMF’s ‘seal of approval’, rather than significant current account improvement. There are also some doubts as to whether such improvement is attributable to the adjustment programme or to the extensive debt relief that was accorded to Egypt by the US and the Arab states during and after the Gulf War.17 On the negative side, gross domestic investment (GDI), which averaged 22.5 per cent of GDP over the period of 1987–1990, was accompanied by a low rate of gross domestic saving, averaging 6.4 per cent of GDP and resulting in a saving investment gap equal to 16.1 per cent of GDP (UN, 1993). The negative rate of growth of GDI reflects the decrease in public-sector investment. This is contributing to significant negative impacts on total investment since government investment represents more than three-quarters of total GDI in Egypt and will, ultimately, extend to all sectors, including housing. Thus, the state’s ability to remain a ‘provider’ for low-income groups is gradually but significantly curbed under such circumstances. The impact on the population is through unemployment and poverty. Changes in labour laws raise unemployment among previously employed workers to more
84 Market Economy and Urban Change
than the prevailing level. The impact of privatization on employment, as elsewhere (Pastor, 1987), is negative, at least in the short run. The cost of living is increasingly affected by devaluation, increases in prices of energy, transportation, public enterprise commodities, the elimination of subsidies, raising indirect taxes and the widening of the tax base. This inevitably leads to reducing real incomes. The tight monetary and fiscal policies, and the reduction of government investment, are likely to further depress the overall affordability of commodities and services, including housing. Although reform programmes have not, yet, provoked social unrest, they have indirectly provided a fertile soil for re-emerging opposition groups (Islamic fundamentalists) to recruit, prepare and promote their case. It can be argued that Egypt has experienced the worst of both worlds: on the one hand, the state’s fear of popular discontent has led to a breach of ERSAP targets, thus putting its aid receipts at risk; on the other hand, the measures that it has taken have had precisely the results that it feared.
THE POLITICAL ECONOMY OF SHELTER Examining the three most significant periods in Egypt’s modern history, it appears that the social contract between the state and its different constituencies underwent a variety of transformations under the three regimes. Nasser’s policies had significant implications for the shape of Egypt’s stratified society and social mobility. Policies that seemed to target the masses were gradually appropriated by the emerging new class of bureaucrats and technocrats for themselves. Sadat put aside the programmes of income distribution in favour of satisfying middle-class consumerism. The emphasis was on export-led growth, with the state acting as a partner in alliance with foreign private capital and with the Egyptian private sector (Waterbury, 1982). The resulting policies imposed economic liberalization, which contributed to growing class inequality, especially in terms of providing public services and housing. Mubarak’s model was little different from that of Sadat. During the Nasser and Sadat eras, the social contract between the state and its citizens was a means of maintaining state and regime stability by appearing to appease the masses with attractive welfare policies. Under Mubarak, because of the contraction measures associated with the ERSAP, the state’s ability to provide these welfare services and commodities, to which the masses have become accustomed, was brought into question. This leads to a general conclusion at this stage: the root causes of the economic and, more specifically, the housing problem are not just the consequences of technical failures or population growth, as has always been claimed by the state; rather, the underlying factors are the driving forces of state intervention, its perception of the problem, its priorities and ways of addressing them.
The State, Foreign Aid and the Political Economy of Shelter in Egypt
85
Socio-economic changes and the urban sector The previous sections set the context and, in some detail, the framework within which successive Egyptian governments mediated the different interests. This section now explores, more fully, how housing policies came to be enacted in Egypt’s urban sector and the broader forces and interests that these policies represented. The state’s early objective, to target and appease the masses, was reflected in its attempt to legitimize and institutionalize the pact between Nasser and the populace through, for example, the national charter or the constitution. In effect, these were attempts to legitimize the original revolutionary aims into a constitutional and legal framework in order to institutionalize and make permanent the characteristics of the coup. This created expectations from the populace to recognize the new system as the ultimate provider. The state took this responsibility and built its support and legitimacy on it. As a direct outcome of the state’s initial bias to the masses, private investment in industry failed to come forward in sufficient quantities and the government decided to nationalize most of the productive capital. The ambitious development projects of the new regime faced many financial difficulties. By the early 1960s, a ‘housing issue’ was hardly recognized as a matter of public intervention. However, the problem had reached a level calling for intervention by means other than market mechanisms. This included the regulation of housing production and the housing market and, under specific political conjuncture, the engagement of the public sector directly in the promotion of housing. Continued development of state bureaucracy contributed to further enhancing state intervention in the urban sector, in general, and housing, in particular. This transformation can only be understood by examining the effects of state intervention in the housing sector (see ‘The state’s mode of intervention’) and by comparing its intentions or perceptions to the medium- and long-term impact.18 Despite the obvious differences between the ‘ideological orientations’ of Sadat and Nasser, Sadat paradoxically continued to use the same mechanisms and tools that Nasser had created. Arguably, the two may have followed different means to achieve the same end: regime stability. Opening up the economy in such unprecedented ways implied inviting capital in an unregulated manner in terms of sectors and size.19 Egypt’s economic liberalization policies, together with the migratory waves of Egyptian labour to the oil-rich Gulf States, deeply affected Egyptian social fabric. In addition to the socio-economic changes resulting from economic liberalization, Egypt’s heavy dependence upon the US and the Arab countries provided the former with enough leverage to push for a greater measure of pluralism. The encouragement and financial support for private business enterprises caused further changes within the social stratification of the Egyptian society. Socio-political observers, in Egypt, contend that, under the open-door policy, an expanding bourgeoisie may have acquired state control. This took the form of a powerful joint Egyptian–US chamber of commerce and the so-called Egyptian Businessmen Association, where both had, and still have, direct links to the
86 Market Economy and Urban Change
cabinet, working as advisory bodies. The resulting policies led to growing class inequality in the provision of public services, particularly shelter.20 Under Sadat, from the early 1970s, there seems to have been a time lag between political thinking and legislation. While on the macro-level there appeared to be a reorientation and liberalization movement; on another level, most laws and regulations created by Nasser were untouched. Legislation that fulfilled the new agenda was enacted but left to operate under the constraints of the existing system. The period under Mubarak, arguably, was primarily one of extension, together with consolidation of the social structure, rather than any radical change. Under the economic reform and structural adjustment strategies (post-1981), it was argued that liberalized market forces would give low-income groups higher incomes as a result of higher productivity, savings, investment and exports. Evidence indicates that economic reform and structural adjustment have led to a serious deterioration of the living conditions of the urban poor (Burgess et al, 1994). There is also an inherent ‘orthodox paradox’ in the reform programme. The policy imperative of reducing state intervention contrasts with the fact that the state, itself, is responsible for implementing these changes. State agencies are, in fact, being asked to determine their own end. Since public employees are likely to see their jobs disappear with the ‘reform’, the opportunities for delay, or even sabotage, are considerable. This general concept can be applied to any sector, and largely explains the slow reform of laws and regulations controlling the housing market and organizational reform of bodies responsible for such sectors. Given Egypt’s unique development trajectory over the preceding decades of a relentlessly enlarging bureaucracy as both a manifestation of, and an instrument for, the co-option of the masses, such resistance to the imperatives of market enablement is hardly surprising. The government’s aim throughout the 1970s and early 1980s was to demonstrate an economic boom, real or imaginary. The ‘false’ prosperity created by dependence upon imported foreign capital and aid contributed to the delay of any real structural reform. At the same time, and in contradiction, the principal characteristic of government policies was to divorce itself from responsibility. What the government interpreted, at that time, as laissez faire or open liberalized approaches may have spiralled out of control. But the question to be posed here is whether this was a conscious process or a continuation of the state’s short-term objectives, which in most cases result in unexpected consequences.
The state’s mode of intervention The state’s allocation of investment between 1952 and 1970 shows that, while there was fluctuation in other sectors, there was a rapid fall of investment in housing. This paralleled a constant increase in industrial investment over the same period. Macro-economic policies were aimed at reducing investment in housing – a ‘consumption’ sector defined as a welfare service – and redirecting it to ‘productive’ industrial and manufacturing activities. A possible explanation, although the evidence is not categorical, is that the state’s intervention was aimed at making investment in the housing sector less appealing or non-profitable. One of the
The State, Foreign Aid and the Political Economy of Shelter in Egypt
87
strategies may have been the creation of an imbalance in the supply factor via direct provision from the government’s side; another was the continuous intervention in laws and regulations concerned with land, building materials and, most significantly, rent control. Rent control, if put in its context, was the start of the state taking control of the housing sector, as it did with agriculture and industry, perceiving the capitalist class as ‘exploitative’. In the medium term, rent control accelerated the deterioration of buildings. Owners were reluctant to carry out any maintenance due to the low rent they received, contributing, yet further, to shortage of supply by loss of existing stock. The most important effect of rent control, however, was that it constituted a disincentive for investing in low-income housing. During the Nasser era, both state intervention and the type of provision reflect the underlying themes: state efforts were directed to the formally employed with secure jobs; the informal sector, under a ‘modernization’ development paradigm, was not recognized. It could also be argued that the interaction between political objectives and the influence of modernization theory produced the state’s attitude during this period. Under Sadat (1970–1981), the outcome of external pressures and domestic interests, in so far as the urban sector is concerned, was to set the scene for an ongoing, though conservative, receptiveness towards policy initiatives, dictated by both domestic and international concerns. The government’s continuing inability to assert/decide which sector should lead had serious implications at the macroeconomic level, manifesting itself in the housing sector and the way in which the state intervened. The government experimented with several approaches (for example, sites and services, urban upgrading and new towns), but without a coherent overall strategy, demonstrating, again, its pragmatic managerial attitude towards problems that require more than a pragmatic response. The state’s indecisiveness and delegation of the task to the private sector, while maintaining control over the market, resulted in serious distortions. The effects and biases of state policies led to the division of the construction industry into three or more market systems, controlling housing production in the informal and formal sectors. These market systems determined forms of distribution, consumption and exchange value, leading eventually to a profit for people who dominated the market. From the late 1970s onwards, there was a shift in the government response towards slums and informal areas. This shift towards aided self-help was the result of two main factors.21 The first was the massive growth of spontaneous housing, which was a reflection of a more general growth of the ‘informal sector’. At the same time, the failure of slum clearance and public housing to deal effectively with the problems of slum dwellers or to provide other services needed by growing numbers of poor urban households became clear by the early 1970s. The second factor was the pressure that came from international lending agencies and, in particular, the World Bank. The World Bank argued for a new approach to urban development, which incorporated various forms of aided selfhelp (World Bank, 1972). Similar approaches were followed by USAID and the
88 Market Economy and Urban Change
UK Overseas Development Administration (ODA), now the Department for International Development (DFID); the three were heavily involved and operational in Egypt during this period. The two packages, which received the most support, were sites-and-services and upgrading schemes. The structure of Egypt’s state apparatus and its essentially conservative bureaucracy created significant resistance to developing, operating and implementing such novel concepts. Hence, they were accepted in principle, but very little was realized. From the politicians’ point of view, upgrading was a failure or an inadequate approach, while sites and services were termed ‘organized slums’. A possible interpretation of this is the lack of prestige and visibility such projects afforded. Such approaches were a prerequisite to the aid flows; but the challenge was how they could be implemented practically by an apparatus unused to a participative ideology. At an institutional level, the government had not fully appreciated the reforms necessary to embrace, the new paradigm of growth with equity in the urban sector. The government went further to experiment with new towns, but adopted the same rigidity of approach, thus undermining their chance of success. Housing policy remained primarily the same. It can be argued that the aim of the new town experiment was a political one, devised as a showpiece in order to demonstrate the state’s commitment. But the new towns constituted a massive drain on scarce resources, and the benefits were further accrued by the ‘haves’ and not those originally targeted.
Inevitable outcomes Quantitative and qualitative misdistribution by region and social group, and numerous dwellings of ‘substandard’ quality, were the main manifestations of the problem at the end of Nasser’s rule. There was a disjuncture between the state’s announced objectives and the implications of its intervention. The majority of state production was allocated to government employees. Goals to provide sufficient low-cost housing for low-income groups were not achieved. The ‘formal’ sector production was accessible for only 25 per cent of the urban population, mainly due to cost. In summary, public housing policies were not designed for, or allocated to, the poorest of the poor and seem to have served three functions. First, housing policies were intended to co-opt the masses: the state built houses when it needed their support more as a gesture than a realistic or feasible attempt to satisfy housing need. Second, such policies helped to create jobs and, more importantly, helped to sustain the construction industry. Finally, the same policies provided for government supporters, for members of middle-class groups in strategic positions and for government officials. They served, in short, both growth and legitimacy objectives. Towards the end of the 1990s, the accumulated outcome could be summarized in three words: housing market distortion. Such distortion manifested itself in different forms:22
The State, Foreign Aid and the Political Economy of Shelter in Egypt
•
•
•
•
•
•
89
A massive gap between cost and affordability for rent or ownership of new buildings. The rate of increase in the cost of building materials and construction averaged between 15 to 20 per cent per annum. At the same time, the rate of increase in land prices was 20 to 30 per cent, and in some years reached 40 per cent per annum. Simultaneously, the national growth and development rate had contributed to a mere 5 per cent increase in incomes. Hence, affordability was in continuous decline. However, there was also a massive gap between prices and affordability for owner-occupier dwellings. An average dwelling would cost between 7 to 10 times an average household annual income, while it is normally around 3.5 to 5 times. Artificially low rent levels of existing tenants. Several studies indicated the disproportion between rent values and income levels. In a city such as Cairo, rent constituted around 0.02 per cent of an average household income, while acceptable international standards should be 15 to 20 per cent. Controlled rent values were far below a realistic rate of return, while purchase values were far higher. Imbalance from the shift to owner occupation. Since the late 1970s, there has been a major shift to owner-occupier and away from rental markets. This was a direct reaction and natural response to the distortion in the housing market created by rent control measures. Building for rent proved to be unfeasible as an investment. It could be argued that rental had totally disappeared from the new housing market in Egypt. Distortions from the shift to middle- and high-income housing. There was very little, if no, investment in low-income housing. This resulted in a surplus of middle- and high-income housing of around 2 million units, as previously indicated, and a shortage in low-income housing. The situation is aggravated when it is taken into account that low-income groups in Egypt form approximately 40 per cent of the population. Imbalance between formal and informal housing. During the last three decades, 60 per cent of the housing stock was built by the informal sector. This figure soared during the 1970s to reach approximately 80 per cent. Over the last four decades, the formal sector’s contribution, public and private, did not stretch beyond 40 per cent of the housing stock. Limited savings and borrowing. As for housing finance, banks and financial institutions have always declined to take part in such activity because of the instability and distortion of the market. Of all banking investment in Egypt, only 1 per cent is invested in housing. In a balanced efficient market this should reach around 20 per cent. This poses a fundamental question: how can the housing issue be addressed without finance?
It is clear from the above that state intervention moved in opposing directions. In attempting to achieve what appears, in theory, as sound and just policies, it has constantly harboured questionable motives. Through the approaches that it adopted – such as building new towns and upgrading existing housing stock – it is evident
90 Market Economy and Urban Change
that the state was trying to juggle and mediate interests and pressures while appearing committed to the masses. Its primary end was to achieve short-term objectives and to maintain stability. This chapter argues that the approach was formulaic and minimalist – a balancing act by the state. By accepting and promoting any specific intervention, successive governments could appear to be restoring trust between themselves and the masses, while conveying the message that incorporation in development projects is conditioned by cooperation. In practice, they did little more than commence a process of patronage, which trickled down from the macro to the grassroots level.
CONCLUSIONS This chapter has addressed the more significant aspects of the political economy in Egypt. The goal has been to assess the impact of domestic and external factors on policy-making and intervention efforts in three distinctive eras of the country’s modern history. With a focus on Egypt’s shelter sector, a picture has been presented of the different structural factors that have contributed to shaping the state’s response to the housing question over time. Reflecting back on the propositions made in the introduction, the following conclusions can be drawn. The first proposition suggested that, while the state may be receptive to external pressure, this reciprocity is constrained by the extent to which external agendas fit domestic needs and the social contract between the state and various class interests. On the macro level, intervention measures and development projects appear to have been skewed by political considerations, either domestic or derived from the interaction between internal and external imperatives. The result is the same: state intervention characterized by an ad hoc approach. The case of Egypt shows, to a great extent, that intervention efforts did not go beyond remedial, reactive measures. The second proposition suggested that external assistance, aimed mainly at geopolitical objectives, frequently has negative effects. The result has generally distorted policies and led to inconsistent policy shifts, linked to the emphasis on the state’s role as interest mediator. If external factors are added to the equation, there has been a major gap on the macro level in Egypt between the manifest objectives of internationally driven urban development programmes and the broader geo-strategic interests that give rise to them. From the point of view of foreign and domestic interests, the state’s mediating role was to accede to the demands of the donors. It was constrained, however, by domestic political agendas supported by a resistant bureaucracy. From the point of view of the international donors, the specific conceptual and operational objectives of urban development or shelter provision were subjugated to a broader geopolitical agenda, one which supported Egyptian compliance with a Western agenda and the operational desire to achieve speedy implementation. It is unrealistic to expect these broader imperatives to have meshed cleanly with the development policies, programmes and projects in Egypt. The underlying issues,
The State, Foreign Aid and the Political Economy of Shelter in Egypt
91
here, are how these international political and technological agendas impacted upon the domestic agendas of Egypt, upon the evolving definition of the social contract and, consequently, upon the conceptualization of interest mediation. As seen in this chapter, the policy-making process, in many sectors in Egypt, is essentially the interaction between the needs of the state (especially the autocratic tendencies of the leadership and the local elite) and external forces. These forces determine policies according to the perceived interests of the principal stakeholders and their own relatively short- to mid-term agendas. Structural changes in development paradigms do not appear to be the main determinant of the policy shifts. Rather, it is the combination of short-term and specific international and state interests, and its responses to international assistance, which is instrumental in the policy shifts and modifications in approaches. There is a conjuncture of three significant determinants of project and programme delivery: the containment of social unrest at the national level; pragmatic geopolitical interests on a regional level; and practical requirements to implement visible showpiece projects or to achieve prompt disbursement of funds at the local level. More specifically, political unrest during the periods under investigation could be attributed to the same root cause: the failure to address the basic needs of the population, such as transportation, education and, particularly, housing. Indeed, the more the regime failed to address the housing question, the greater the threat of unrest. This threat, in turn, led the state to adopt expedient intervention measures, which primarily concentrated on the containment and maintenance of stability. In other words, the more the regime failed to address the housing question, the more political unrest threatened stability. On the other hand, the more the state sensed this threat, the more it adopted intervention efforts and measures that only aimed at maintaining stability. Another conclusion relates to foreign aid and market forces. It is also clear that a shift to a market economy underwritten by the assistance programme was inherently contradictory. The question was not only one of intergovernmental and intra-governmental conflicts in terms of perceptions and priorities, but also a conceptual problem that may well have hindered aid efforts. Underpinning this is a crucial point: aid and structural adjustment, in Egypt and in most developing countries, do not take account of the dualistic nature of the market. Much intervention assumes that the market is characterized by full and free competition, where prices are flexible, respond instantaneously to changes in consumers’ demand and initiate an immediate increase in supply (Riddell, 1987). The case of the housing sector, and other sectors in Egypt, defies this assumption. Production is monopolized by a small number of bodies, including the state. Linkages between consumers and producers are far from perfect and the state controls almost all elements of the market, from laws and regulations governing the cost of materials and rents, to land and finance. There have been unusual circumstances in the Egyptian case, which circumscribe the applicability of the findings to other situations. These have been the central role that Egypt plays in the Middle East; the special relationship which the country has with the US, in particular, and major donor countries, in general;
92 Market Economy and Urban Change
the rapid and dramatic changes and shifts in the country’s ideological orientation and alliance, from the East to the West and at the height of the Cold War; and the significant impact of the latter upon changes in the social structure, interest groups and class alliances. First, the policy-making process is an outcome of the interaction between the needs of the state (especially the autocratic tendencies of the leadership and the technocrats) and external forces that determine policies according to a different agenda (geopolitical, in some cases). Second, outcomes may, therefore, not be generated by a conscious policy-making process, but, instead, directly from political impact. The third point is not just the width of the gulf between politicians and technocrats, but the nature of it. When considering intervention, it appears that both groups tend to use the same tools for different ends. While technocrats deal with factors of production in isolation from the interaction between domestic and external determinants, politicians attempt to use technocratic ‘fixes’ to achieve a stability agenda. The end result, in either case, is that the root causes (mainly structural) are not addressed. Fourth, examination of the consistency between the state’s announced ideological orientations and objectives and the final outcomes reveals further ambiguity. It appears that state intervention is determined not only by the prevailing development paradigm, but also, to a greater extent, by the interaction between such paradigms and the state’s short-term specific political objectives, whether domestic or international. On the other hand, policies and provision can produce changes in the social structure, which, in turn, become key factors in the evolving social contract. The chapter shows how state policies such as nationalization, and price and rent controls, were used as instruments to appease the urban masses and build public support for Nasser’s new regime. Such policies cultivated a new middle class, which gradually took control of the state apparatus and later shifted policies to serve its own interests. Simultaneously, the government maintained the same rhetoric of alliance to low-income groups. With minor exceptions, the same processes appear to have continued throughout Sadat’s period and beyond into the Mubarak period. Government policies can thus create new forces which then work, not surprisingly, for their own interests but distort the original policy objectives away from the target group. The state often finds itself in a position of having to mediate unanticipated interests representing groups generated by its own policies. Finally, the chapter demonstrates the importance of focusing on the domestic and external macro level. It attempted to link this to the outcomes, rather than to assess ‘on-budget’ state expenditure. Such approaches and models generally fail to account for the effects of factors such as class movements, alliances, sociopolitical transformations, external political agendas and the impact of development paradigms on social change. Such factors continue to significantly determine policy formulation and state intervention by constantly redefining the nature and role of the state.
The State, Foreign Aid and the Political Economy of Shelter in Egypt
93
NOTES 1
The term ‘state’ has a specific connotation in political theory. However, in a case like Egypt with limited political institutional development, the term can have a very specific and different meaning. In the text, the term is sometimes used to refer to national interests, at other times to government. The reason for this is that the state, in the case study, is a conglomerate of institutions and agencies whose interests may sometimes conflict. The actual decision-making process is in the hands of a centralized and concentrated power structure that controls the capital (for example, in the Egyptian–US Chamber of Commerce, the president and prime minister act as executives). The idea of an efficiently functioning representative system is questionable. The focus of the study, therefore, is on the central organs of the state. As the determinants of public policy, the study treated them as entities when examining their relations with prominent groups in the society. 2 Other measures included subsidization of popularly consumed commodities, a ceiling on incomes and a progressive income tax, and arrangements for worker profitsharing. 3 The central objectives of the Kennedy administration were to keep the Arab–Israeli conflict from open war; to limit Soviet influence in Egypt; and to restrain Nasser from attacking Western interests in the Arab World (Burns, 1985). 4 Between January 1961 and February 1962, the Kennedy administration signed three ‘Title I Food for Peace’ agreements with the Egyptian government, committing the US to provide about US$170 million worth of surplus commodities to Egypt. 5 The average for the decade of 1960–1970 was 11,000 public-sector units per year. 6 Several forces converged to produce this transformation: the elite who had lost faith in a public sector burdened by bureaucratic inefficiency, corruption and populism as a viable engine of development; the private sector and bourgeoisie who could help to revitalize the economy; servicing the continuing debt crises, which in the 1970s absorbed 40 per cent of export earning; and population growth surging beyond agricultural production, and thus necessitating hard currency for food imports, only obtainable through aid and a Western reorientation (NCSCR, 1985a). 7 The US accounted for nearly half of the foreign aid going to Egypt. More than US$7.6 billion in loans and grants had been obligated between 1975 and 1982, roughly divided between project aid and various commodities (Weinbaum, 1983b). 8 Foreign assistance peaked at US$2.9 billion in 1977 – nearly three times the 1973 figure and sourced from a range of Western bilateral and multilateral donors. NonUS aid doubled from 1976–1979 to US$1.1 billion; but the US accounted for nearly half of Egypt’s foreign aid, with more than US$7.6 billion in loans and grants obligated between 1975 and 1982, roughly divided between project aid and commodities (USAID, 1981). 9 By 1981, the USAID mission in Egypt had become by far the largest AID post in the world, with more than 100 professional staff members and numerous attendant consultants and specialists on temporary assignments. In its aid relationship with the US, Egypt arguably represented a ‘case of a totally dependent and “penetrated” country’ (Nonneman, 1988). 10 This is supported by two sources of data: data from the survey carried out in this research: interviews with US and Egyptian officials working on aid projects; and data from an earlier research project looking at the impact of foreign technical assistance on urban development paradigms in Egypt. The crucial point investigated
94 Market Economy and Urban Change
11 12
13
14
15 16 17
18 19
20
in the later research project was how projects come to exist, and how and who decides priorities and on what criteria (see Zetter and Hamza 1997, 1998). Revenues from petroleum exports and foreign remittances, and ‘strategic rent’ from bilateral and multilateral donors, in return for supporting US foreign policy goals in the region (Richards, 1991). The growth of GDP slowed down during the 1980s, reflecting the economic crisis that Egypt faced during this period. Between the mid 1970s and early 1980s, GDP grew at an average rate of around 9 per cent; and through the mid 1980s the growth rate was still impressive at 6 to 7 per cent per annum. But in the second half of the decade, the rate of GDP growth decelerated, reaching as low as 1.5 per cent during 1991–1992 (UN, 1993). The World Bank (1991) estimates that Egypt’s nominal debt grew from less than US$2 billion in 1970 to about US$21 billion in 1980, to roughly US$50 billion in early 1990. If the debt-to-gross-national-product (GNP) ratio is calculated using the free market exchange rate, by 1990 Egypt owed a sum equal to 150 per cent of the value of GNP, the highest ratio in the world. The hybrid legacies resulting from the opening of Nasser’s state-dominated economy to the international capitalist market, and the protected interests of the elite, proved durable where the public sector was still the main engine of investment (75 per cent of the total). The bureaucracy, employing a large number of the middle class, was a formidable constituency, a safety valve and an instrument of control. Yet, Mubarak also inherited the contradiction between the standards of nationalist legitimacy established under Nasser, and Sadat’s foreign policy alignments. This applies to the macro-economic level in almost all sectors, in general, and manifested itself in specific sectors, such as housing, leaving measures such as rent controls untouched until as late as 1996. From the late 1970s to 1990, Egyptian debt increased tenfold of approximately US$53 billion – about US$42 billion in public- and private-sector debt and US$11.4 billion in military debt (World Development Reports 1979–1997, World Bank). Egypt’s position has always been to emphasize the importance of remaining politically stable and to use its strategic importance to extract favours. This is another clear example and evidence of the state’s interest-mediation role and the interplay of international and geopolitical issues to fulfil domestic agendas and interests. The Gulf War bargain was attractive, both economically and politically. Economically, the reduction of up to US$20 billion of debt cut yearly interest payments by US$2 billion for the following ten years. Politically, the agreement was easier to sell domestically since the government could argue that its creditors were shouldering part of the burden of past mistakes. Key persons interviewed during the course of this study also confirmed this. This could serve to indicate which group benefited in the end, and how the apparent commitment of the state to the poor resulted in a counterproductive outcome. Under law 43 of 1974, a substantial number of real estate, construction and development companies were established with joint Egyptian and foreign capital. However, very few of these companies catered for low- or even middle-income housing (NCSCR, 1985b). For example, public discourse, at the time, suggests that the bourgeoisie was able to commit the government to the investment of scarce public funds, heavily conditioned external loans and aid money into a network of flyovers and highways, benefiting well-off motorists at a time when public transport was deteriorating.
The State, Foreign Aid and the Political Economy of Shelter in Egypt
95
21 An additional factor was the fear that slums and informal areas could be a seedbed for political unrest. 22 Sources on price increase and other statistical data are Rageh (1996, 1995) and Zaitoun (1980).
REFERENCES Abdel-Khalek, G (1982) ‘Foreign economic aid and income distribution in Egypt, 1952– 1977’, in Abdel-Khalek, G and Tignor, R (eds) The Political Economy of Income Distribution in Egypt, New York, Holmes and Meier Amin, G A (1982) ‘External factors in the reorientation of Egypt’s economic policy’, in Kerr, M H and Yassin, E (eds) Rich and Poor States in the Middle East, Boulder, Colorado, Westview Press Ayubi, N N (1980) Bureaucracy and Politics in Contemporary Egypt, London, Ithaca Press Ayubi, N N (1982) ‘Implementation capability and political feasibility of the open door policy in Egypt’, in Kerr, M H and Yassin, E (eds) Rich and Poor States in the Middle East, Boulder, Colorado, Westview Press Baker, R (1978) Egypt’s Uncertain Revolution Under Nasser and Sadat, Cambridge Massachusetts, Harvard University Press Burgess, R, Carmona, M and Kolstee, T (eds) (1994) Contemporary Urban Strategies and Urban Design in Developing Countries: A Critical Review, Position paper prepared for the International Seminar: The Hidden Assignment, Rotterdam, 5–7 October, The Netherlands Architecture Institute, Nai(1) Burns, W J (1985) Economic Aid and American Policy Toward Egypt, 1955–1981, Albany, New York, State University of New York Press Butter, D (1991) ‘Debt and Egypt’s financial policies’ in Tripp, C and Owen, R (eds) Egypt Under Mubarak, London and New York, Routledge Dessouki, A E H (1982) ‘The politics of income distribution in Egypt’, in Abdel-Khalek, G and Tignor, R (eds) The Political Economy of Income Distribution in Egypt, New York, Holmes and Meier Handoussa, H A (1990) ‘Fifteen years of US aid to Egypt: A critical review’, in Oweiss, I M (ed) The Political Economy of Contemporary Egypt, Georgetown University, Washington, DC, Centre for Contemporary Arab Studies Hinnebusch, R A (1990) ‘The formation of the contemporary Egyptian state from Nasser and Sadat to Mubarak’, in Oweiss, I M (ed) The Political Economy of Contemporary Egypt, Georgetown University, Washington, DC, Centre for Contemporary Arab Studies Mabro, R (1974) The Egyptian Economy: 1952–1972, Oxford, Clarendon Press NCSCR (1985a) The Comprehensive Social Survey of the Egyptian Society (1952–1980) [Almash Aligtima’i Al-shamel Lil Mugtama’ Al-Masry], Cairo, Egypt NCSCR (1985b) The Comprehensive Social Survey of the Egyptian Society, Housing (19521980) [Almash Aligtima’i Al-shamel Lil Mugtama’ Al-Masry, Mugalad Al-Iskan] (Arabic), The National Centre for Social and Criminal Research, Cairo, Egypt, National Centre for Social and Criminal Research Nonneman, G (1988) Development Administration and Aid in the Middle East, London, Routledge Pastor, M (1987) ‘The effects of IMF programmes in the Third World: Debate and evidence from Latin America’, World Development, vol 15, no 2, pp249–262
96 Market Economy and Urban Change Rageh, A (1995) ‘Housing environment and the Egyptian city modern society’ [‘Albi’a Al-Iskaniya wa Mugtama’ Al Madina Al Misriya Al Mu’asira’], Unpublished paper for CEDEJ, Egypt Rageh, A (1996) ‘Housing policies for low-income groups’ [‘Syasat Iskan Mahdudi AlDakhl’], Unpublished paper for the National Specialised Councils, Egypt, Housing Committee Richards, A (1991) ‘The political economy of dilatory reform: Egypt in the 1980s’, World Development, vol 19, no 12, pp1721–1730 Riddell, R C (1987) Foreign Aid Reconsidered, Baltimore, Johns Hopkins University Press Soliman, A M (1992) ‘A prognosis for housing development in new towns in Egypt’, Netherlands Journal for Housing and Environmental Research, vol 7, no 3, pp283–305 UN (United Nations) (1993) Structural Adjustment and Reform Policies in Egypt: Economic and Social Implications, Beirut, Lebanon, United Nations Economic and Social Council, Social Commission for Western Asia USAID (1981) Annual Report, Cairo, United States Agency for International Development Information Centre Waterbury, J (1976) ‘Corruption, political stability and development: Comparative evidence from Egypt and Morocco’, Government and Opposition, vol 11, pp426–445 Waterbury, J (1982) ‘Patterns of urban growth and income distribution in Egypt, 1952– 1977’, in Abdel-Khalek, G and Tignor, R (eds) The Political Economy of Income Distribution in Egypt, New York, Holmes and Meier Weinbaum, M.G (1983a) ‘Politics and development in foreign aid: US economic assistance to Egypt, 1975–1982’, The Middle East Journal, vol 37, no 3, pp636–655 Weinbaum, M G (1983b) ‘Egypt’s adjustment to a global market economy: The role of US economic assistance’, Paper prepared for the Annual Meeting of the American Political Science Association, Cairo, USAID/Cairo Development Information Centre World Bank (1972) Urbanization: Sector Working Paper, Washington, DC, World Bank World Bank (1991) Egypt’s Economy in the 1990s: Challenges and Opportunities, Washington, DC, World Bank World Bank (1979–1997), World Development Report, Oxford, Oxford University Press Zaitoun, M (1980) ‘The housing problem in Egypt and its future trends’, Paper presented at the Fifth Annual Conference of Egyptian Economists, March, Cairo, Egypt Zetter, R and Hamza, M (1997) ‘The impact of foreign technical assistance on urban development projects in Egypt’, Habitat International, vol 21, no 2, pp153–166 Zetter, R and Hamza, M (1998) ‘Egypt: The state, foreign aid and community participation in urban shelter projects’, International Planning Studies, vol 3, no 2, pp185–205
Chapter 4
Tackling Urban Poverty: Principles and Practice in Project and Programme Design in Kenya
Carole Rakodi
INTRODUCTION Various lessons were learned from the sites-and-services and upgrading projects funded, primarily, by the World Bank and the United States Agency for International Development (USAID) during the 1970s. The response of these agencies during the 1980s, especially in the context of the shift in economic policy towards structural adjustment policies based on neo-liberal economic theories, was to emphasize the development of wider systems for the supply of infrastructure, housing finance and land in order to enable housing and land markets to work more efficiently and infrastructure provision to be placed on a financially sustainable basis. By the late 1980s, it had become clear that, on the one hand, and especially in Africa, poor urban people had been one of the groups hardest hit by the impacts of stabilization and structural adjustment programmes, and, on the other, that the efforts to develop shelter support systems (especially housing finance) had not benefited the poorest. At the same time, recognition of the limitations of focusing almost entirely on economic policy and rolling back the state in favour of the market gave rise to increased emphasis, once again, on systems and institutions of governance, including democratization, renewed attempts to develop an efficient, effective and capable public sector, and decentralization. In addition, the increased availability of evidence that showed continued widespread and, in some cases, deeper poverty, especially from World Bank-funded Living Standards Measurement Surveys and poverty assessments, resulted in renewed attention to directly address the needs of the poor.
98 Market Economy and Urban Change
Spreading from the United Nations International Children’s Fund (UNICEF) to many of the bilateral agencies, aid programmes were redirected in line with a renewed commitment to poverty reduction. Some of these agencies, including some that have provided little support to urban projects in the past, are reviewing the geographical distribution of their assistance and developing programmes to improve the management of urban development. Because of the concentration of poor urban households in informal settlements, poverty reduction activities in cities tend to concentrate mainly on measures to improve the living conditions of poor residents on an area basis.1 Such projects bear a close resemblance to the upgrading projects of the 1970s. It is timely, therefore, to revisit those projects in order to identify lessons relevant to contemporary attempts to reduce urban poverty. The aim of this chapter is to briefly review some of the lessons of the upgrading and sites-and-services projects of the 1970s and recent research on the causes and characteristics of urban poverty in order to identify a number of principles that might form a basis for the design of a new generation of urban poverty reduction projects and programmes. Experience, to date, indicates that the principles and approaches that offer most promise raise a number of problematic issues, many of which pose difficulties for external funders because of the organizational characteristics of the latter. Some of these are reviewed in the final section of the paper.
LESSONS AND STARTING POINTS Lessons from an earlier generation of low-income shelter projects Many of the upgrading and sites-and-services schemes of the 1970s and 1980s depended upon external support. Indeed, the policies underlying them were often promoted by external agencies, instead of being home-grown. Evaluations were conducted by the agencies themselves, notably the World Bank’s Learning by Doing (World Bank, 1983) (see also Keare and Parris, 1982). In addition, many independent evaluations have identified and explained the outcomes and impacts of these programmes (for example, van der Linden, 1986; Pugh, 1990; Rakodi, 1991). Here a brief summary of some of the findings provides lessons for new interventions. First, few of the upgrading or sites-and-services projects were replicated on a large scale or made it possible for large numbers of urban residents (especially poor households) to obtain access to secure tenure, adequate services and improved housing.2 The reasons for this were political, organizational and conceptual: •
Potential shortcomings, derived from weak local ownership of externally driven policy, were exacerbated by internal political factors. This led to disillusionment among politicians when upgrading of informal settlements failed to provide the dramatic ‘solution’ for which they had hoped and for which they could claim the credit. In addition, it was politically more expedient to retain the promise of future regularization as a bargaining counter in patron–client relationships with urban residents than to support widespread regularization.
Principles and Practice in Project and Programme Design in Kenya
•
•
99
Moreover, political opportunities made it possible to provide access to publicly owned land by clients other than the intended occupants of serviced plot schemes. The ‘project’ organization of most design, funding and implementation, often with special organizational and staffing arrangements, suited donor requirements for easy tracking of the use and impact of funds and was, in some cases, appropriate. More often, however, it generated resentment among poorly resourced departments responsible for overlapping aspects of land administration, service delivery or housing supply, and failed to build among the latter commitment to the new approaches and capacity to take on responsibility for operation, maintenance and replication. The ‘project’ approach was also based on an area-based conceptualization of problems of insecure tenure, inadequate supply of land for low-income housing and deficient infrastructure. Purchase, subdivision and servicing of tracts of land were expected to provide opportunities for low-income households to access home ownership. Regularization and infrastructure installation in informal settlements was expected to stimulate continued improvement of services and investment in existing housing. In practice, beneficiaries of serviced plot schemes were not the poorest. Many were middle-income households above the eligibility ceiling, both for reasons of affordability and because of a failure to appreciate that market failures in the supply of land and housing for middle-income households would inevitably lead to downward raiding of publicly provided and often subsidized solutions aimed at the poor. In some cases, upgrading did benefit large numbers of low-income house owners; but where land supply was constrained, upgraded areas became attractive to nonpoor households and investors, and rents increased, forcing out tenants. Finally, failure to tackle constraints on city-wide infrastructure supply and to strengthen the capacity of agencies responsible for ongoing operation and maintenance led to rapid deterioration of infrastructure services, compounded by a vicious circle of poor delivery and failure to recover costs.
Second, inappropriate and unsuccessful project components and failure to maintain or replicate improvements can be attributed to the approaches to design and implementation that were adopted. Project design processes which did not involve those responsible for implementation, which did not allow for intended beneficiaries to play a role in identifying needs and appropriate solutions, and which were designed and undertaken by central ministries or consultants (or, worse still, foreign consultants) produced inappropriate schemes. In addition, projects which involved the setting-up of new organizations, included capital costs but paid little or no attention to operation and maintenance, and were based on unrealistically high unit costs did not deliver sustainable and replicable improvements. Finally, external evaluations of projects often did not identify impacts perceived as critical by the poor, generated resentment among local staff and failed to maximize learning from experience.
100
Market Economy and Urban Change
Understanding urban poverty A second source of inputs for the design of interventions to reduce urban poverty is the recent research that has built on an extensive reconceptualization of rural poverty to increase understanding of its nature. Much research on poverty has been based on the definition of a poverty line (PL), and this is still the basis for poverty monitoring using large-scale sample surveys. Expenditure-based PL monitoring does capture some important aspects of deprivation and provides a useful, if costly, tool to monitor the incidence of poverty. To fulfil this potential, it needs to incorporate the methodological refinements that have been developed during recent years, to be carried out periodically to give an indication of trends and to be disaggregated not only to the urban level but within urban areas. However, even with methodological refinements, sole reliance on PL measurements causes a number of problems (see, for example, Rakodi, 1995; Hanmer et al, 1997; Booth et al, 1998): •
•
•
It is defined by outsiders and neglects people’s own definition of poverty, which incorporates lack of access to assets and services, as well as ill health and insecurity, and recognizes different degrees of vulnerability related, for example, to household composition and its implications for the availability of labour (Rakodi, 1995; Wratten, 1995; Moser, 1996). It does not provide a sufficient basis for understanding the causes of impoverishment (or improved well-being) for individuals, households and communities; the causes of persistent poverty and deprivation (and its reduction or deepening); the intergenerational transmission of poverty; or the immediate triggers of impoverishment. It implies that the poor are passively waiting to become beneficiaries of external interventions when they, in practice, adopt positive strategies for coping with impoverishment and securing improved well-being (Rakodi, 1995; Moser, 1998).
Policy should be informed by an understanding of the ways in which households cope, adapt and manage in deteriorating economic situations, in circumstances of personal adversity and in response to opportunities to improve their well-being so that it supports rather than damages the efforts of the poor to help themselves (Amis and Rakodi, 1995; Satterthwaite, 1997). This implies that an understanding of household livelihood strategies is necessary, although not sufficient to identify the most appropriate and effective ways of reducing poverty. Conceptualizing the resources available to households as a stock of assets, which can be stored, accumulated, exchanged or depleted and put to work to generate a flow of income or other benefits, is currently considered to be the most promising approach (Moser, 1998; Rakodi, 1999a; Rakodi with Lloyd-Jones, 2002). Social units need, it is suggested, to be able to call on stocks of all types of capital (natural, produced/physical, financial, human, social and political) (Rakodi, 2002). The capital available varies between households and over
Principles and Practice in Project and Programme Design in Kenya 101
time, related to the life cycles of individual households, broader economic conditions and the urban policy regimes. Households’ strategies to manage their capital assets vary: the choices open to them may be very constrained (trapping them in vicious circles of permanent poverty or making them vulnerable to impoverishment) or relatively open (enabling trade-offs to be made between the use of, and investment in, different forms of capital to allow livelihood diversification or realization of improved well-being). The effects of macro-economic fiscal and monetary policies are transmitted to the household level by the conduits of markets and infrastructure. Economic growth is generally associated with a reduction in poverty, transmitted in urban areas primarily through formal and informal labour markets (Figueirendo et al, 1995). Its labour market effects will, therefore, depend upon the sectoral composition of growth, its labour intensity, and the structure and ownership of enterprises. Macro-economic policies may be designed to promote expansion and to take account of their impact – for example, reducing the speed of liberalization to allow manufacturing and other sectors time to adjust (van der Hoeven, 1995). Some analysts would argue, in addition, for improved employment protection and the institution or reinstatement of minimum wages (for example, Guhan, 1994; ILO, 1995; Shaheed, 1995). However, economic growth tends to favour those above or just under the PL and not the poorest, whose limited human capital assets prevent them from taking advantage of income-earning opportunities. Moreover, for economic growth to occur and for it to result in improved well-being, it has to be accompanied by investment in infrastructure and human capital. This, in turn, depends on, firstly, policies with respect to the reduction of fiscal deficits, which can be slowed to avoid harmful cuts in ‘soft’ sectors – for example, social services or maintenance (Stewart, 1995) – and, secondly, on the ability of public-sector agencies to capture a share of growth in revenue, which is then employed both to encourage further growth and to improve living conditions for the poor. Although it is possible that the ‘trickle-down’ effects of economic growth are the most effective means of reducing poverty, it is difficult to assess their impact because of the complexity of the effects, which are both direct and indirect and also change over time, and the heterogeneity of poor groups (Killick, 1995). Fiscal and public expenditure meso-policies may reinforce or compensate for the possible poverty-increasing effects of macro-policies through their impact on disposable incomes, their effect on the prices of goods and services consumed by the poor by means of indirect taxes and subsidies, and their influence on the availability (and price) of publicly provided goods, especially health, education and water (Stewart, 1995). At the urban level, poverty incidence and characteristics result from the interaction between macro- and meso-processes and policies and the particular circumstances of city economies, residential areas and households. Urban agencies may be able to do little to influence the broader economic conditions that determine the level of demand for urban produced goods and labour other than to engage in macro-economic policy debates in order to ensure that the effects of economic policies on urban economies and residents, especially the poor, are
102
Market Economy and Urban Change
recognized and that policies are designed to minimize their poverty-increasing effects and to maximize their poverty-reducing effects. In order to have an influence on economic policy-making, as well as for their own policy formulation, therefore, they need to develop an understanding of the impacts of economic trends on the incidence and characteristics of poverty in urban areas; the livelihood strategies of different groups of poor households in local economic, political and social contexts; and the way in which policies influenced or determined at the city level facilitate or constrain households’ attempts to make the best use of the assets available to them. The scope for local policy is constrained both by the effects of national policies and by the allocation of responsibilities for social and infrastructure expenditure (see Dillinger, 1993; Smith, 1997). The potential for action depends upon the extent of local autonomy, which is limited in most countries despite recent decentralization trends, so that – although there may be scope for local decisionmaking on expenditure priorities and pricing/subsidy policies, the design of social policies and safety nets, and measures to support economic activities – the impact of local policies is likely to be outweighed by the effects of national policies. Nevertheless, devolution of decision-making to the local level potentially allows the initiation and design of policy packages appropriate to local conditions, the adaptation of national policies to local circumstances, and the adoption of a coordinated multi-sectoral approach to poverty reduction (see Vanderschueren et al, 1996). This approach needs to be tailored to local circumstances. The assets upon which households draw in assembling their livelihoods can be used as a starting point for identifying potential interventions.3 Their access to these resources and ability to use them to prevent further impoverishment and to maintain or improve well-being is, in part, a product of household characteristics and strategies, but is also determined by the operation of wider systems of provision (for example, of piped water or education) or markets (for example, for labour, land and housing). The priorities of poor households will differ according to their needs and resources, the impacts upon them of economic trends, and the constraints on their ability to access services and take advantage of employment opportunities. It is not the purpose of this chapter to identify appropriate components for an urban poverty reduction programme. Decisions on priorities and the design of individual measures will be city specific in the light of local needs, allocation of responsibilities and availability of resources. However, an understanding of the livelihood strategies of urban households implies that interventions may be needed to increase their access to a range of assets and resources, including: • • • •
land with secure tenure; physical capital, including housing and productive equipment for incomegenerating activities; financial services; labour market opportunities by
Principles and Practice in Project and Programme Design in Kenya 103
• • •
•
•
promoting the growth of good-quality employment and creating an enabling environment for the informal sector; enabling people to take advantage of labour market opportunities;
physical infrastructure and social services, which are critical to the development of human capital resources (good health, knowledge and skills), employment generation (such as water and electricity) and enabling people to take advantage of urban opportunities (for example, public transport); safety nets that are accessible to the chronic poor and to the vulnerable in times of stress or crisis, including provisions to ensure food security, crisis (consumption) credit, basic pensions and income subsidies, care for vulnerable groups such as the chronically sick and disabled, and support for children not attending school; social and political capital through the development of adequate systems of representation, provision of access to legal entitlements and safeguards, improving security and providing protection against crime and violence, and supporting grassroots organization.
Responsibility for some of these will normally rest with central government, but there may be scope for local delivery agents to adapt policies to local circumstances. The responsibility for others may rest with central government, specific public agencies and local government, with precise arrangements varying between countries and cities. The allocation of responsibility for direct and indirect provider roles between central and local government, and between public sector and nongovernmental entities (non-governmental organizations, or NGOs, and private enterprise), has been reconsidered in the course of economic and institutional reforms (Batley and Larbi, 2004). The organizational context is, therefore, often rather fluid. However, it is assumed that both the traditional responsibilities of local government and the new opportunities offered by democratic decentralization provide scope for local initiatives to tackle poverty and deprivation. The process of project design that will be considered in the remainder of this chapter is based on the assumption that local awareness, motivation and capacity exist.
URBAN POVERTY REDUCTION PROJECTS AND PROGRAMMES: PRINCIPLES AND APPROACHES The experience and increased understanding briefly discussed in the previous section suggest a number of principles upon which the design of city-level interventions to reduce urban poverty, including those supported by external agencies, should be based. These will be used to suggest an approach to project preparation, illustrated by recent Kenyan experience. The experience cited suggests that implementation of approaches based on these principles is feasible, although far from unproblematic (see ‘From principles to practice: Unresolved issues’).
104
Market Economy and Urban Change
Principles for the design of urban poverty reduction projects and programmes Principles include the following: •
•
• •
Political legitimacy and participation: both primary stakeholders (people, households and their organizations) and local secondary stakeholders (local authorities, local branches of national agencies, NGOs and private-sector organizations) should be involved in planning, not merely as consultees, but with an active role in decision-making. This moves beyond a conceptualization of participation as the involvement of intended beneficiaries in public-sector decisionmaking to a communicative approach to planning and collaborative or negotiated decision-making (Choguill, 1996; Healey, 1997; Rakodi, 1999b). The political context and system needs to give such an approach to planning legitimacy, and to support it by providing the means to resolve conflicts and to raise and allocate resources. Needs and priorities of the poor: projects and programmes need to be based upon an adequate understanding of the situation and priorities of the poor, recognizing that these may vary between households, groups and communities over time. In addition, appreciation that the poor may not all be geographically concentrated in informal settlements and that not all of the residents of informal settlements are poor must inform project design. Local ownership of proposals: this is vital to sustainability and replication. Priority must be given to negotiation and agreement between local actors over the technical superiority of project and programme design. Partnership: despite moves towards devolution in many countries, local government often lacks policy formulation, and administrative and financial capacity. In addition, some of the activities needed to achieve developmental goals fall outside its traditional responsibilities and spheres of competence. To an increasing extent, NGOs, GROs (grassroots organizations) and the private sector have been trying to meet previously unsatisfied needs and to compensate for public-sector deficiencies. For some tasks – such as financial services for poor households; support to micro-enterprises; the supply of large quantities of low-cost housing; area-based improvements in informal settlements; and the operation of public transport and solid waste collection – one or other of these generally demonstrates greater capacity than government. However, they cannot ensure systematic coverage, redistribute resources or enforce regulations. Crude advocacy of ‘rolling back the state’, marketization and privatization are giving way to a more nuanced debate about alternative ways of dividing responsibilities for service delivery, appropriate roles for the public sector and ways of developing public-sector capacity to fulfil its agreed roles (Batley, 1997; Grindle, 1997). New governance arrangements are still evolving and the relationships between public-sector agencies and civil society organizations of various types are often characterized by mutual suspicion, conflict and resistance to change. Nevertheless, it is increasingly widely accepted that
Principles and Practice in Project and Programme Design in Kenya 105
•
•
a solely public sector-driven approach to policy formulation and implementation is no longer either convincing or workable. Thus, in the context of urban poverty reduction, there is a need to involve a range of local actors in planning, implementation and service delivery, defining roles and responsibilities to make the most of their relative strengths, developing new working relationships between them and further developing the capacity of each to perform suitable tasks (Finsterbuch and Van Wicklin, 1989; Reilly, 1995; Abbott, 1996). Institutionalization of planning and project design processes, service delivery and other interventions: these are also vital to sustainability and replication, implying a preference for working with existing and ongoing, rather than new, projectspecific or limited-life organizations, and matching activities to their capacities, rather than to an ideal of maximum effectiveness. These capacities are a product of an organization’s external context, as well as its internal resources, organizational arrangements and procedures. They are not fixed and can be developed, but in realistic incremental stages compatible with both external and internal constraints (Hilderbrand and Grindle, 1997; Throstle et al, 1997). Participatory monitoring and evaluation: success should be assessed primarily in terms of local stakeholders’ perceptions of the extent to which interventions have achieved agreed objectives, and not merely in terms of externally defined criteria, implying collaborative design and implementation of outcome and impact evaluation (Narayan, 1993; Goyder et al, 1998).
Approaches to programme/project design In order to design and implement policies to embody the above principles, alternatives to traditional approaches to planning, policy formulation and project preparation are needed. There is increasing evidence from around the world that, even if the process is initiated by public-sector agencies, it is necessary and possible to involve other stakeholders from the outset, and on a more equal basis than implied by traditional consultative modes of participation. While there has been some evaluation of collaborative approaches to planning, partnership arrangements and inter-organizational networks in Northern countries, accounts of their equivalents in the South have mostly been assembled by international agencies, which proceed to advocacy and replication on the basis of rather slender evidence on feasibility and effectiveness. Systematic evaluation of experience with approaches to project and programme planning and implementation, which attempt to comply with one or more of the above principles, is rare. Nevertheless, anecdotal evidence suggests not only that the number of attempts to realize them is growing, but also that some of the attempts are sufficiently successful to be identified as examples of good practice (UNCHS and CITYNET, 1997; Rakodi, 1999b). Here, an approach based on these principles will be outlined. This was developed during 1996 and 1997 in the course of designing the first project of a proposed urban poverty reduction programme in Kenya for the UK Department for International Development (DFID), building on some preliminary work supported by the United Nations Centre for Human Settlements (UNCHS, now UN-Habitat) urban poverty programme.
106
Market Economy and Urban Change
As implied above, there is a role for central government in the design of mesopolicies (fiscal policies and sectoral policies related to education, health and physical infrastructure), the development of an overall policy framework, the design of regulatory systems, and the financing and provision of certain technical expertise; but the primary decision-making responsibilities for cities should be local. A collaborative approach to poverty reduction at the city level needs to bring together local stakeholders within negotiated partnership arrangements, designed to make the most of their strengths, further develop their capacity to perform relevant tasks, and reach agreement on the most appropriate allocation of responsibility for project implementation and service delivery. The process will be influenced by the source of the initiative (external or internal, political or administrative), existing arrangements for planning, consultation and decision-making, and previous efforts at identifying needs and preparing policies, plans and projects at city and community levels. Box 4.1 Partnership approaches to meeting the needs of the urban poor in Kenya The process used in preparing a proposed urban poverty project in three secondary cities and towns in Kenya started in each city or town with the following: 1 2
Preparation of a poverty profile by consultants, the results of which were presented to a poverty consultation. Organization of a poverty consultation by the municipal council but involving a wide range of local stakeholders, including local authority departments, councillors, local offices of central government agencies, non-governmental organizations (NGOs) working within the town, religious organizations, and community-based organizations (CBOs) where they existed. The consultation: • • •
3
4
agreed an understanding of poverty in the town; agreed a provisional set of possible responses to the problems identified; agreed the composition of a steering committee representative of all stakeholders to coordinate the project planning process.
Establishment of a series of working groups, including steering committee members and others, to collect information on existing programmes and review possible solutions to the main problems identified. Since virtually none of those involved had any previous experience of project planning, the working groups were assisted by consultants tasked to support the project planning process rather than to produce proposals, as well as to carry out an institutional appraisal of the local authority and selected NGOs. Initial training of staff of the local authority and NGOs in methods of participatory urban appraisal (PUA), and the carrying out of preliminary PUAs in a selection of typical informal settlements in order to improve awareness of the needs and priorities of poor residents and to inform the planning process, rather than to produce precise settlement level proposals, which were to be produced in a more collaborative and considered way with residents during project implementation.
Principles and Practice in Project and Programme Design in Kenya 107 5
6
7
Evaluation of the existing community-based healthcare system established with United Nations International Children’s Fund (UNICEF) support during the 1980s, and a workshop to which results of the study were presented, in order to draw up proposals for further development of the system. A logframe planning workshop, involving members of the steering committee and a range of other stakeholders, to develop the draft proposals suggested by the steering committee into a draft project proposal, including selection of settlements for the programme’s launch. Appraisal mission by UK Department for International Development (DFID) staff to review the draft proposals, leading to revisions and eventual approval of a project in Mombasa in 1999.
The process involved a number of departures for local actors: several local authority departments had no previous history of working together, let alone public-sector agencies with NGOs, or NGOs with each other; and few had had any experience of project planning since there had been little donor support to the towns, and previous projects had been planned by the ministry or consultants. Many wanted DFID staff or consultants to prescribe solutions. Neglected local authorities were desperately short of funds and senior staff; all public-sector employees were poorly paid and many were poorly motivated. In most places, communities were not systematically organized, and public-sector/community relationships varied in their intensity and levels of hostility. Virtually none of the staff of public agencies or NGOs were familiar with participatory methods, and none or few of the NGOs were using demand-driven methods in informal settlements. The approach adopted, in the interest of local ownership, sustainability and potential replicability, resulted in a steep learning curve for a large number of local actors. Consolidation of new working practices and relationships, and of changed attitudes towards the urban poor and informal settlements, is threatened by resource scarcities, staff transfers and electoral change. The development of local institutional capacity to respond to urban poverty is central to the project. Inevitably, this commitment to developing local project planning skills and to the process of community organization and planning that will be needed during implementation takes time and funds before practical improvements to the lives of poor residents can be attained. In addition, the process and the proposed approach caused practical difficulties for the potential funding agency and there were considerable delays in securing (partial) project approval.
In the Kenyan context, local authorities lacked policy formulation, and administrative and financial capacity. Neither they, nor central government had explicitly considered the need for poverty reduction strategies at the urban level; and relations between local authorities and other stakeholders were weak and mutually suspicious. Earlier experiences were confined to large World Bank-funded upgrading projects implemented during the early 1980s – which had been designed by central government, experienced major implementation problems and had mixed and often adverse outcomes – and small-scale UNICEF-supported programmes during the late 1980s and early 1990s – which had avoided some of the worst features of the World Bank-funded projects but had had a limited and patchy
108
Market Economy and Urban Change
impact. During 1996 and 1997, the initiative to commence project preparation (see Box 4.1) came from both Mombasa Municipal Council and DFID. The more general application of the approach is now discussed, drawing on the Kenyan experience to illustrate issues and problems that would need to be addressed. The process of project preparation involves: • •
•
Preparing a poverty profile of the city or town, by consultants if necessary. A local stakeholder consultation, bringing together a wide range of actors, including local government officials and councillors, relevant departments of central government, NGOs, religious organizations, community-based organizations (CBOs) and other agencies. Making use of the preliminary investigation of poverty reported in the poverty profile, such a consultation provides an opportunity to reach consensus on the nature and dimensions of poverty in the city or town concerned; to undertake a preliminary identification of the highest priority needs, the possible solutions and the actions required to achieve the proposed solutions; to identify responsible organizations; and to achieve agreement on a mechanism for organizing and coordinating a further process of programme development. Reaching agreement on the composition of a task force or steering committee to undertake further planning at a consultation with wide local representation is intended to increase transparency and accountability, although this can only be maintained if the steering committee periodically reports back to, and consults with, the wider group of stakeholders. Establishing a local steering mechanism to ‘own’ the process of project planning and the proposal that results, and to request and coordinate external inputs. The appropriateness of including the mayor or political representatives in such a committee will depend upon the local political situation. In the absence of local experience of such an approach, this committee and the planning process are likely to need facilitation and support (Wight, 1997). The support might include both technical expertise absent in local agencies and mediation to assist and arbitrate as new ‘partnership’ relationships between public-sector organizations, NGOs and CBOs are developed. Local government may need support in developing institutional capacity; in changing emphasis from traditional controlling/providing roles to enabling/facilitating roles; and in handling tensions and conflicts both within its own ranks and between it and its political constituents. For example, appreciation may be developed that, if collaboration with other local stakeholders has the potential for increasing the extent and quality of service delivery, the legitimacy of the local authority itself may be enhanced, giving greater scope for improving its performance of other functions. Non-traditional consultants who adopt a facilitating and participatory mode of operation are needed if appropriate and locally owned proposals are to be developed, and if the skills to identify problems, analyse performance and draw up proposals are to be developed among local stakeholders (Wight, 1997).
Principles and Practice in Project and Programme Design in Kenya 109
•
•
Providing for poor residents to voice their experience of poverty, identify and prioritize their needs (through PUAs), devise solutions (jointly with secondary stakeholders through community action planning, or CAP), and participate in implementation, operation and maintenance, and monitoring and evaluation. There is a potential intermediary role for NGOs in facilitating this process, especially if local government is associated with unsuccessful past interventions and has to undergo a learning process on appropriate methods, if political control at the city level is not seen as being pro-poor, or if community organization is poorly developed or unrepresentative. A forum for agreement to be reached on project proposals. In the Kenyan case, logframe workshops were held, at which local steering committee members and other stakeholders participated in agreeing project goal, purpose, outputs and activities, building on the deliberations at the initial consultation, preliminary PUAs and draft proposals prepared by working groups of the steering committee and NGOs. Such a workshop also provides an opportunity to consider any necessary changes to the composition and terms of reference of the steering committee once implementation commences, and to secure wide stakeholder backing for the central management mechanism. The proposals need to incorporate arrangements for implementation, including management and coordination and disbursement of funds; selection of settlements in which project activities will focus; arrangements for planning and implementation at settlement level; proposals for city-wide interventions to develop capacity, provide back-up to community-level measures and work with non-settlement specific groups, such as street children; and a menu of likely activities at settlement level derived from needs identified in the preliminary needs assessments. Whether it will be more appropriate to include political decision-makers in this forum or to institute a parallel or subsequent process will depend upon local circumstances.
This account implies that stakeholders are willing to collaborate, consensus can be reached and external consent will be forthcoming. However, none of these outcomes is straightforward and none can be assumed. In the Kenyan context, the marginalization of local government, the withdrawal of financial support for its activities by the central government, and the resulting failure in traditional municipal service delivery was, by 1996, leading councils to have somewhat more open minds than before regarding the need for working with other agencies, especially the private sector, but also NGOs. Moreover, gradual recognition that informal settlements and their residents could no longer be ignored or resettled had led to a change in attitude among many local politicians and officials, who were ready to adopt more constructive approaches to solving the problems of these areas. Despite these shifts in attitude, resistance to change, inconsistency of attitudes and lack of capacity to operate differently hindered the development of new approaches. For example, senior municipal officials were reluctant to share decisionmaking responsibility with other stakeholders and to abandon municipal direct provider roles, despite their recognition that local authorities were incapable of
110
Market Economy and Urban Change
fulfilling their responsibilities. Public commitment by local authorities to facilitate the informal-sector economic activities of the urban poor was accompanied by continued enforcement of by-laws under which informal sector entrepreneurs were cleared off city-centre streets. Staff of both local authorities and NGOs, while recognizing the need for residents to identify priority needs and preferred solutions, persisted in advancing supply-driven interventions. Thus, engineers and planners tended to propose roads and house improvements, despite evidence that neither were high priority to residents, while NGOs submitted requests for funding delivery of their traditional programmes (such as family planning and skills training) without evidence of demand. Staff members of both local authorities and NGOs, although expressing a desire to work with residents to identify their needs and priorities, lacked knowledge of participatory approaches and CAP methods. Power struggles were manifest in the: • • • •
desire of local authorities to function as the funding channel despite the manifest lack of trust by all other stakeholders and many of their own staff in their ability to do so in an efficient and transparent manner; reluctance of agencies with related responsibilities to work together, especially in the health and water sectors in Mombasa; search for a model for community organization that would not threaten, antagonize or be de-railed by ‘the administration’ (the chiefs, or lowest level of national government, political organization and administration); tendency of chief officers (appointed by central government) to keep elected councillors at arm’s length from the project decision-making process, in the context of a sensitive political situation in which the large urban areas were actually or potentially under opposition control and symbolic mayors on the UK local government model were flexing their muscles and trying to adopt a stronger leadership role (Rakodi et al, 2000).
Agreement of policies and proposals may be achieved relatively easily because all of the actors involved recognize that the significant decisions are taken during the course of implementation, when finance has already been secured. Conflicts of interest and struggles for power may, therefore, remain concealed until resource allocation is under way and it may be difficult to sustain collaborative decisionmaking at city, project or community level throughout the implementation process. An effective project planning process attempts to reveal, mediate and resolve such conflicts early on.
FROM PRINCIPLES TO PRACTICE: UNRESOLVED ISSUES At the time of writing, it was too early to evaluate the process of project implementation or its outcomes and impact in Mombasa. Ultimately, such an evaluation will (or will not) validate the principles set out above and the process of project design adopted. In the interim, however, it is useful to review some of the issues
Principles and Practice in Project and Programme Design in Kenya 111
raised by the above account. Those discussed in this concluding section include both general issues, of concern to all stakeholders, and issues that have particular implications for external agencies and donors.
Politics, decision-making and the poor Implementing interventions that are designed to reduce urban poverty implies political commitment at both city and national levels. Such political commitment has not been notable in many countries and cities in the past, and doubt has been cast on whether it is realistic to expect it. The motives of, and influences on, politicians, whether elected or not, depend primarily upon the extent to which their positions and legitimacy rely on support by the poor, compared with other urban groups. That reliance varies over time, with political circumstances, and may also vary between politicians with different party allegiances or motives for seeking political office. Where the votes of the poor count, they may be able to influence decision-making and policy agendas in their favour; but this may also be potentially divisive, rendering poor groups vulnerable to co-option. At present, we know relatively little about the political circumstances under which policy decisions and resource allocation in urban areas are pro-poor (although see Satterthwaite, 2000). Political commitment to poverty reduction also implies willingness, on the part of politicians and officials, to listen to poor people’s own analysis of their situation, their identification of priorities and their preferred solutions in order to ensure that interventions are appropriate. This implies attitudinal change, particularly with respect to gender, and a changed relationship between residents, officials and politicians. It gives professional expertise a different status and function and requires new skills on all sides. It implies a need for different channels and mechanisms for decision-making at community and city level from both traditional elected mayors or councils and hierarchical, top-down and isolationist local authority technocrats. The need for political commitment thus raises questions about the necessity and characteristics of systems of representative and participatory democracy and about the relationship between them. The responsibilities of elected representatives at city level include promoting the economic health of the city, raising and distributing revenue between objectives and areas within the city, and responding to the demands of different constituency groups. The local accountability provided by elections of ward councillors seems to exceed that of a party list system, although the latter may make city-level decision-making easier. Furthermore, councillors can only be locally responsive and accountable if they are not overruled by an executive mayor. However, cities are large and differentiated, and even wards are mixed, so officials and councillors may find it hard to respond to the different needs and priorities of particular communities, while residents may perceive even a responsive local authority as distant and unapproachable. In addition, elections occur infrequently. In practice, even in democratic systems for urban local government, not only do parties rarely articulate coherent policy platforms, but also
112
Market Economy and Urban Change
favouritism seems to prevail even in democratic politicial systems (Rakodi, 2004). Although representative democracy may function poorly, recent evidence indicates that residents still maintain a residual faith that, however ineffectual local government is, it holds out more hope of local responsiveness and accountability than either NGOs or the private sector (Rakodi, 1999c; Benjamin, 2000). However, participatory democracy is also likely to be needed at the local (settlement and community) level to provide an organizational framework for CAP and its implementation.
Uneven stakeholder bargaining power and negotiating capacity The relationships between national and local government, poor residents in cities and other stakeholders such as NGOs are characterized by uneven distribution of power. Not only is their bargaining power unequal, but their capacity to negotiate is determined by status, skills, expertise and experience, which vary. Complex power relationships are compounded by the presence of a donor and donorrecruited consultants. Control over decision-making should be exercised by a local mechanism formed by, and representing, relevant stakeholders, which takes responsibility for seeking external support and negotiating with potential donors, rather than, as so often, being donor driven. An incipient mechanism of this type has emerged in the Nairobi Informal Settlements Coordinating Committee since 1996. It has been argued (Anzorena et al, 1998) that the most effective initiatives to reduce urban poverty will come from local groups/CBOs, working with local NGOs, with some support from external agencies. However, such a bottom-up approach depends upon the renegotiation of power relationships between CBOs and local government, difficult for donor agencies who generally work with public agencies and may be unwilling to challenge local political relationships. Where political changes have already occurred, existing procedures for consultation may provide a framework of prioritized needs and preferred solutions to which donors can respond. More commonly, however, and especially outside Latin America, this has not occurred and the capacity to undertake it prior to project approval may be lacking. Methods have been developed to increase the negotiating capacity of the disadvantaged and to empower them to articulate their views and to influence decisionmaking, especially the techniques of participatory appraisal (PA) and community action planning. However, the needs and solutions identified through PA and CAP are likely to be influenced by who is facilitating the process, what questions are being addressed and what organizations are known to provide. Increased use of PA in rural areas, Warner (1997) concludes, has resulted in more aware and betterinformed ‘outsiders’; but there is little evidence that it has improved the basis upon which the poor understand and interact with those outsiders. PA is, therefore, necessary but not sufficient, and projects may, in addition, need to include measures to develop the capacity of those less able to engage in negotiation (poor groups, but also some organizations and their staff ), so that stakeholders can reach agreement to mutual advantage and satisfaction. In addition, non-adversarial techniques to resolving conflict and building consensus are required.
Principles and Practice in Project and Programme Design in Kenya 113
Community organization Residential areas are often highly differentiated. They may be rich in associational life, including informal social networks and groups such as rotating savings and credit associations. They may also contain a variety of membership organizations, but there may be no overall organization that represent all interests to which agencies external to ‘the community’ can relate. Typically, residents organize on an area basis in order to solve problems of security, land and infrastructure installation, or in response to external threats. Once the problems are solved, the organization may become dormant or fail to actively involve residents. Even if resident involvement in planning and decision-making (and, perhaps, in service delivery) becomes institutionalized, a CBO is unlikely to be sustained unless leaders maintain their legitimacy and the benefits exceed the transaction costs for individuals and households. Demands on residents’ time, in particular, may be unrealistic. For example, suitable rewards will be necessary in most cultures and situations for community health workers to devote time to healthcare on an ongoing basis; and poor residents generally need to be paid for labour time devoted to implementing physical improvements. Even if realistic approaches are devised, and support from CBO federations or NGOs is available, the pattern of resident involvement, and the viability and activity of CBOs over time, are likely to vary. In Sri Lanka, for example, the systematic and comprehensive process of CAP designed with the assistance of external consultants was adopted only in part and was adapted to reduce its demands on the time of both residents and facilitators from the National Housing Development Authority. In addition, following a peak in Community Development Council activity during the early 1990s, most either collapsed or became dormant, mainly because of the removal of political support, but also because immediate issues had been addressed and/or funds were not available to tackle outstanding problems (UNCHS, 1993; Hosaka, 1997; Fernando et al, 1999).
Donor support, project design and capacity-strengthening The lack of structures, processes and capacity for identifying needs, developing solutions and preparing project proposals, especially in the absence of an appropriate political system and consultation arrangements, have been noted above as obstacles to implementing the principles for collaborative development and operation of projects advocated in this chapter. Identification of needs, CAP and formulation of proposals may be undertaken either in advance of the preparation of a project and its submission for funding, or as part of project preparation or implementation. In the case of the former, there is, however, a potential problem of disappointed expectations if funding is not forthcoming, from which donors are insulated, but which may cause political difficulties for the elected local government and community leaders, as well as practical difficulties for those from public agencies and NGOs who are working with communities. The latter is an alternative; yet funding agencies have difficulty in appraising and approving a project if its content is not known in advance. In addition, if capacity to undertake
114
Market Economy and Urban Change
collaborative project design and implementation is weak, a relatively large proportion of project funding may need to be spent on capacity-strengthening activities, particularly in the early stages, rather than on delivery of practical measurable benefits to the poor. Various characteristics of collaborative approaches to project planning, therefore, cause difficulties for external agencies, which need to specify outputs, schedules and targets at project appraisal and to keep ‘administrative’ costs below strict and sometimes unrealistic ceilings. Capacity-building may be essential in order to achieve sustainability and to replicate projects; but measurable benefits count for more in project appraisal. A staged project design may be used in which funds are committed for the whole package, but released in stages, initially for capacity-building and project design, and subsequently for further activities. Even at this stage, however, the project will not be a ‘blueprint’. City-wide sectoral programmes may be appropriate and can be designed separately or during the first phase of a project. However, it is unrealistic to expect poor groups to come up with fully formed CAPs at the outset, given their likely disillusion with the ability of government to keep its promises, transient populations and high proportions of tenants, especially where community organization is weak and fragmented. External agencies, therefore, need procedures that are sufficiently flexible to deal with evolving rather than blueprint project and programme design. A further problem for the authorities, including donors, may arise from the trade-off between the technical quality of plan-making and inclusiveness. The technical quality of plans and programmes prepared in a collaborative way may be less than the authorities desire, especially in planning involving communities (and many NGOs). It is likely to arise from varying, and often limited, understanding and knowledge of project planning and differing perceptions of what is required among the participants, including local public-sector actors. Different perceptions of what is required may also cause difficulties between professionals and other stakeholders.
Multisectoral versus sectoral organization and delivery Service delivery has traditionally been (and may most efficiently be) organized on a sectoral basis. The deficiencies of sectoral service delivery have stemmed, inter alia, from coordination failures and supply-driven planning that is unresponsive to user views and feedback. In order to improve on service delivery performance, better coordination, multi-sectoral priority setting and resource allocation, and greater responsiveness are needed. This is nothing new – these problems affected public-sector delivery systems long before the current reform attempts or donorpromoted focus on ‘poverty reduction’. Better-performing public-sector agencies and local authorities have both liaised with relevant external organizations and been responsive to user views and organizations. However, the recent emphasis on separating responsibility for direct from indirect provider roles to improve the efficiency of service delivery, and to make use of delivery agents other than the public sector, has given rise to an increased need for the development of effective inter-
Principles and Practice in Project and Programme Design in Kenya 115
organizational networks. The jury is still out on whether current reforms will result in services that are available and affordable to the poor or more efficient and effective service delivery, and whether full or partial privatization, sub-contracting, commercialization or the development of arm’s-length agencies have advantages over traditional central or local government departments (Batley and Larbi, 2004). However, it is clear that inter-organizational networks and partnership arrangements have costs as well as benefits, and that commercialization and privatization often adversely affect access to services by the poor. In addition to the reform agenda in service delivery and renewed emphasis on decentralization, therefore, increasing attention has been paid to addressing the needs of the poor. As noted above, poor people see poverty, deprivation and well-being in multidimensional terms. Whereas a supply-driven project typically includes one or two interventions determined by the remit of an outside agency or NGO, a demand-driven approach requires flexibility that is related to project components and to which agencies should respond, as the needs of households and communities vary between areas and over time. Given multiple needs and limited resources, analytical techniques and decision-making processes are required to identify priorities and select the most appropriate interventions. Moreover, if a range of complementary interventions is to be implemented, clear links between sectoral service-delivery organizations are needed. If a project is only able to offer solutions to one or two problems following a general needs assessment, residents will become frustrated. Yet, not only do government ministries, local authority departments and NGOs tend to operate within their own sectors, but so do external agencies. Just as in governments, sectoral organizational structures within external agencies may hinder multi-sectoral responses to development problems.
Institutionalization of collaborative project planning and implementation capacity Project planning, decision-making, coordination of implementation, and the design and use of monitoring and evaluation should be carried out by a local coordinating mechanism rather than by a costly and unsustainable project-specific implementation unit established for donor convenience. Given the lack of experience of collaborative approaches in most cities, and the general deficiencies in policymaking capacity, coordination of implementation and accountability, the coordinating mechanism and planning and implementation processes are likely to need support. This may or may not include technical expertise. However, it is generally likely to require neutral outsiders to assist and mediate in the process of management and in the development of new working relationships between publicsector organizations, NGOs and CBOs. In the longer term, and not only for poverty reduction, strategic planning and policy-making capacity at city level needs to be developed for sustainability. Within a local authority, this is likely to be attached to the office of the chief executive or mayor, although it should involve not only sectoral departments, but also other relevant agencies.
116
Market Economy and Urban Change
The process of establishing and institutionalizing new mechanisms for coordination and for ensuring accountability (especially if government is distrusted by other stakeholders) is likely to be slow, as is the process of changing working practices and relationships. Progress in organizational and institutional change is incremental rather than dramatic. It is often affected by changes in the external context and unforeseen events (Throstle et al, 1997; Wight, 1997). These characteristics pose problems for donors, whose requirements are for short disbursement periods, rapid progress and clear achievements.
Funding arrangements for implementing city and community poverty-reduction programmes Urban services may be funded directly, through cost recovery, or indirectly, from general revenue at the national or local level. In either case, resources have to be distributed between achieving economic growth goals, meeting basic needs and increasing equity. Both user charges and allocations of general revenue should embody redistributive elements, channelling resources to poorer residents. Even in the short term, locally generated resources support most service delivery and project implementation, and in the longer term it is essential that they do. However, external funding is also likely to be needed for varying periods and on varying scales. Some donors are obliged to channel funds through central government, which guarantees loan repayment and audits expenditure. This reduces local autonomy and may cause delays. It may be possible for projects to be prepared and implemented with external funds using established financial channels and reporting arrangements (for example, local authorities and their treasuries, semi-autonomous public-sector agencies and NGOs). However, this may be inappropriate if other stakeholders are suspicious of the fund holder, if the fund holder fails to coordinate with other bodies responsible for implementation of particular components, or if the sectoral composition of project components cannot be determined in advance. Funding arrangements must be transparent and CBOs, NGOs or public-sector agencies must be able to access funds as planning and implementation progress. At the community level, small-scale funding is required (loans or grants, as appropriate) for which decision-making on allocation is transparent, accountability is clear and enforceable and procedures are non-bureaucratic. One possible avenue for funding CBOs and local NGOs is a community development fund, several arrangements for which are possible (Anzorena et al, 1998). One model exists in the development trusts of the UK, which are supported by both government and nongovernment finance. In developing countries, there are recent examples of funds operated by central government (the Urban Community Development Office in Thailand) and at city level (the Sustainable Ibadan Trust Fund). A proposal for such an arrangement in Kenya, where levels of trust in local authority neutrality and accountability are low, gained substantial local backing. Experience with national-level donor-funded social development funds shows that they can provide a workable mechanism for NGOs and CBOs to access funds, but that there
Principles and Practice in Project and Programme Design in Kenya 117
is a tendency for the funds to be disproportionately allocated to the best organized communities (Vivian, 1995). However, such funds are not a substitute for direct funding of public-sector agencies and the rules of some donor agencies prohibit their use.
Room for manoeuvre A final issue is the extent to which structural constraints on reducing poverty or on changing the operation of the agencies involved can be tackled during a citylevel project or programme, or have to be accepted. These constraints include national macro- and meso-policies, the legal framework for urban administration, the local government finance system, and local government powers, responsibilities and staffing. Lack of central government ability or will to tackle problems in these areas will constrain the effectiveness of interventions that are intended to reduce poverty. Donor strategies lie on a continuum between focusing on promising situations where commitment to shared goals is high and expected outcomes are dramatic; working within existing constraints because of a desire to address significant problems, even though only incremental progress can be expected; and deciding not to fund, despite the need, because it is considered that achievement of the desired results is precluded by the severity of the constraints. Unless the decision is not to fund, donors have typically dealt with constraints by imposing conditions. However, if conditions are imposed that are unwanted, they cannot be enforced and will be ignored. Ultimately, a balance has to be struck between negotiating conditions that are desirable, acceptable and likely to be fulfilled, and accepting that interventions must be realistic within the constraints.
CONCLUSIONS The extent of poverty in urban areas varies with economic conditions between countries and cities over time. The current concern for the urban poor arises from their growing numbers in countries undergoing structural adjustment or in economic crisis, and from persistent problems even in countries and cities with good records of economic growth. Donor and recipient concern also extends to the potentially destabilizing effects for politics, society and economic reform policies of a disaffected urban population, and the important role of low-income people in democratization. However, even prosperous urban areas are typified by inequality, and poverty is not a new problem. Contemporary efforts to reduce it can learn from earlier experiences. Remedial poverty alleviation measures may benefit poor people, but are unlikely to tackle the underlying causes of poverty and deprivation. Lasting solutions require appropriately designed macro- and meso-policies, changes in political and economic relationships, and new ways of working with poor people. The lessons of upgrading projects that were implemented, generally with external support, during the 1970s and 1980s, have been drawn upon in this chapter to derive a set of principles for project and programme design. In addition, recent research on urban
118
Market Economy and Urban Change
poverty was discussed in order to identify likely interventions. This research uses a conceptual framework based on household livelihood strategies in which households manage portfolios of assets to survive, cope with impoverishment or increase their well-being in order to complement a consumption-based view of poverty in which welfare is linked primarily to labour market position. How the principles might be implemented is discussed, with reference to recent Kenyan experience. Although at the time of writing it was too early to evaluate implementation, outcomes and impact, the project planning experience demonstrates that, even in difficult and unpromising circumstances, the principles can potentially be implemented. However, progress was slow and uneven, a number of issues were unresolved, and problems occurred in the relationships between stakeholders. Central government distrust, on the one hand, and insistence that municipalities rely on locally generated revenue, on the other, resulted in difficult central–local relations and gross under-resourcing of local government in Kenya.4 Despite their lack of capacity, Kenyan local authorities were ambivalent towards potential partners, especially NGOs. Furthermore, there were a number of difficulties arising from mismatches between the mode of operation of the external agency and local needs. For poverty reduction to occur, not only will such issues need to be resolved, but the economic and political causes of poverty, which constrain the scope for effective interventions at the city level, will also have to be addressed and further research carried out to assess the relative success of alternative components of poverty reduction strategies.
NOTES 1 2 3
4
There are merits and demerits in the assumptions underlying such an approach and its practice, but insufficient space to discuss them here. There were exceptions to this generalization, notably the Kampung Improvement Programme in Indonesia. Reference is made here to households, although it is recognized that the concept of a household as a co-resident unit has problems given the mobility of household members and continued urban–rural ties, and inequalities of status, power, access to resources and scope for independent action within households. All of the suggested programme components need to be selected and designed in the light of, and to redress, gender, age, religious and ethnic inequalities. Subsequently, agreement has been reached after long delays on the reintroduction of an element of central–local fiscal transfer in urban–local government finance, and implementation has commenced.
REFERENCES Abbott, J (1996) Sharing the City: Community Participation in Urban Management, London, Earthscan Amis, P and Rakodi, C (eds) (1995) ‘Urban poverty: Concepts, characteristics and policies’, Habitat International, vol 19, no 4, pp 403–527
Principles and Practice in Project and Programme Design in Kenya 119 Anzorena, J, Bolnick, J, Boonyabancha, S, Cabannes, Y, Hardoy, A, Hasan, A, Levy, C, Mitlin, D, Murphy, D, Patel, S, Saborido, M, Satterthwaite, D and Stein, A (1998) ‘Reducing urban poverty: Some lessons from experience’, Environment and Urbanisation, vol 10, no 1, pp167–186 Batley, R (1997) A Research Framework for Analysing Capacity to Undertake the ‘New Roles’ of Government, Role of Government in Adjusting Economies Paper 23, Birmingham, University of Birmingham, School of Public Policy, Development Administration Groups Batley, R and Larbi, G (2004) The Changing Role of Government: The Reform of Public Services in Developing Countries, Basingstoke, Palgrave Macmillan Benjamin, S (2000) ‘Urban governance, economic settings and poverty in Bangalore’, Environment and Urbanisation, vol 11, no 2, pp35–56 Booth, D, Holland, J, Hentschel, J, Lanjouw, P and Herbert, A (1998) Participation and Combined Methods in African Poverty Assessment: Renewing the Agenda, London, Department for International Development, Social Development Department Choguill, M B G (1996) ‘A ladder of community participation for underdeveloped countries’, Habitat International, vol 20, no 3, pp431–444 Dillinger, W (1993) Decentralization and its Implications for Urban Service Delivery, Washington, DC, World Bank, UMP 16 Fernando, A, Russell, S and Wilson, A with Vidler, E (1999) Urban Governance, Partnership and Poverty in Colombo, Birmingham, University of Birmingham, School of Public Policy, International Development Department Figueirendo, J B, Lachaud, J-P and Rodgers, G (1995) ‘Poverty and labour markets in developing countries’, in Figueirendo, J B and Shaheed, Z (eds) Reducing Poverty Through Labour Market Policies, Geneva, International Institute for Labour Studies, pp11–26 Finsterbuch, K and Van Wicklin, W A (1989) ‘Beneficiary participation in development projects: Empirical tests of popular theories’, Economic Development and Cultural Change, vol 37, no 3, pp573–593 Goyder, H, Davies, R and Williamson, W (1998) Participatory Impact Assessment, London, ACTIONAID for Department for International Development Grindle, M S (ed) (1997) Getting Good Government: Capacity Building in the Public Sectors of Developing Countries, Boston, Harvard Institute for International Development Guhan, S (1994) ‘Social security options for developing countries’, International Labour Review, vol 133, no 1, pp35–54 Hanmer, L, Pyatt, G and White, H (1997) Poverty in Sub-Saharan Africa: What can We Learn from the World Bank’s Poverty Assessments? The Hague, Institute for Social Studies Healey, P (1997) Collaborative Planning: Shaping Places in Fragmented Societies, Basingstoke, Macmillan Hilderbrand, M E and Grindle, M S (1997) ‘Building sustainable capacity in the public sector: what can be done?’ in Grindle, M S (ed) Getting Good Government: Capacity Building in the Public Sectors of Developing Countries, Boston, Harvard Institute for International Development, pp31–62 Hosaka, M (1997) ‘Involving communities: the CAP experience in Sri Lanka and its lessons’, in CITYNET (ed) Effective Participatory Urban Management, Yokohama, CITYNET, pp101–105 ILO (International Labour Office) (1995) ‘The framework of ILO action against poverty’ in Rodgers, G (ed) The Poverty Agenda and the ILO: Issues for Research and Action, Geneva, International Institute for Labour Studies, pp1–78
120
Market Economy and Urban Change
Keare, D H and Parris, S (1982) Evaluation of Shelter Programmes for the Urban Poor, Washington, DC, World Bank, Staff WP 547 Killick, T (1995) ‘Structural adjustment and poverty alleviation: An interpretative survey’, Development and Change, vol 26, no 2, pp305–331 Marr, A (1999) The Poor and their Money: What Have We Learned? London, Overseas Development Institute, Poverty Briefing 4 Moser, C O N (1996) Confronting Crisis: A Comparative Study of Household Responses to Poverty and Vulnerability in Four Poor Urban Communities, Environmentally Sustainable Development Studies and Monographs, Series No 8, Washington, DC, World Bank Moser, C (1998) ‘The asset vulnerability framework: Reassessing urban poverty reduction strategies’, World Development, vol 26, no 1, pp1–19 Narayan, D (1993) Participatory Evaluation: Tools for Managing Change in Water and Sanitation, Technical Paper No 207, Washington, DC, World Bank Pugh, C (1990) Housing and Urbanisation: A Study of India, New Delhi, Sage Publications Rakodi, C (1991) ‘Developing institutional capacity to meet the housing needs of the urban poor: Experience in Kenya, Tanzania and Zambia’, Cities, vol 8, no 3, pp228–243 Rakodi, C (1995) ‘Poverty lines or household strategies? A review of conceptual issues in the study of urban poverty’, Habitat International, vol 19, no 4, pp407–426 Rakodi, C (1999a) ‘A capital assets framework for analysing household livelihood strategies – implications for policy’, Development Policy Review, vol 17, no 3, pp315–342 Rakodi, C (1999b) ‘Collaborative planning and decision making’, Paper to One World Action Seminar Influence and Access: Local Democracy and Basic Service Provision, London 25–26 May Rakodi, C (1999c) ‘Water and health care provision: The views of users’, in Batley, R (ed) (1999) Findings in Health, Water, Agriculture and Business Development Sectors, Role of Government in Adjusting Economies Working Paper 40, pp75—96, Birmingham, University of Birmingham, School of Public Policy Rakodi, C (2002) ‘A livelihoods approach – conceptal issues and definitions’, in Rakodi, C with Lloyd-Jones (eds) Urban Livelihoods: A People-centred Approach to Reducing Poverty, London, Earthscan, pp3–23 Rakodi, C (2004) ‘Representation and responsiveness – urban politics and the poor in ten cities in the South’, Community Development Journal, vol 39, no 3, pp252–265 Rakodi, C, Gatabaki-Kamau, R and Devas, N (2000) ‘Poverty and political conflict in Mombasa’, Environment and Urbanisation, vol 11, no 2, pp153–170 Rakodi, C with Lloyd-Jones, T (eds) (2002) Urban Livelihoods: A People-centred Approach to Reducing Poverty, London, Earthscan Reilly, C (ed) (1995) New Paths to Democratic Development in Latin America: The rise of NGO–Municipal Collaboration, Boulder, Colorado, Lynne Rienner Satterthwaite, D (1997) ‘Urban poverty: Reconsidering its scale and nature’, IDS Bulletin, vol 28, no 2, pp7–23 Satterthwaite, D (ed) (2000) ‘Poverty reduction and urban governance’, Environment and Urbanisation, vol 11, no 2, pp3—202 Shaheed, Z (1995) ‘Minimum wages and poverty’, in Figueirendo, J B and Shaheed, Z (eds) Reducing Poverty through Labour Market Policies, Geneva, International Institute for Labour Studies, pp111–132 Smith, B C (1997) ‘The decentralization of health care in developing countries: organizational options’, Public Administration and Development, vol 17, no 4, pp399–412
Principles and Practice in Project and Programme Design in Kenya 121 Stewart, F (1995) Adjustment and Poverty: Options and Choices, London, Routledge Throstle, J A, Sommerfeld, J U and Simon, JL (1997) ‘Strengthening human resource capacity in developing countries Who are the actors? What are their actions?’ in Grindle, M S (ed) Getting Good Government: Capacity Building in the Public Sectors of Developing Countries, Boston, Harvard Institute for International Development, pp63–93 UNCHS (UN Centre for Human Settlements) (1993) The Urban Poor as Agents of Development: Community Action Planning in Sri Lanka, Nairobi,UNCHS UNCHS and CITYNET (1997) Partnership for Local Action: A Sourcebook on Participatory Approaches to Shelter and Human Settlements Improvement for Local Government Officials, Nairobi, UNCHS and Yokohama, CITYNET van der Hoeven, R (1995) ‘Structural adjustment, poverty and macro-economic policy’, in Rodgers, G and van der Hoeven, R (eds) The Poverty Agenda: Trends and Policy Issues, Geneva, International Labour Office, pp177–205 van der Linden, J (1986) The Sites and Services Approach Reviewed, Aldershot, Gower Vanderschueren, F, Wegelin, E and Wekwete, K (1996) Policy Programme Options for Urban Poverty Reduction: A Framework for Action at the Municipal Level, UNDP/ UNCHS(Habitat)/World Bank Urban Management Programme, Policy Paper 20, Washington, DC, World Bank Vivian, J (1995) ‘How safe are “social safety nets”? Adjustment and social sector restructuring in developing countries’, European Journal of Development Research, vol 7, no 1, pp1–25 Warner, M (1997) ‘“Consensus” participation: An example for protected areas planning’, Public Administration and Development, vol 17, no 4, p413–432 Wight, A R (1997) ‘Participation, ownership, and sustainable development’, in Grindle, M S (ed) Getting Good Government: Capacity Building in the Public Sectors of Developing Countries, Boston, Harvard Institute for International Development, pp369– 412 World Bank (1983) Learning by Doing: World Bank Lending for Urban Development 1972–82, Washington, DC, World Bank Wratten, E (1995) ‘Conceptualising urban poverty’, Environment and Urbanization, vol 7, no 1, pp11–36
Chapter 5
Bridging the Rural–Urban Divide: What Can the Urban Learn from the Rural? Reflections on the Case of Mexico
Gareth A. Jones
INTRODUCTION1 One of the most enduring organizational devices in development studies is the division of society into rural and urban. Indeed, the association of urbanization with particular notions of modernity has been a ‘normal’ part of the development discourse so that, to many people, the urban is a synonym for development itself and ‘anti-poverty measures’ are shorthand for rural programmes – note the few references to the urban in the 2000/2001 World Development report ‘Attacking Poverty’ (World Bank, 2001). Moreover, despite the so-called ‘new’ thinking on so many ‘new’ agendas, the validity of rural and urban as organizational categories has mostly escaped attention. An enormous machinery of government agencies, donor organizations, non-governmental organizations (NGOs), academics and consultants gather and analyse statistics that are assigned to one category or the other. Despite rhetoric of holistic programmes, horizontal coordination and joined-up government, the development lexicon remains full of signifiers to spatial exclusivity: ‘urban’ governance, urban management, urban indicators, urban poverty, sustainable cities. Generally, there is little awareness that local people’s representations of the rural–urban divide may not be separated along the same imaginary lines or that people in rural areas might be urban stakeholders too (James, 2001). Only very gradually has some dissatisfaction with rural and urban elements as stable categories appeared, and concepts such as ‘rural–urban interface’
124
Market Economy and Urban Change
and ‘peri-urban’ have emerged to challenge stereotypes (Rigg, 1998; Tacoli, 1998; Brook and Dávila, 2000; Mbiba and Huchzermeyer, 2002). This chapter reviews some of the recent research on the rural–urban/periurban. As outlined in the next section, this work unsettles many of the most comfortable spatializations of development thinking and offers some challenging policy opportunities. But the rural–urban/peri-urban also assert a difficult territoriality.2 ‘Peri-urban’ is represented as a physical space, a concrete locale in which things happen, while the ‘rural–urban’ presents an interactive space (or spaces) of complex fluidity between the urban and rural. Despite the obvious potential, it is notable that very little of the work on the rural–urban/peri-urban takes a multispatial approach (Binns and Lynch, 1998). Rather, researchers studying the rural– urban/peri-urban do so from the viewpoint of either the urban or the rural (Mbiba and Huchzermeyer, 2002). In the absence of more multi-spatial approaches, the research on the rural–urban/peri-urban have become extensions of established research agendas and policy formations, rather than institutional spaces that challenge us to bridge the rural–urban divide.3 This argument derives from three personal frustrations that illustrate the need for greater imagination in research and policy. Appropriately, all three are linked in different ways to how we choose to engage with, or ignore, the shift from ‘welfare to market economy’. My first frustration derives from attendance at a workshop to discuss a multi-donor project on rural–urban interaction at which most of the participants defined themselves unambiguously as rural specialists, clearly organized into cohorts of agronomists and environmental scientists, while only a few participants had urban experience and had not been involved in the original research. A major policy proposal tabled at the workshop was for the adoption of ‘urban forestry’ because, according to somebody’s key indicators, there seemed to be too few wood products being used in the urban construction sector. It was suggested that the peri-urban area could be used to increase the quantity of urban agro-forestry that might also stabilize slopes, open green space for recreation and prevent land sales. Apparently, cities located in countries with enormous oil, cement and glass industries, closely allied to political elites and undergoing a deepening ‘urbanization of poverty’ should allocate resources to planting trees. I was also unsure how urban forestry was to compete with land markets in which un-serviced plots might be worth up to US$60 per square metre providing some landholders with predictable income from sales, even when conducted illegally. Moreover, experience had shown me that zoning or expropriation for ecological reserves tended to accelerate land sales, provoke tortuous litigation, motivate social movements and encourage environmental damage through leapfrog development (Jones, 1991, 1998). While appearing to promise a dynamic understanding of complex spatial and thematic interactions, an ‘urban problem’ was being seen through the single lens of environmental sustainability. This approach was legitimated by representing the ‘peri-urban’ as a physical space in which the market economy, that presumably had contributed to the ‘urban problem’ in the first place, was conceptually suspended in favour of welfare and environmental arguments.
Bridging the Rural–Urban Divide 125
The second frustration reveals how spatially restricted thinking is likely to be poorly informed about development, generally, and never more so than when land is the focus of debate. In Making Markets Work Better for the Poor, the Department for International Development (DFID, 2000a) attempts to conceptualize how positive welfare outcomes are compatible with the quasi social economics of an asset-vulnerability framework. The document identifies land as an important asset for the poor. But, from thematic and aspatial beginnings, the document proceeds to ignore land and land reform as anything other than rural. The author urges support for the poor to access assets because ‘households with access to land are better able to use their own labour to generate livelihoods through the production of agricultural commodities or through hunting and gathering’ (DFID, 2000a, p18). And which society has recently reached sustainable levels of food production and welfare through individual agrarian autarky? Even households with access to land (and financial, social and human capital) require a multi-spatial response to poverty that generally involves cities. Assets, as defined by the asset vulnerability framework, are not fixed in space; so why think of them as such? Land markets cross our predefined rural and urban categorizations. The third frustration is the ‘grad-grind’ nature of so much research and policy on land, especially in relation to cities. Despite the opportunities for demanding multidisciplinary and multi-spatial approaches to the study of land, so much research seems to consist of re-branding 20-year-old ideas into something ‘new’ – de Soto (2000) is a prime culprit, but he is not alone. Is the rigidity of our thinking in spatial terms holding back the formation of imaginative research agendas? Is it undermining the effectiveness of policy? More specifically, is it even contributing to the problem of illegality and social exclusion? To what extent are ‘urban problems’ pre-established by policies that affect agrarian or customary land tenure, or programmes of social development in rural areas? Do we know how programmes that affect rural, agrarian and customary land tenure impact upon urban land tenure problems? Why, if we take the concepts of the rural–urban/peri-urban seriously, do we think that an urban problem necessitates an urban solution? How many housing programmes have been designed on the assumption of an increasingly ‘enabling’ policy environment for land, while the architects of rural land reform are designing ways of locking ‘beneficiaries’ into land-holding but out of the land market? In ‘The land market: Where did the synergy go?’ the limitations posed on research and policy by attempting to see land markets with one eye rather than a binocular vision are explored.
RURAL–URBAN: BREAKING DOWN THE BARRIERS OR RE-IMAGINING POLICY SPACES? The recent attention to the rural–urban and peri-urban has extended research and policy in some exciting ways. Certainly, we are being alerted to the importance of urban agriculture and rural industrialization that are ‘out of place’ according to traditional categorizations, and to new residential patterns with upper-income
126
Market Economy and Urban Change
groups and some ‘urban’ working class living in meta-suburbs (McGee, 1991; Tacoli, 1998; Kelly, 1999; Ward, 2001). There is also important research revealing how multi-headed and multigenerational households occupy shared geographical spaces as a response to poverty (Tacoli, 1998; Brook and Dávila, 2000; Jerve, 2001). The remittance of income from employment in cities is shown to be a vital component of income stabilization and capital accumulation strategies of ‘part-time peasants’ (Melmed-Sanjak and Lastarria-Cornhiel, 1998; Rigg, 1998). Conversely, maintaining rural links is important to urban survival, not only in gaining access to a more diverse food basket but also through knowledge systems of rural land programmes (Potts and Mutambirwa, 1997; Binns and Lynch, 1998; James, 2001). Not surprisingly, the concepts of the rural–urban and peri-urban have been picked up as an emerging area for policy. There are rather general references to ‘urban’ and ‘rural’ as interdependent markets linked by exchanges of people, goods, services, capital, social transactions, information and technology, offering new policy spaces. According to the World Bank: Fostering rural–urban synergies and well-integrated national and city strategies to help countries realize the promise of urbanization represents a prime opportunity for the Bank to pursue a new ‘comprehensive development framework’ (World Bank, 2000, pp3–4). And DFID entertains the idea that an enterprising city linked to a bucolic countryside can represent a win–win situation in which: The overall challenge is therefore to ensure that this synergy is realized, that agriculture benefits from, and at the same time helps provide resources for, improved infrastructure, such as roads, electricity, health services and telecommunications; and that agricultural markets meet the food and produce needs of urban centres (DFID, 2000b, p11). But while stress is now placed on interaction, the policies being advocated are an assortment of conventional fare. As Jerve (2001) notes, most pro-poor and antipoverty initiatives remain steadfast to discreet urban or rural domains. Note, for example, the comforting impression given by DFID that rural and urban might ‘work together’. Dynamic and complex connections across space are replaced by bounded actors with roles to perform in determined spaces: farmers feed cities, and urban residents buy food and make the countryside profitable by raising investment. Policy-makers conveniently ignore the implication that if the rural and urban are not discreet spaces, then it might no longer be appropriate to think of agricultural policies as assisting a ‘rural’ poor (McGee, 1991). There seems to be little imaginative discussion of whether policies can be spatially interactive. How many development agencies are encouraging the rural poor to gain jobs in urban areas, and not just in the nearest city or even within the same nation state? Is the best job for a sharecropper in Uganda to be found in Kampala or in London,
Bridging the Rural–Urban Divide 127
where they might have relatives (social capital), receive education for their children (human capital) and retain savings in hard currency (financial capital)? Despite millions of people making this kind of observation each year, I don’t know of a multilateral agency programme that encourages this kind of rural–urban interface.4 Indeed, while ‘buzzing’ with the new terms many policy-makers and researchers are actually reasserting a conventional territoriality. The rural–urban, from being a liminal space of flows, is often succeeded by terms such as ‘interaction’, ‘linkage’ or ‘interface’ that suggest a relationship between two fixed spaces. Periurban, a term that should be meaningless if we embrace multi-spatiality, has become supplemented by ‘edge’, ‘fringe’ or ‘rim’ that suggest a physical space somehow different from, and probably in transition between, the immutable spaces of rural and urban. This can lead to some confusion, as when the World Bank notes that ‘urban poverty is growing in scale and extent, especially at the peri-urban rim’ (World Bank, 2000, p3). Where is that exactly? Is there a rim around the urban or does the peri-urban have its own rim? Is the peri-urban rim for poverty the same as the peri-urban rim of environmental interaction? Should the periurban, defined according to environmental criteria, include all forms of environmental interaction or just those that we do not like, such as wastewater (mis)management or refuse dumping?5 Surely, if we are going to look for ‘synergies’ we must be alive to the construction of territorialities. We must consider, at the very least, institutional spaces, as well as physical ones. An obvious place to start is to consider the land market that is inherently multi-spatial.
THE LAND MARKET: WHERE DID THE SYNERGY GO? A search of the literature on the rural–urban and peri-urban found very few papers that dealt with the land market at all. Rarely, however, was there the honest admission that: … little is known about how much land is being converted and for what purposes … there is no characterization of who is buying the land and for what purposes, whether it is urban dwellers buying land for investment or speculative purposes, farmers from other villages or new industries buying agricultural land for industrial purposes (Brook and Dávila, 2000, p16). Can we seriously talk about sustainable livelihoods and asset frameworks if we do not investigate land, as perhaps the most valuable asset held by the poor, and which transgresses both urban and rural spaces? Is there a development agency or government currently building capacity among the rural poor on how to sell their land for the highest price, how best to invest the proceeds, and how to sell water, construction and transport services to the occupants of the new settlements? These can be lucrative and sustainable businesses. Or is it easier to retain the tedious spatial stereotype that urban growth takes place at the expense of rural livelihoods?
128
Market Economy and Urban Change
While we ponder, the market is ‘converting’ about 500,000 hectares of agricultural land to urban use per annum, much of it by means that are extra-legal, and often spatially inefficient and socially inequitable (GTZ, 1998). While most economists make no theoretical distinction between a market for land that will be used for housing or one used for maize, we have become accustomed to the idea of something called an urban land market and a rural/agrarian land market. Clearly, it is useful to understand what is happening in the process whereby land is converted from rural to urban use. In particular, there needs to be more research that looks at how agrarian or customary tenure reform affects alienation processes for urban use, and how changes to urban codes or planning procedures impact upon the market for land in rural areas (Hammer, 1998; Jones and Ward, 1998; McAuslan, 1998; Kelly, 1999; Gough and Yankson, 2000; Jones, 2000). However, we must be alert to the difficulty of associating a type of land market with the space in which the land is located, and of inventing a new space, the peri-urban, fringe or edge land market, as an accommodation. Field research in Mexico conducted by this author provides a good illustration of this. In 1987, I followed up a casual observation that ‘urban’ plots were being sold over 15 kilometres from the ‘fringe’ of the city of Puebla. Using field visits and government maps, I went on to quantify the amount of land being sold and calculated that the peri-urban area was many times larger than the city itself (Jones, 1991). That observation opened many new avenues of research around the themes of land alienation and access, policy and conflict. At the time, it suited me to spatially determine the land market according to the location of the land being converted as I could trace changes to land ownership through the maps and interviews. If, however, I had ‘followed the money’, I might have learned sooner that some important land deals were taking place in San Antonio, Texas and New York, or, had I ‘followed the politics’, that the legal and political legitimacy for land conversion involved actors in Mexico City. The ‘Puebla’ land market exists in a network of spaces and geographical scales that are not restricted to a contiguous city and countryside. I want to extend the problem of spatially restricted thinking by considering some of the current debates about land policy reform and, especially, security of tenure. According to McLaughlin and de Soto (1994), 90 per cent of rural and 50 per cent of urban property rights in Latin America are not protected by formal titles. Improving upon this situation is a priority for development agencies who claim that improved security of tenure can assist urban management, the equitable provision of adequate shelter, the development of sustainable human settlements, and the alleviation of poverty. Yet, very few urban land tenure programmes have gone to scale (Durand-Lasserve and Royston, 2002). Consider the record of Latin America, which has the most advanced policy experience with land tenure security (Ward, 2003). In Chile, a highly technocratic government which prioritized private property rights as part of its development strategy managed to issue over 100,000 land titles in 1980, but was delivering fewer than 10,000 titles per annum by 1989. In Argentina, the Arraigo Programme in Buenos Aires allowed the sale of national lands to occupiers, and with much
Bridging the Rural–Urban Divide 129
fanfare three settlements with 25,000 inhabitants received title in 1992; but only 3000 titles were issued between 1996 and 1999 (Clichevsky, 1999). In Brazil, the Pro-Favela Programme of Belo Horizonte delivered 6000 titles from 1983 to the end of 2000, mostly to occupants of public land in a city with 500,000 favelados (squatters) (Fernandes, 2001). In Recife, in 1987, the municipality passed legislation to recognize favela (squatter settlements) as Social Interest Development Zones (Zonas Especiais de Interesse Social, ZEIS), and 27 favela were quickly incorporated within zoning measures (Maia, 1995). But, by the early 1990s, only nine had begun the process of legalization and only one favela had been legalized by 2000 (Fernandes, 2001). Meanwhile, there may be 600 squatter settlements in Recife and even some favela declared a ZEIS have been subject to judicial review and eviction (Maia, 1995; de Souza, 2001). Some of these programmes, and others like them, are often praised for being ‘good practice’. Is this double-speak to legitimate the lack of delivery? Good practice seems to suggest a judgement based on input (process) rather than output (scale and impacts). If we have misgivings at all, we might look for an explanation in policy processes to discover possible shortcomings in the legal and administrative frameworks, the lack of good governance or technical capacity. Good practices can always be made better. How many studies of security of tenure consider the inadequacies of our spatial understanding of policy and change? Yet, all of the programmes described above share a number of common features. First, they are all retrospective, addressing the problem of tenure insecurity for longstanding settlements (Fernandes, 2001; Ward 2003). Thus, despite rhetoric that security of tenure promotes social inclusion, and despite econometric arguments that they could assist poverty alleviation, these programmes primarily avoid the poorest settlements (Lanjouw and Levy, 1998; de Souza, 2001; see also Durand-Lasserve and Royston, 2002). Most planners oppose extending security, and especially titles, to areas that have low population densities; politicians prefer programmes to respond to demand that might take years to articulate; and managers see more logic in prioritizing the incorporation of consolidated settlements into the fiscal base – all of which work against the newest settlements where the poorest reside. Second, the programmes hold an implicit assumption that the effects of security are going to manifest within the settlement or house. The very term ‘housing investment’ seems to ignore the possibility that increased investment postsecurity/titling might take place somewhere other than the immediate house. Rather than consider change spatially, programmes and the security-of-tenure debate are more widely legitimated by reference to impacts in situ over time. The standard argument is that security of tenure assists an enterprising poor struggling to invest in property ownership and small firms, using credit, and becoming ‘better citizens’, complying with business laws and taking pride in their community (Ward, 2003). Demonstrating the validity of this argument, however, has been made difficult because of failure to consider impacts in a broader spatial setting. No study has adequately followed those who have left legalized settlements – studies have concentrated on presence not absence, when the latter might be more informative. Nor has much attempt been made to measure whether the
130
Market Economy and Urban Change
legalization of settlements raises the shadow price for land (in expectation that new settlements will soon be legalized), or recorded whether programmes disrupt important social institutions that exist outside settlements. Third, the programmes assume that the problem of insecure (or illegal) tenure in cities is best resolved by measures within the city. A notable absence from most security-of-tenure programmes is consideration of both rural and urban areas (GTZ, 1998). In Latin America, there are two prominent exceptions that, perhaps not without coincidence, are also the only two programmes to have achieved scale of delivery. The first is Peru, which regularized fewer than 18,000 plots from 1961 to 1980, but may have delivered 300,000 titles from 1981 to 1995, and registered 1.4 million ‘properties’ from 1996 to 2001 (McLaughlin and de Soto, 1994; Riofrio, 1998; Calderón, 2000; Kagawa and Turkstra, 2002).6 The second exception is Mexico, where almost 300,000 titles were delivered between 1974 and 1988, approximately 1.1 million titles from 1989 to 1993 and about 600,000 titles to 2001 (Jones and Varley, 1999). A number of features mark out the experience of Peru and Mexico; not least among them is that tenure problems have been addressed in relatively new and mostly poor settlements.7 While claiming that cause and effect might be unwise, it is suggestive that the scale and quality of difference between these and the previous examples might be related to the fact that, in Peru and Mexico, programmes have addressed both the rural and urban security problem. This is perhaps most conscious in the case of Peru where, since 1996, about 400,000 titles have been registered for non-urban plots (Calderón, 2000; Kagawa and Turkstra, 2002). In Mexico, the agency responsible for expropriation, compensation and title allocation was part of the agrarian sector as the land sales by ejido ‘agrarian’ communities transgressed agrarian law (Jones and Ward, 1998). This legal and political arrangement necessitated a pact between the ejido and the state, which permitted the negotiation of ejido ‘cooperation’. Interestingly, once a more decentralized approach was adopted, with a greater role for municipalities, and agency responsibility was shifted to the federal department responsible for the urban sector, but still within agrarian law, the performance of delivery declined dramatically (Jones and Ward, 1998; Jones and Varley, 1999). Even for these two countries, however, and just about everywhere else, we have very little grasp of the impact of security of tenure in cities upon agents providing land for city growth. Will an announcement that occupiers are no longer to be evicted generate distress sales as landowners interpret this as a squatter’s charter? Will providing greater security of tenure to holders of land in the imaginary ‘peri-urban’ area provide for orderly urban growth or raise prices beyond the reach of the poor?8 These are simple questions for which we appear to have no answers. Rather, governments and multilateral agencies seem willing to spend billions of dollars on programmes to support security of tenure within cities and outside of cities, but rarely seem to address the connection between the two. Indeed, the vogue terms such as rural–urban interface and synergy seem remarkably absent from documents describing policies for security of tenure. Policy has not considered the connectivity implicit in one land market, but prefers to imagine separate –
Bridging the Rural–Urban Divide 131
urban, rural and, now, peri-urban – rather than segmented land markets. Rural areas, of course, possess many of the same problems as described for cities: squatting; contested claims involving customary rights; inappropriate regulation; eviction; inequality (see, especially, Toulmin and Quan, 2000; Zoomers and van der Haar, 2000). How many of these same problems manifest in cities are because they were not resolved prior to conversion? Yet, how many of those interested in security issues in cities have looked at the literature describing the experience of rural programmes?9
BRIDGING THE RURAL–URBAN DIVIDE Property rights, context and governance The remainder of this chapter considers what ‘urban’ researchers and policy-makers might learn from work on land in rural areas.10 At the risk of gross generalization, it is notable that leading debates in the rural literature place particular emphasis on markets and property rights, and the relations between the two, regarding welfare conditions as an outcome of these relations. By contrast, much of the early policy debate surrounding the urban started from a position of hoped-for welfare outcomes. Only recently have issues that have long been central to rural research and policy, and which are more closely associated with market and/or institutional economics – such as how to use property rights as collateral, how to activate land markets, and shortcomings of law reform – become popular themes for debate. Wherever possible, this section suggests ways in which researchers and policy-makers, whose principle interest is urban, might think across space rather than within separate imagined spaces. The urban literature on security of tenure is mostly preoccupied with tenure status and legality, rather than with property rights. By contrast, a Property Reform School perspective underpins the diagnosis of problems and provides a framework to arrive at possible solutions in the rural literature (Platteau, 1996). Theoretically, the Property Reform School suggests that institutions will respond over time to social and economic signals. Specifically, it is argued that non-individual tenure systems are unable to cope with population pressure or land scarcity, causing disputes and insecurity that oblige landholders to shorten time horizons, resort to suboptimal investment and adopt disguised land transfers (Feder and Noronha, 1987). But, as ‘we cannot see, feel, touch, or even measure institutions, they are constructs of the human mind’ (North, 1990, p107). Furthermore, there is an awareness that institutions may not change in predictable, socially positive ways or geographically even ways (Jones, 2002). To support the transformation of property rights it is argued that community organizations and, ultimately, the government need to establish predictable market rules and set out systems to adjudicate disputes (North, 1990; Brandão and Feder, 1996). Nevertheless, there is an undiscussed contradiction that while the evolution of rights is likely to be differentiated, the law and state programmes as the preferred institutions of change are insensitive to the particularities of place (Jones, 2002).
132
Market Economy and Urban Change
The attention to property rights rather than tenure status has motivated considerable interest in understanding the nature of insecurity. In the urban setting there is a tendency either to read off a predetermined condition from the legal category into which occupiers fall, or assume that because evictions occasionally happen then people must feel insecure. Yet, even in settlements formed by invasion and where evictions do occur many residents report that the chance of being evicted is ‘impossible’ (Lanjouw and Levy, 1998). The greater focus of primary research in rural areas has built up considerable evidence that insecurity is linked to a host of demands from family members, other households, the decisions of local leaders, encroachment from neighbouring communities or the state autocracy (Platteau, 1996; Jansen and Roquas, 1998; Firmin-Sellers and Sellers, 1999). Yet, research also shows that the demand for designated ways of attaining more secure rights is contextual and that even where high insecurity is reported, few might make the effort to register land rights or to convert registered land to freehold (Dujon, 1997; Liu et al, 1998; Firmin-Sellers and Sellers, 1999). As with much of the more rhetorical policy literature for cities, in the rural literature a link has been made between securing property rights and particular structures of governance. This literature has generally stressed the need for administrative decentralization (McLaughlin and de Soto, 1994), attention to greater transparency and closer stakeholder provision of information (Feder and Nishio, 1999), a well-functioning legal system based on consensus (McAuslan, 1998; de Soto, 2000), and a technically competent, well-financed and committed bureaucracy (Wachter and English, 1992). Before reading across from the rural literature, however, it should be noted that the empirical validity of these broad conditions is not clearly specified.11 Indeed, although such conditions are represented as prerequisites, a number of writers note their absence before, during and after attempts to improve property rights (Wachter and English, 1992; Fitzpatrick, 2000; McAuslan, 2003). The lessons that may be drawn from this are that a more critical consideration needs to be given in both the rural and urban to the belief that complex agendas for reforming property rights can be pasted onto the operation of states in ways that conform to good governance. Much more work needs to be done on the human agency of programmes, how information/knowledge networks are created, what political forces form and maintain land structures, and the discourses that dictate certain policy directions. We need to consider whether the good governance that works for the conduct of land (law) reform and land titling in rural areas also works for land subject to conversion to urban use.
Property rights, ‘alternative’ tenure systems and land ‘law’ reform In the literature on urban land tenure, the pervasiveness of the freehold titling discourse means that one can label just about anything that is not an individually held, formally recognized, freehold title as ‘alternative’. Such a conformity–alternative binary is appreciated as problematic in the rural-based literature. First, there is a nuance to the idea that customary practices are separate from formal codes,
Bridging the Rural–Urban Divide 133
and therefore can be formalized, because what we understand as custom was constructed by formal law and state agency during the past (Prill-Brett, 1997; Tshuma, 1998; Toulmin and Quan, 2000). Second, for many years the supposed champion of the titling discourse, the World Bank, has recognized efficiency arguments for not pursuing individual titles (Deininger and Binswanger, 1998). Picking up on work in Africa, especially, the World Bank has accepted the case for adaptive rather than replacement systems of tenure as reflections of less concrete bundles of rights (Platteau, 1996; Toulmin and Quan, 2000). From an adaptive perspective, there is now a large literature showing that where insecurity can be dealt with locally and land sales to outsiders are not a priority, then group titles or trust arrangements can work well (Atwood, 1990; Bassett and Jacobs, 1997; Fitzpatrick, 2000; Fourie, 2003). Third, there has been considerable attention to the costs as well as the benefits of non-freehold systems, and care not to confuse an ‘alternative’ with presumed positive social outcomes (Deininger and Feder, 1998; Toulmin and Quan, 2000). Research has critiqued the efficiency and efficacy of community-based trust or co-title arrangements (Bassett and Jacobs, 1997; Deere and León, 2000; Fourie, 2003). This work shows that secure property rights, based on communal or customary type systems, are not necessarily more egalitarian as ‘custom’ is constructed by power relations that involve asymmetric information (Moore, 1998; Tshuma, 1998) and considerable state oversight or collusion (Feder and Noronha, 1987; Hammer, 1998). In systems where security is acquired through investment, the better-off can invest more to secure those rights, oblige poorer households to invest beyond what is rational for their income, and take over properties that appear to have been abandoned (Gray and Kevane, 2001). Where security is attained through fulfilling social obligations, these might be cheap in financial terms, but impose high opportunity costs and work against the aims of gender, age or ethnic equality (Moore, 1998; James, 2001). Unlike titled systems where enforcement of rights should be through state-sanctioned administrative or juridical procedures, the enforcement of ‘alternative’ socially legitimated property rights may rely upon those with a vested interest in the outcome, are not accountable for decisions and who might prefer temporary resolutions (Lemel, 1988; Deininger and Feder, 1998). There are at least two implications for urban learning from these debates – especially in the context of a general shift from welfare to market economy. First, rather than a preoccupation with tenure systems, property rights affords a more prominent consideration of institutions. Property rights are complex bundles involving a range of interlocking institutions and organizations. There is not a single right that is unrelated to and unaffected by others, hence the definition of property rights in some quarters as an expression of exclusion. Therefore, property rights (and titles as just one simplified version of rights) are reflections of social relations. It is theoretically misleading, therefore, to talk about a spectrum of tenure along which there is, at some point, an ‘adequate’ level of security. Since property rights are not one dimensional, governments cannot follow a set menu of actions to attain a particular level of security. What is perceived to be adequate by
134
Market Economy and Urban Change
a landholder will not correspond to the perception of a prospective developer, an informal creditor, an heir, and so on. The second implication is for critical attention to the law as the institutional instrument most closely linked to reform. Recent experiences show how difficult it has been to translate apparently acceptable rights-based agendas into laws and then into practice (McAuslan, 2003). The difficulties of land reform based on a legal positivism for countries that are characterized as lacking the ‘rule of law’ and where state intervention is regarded as a threat to property rights needs wider discussion. Writers on the urban similarly need to question their implicit faith in the role of law before assuming that the rule of law can somehow be constructed to secure property rights (Jones, 2002).12 In the urban context especially, we need primary research, not inductive guesswork, on the perception of law by those who undertake and sanction illegal land activities. We must avoid what we have at present, which is a notional concept of ‘rule of law’ as understood by law-makers or related stakeholders. If we understand insecurity as embedded within an array of institutions that legitimate occupation, then it might be helpful to also understand the law from this, more plural, perspective.
Land titles and investment In the rural-based literature there are prominent arguments that secure property rights and titling, in particular, deliver efficiency benefits by raising productivity levels, access to credit, prevention of asset division, secure contracts and less state interference, and that these, in turn, might provide equity benefits and possibly poverty reduction (Deininger and Binswanger, 1998; Melmed-Sanjak and LastarriaCornhiel, 1998; Deininger, 1999). Most of these arguments can be supported by static econometric models which show the importance of tying reforms to the operation of other factor markets (Atwood, 1990; Besley, 1995; Carter and Salgado, 1998; Deininger and Feder, 1998). By contrast, despite some early work from the World Bank (Jimenez, 1984),13 the link between tenure (property rights) and investment tends to be supported by reference to household behaviour.14 The argument that more secure property rights will raise productivity because of reduced uncertainty motivating farmers to invest scarce resources, adopt technology and plant higher value/yield crops is supported by data from titling programmes in Honduras, Paraguay, China and elsewhere (Deininger and Feder, 1998; Liu et al, 1998; Carter and Olinto, 2003). Although many rural titling programmes impose restrictions on holders from selling or ceding land, in similar ways to the restrictive property right-giving of many urban programmes, researchers have tended to identify the need to coordinate rights/titles with the need for active land markets. Besley (1995) argues from a study in Ghana that the rights– investment relationship requires a land market to assure the holder of ‘gains from trade’. A number of researchers note that investment does not require formal titles so long as customs and norms regulate land rights and reduce uncertainty adequately. But where land is under pressure from commercialization and transactions by outsiders, the credibility of whom cannot be vouched for by social
Bridging the Rural–Urban Divide 135
agency and who themselves require evidence of seller rights, formal land title becomes a necessity. Yet, others have questioned the neat tenure security investment (MelmedSanjak and Lastarria-Cornhiel, 1998), even casting doubt that the means to secure property rights are not cost effective (Atwood, 1990; Pinckney and Kimuyu, 1994; Place and Migot-Adholla, 1998). Lemel (1988) cites a number of studies to point out that where title and investment are both correlated to farm size (wealth), soil quality and age of holder, a simple connection may be difficult to prove. Pinckney and Kimuyu (1994) show from a comparison of titled land in Kenya and nontitled land in Tanzania that investment levels are not changed by titles either comparatively or over time. Atwood (1990) and Place and Migot-Adholla (1998) also question whether the impact of titling is positive for either productivity or equity, and present evidence that registration and title are not significantly related to yields. As Gray and Kevane (2001) show in a study that analyses reverse causation, insecurity does not lead to poor practices (such as environmental degradation and low yields), but may encourage intensive investment and use. Atwood (1990) concludes that the impact of title or registration cannot be predicted deductively; rather, one has to understand the causes and differential effects on people and investment of insecurity. Feder and Nishio (1999) argue, however, that we still need more robust assessment of the costs and benefits of measures to provide security. As already indicated, urban research has floundered on building methodologically tight assessments. We could learn from the rural.
Economic behaviour and collateralized borrowing According to the win–win scenario, security of tenure and, especially, titles give financial institutions a greater guarantee of collateral upon which to lend and the occupiers a valorized property upon which to borrow. Indeed, data indicate that following land titling in Costa Rica, Honduras, Jamaica, Paraguay and Thailand, access to credit did increase significantly (Feder and Noronha, 1987; Feder and Nishio, 1999). Other research broadly supports the win–win scenario but notes that behaviour and outcome will be differentiated according to existing asset holding, savings and additional incomes (GTZ, 1998; Deininger and Olinto, 2000). The strong correlation between existing wealth and the take-up of reform opportunities means that access to credit might further support a tilt to better-off groups (Carter and Salgado, 1998; Melmed-Sanjak and Lastarria-Cornhiel, 1998). This might be especially so where households are already in debt to formal or informal creditors, so that the take-up of additional credit upon acquiring a title is unlikely to be pronounced in a safety-first environment (Carter, 2000). Some writers go so far as to doubt the robustness of an empirical link to credit. Lemel (1988) points to a number of methodological problems with studies, such as not accounting for the influence of other assets, ownership changes over time and the use of non-comparable control groups. Studies of Cameroon, Honduras and Kenya found that few producers received credit, and land titles were not an important source of collateral (Pinckney and Kimuyu, 1994; Jansen and
136
Market Economy and Urban Change
Roquas, 1998; Place and Migot-Adholla, 1998; Firmin-Sellers and Sellers, 1999). In Guatemala, Nicaragua and Mexico, credit was denied to small-scale farmers even when legal land title was available due, in part, to adjustment reforms of the financial sector and the availability of less risky lending alternatives (Jonakin, 1997; Carter, 2000; Jones, 2000). Various studies suggest that the security-to-credit relationship is strongest where dedicated financial institutions are established as part of integrated development programmes (Alston et al, 1996; Deininger, 1999). Researchers of rural land reform have also raised conceptual reasons to doubt the simplicity of a security-to-credit link (Atwood, 1990; Platteau, 2000). First, most formal credit markets are highly regulated and have few incentives to go downmarket. It is not impossible to imagine a short-run scenario in which the availability of credit to plot-holders falls because banks do not move in and informal lenders move out. Second, titles do not reduce the transaction costs incurred by banks of dealing with many, highly dispersed, low collateral and insecurely employed potential borrowers (Deininger and Binswanger, 1998) – hence the numerous micro-finance initiatives sponsored by agencies presenting access to credit as otherwise a natural outcome of various policy measures, including more secure property rights. Third, collateral requires an active land market with no barriers to foreclosure and resale, whereas, in practice, even after titling, there are numerous legal and customary limits on foreclosure. Fourth, formal credit will not be forthcoming where informal credit institutions are strong, offering credit at high rates of interest and with considerable social pressure (Feder and Noronha, 1987), or where local endogenous factors are influential (Besley, 1995; Gray and Kevane, 2001). Fifth, we have probably over-represented the quality of titles and other documents as a summary of property rights information and, therefore, as a basis for assessing risk. Documents do not track claims by relatives, moneylenders or government agencies, while fraud and conveyancing shortcomings undermine their validity (Lemel, 1988). These insights are useful to add to the very limited research on security and finance in cities, which has failed to look at the demand for credit (Lanjouw and Levy, 1998) or how households managed to acquire plots and consolidate housing so quickly in an apparently ‘under’ credit-served context. In the light of the research on rural security, titling and credit, there should be very little surprise that recent data from Peru show that the massive registration programme there has not linked secure property rights to credit. One survey found that only 15 in 425 households regularized between 1996–1999 had gained access to credit, and this was through a government loan programme that makes no distinction on legality (Kagawa and Turkstra, 2002). Another survey found that the purpose of acquiring ‘housing loans’ was not for housing, but almost exclusively for micro-enterprises (Riofrio, 1998). Housing was the guarantee, not the destination, of funds as bank lending rates at 40 per cent repayable over a maximum of 18 months could never be met if money was spent on housing alone. As Riofrio (1998) found, the few borrowers tended not to be the most socially excluded but had more wage earners and a small business.
Bridging the Rural–Urban Divide 137
Property rights, land markets and prices Security of land tenure in cities has been justified for the benefits that it will bring to those in situ. Many policy-makers, and not just a few researchers, while in favour of legalization and secure tenure, are suspicious of boosting land markets that they regard as the cause of the ‘urban problem’. In numerous upgrading programmes, security has been argued on welfare grounds, legitimating the imposition of constraints on selling land and housing on the market. As de Soto (2000) has pointed out, this curtailing of property rights may make policy-makers complicit in a bias against the poor, who having invested in property then find great difficulty in realizing that asset which de Soto claims might be worth US$9.3 trillion. This welfare over market is somewhat in contrast to many rural land titling programmes that actually have as their aim to activate the land market by encouraging more efficient landholders to buy out less efficient ones (Brandão and Feder, 1996; Deininger and Binswanger, 1998; Carter, 2000). In the case of the ‘negotiated land reform’ adopted in South Africa, Brazil, Guatemala and India, a land market is stimulated by capital grants, state brokerage to locate willing sellers and fiscal policies, all of which are supposed to encourage markets to distribute land with secure property rights to smaller-scale holders (Deininger, 1999). Generally, researchers have argued that linking property rights, for example as titles, to an active land market is likely to be pro-poor. Land titles might reduce transaction costs, which are judged to be higher in informal and customary-based markets, by making exchanges more certain and thereby benefiting both buyer and seller (North 1990; Carter and Salgado, 1998). Lower transaction costs should be reflected in lower prices, although it is recognized that as security will allow realization of the present value of the income stream (which will increase through investment), land prices could rise (Brandão and Feder, 1996; Carter and Salgado, 1998). Empirical support for these arguments seems mixed. In Thailand, where land titling increased access to credit, and raised investment and income to titled farmers compared to untitled, it was also found that land transactions were stimulated and that the price of titled land was greater than untitled (Feder and Nishio, 1999). In Brazil, Alston et al (1996) found that titles increased the opportunities for land transactions and also raised land value. The empirical model suggested that values rose because of increased demand for titled land as a result of reduced enforcement costs and investment; but it presented no data that transactions were prevalent or had increased. It has also been suggested that the volume of transactions might be inflated by title recipients selling up after a programme in order to release capital for other purposes (Jonakin, 1997). Dissent on the activation of land markets comes from a study of Kenya showing that land titles did not motivate more transactions compared to the pre-existing land market (Pinckney and Kimuyu, 1994; Place and Migot-Adholla, 1998), and in Honduras and Paraguay, where differences in land market activity between titled and non-titled plots proved difficult to identify (Carter and Salgado, 1998). Finally, Platteau’s (2000) excellent review of the African experience reveals that titles did not activate the land market; but where the market was already active, the superimposition of titles may
138
Market Economy and Urban Change
have had profound social impacts through concentration, asymmetric information and access to institutions. The deliberate link in ‘rural’ titling programmes to land market transactions should interest urban policy-makers and researchers. It is worth exploring whether, compared to the dismal performance of retrospective legalization programmes, a form of negotiated land reform could operate in or near cities. First, negotiated land reform operates on the basis of income and not settlement location and, therefore, has a potential to target the poor. Second, it might encourage manageable urban growth by facilitating the purchase of plots in existing settlements. Third, the demand for formal plots part-financed with a grant and fast transaction periods should encourage developers to increase supply. Fourth, the programme could be pro-cyclical to expand during declines in ‘real’ land prices.15 Fifth, the subsidy is transparent, non-recurrent and can be recovered through fiscal measures.
Property rights and social inclusion While securing property rights is often represented as part of a ‘social contract’, with connotations of being inclusive and communal, they are also about how we recognize the exclusion of others. Nevertheless, there are a number of arguments in favour of secure property rights as part of broader social and poverty programmes. De Soto (2000) has argued that titling releases the assets of the poor, thereby creating opportunities for leading them out of poverty. Deininger (1999) argues that market-assisted land reform can assist the very poor by assuring individually recognized rights within a collective framework. Feder and Noronha (1987) propose that as titles provide all landholders with the same rights, they constrain those with better information from buying out those who lack information and, in particular, diminish the exploitative power of chiefs and other leaders. Nevertheless, as Carter (2000) notes, while many programmes are legitimated by reference to poverty alleviation and social inclusion, very few have been designed with this aim or can demonstrate a positive influence. Research on rural areas has highlighted how making statements about the affect on social inclusion needs to acknowledge two conceptual difficulties. First, securing property rights usually entails making a snapshot of the status quo, which may or may not be socially equitable and which may have resulted from pressure upon the vulnerable in the expectation of reward with security (title) (Lemel, 1988; Toulmin and Quan, 2000). Second, it is difficult to disentangle whether it is the security/title itself that causes social inclusion/exclusion or the manner of conferment. Feder and Nishio (1999, p38), for example, argue that the negative implications of titling are likely to be worse when implementation is ‘sporadic’. This focuses attention on the capacity of outreach workers to explain rules and procedures, but should not obscure the possibility that this impact might also be due to resistance from groups who believe themselves to be vulnerable to change (Jones, 2000). These conceptual difficulties notwithstanding, studies have indicated how measures to confer security of property rights have worked against social inclusion. According to Dujon (1997), Jansen and Roquas (1998) and Platteau (1996),
Bridging the Rural–Urban Divide 139
more secure property rights and, especially, titles may be incompatible with established institutions. In particular, it has been noted how safety mechanisms to protect vulnerable groups, such as access to common resources, may be eroded with titling and pro-individual based property rights (Atwood, 1990; Jacobs, 1998). Land concentration may increase in the hands of community leaders and men, generally (Lastarria-Cornheil, 1997; Jansen and Roquas, 1998; Izumi, 1999; James, 2001), even when reform was predicated upon recognizing the equal rights of women (Firmin-Sellers and Sellers, 1999; Deere and León, 2000). Titling or other procedures may require contact with a single household ‘head’; may expressly deny the possibility of joint or multiple plot holding; or may encourage self-selection through the impression that obtaining credit is less likely for women or groups perceived as less productive, where there is a preference for male heirs or where agencies are under pressure to distribute documents to an ambitious schedule (LastarriaCornheil, 1997; Meinzin-Dick et al, 1997; Hammer, 1998; Jacobs, 1998). The broad implication is that existing social institutions will not be extinguished with changes to tenure status or property rights (Platteau, 1996) and therefore the representation in much of the literature that secure rights will solve a series of social problems is by no means automatic. Indeed, the idea that security is constantly contested is shown by the stress placed upon mechanisms to resolve disputes as part of many reforms (Deininger and Feder, 1998; GTZ, 1998; Jones, 2000; Platteau, 2000). There is considerable appreciation that reforms induce certain kinds of disputes, possibly resulting in removals, incursions and illegal land sales (Prill-Brett, 1997; Jansen and Roquas, 1998; Place and Migot-Adholla, 1998; Fitzpatrick, 2000; McAuslan, 2003). Disputes will emerge when titles are ‘botched’ or overzealously issued without accurate information, as has happened in many countries (Jones and Varley, 1999; Platteau, 2000), or involves state intrusion into the administration of domestic life (such as inheritance and intrahousehold negotiations on gender) (Jansen and Roquas, 1998; Jones, 2000). Again, what matters is not choosing the adequate level of tenure security to place on offer, but the legitimacy of the institutions and consensus about how property rights are formed and maintained.
CONCLUSIONS This chapter has argued that we should get away from the spatial conformity of so much research and policy. Illustration of this argument is, of course, based on a deceit as – through most of the chapter – a distinction has been made between writing on the urban and the rural. Largely, the chapter has been forced into this deceit as writers have generally looked at either the rural or the urban, and rarely considered connectivity. The most notable exception in recent times has been the attention to the rural–urban or peri-urban. It is empirically interesting to consider that spatial boundaries between the rural and urban are becoming so blurred that ‘distinctions among cities, towns and rural areas are becoming almost obsolete as economic activity spreads outward into vast semi-urbanized and rural industrialized
140
Market Economy and Urban Change
regions’ (World Bank, 2000, p90). But much of this literature has not shown itself to be alert to the implications of territoriality; inventing new spatial terms for imaginary spaces is not an innocent act. Just as the failure to think spatially might have contributed to the rather limited progress in certain policy areas, such as the provision of security of tenure in cities, it is equally disingenuous to ‘locate’ a new set of problems within an imagined space called the peri-urban and then diagnose that the solutions should also be located there. In predominantly market economies in which policy is increasingly legitimated according to how it enables the market to work, a more conceptual and multi-spatial understanding is required. This chapter suggests that if we are to take the ‘blurring’ seriously, we should become rural–urban researchers and think of policy design in these terms. A useful step is for urban researchers to learn more about the rural and, although space has not permitted demonstration, vice versa. Until we are able to grasp the conceptual and empirical linkages across the rural and urban, it seems premature to talk about policy synergy. One approach might be to focus on institutions that connect spaces in order to cross the rural– urban divide. The most obvious institutions to consider are probably land markets and law, both of which seem largely absent from analysis in the peri-urban and rural–urban literatures; but we should also consider political agency, power and custom. If we want to plan, manage or govern urban growth, then we need to know about how the land market is operating outside of cities. If landholders are reluctant to make improvements in the face of pending urbanization, what influence will this have on the land price-conversion ratio? Do titles make any difference in such circumstances? If greater security provides for more active land markets, will this contribute to more- or less-ordered growth? If security raises prices as valorized investment exceeds the reduction in transaction costs, will this make it harder to assemble sufficient quantities of land for developments suitable for lower-income groups? Might land titling for the security of ‘farmers’ have negative implications for the urban poor’s access to land? Or might a rural titling programme that creates fewer, better-off landholders and/or undermines customary laws be seen as beneficial by a manager attempting to ‘order’ urban growth? Can one devise a land law that deals appropriately and consensually with the needs of the rural and the urban? Until we know how institutions connect through space, we are deluding ourselves that synergy can be constructed.
NOTES 1 2 3
I would like to thank Edesio Fernandes for his helpful comments on the draft version of this chapter. Territoriality is the attempt to influence people by delimiting and asserting control over a geographic area. By pointing to the need for a bridge across the rural–urban divide, therefore, I am not repeating the call for regional policy or metropolitan governance, which again created discreet, but imaginary (political) spaces.
Bridging the Rural–Urban Divide 141 4
5 6 7
8
9
10
11
12 13
14
One might argue that immigration amnesty programmes are a post-hoc response to the multi-spatial strategies of the poor. At a more localized level, Edesio Fernandes (2001) suggested that the ‘rurban’ programme in Parana, Brazil, was based, in principle, on a multi-spatial approach; but I could not find details in time to back this up. Where peri-urban is used to capture a space for debating environmental sustainability, it tends to ignore air pollution completely. The government also lowered the standards for a property to qualify for registration, making comparison over time not strictly appropriate. This is not to deny a high degree of selectivity. In Peru, delivery has been high partly because Comisión de Formalización de la Propiedad Informal (COFOPRI) has concentrated upon state-owned and most flat desert land, rather than upon land with complicated legal and political conditions. In Mexico, insecurity of holding on private land has been poorly dealt with by a range of decentralized state-level agencies. Based on the notion of change in situ, discussion of urban security of tenure often makes incidental reference to the possibility that land prices may decline as transaction costs are assumed to fall with the removal of restrictive social institutions and regulations. Separately, however, the same voices can be heard claiming that security of tenure is good for the poor as it allows them to realize an increasingly valuable asset, implying, therefore, that prices rise as utility is valorized. Land titling programmes for rural areas can be large. In Thailand, 5.5 million titles have been distributed at a cost of US$247 million between 1984 and 1997; in Mexico, a titling programme begun in 1993 had distributed certificates to 2.2 million households at a cost of US$1.1 billion by 2000; and in the Honduras 125,000 titles were distributed from the mid 1970s to the early 1990s (Jansen and Roquas, 1998; Jones, 2000). I am conscious that this review misses numerous important topics and authors. Taxation on agriculture, for example, may accelerate the conversion of land to urban use, as will the availability of subsidized credit for housing, while the dedication of credit to agriculture may slow conversion but raise land prices, making it more costly to establish settlements for low-income groups. The argument for decentralization is hardly born out by the case of Peru, upon which it is often justified. Both the property formalization system (PROFORM) and COFOPRI ran from the Office of the President in order to sort out administrative conflicts, and decentralization really only took shape from 2001. Moreover, the technical experience of Peru and Mexico is that scale may need some centralization in order to coordinate relevant national legislation, control groups involved in illegal land development and challenge the protection of politicians over whom local government will have little leverage. Readers are referred to the International Research Group on Law and Urban Space at www.irglus.org. It is interesting that the econometric model proposed by Jimenez is based on ‘a city of a fixed size in which there is an amount of land (which is also fixed in size) that is available for squatting’ (Jimenez, 1984, p557). In other words, the model assumes no land market and spatial mobility in order to analyse a set of problems related to highly active land markets and high levels of spatial mobility. In fact, there is not much theoretical or empirical consideration of actual household behaviour in either the urban or rural literatures (Melmed-Sanjak and LastarriaCornhiel, 1998).
142
Market Economy and Urban Change
15 Of course, some adaptation might be necessary as negotiated reform in South Africa was possible because the enormous release of land supply post-apartheid forced land prices downward. This would not be likely in areas subject to urban growth.
REFERENCES Alston, L J, Libecap, G D and Schneider, R (1996) ‘The determinants and impact of property rights: Land titles on the Brazilian frontier’, Journal of Law, Economics and Organization, vol 12, no 1, pp25–61 Atwood, D A (1990) ‘Land registration in Africa: The Impact on agricultural production’, World Development, vol 18, no 5, pp659–671 Bassett, E M and Jacobs, H M (1997) ‘Community-based tenure reform in urban Africa: The community land trust experiment in Voi, Kenya’, Land Use Policy, vol 14, no 3, pp215–229 Besley, T (1995) ‘Property rights and investment incentives: Theory and evidence from Ghana’, Journal of Political Economy, vol 103, no 5, pp903–937 Binns, T and Lynch, K (1998) ‘Feeding Africa’s growing cities into the 21st century: The potential of urban agriculture’, Journal of International Development, vol 10, no 6, pp777–793 Brandão, A S P and Feder, G (1996) Regulatory Policies and Reform: The Case of Land Markets, Private Sector Development Department Occasional Paper 15, Washington, DC, World Bank Brook, R and Dávila, J (eds) (2000) The Peri–Urban Interface: A Tale of Two Cities, London, School of Agricultural and Forest Sciences, University of Wales and Development Planning Unit, University College London Calderón, J (2000) ‘Regularización de la Tierra y Derecho: Perú y Más Allá, in Fernandes’, E (ed) Derecho, Espacio Urbano y Medio Ambiente, Madrid, Dykinson, pp95–114 Carter, M R (2000) ‘Old questions and new realities: Land in post-liberal economies’, in Zoomers, A and van der Haar, J (eds) Current Land Policy in Latin America: Regulating Land Tenure under Neo-liberalism, Amsterdam, KIT, pp29–43 Carter, M R and Olinto, P (2003) ‘Getting institutions right for whom? Credit constraints and the impact of property rights on the quality and composition of investment’, American Journal of Agricultural Economics, vol 85, no 1, pp173–186 Carter, M R and Salgado, R (1998) ‘Land titling and property rights reform: Enabling or disabling peasant land access?’ Paper presented at WIDER Conference, Santiago, 27–29 April, Mimeograph Clichevsky, N (1999) Politicas de Regularización en Argentina: Entre la Euforia y la Frustración, Universidad de Buenos Aires, Buenos Aires Deere, C D and León, M (2000) ‘Gender, land and equity: From reform to counterreform in Latin America’, in Zoomers, A and van der Haar, J (eds) Current Land Policy in Latin America: Regulating Land Tenure under Neo-liberalism, Amsterdam, KIT Deininger, K (1999) ‘Making negotiated land reform work: Initial experience from Colombia, Brazil and South Africa’, World Development, vol 27, no 4, pp651–672 Deininger, K and Binswanger, H (1998) The Evolution of the World Bank’s Land Policy, www.worldbank.org/landpolicy/papers/evolution/index.htm Deininger, K and Feder, G (1998) Land Institutions and Land Markets, Policy Research Working Paper 2014, Washington, DC, World Bank
Bridging the Rural–Urban Divide 143 Deininger, K and Olinto, P (2000) Why Liberalization Alone has not Improved Agricultural Productivity in Zambia: The Role of Asset Ownership and Working Capital Constraints, http://ideas.repec.org/p/wbk/wbrwps/2302.html de Soto, H (2000) The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else, London, Bantam Books de Souza, F A M (2001) ‘The future of informal settlements: Lessons in the legalization of disputed urban land in Recife, Brazil’, Geoforum, vol 32, no 4, pp483–492 DFID (Department for International Development) (2000a) Making Markets Work Better for the Poor: A Framework Paper, London, DFID DFID (2000b) Consultation Document: Meeting the Challenge of Urban Poverty, London, DFID Dujon, V (1997) ‘Communal property and land markets: Agricultural development policy in St Lucia’, World Development, vol 25, no 9(1), pp1529–1540 Durand–Lasserve, A and Royston, L (2002) Holding Their Ground: Secure Land Tenure for the Urban Poor in Developing Countries, London, Earthscan Feder, G and Nishio, A (1999) ‘The benefits of land registration and titling: Economic and social perspectives’, Land Use Policy, vol 15, no 1, pp25–43 Feder, G and Noronha, R (1987) ‘Land rights systems and agricultural development in sub-Saharan Africa’, World Bank Research Observer, vol 2, no 2, pp143–166 Fernandes, E (2001) ‘Regularising informal settlements in Brazil: Legalisation, security of tenure and city management’, Paper presented at N–AERUS Annual Workshop, Leuven, 23–26 May Firmin-Sellers, K and Sellers, P (1999) ‘Expected failures and unexpected successes of land titling in Africa’, World Development, vol 27, no 7, pp1115–1128 Fitzpatrick, D (2000) ‘Re-establishing land titles and administration in East Timor’, Pacific Economic Bulletin, vol 15, no 2, pp152–160 Fourie, C (2003) ‘Regulatory frameworks and the urban poor in Namibia’, in Jones, G A (ed) Urban Land Markets in Transition, Massachusetts, Lincoln Institute of Land Policy Gough, K V and Yankson, P W K (2000) ‘Land markets in African cities: The case of peri-urban Accra, Ghana’, Urban Studies, vol 37, no 13, pp2485–2500 Gray, L C and Kevane, M (2001) ‘Evolving tenure rights and agricultural intensification in southwestern Burkina Faso’, World Development, vol 29, no 4, pp573–587 GTZ (Gesellschaft für Technische Zusammenarbeit) (1998) Land Tenure in Development Cooperation: Guiding Principles, Wiesbaden, Universum Verlagsanstalt GmbH KG Hammer, M (1998) ‘“Stool rights” and modern land law in Ghana: A geographical perspective on the transformation of tradition’, Afrika Spectrum, vol 33, no3, pp311–338 Izumi, K (1999) ‘Liberalisation, gender and the land question in sub-Saharan Africa’, Gender and Development, vol 7, no 3, pp9–18 Jacobs, S (1998) ‘Past wrongs and gender rights: Issues and conflicts in South Africa’s land reform’, European Journal of Development Research, vol 10, no 2, pp70–87 James, D (2001) ‘Land for the landless: Conflicting images of rural and urban in South Africa’s land reform programme’, Journal of Contemporary African Studies, vol 19, no 1, pp93–109 Jansen, K and Roquas, E (1998) ‘Modernizing insecurity: The land titling project in Honduras’, Development and Change, vol 29, no 1, pp81–106 Jerve, A M (2001) ‘Rural–urban linkages and poverty analysis’, in Grinspun, A (ed) Choices for the Poor: Lessons from National Poverty Strategies, New York, UNDP Jimenez, E (1984) ‘Tenure security and urban squatting’, Review of Economics and Statistics, vol 66, no 4, pp556–567
144 Market Economy and Urban Change Jonakin, J (1997) ‘The interaction of market failure and structural adjustment in producer credit and land markets: The case of Nicaragua’, Journal of Economic Issues, vol 31, no 2, pp349–357 Jones, G A (1991) ‘The commercialisation of the land market? Land ownership patterns in the Mexican City of Puebla’, Third World Planning Review, vol 13, no 2, pp129–153 Jones, G A (1998) ‘Resistance and the rule of law in Mexico’, Development and Change, vol 26, no 3, pp499–523 Jones, G A (2000) ‘Between a rock and a hard place: Institutional reform and the performance of land privatisation in peri-urban Mexico’, in Zoomers, A and van der Haar, G (eds) Current Land Tenure Policy in Latin America: Regulating Land Tenure under Neoliberalism, Amsterdam, KIT, pp201–226 Jones, G A (2002) ‘Camels, chameleons and coyotes: Problematizing the “histories” of land law reform’, in Holder, J and Harrison, C (eds) Current Legal Issues: Law and Geography, Oxford, Oxford University Press Jones, G A and Varley, A (1999) ‘Decentramento o frammentazione? Riflessioni sulla riforma dei suoli urbani in Messico’, Storia Urbana, vol 23, no 88/89, pp93–117 Jones, G A and Ward, P M (1998) ‘Privatizing the commons: Reforming the ejido and urban development in Mexico’, International Journal of Urban and Regional Research, vol 22, no 1, pp76–93 Kagawa, A and Turkstra, J (2002) ‘The process of urban land tenure formalization in Peru’, in Payne, G (ed) Land, Rights and Innovation: Improving Tenure Security for the Urban Poor, London, ITDG Kelly, P F (1999) ‘Everyday urbanization: The social dynamics of development in Manila’s extended metropolitan region’, International Journal of Urban and Regional Research, vol 23, no 2, pp283–303 Lanjouw, J O and Levy, P I (1998) Untitled: A Study of Formal and Informal Property Rights in Urban Ecuador, Yale, Yale University Economic Growth Center Discussion Paper 788 Lastarria-Cornhiel, S (1997) ‘Impact of privatization on gender and property rights in Africa’, World Development, vol 25, no 8, pp1317–1333 Lemel, H (1988) ‘Land titling: Conceptual, empirical and policy issues’, Land Use Policy, vol 5, pp273–290 Liu, S, Carter, M R and Yao, Y (1998) ‘Dimensions and diversity of property rights in rural China: Dilemmas on the road to further reform’, World Development, vol 26, no 10, pp1789–1806 Maia, M L (1995) ‘Land use regulations and rights to the city: Squatter settlements in Recife, Brazil’, Land Use Policy, vol 12, no 2, pp177–180 Mbiba, B and Huchzermeyer, M (2002) ‘Contentious development: Peri-urban studies in sub-Saharan Africa’, Progress in Development Studies, vol 2, no 2, pp113–131 McAuslan, P (1998) ‘Making law work: Restructuring land relations in Africa’, Development and Change, vol 29, no 3, pp525–552 McAuslan, P (2003) ‘A narrative of land law reform in Uganda’, in Jones, G A (ed) Urban Land Markets in Transition, Massachusetts, Lincoln Institute of Land Policy McGee, T G (1991) ‘The emergence of Desakota regions in Asia: Expanding a hypothesis’, in Ginsburg, N, Koppel, B and McGee, T G (eds) The Extended Metropolis: Settlement Transition in Asia, Hawaii, University of Hawaii Press McLaughlin, J and de Soto, H (1994) ‘Property formalization: The PROFORM solution’, Geomatica, vol 48, no 4, pp307–314
Bridging the Rural–Urban Divide 145 Moore, S F (1998) ‘Changing African land tenure: Reflections on the incapacities of the state’, European Journal of Development Research, vol 10, no 2, pp33–49 Meinzen-Dick, R S, Brown, L R, Feldstein, H S and Quisumbing, A R (1997) ‘Gender, property rights, and natural resources’, World Development, vol 25, no 8, pp1303–1315 Melmed-Sanjak, J and Lastarria-Cornhiel, S (1998) ‘Land access, off-farm income and capital access in relation to the reduction of rural poverty’, Land Reform, vol 1, pp5–18 North, D C (1990) Institutions, Institutional Change and Economic Performance, Cambridge, Cambridge University Press Pinckney, T C and Kimuyu, P K (1994) ‘Land tenure reform in east Africa: Good, bad or unimportant?’, Journal of African Economics, vol 3, no 1, pp1–28 Place, F and Migot-Adholla, S E (1998) ‘The economic effects of land registration on smallholder farms in Kenya: Evidence from Nyeri and Kakamega districts’, Land Economics, vol 74, no 3, pp360–373 Platteau, J-P (1996) ‘The evolutionary theory of land rights as applied to sub-Saharan Africa: A critical assessment’, Development and Change, vol 27, pp29–86 Platteau, J-P (2000) ‘Does Africa need land reform?’ in Toulmin, C and Quan, J (eds) Evolving Land Rights, Policy and Tenure in Africa, London, DFID/IIED/NRI Potts, D and Mutambirwa, C (1997) ‘“The government must not dictate”: rural–urban migrants’ perceptions of Zimbabwe’s land resettlement programme’, Review of African Political Economy, vol 24, no 74, pp549–566 Prill-Brett, J (1997) ‘Ancestral land rights and legal pluralism: Another land reform in the highlands of northern Philippines’, Law and Anthropology, vol 9, pp43–71 Rigg, J (1998) ‘Rural–urban interactions, agriculture and wealth: A Southeast Asian perspective’, Progress in Human Geography, vol 22, no 4, pp497–522 Riofrio, G (1998) ‘Por Qué las Familias Han Hipotecado Tan Poco?’, Paper presented at the Workshop Comparative Perspectives on Urban Land Market Reform in Latin America, Southern Africa and Eastern Europe, Lincoln Institute of Land Policy, 7–9 July Tacoli, C (1998) ‘Beyond the rural–urban divide’, Environment and Urbanization, vol 10, no 1, pp147–166 Toulmin, C and Quan, J (eds) (2000) Evolving Land Rights, Policy and Tenure in Africa, London, DFID/IIED/NRI Tshuma, L (1998) ‘Colonial and postcolonial reconstructions of customary land tenure in Zimbabwe’, Social and Legal Studies, vol 7, no 1, pp77–95 Wachter, D and English, J (1992) The World Bank’s Experience with Rural Land Titling, Policy and Research Division Paper No 35, Washington, DC, World Bank Ward, P M (2001) ‘Squaring the circle: Whither or wither segregation in cities?’ Paper presented at International Seminar on Segregation in the City, Lincoln Institute of Land Policy, Cambridge, Massachusetts, 25–28 July Ward, P M (2003) ‘Land regularization in Latin America: Lessons in the social construction of public policy’, in Jones, G A (ed) Urban Land Markets in Transition, Massachusetts, Lincoln Institute of Land Policy World Bank (2000) Cities in Transition: World Bank Urban and Local Government Strategy, Washington, DC, World Bank World Bank (2001) World Development Report 2000/2001: Attacking Poverty, Washington DC, World Bank Zoomers, A and van der Haar, Z (2000) (eds) Current Land Tenure Policy in Latin America: Regulating Land Tenure under Neo-Liberalism, Amsterdam, KIT
Chapter 6
Between Command and Market Economies: The Changing Roles of Public and Private Housing Sectors in Transitional Economies
Geoffrey Payne and Richard Grover
INTRODUCTION: THE CONTRASTING POLITICAL ECONOMIES OF URBAN DEVELOPMENT There are comparatively few societies in the world in which urban development is wholly a private-sector activity, determined by landowners and developers pursuing their own self-interests. Even in those societies in which the private sector is dominant and capitalist activity is the norm, the state tends to intervene in urban development. The justification for this is that urban development generates externalities, which impact upon third parties not involved in the development process. Where these bring costs to third parties, the state often seeks to mitigate these – for example, through urban planning processes by denying development consent or by imposing conditions. If there are beneficial externalities from a development, the state may seek to promote it. For example, subsidies may be provided to encourage private owners to participate in desired development. Powers of compulsory purchase can be used to assemble sites or partnerships entered into with private developers and financiers. Through its control of externalities, the state in capitalist societies can be regarded as providing a regulated environment in which markets can function efficiently, so that private urban development can take place without undue adverse consequences.
148
Market Economy and Urban Change
By contrast, for a significant number of countries during much of the postwar period, the underlying philosophy has not been one of the state providing a regulatory environment in which private urban development can flourish. Rather, the view has been taken that urban development ought to be a state monopoly. In the socialist countries, there was ideological opposition to the private ownership of land and private ownership of the means of production used in the construction industry. This inevitably resulted in urban development being a state activity, as there was no private legitimate sector access to the resources this needed. The state was pre-eminent in determining the spatial and social allocation of resources in accordance with official policies, standards and objectives. It is this latter model of economic development that provides the starting point for this chapter. The chapter examines both the failure of the command economy model to satisfy supply-led housing provision, and how the legacy and consequences of this model have impacted upon the newly imposed market-driven provision in the so-called transitional economies since the collapse of communist regimes a decade or so ago. Recognizing, equally, the limitations of an unregulated market enablement model as the means of satisfactorily fulfilling housing needs (its crude and rapid imposition has been particularly problematic), the chapter considers emerging and experimental practices involving partnership approaches between public and private sectors. The chapter argues that these less ideologically extreme approaches offer a potentially more valuable way of providing housing for the mass of the urban poor in fast-growing cities.
STATE CONTROL OVER URBAN DEVELOPMENT In the Union of Soviet Socialist Republics (USSR), for example, there was no legal market in land or housing. Land had been nationalized by the Bolsheviks in 1917. After the civil war, the Civil Code of 1921 drew a distinction between socialistic and personal property. Socialistic property was not capable of being privately owned. Land and most buildings, other than country houses and flats in residential cooperatives, came into the category of socialistic property and therefore could not be privately owned. It was not permitted for personal property, including real estate, to be used for commercial profit. Thus, only the state was permitted to carry out urban development. State enterprises and organizations were the main source of capital investment in housing, and state banks provided credits. Housing development was determined by the needs of industrial development. Major industrial projects also included finance for the housing of their workers and for social infrastructure, such as education and healthcare. Housing and urban development were subordinate to industrial development and were intended to help achieve industrial development goals. Allocation of housing was primarily through queuing rather than in response to effective demand, with the determination of allocation in the hands of municipalities or enterprises (Grover et al, 2001). The concentration of power and resources in a few hands reinforced a supplydriven approach in which housing needs were assessed in terms of housing deficits,
Between Command and Market Economies 149
using arbitrarily defined criteria, such as the minimum acceptable floor area per person. Within the central planning paradigm, forms of provision gradually became driven by political or technical considerations, rather than based on expressed social needs or resources. Centrally determined standards and regulations were often imposed on areas for which they were inappropriate, sometimes with disastrous consequences. For example, design standards for the USSR were controlled by Soviet agencies based in Moscow and failed to take into account local seismic conditions. Consequently, a high proportion of the casualties in the 1988 earthquake in Armenia were caused by the structural failure of state-built apartments (Anlian and Vanian, 1997, p15). The concept of value for money was largely absent. Since the principal underlying central planning approaches was to counter the ethos of market forces, the emphasis on costs became increasingly marginal to the extent that, in the socialist countries, it was almost impossible to assess the costs of any housing supply component using conventional pricing mechanisms. Patterns of urban development were often different from those that result from the impact of market forces. For example, in Moscow and St. Petersburg during the early 1990s, a disproportionate share of the land in prime central locations was allocated to low-intensity industrial use. There was a positive gradient between population density and distance from the city centre instead of the negative one found in market-oriented cities. The density of development was lower towards the city centre, but more intensive on the urban periphery, than in market-oriented cities (Bertaud and Renaud, 1997). Central planning does not have a track record of successfully producing urban development that meets the needs of its citizens. Rather, its legacy has been one of large-scale projects that have gone wrong or been abandoned incomplete, such as Ceausescu’s attempt to remodel Bucharest, and cities that have unattractive environments, with poorly constructed and maintained high-rise housing, lacking in services and located away from urban facilities. This is scarcely surprising in view of the priority given to industrial development, compared with meeting the aspirations of households, and the internal inefficiencies of the system. A number of developing countries adopted a socialist development model, based upon the experiences of the USSR. Courses on central planning for officials from developing countries, as well as aid and soft loans from the Soviet Union and its allies, helped to spread ideas about state control over urban development. This included central planning of the economy, unbalanced growth models that supported the development of key industries at the expense of agriculture and household consumption, and state ownership of land. In half of the sub-Saharan countries reviewed by Mabogunje (1990), the state had nationalized all land, thereby increasing its monopolistic control over development. In some other countries, notably in South America, what was effectively a state monopoly over development came about as a result of political and bureaucratic forces rather than for ideological reasons. Development was controlled through a web of bureaucratic and legalistic means. While these may originally have had the objective of controlling the adverse externalities from urban development,
150
Market Economy and Urban Change
they came to have the effect of making legal development prohibitively expensive and almost impossible to obtain (de Soto, 1989, 2000). The process of gaining legal consents for development had the potential to enrich through corruption those with the ability to control the supply of these consents. In addition, the elite were able to enhance their political controls by offering development consents that would otherwise have been impossible or prohibitively expensive to obtain. While there may have been little ideological support for socialist-style state control over urban development, politicians and bureaucrats had an incentive to maintain and enhance state control in order to satisfy their own interests. For those educated in the belief that the main role of planning was to meet the needs of all citizens, or at least all of those unable to satisfy their needs and aspirations within commercially driven markets, housing was predominantly a welfare activity. The state’s assumption of authority can be argued to have undermined the willingness of otherwise capable groups to organize housing for themselves. In countries such as Tanzania during the 1970s and early 1980s, many households able to afford their own housing were inclined to sit back and wait for a free or subsidized unit from the state, increasing their dependency, and even leading to greater demands. Payments for housing could be very low. For example, in Russia in 1993, expenditure on housing and communal services amounted to only 0.7 per cent of household expenditure (Goskomstat, 1999). Under these circumstances, there was little incentive for the population to assume responsibility for the provision of their own housing. It is of note that by 1998, six years after the policy of privatization commenced, less than half of the housing stock in Russia had been privatized. Even in mixed and market-based economies, housing policy has commonly been based upon a welfare approach. For example, South Africa’s attempt to improve the living conditions of the black majority resulted in the goal being adopted of constructing 1 million dwellings within five years of the African National Congress (ANC) assuming power. This placed a considerable burden on public finances. Dewar (1999) estimated that if 90 per cent of households qualify for the full grants available to low-income households and the remaining 10 per cent qualify for part subsidies, the total annual cost to the state would be about UK£300 million. On top of this has to be added the inflationary impact of stimulating the demand for land and building materials over a short period and the increasing dependency of households. Moreover, the pressure to increase supply led to a standardization of housing provision in suburban locations, which created alienating environments and has separated housing from social and economic activities. Low densities and peripheral locations of new developments make public transport uneconomic, imposing potentially further costs in the form of transport subsidies.
THE RETREAT FROM WELFARE The idea that urban development should be a state monopoly has broken down over the past decade as a result of a number of forces. The ‘new world order’,
Between Command and Market Economies
151
which succeeded the break-up of the USSR, resulted in the abandonment of its brand of socialism, except in a handful of countries such as Cuba and North Korea. Market-led solutions have been promoted by donor agencies, such as the World Bank, United States Agency for International Development (USAID), and the European Union (EU) and its member states. Access to grants and soft loans has been conditional on adopting such solutions. The realization of prizes, such as membership of the EU or the World Trade Organization (WTO), has also depended upon the adoption of market-friendly policies. Aid and loans from bodies such as the World Bank and the International Monetary Fund (IMF) have been conditional on reducing market distortions by cutting subsidies and targeting them more effectively. In the leading communist regime, the USSR, during 1989–1990, Mikhail Gorbachev brought about the separation of government from the Communist Party, a process that led to the formal break-up of the USSR in 1991 and the ending of the Communist Party’s role in government. A market economy, with privatization of state enterprises and assets, replaced the central planning system. The former Soviet satellite and client states and the non-Russian parts of the USSR were left to pursue their own policies without the constraint of the preceding doctrine. Housing in Russia was transferred to the private sector by means of free and voluntary transfers from the state or municipalities to occupiers with residence permits renting under social contracts. Elsewhere in Central and Eastern Europe, restitution has also played an important role in the creation of private land and housing markets. This has enabled former owners, or their heirs, to recover property that had been expropriated under Communist governments. Privatization and restitution have contributed to the growth of owner occupation. In Russia, 46 per cent of the housing stock was privatized between 1992 and 1998, principally between 1992 and 1994. In some other parts of Central and Eastern Europe, the extent of privatization has been less dramatic because of the existence of large cooperative housing sectors during the Communist period than in the USSR. However, countries such as Bulgaria, Estonia, Hungary, Romania and Slovenia now have owner occupation levels in excess of 80 per cent (Yasui, 2000). With the abandonment of the socialist development model by the successor states of the USSR, those developing countries, for which the USSR had been a mentor, also changed their approach to urban development. Moreover, writers such as de Soto (2000) provided intellectual support for donor agency preferences for market solutions by arguing that state controls and a state monopoly over urban development prevent capital from being mobilized in support of economic development. Funding to support a capitalist approach to urban development was available at a time when there was none to support the socialist model. For example, in Armenia, the 1988 earthquake was followed by credit from the World Bank of US$28 million for reconstruction work (Anlian and Vanian, 1997). This evolved into a regulation requiring all state construction, no matter what the cost, to be subject to competitive bids. It also introduced the principle of cost recovery, with well-targeted subsidies in the form of housing allowances for those able to satisfy eligibility criteria.
152
Market Economy and Urban Change
Once private ownership of real-estate assets is permitted, private sale and rental markets for housing can develop. Private construction and development industries can come into being. Private banking systems can become the means of raising urban development finance. The state thus ceases to have a monopoly over urban development as it no longer exercises detailed control over land, the construction industry or the banking system. It may still have regulatory functions in order to ensure the control of adverse externalities and it can promote development that is socially beneficial. The role of the state can be one of partnership with the private sector; but the state does not have exclusive development rights. In reality, the development of private real estate markets has not been smooth. Housing production, particularly of social housing for low-income and other needy groups, has declined as the role of the state has diminished. In Armenia, state supply of housing virtually dried up after the break-up of the USSR in 1991, except for a small amount of reconstruction work related to the earthquake of 1988. Over 50,000 prefabricated apartment units remain unfinished (Anlian and Vanian, 1997). In Russia, the floor space of new housing constructed in 1998 was 74 per cent of that constructed in 1992 and the number of apartments was 56 per cent (Goskomstat, 1999). The state was responsible for only 12 per cent of the construction that it undertook in 1992. The number of families re-housed due to overcrowding was only 36 per cent of the 1992 level. In Romania, in 1992, 50 per cent of the dwellings completed were financed from public funds. In 1998 this had fallen to 10 per cent so that the number of dwellings completed with public funds was only 26 per cent of what it had been in 1992 (National Commission for Statistics, 1998). By contrast, housing production for those with effective demand has increased. In Russia, the proportion of new housing commissioned by households increased from 12 per cent of the total in 1992 to 39 per cent in 1998, while that commissioned by state bodies fell from 70 per cent to 11 per cent. The average size of dwelling increased from 60.8 to 79.1 square metres (Goskomstat, 1999). In Romania, in 1991, 75 per cent of new dwellings were in apartment blocks of three or more storeys and 17 per cent were single-family houses. In 1998, the proportions were 17 and 58 per cent, respectively, and the average dwelling constructed increased from 34 to 47 square metres (Romania, 2000). In Armenia, the 1988 earthquake proved to be the catalyst to stimulate reforms in housing, as the World Bank imposed conditions on its credits in the form of policy changes. Although most land in rural areas had been privatized on independence in 1991, land and maintenance in urban areas remain largely under direct or indirect state control. This has several important implications. The market value of buildings is so low that it is impossible to use them as collateral for loans to effect improvements, or even to prevent further deterioration. In some cases, particularly the older high-rise apartment blocks, it is estimated that the cost of raising their structural ability to withstand earthquakes to current standards would cost more than US$1 million per building. In market terms, many of the blocks currently have a negative value. As land and housing markets emerge, it is the blocks in advantageous locations, particularly in central areas, which attract the limited private-sector capital investment. While the land remains under state con-
Between Command and Market Economies
153
trol, it is difficult for residents and developers to realize that its commercial potential and investment is inhibited. Even if the land under the buildings is privatized and the titles in both united, opportunities to generate economic benefits to cover the costs of building maintenance and environmental improvements will be frustrated unless regulations restricting land use and administrative procedures for processing development proposals are changed. If control over maintenance remains directly or indirectly with state agencies, the prospects for preventing further deterioration will be limited. There is evidence of inefficiency, as well as politicization, resulting in resources being diverted to limited group interests. Attempts at privatization of these in 1991 largely failed, though some maintenance agencies operate as cooperatives. However, there is a long way to go before groups of residents are able to secure building work on competitive tenders, even where they are able to afford it. In housing, as in other aspects of living standards, there is evidence that the transition from centrally planned to capitalist society has increased inequalities (Ellerman, 2000). Those with effective demand have benefited from transition, while those dependent upon state aid have experienced a shrinking of the welfare safety net. New luxury suburban developments have been constructed, while the construction of social housing has plummeted. The introduction of market forces may have reinforced previous inequalities. As Anlian and Vanian note (1997), a family who, by chance or good fortune, or by virtue of status in the Communist Party or an official body, lived in a highly desirable location or a well-appointed apartment, has been able to assume ownership of a valuable asset. As a result, some of the non-cash benefits enjoyed by the nomenklatura may have become capitalized into asset prices. Other households, by contrast, may have acquired assets with considerable liabilities resulting from poor design, construction or maintenance. Policy changes have been accepted with varying degrees of enthusiasm. The old guard of professionals have often found it difficult to adapt to the new situation or accept new approaches. They may obstruct innovative policies, sometimes because of vested interest, as well as on grounds of principled objection, or fail to change their attitudes sufficiently to implement them successfully. Authoritarian practices and attitudes continue even when undertaking participatory projects. Younger, highly qualified, officials may be unable to translate new ideas obtained from international exposure into local practice. They may not understand the extent to which these depend upon changes elsewhere in the economy in order to be successful, or may be insufficiently pragmatic to be able to adapt what they have learned to local conditions. In some transition countries, this has created a bipolar approach, in which some sections of the professional cadres and political elites remain wedded to the previous development paradigms, while others are pushing hard to build constituencies of support to introduce new approaches. Competition may occur between different agencies tasked with creating different elements of new approaches, with each jealously guarding its area of influence and access to its data. Such internal conflicts run the risk of rendering public bodies even less effective and discrediting new approaches before they have had the chance to prove themselves.
154
Market Economy and Urban Change
PRAGMATIC ALTERNATIVES While both central planning and neo-liberal paradigms of planning and housing have been highly influential, both have also generated outcomes very different from those intended or envisaged by their proponents. Officially sanctioned forms of land development and shelter provision have generally failed to deliver their expected benefits. Unrealistically high standards, restrictive planning regulations, and cumbersome and costly administrative procedures inhibit the ability of public- or private-sector suppliers to address either the scale or nature of demand. Antipathy between public- and private-sector interests constrain opportunities for innovation and raised the cost of entry to legal shelter. Increasing emphasis upon the role of the private sector to meet economic policy objectives under globalization pressures has recently generated considerable interest in various forms of public–private partnerships (Payne, 2000). This partly reflects an increasing awareness that neither the state, nor unrestrained market forces, are able to meet the basic needs of the majority of people. This raises the question of the appropriateness of either paradigm in addressing the needs of diverse social and economic realities in both transitional and developing market-based countries. Yet, examples exist in which innovative approaches, based on local traditions and practices, have proved effective in meeting needs. One way of addressing these issues and building confidence, as well as developing new constituencies of support for new approaches, is through the dissemination of such successful approaches and their application in pilot projects elsewhere. A continuum of new approaches exists between those that are close to a free market in urban and housing development, in which the public sector’s role is one of being a facilitator, and those in which the public sector is strongly proactive in urban development. Between these two is a range of intermediate positions, in which the public sector performs a variety of different roles. As argued above, urban development results in externalities, both beneficial and harmful. Their existence means that there is a continuing role in urban development for collective bodies to promote beneficial externalities and to limit the harmful ones. It is generally neither possible nor desirable for urban development to be undertaken exclusively by private individuals or companies. They are not in the position to provide infrastructure and other public goods, and cannot compel other owners to promote the common good. Moreover, should individual owners selfishly pursue their own interests, this can result in worse outcomes than if cooperation takes place (Rothenberg, 1969). For example, maintaining one’s own property to a good standard produces beneficial externalities for neighbouring properties, whose value is enhanced as a result. If all owners did this, the value of the neighbourhood as a whole is likely to be enhanced. But how can ‘free riders’ – who decide that it is in their interest to benefit from externalities generated by others, while contributing nothing to their neighbours – be impeded? They fail to maintain their properties, thus saving themselves any costs, while deriving benefit from the expenditure of others. Faced with this, their neighbours will realize that the rational course of action is
Between Command and Market Economies
155
to cease expenditure on maintenance since the worst outcome is to spend money and generate externalities for others, but get nothing back in return. In this way, an area can enter a cycle of neglect and blight as each owner individually pursues his own self-interest, even though cooperation and agreement to enhance the neighbourhood would be in everyone’s interest. Urban development usually is a collective good with individual benefits. Being a collective good, urban development is likely to involve a collective body with the ability to generate cooperation between individual landowners. The differences along the continuum depend upon the extent to which the state or the municipality is the collective body or whether some private club is able to fulfil this role. Ankara and Moscow represent the extremes of the continuum. In Ankara, the public sector has performed the role of facilitating urban development that has been promoted by communities. Local communities are the lead collective body and lobby for, and influence, the use of state powers in support of urban development. In Moscow, where there has been no recent history of non-state collectives, the city government has been proactive in urban development, including intermediating between the capital market and individual households. A powerful interventionist mayor has exploited the creditworthiness of the city to continue public housing redevelopment programmes and other urban development projects at a time when these have declined in other parts of Russia. In contrast to either end of the continuum, public–private partnerships are seen by many as a way out of the impasse between public- or private-sector urban development and a way of constituting a political third way, in which the relative strengths of both sectors complement each other. Among the examples of urban and housing development that embody a partnership approach, land readjustment and pooling, guided land development, participatory development projects, and requests for proposals have been most widely adopted. The development of Ankara provides an interesting example of how the state can facilitate urban development without carrying it out itself. When Ankara was established as the national capital in 1923, it had a population of about 20,000. By 1969, this had increased to 1.2 million. Currently, the population is just over 3 million, a rate of growth as rapid as that of almost any major city. During this period of growth, local government resources were restricted to a levy on car parks, cinema tickets and other marginal sources, as well as grants from central government, which did not always materialize. This left no resources for direct intervention or subsidies. Master plans were routinely prepared, only to gather dust due to lack of resources to implement them. Yet, during the 1960s and 1970s, when immigration into the city was at its peak, it was possible for migrants to find a place to live and work within months, if not weeks. Housing supply kept pace with demand throughout this period. Housing standards within low-income settlements could be argued to be higher than in the increasingly densely developed middle-class neighbourhoods. How was this achievement possible? Under the Ottoman Land Law of 1858, unused or unclaimed land could be occupied and developed by anyone needing it. Practices known as imece (self-help) and salma (a local tax) evolved to enable isolated Anatolian villages to obtain essen-
156
Market Economy and Urban Change
tial infrastructure and social facilities. When villagers migrated to the city, they claimed and developed land and housing according to these traditional practices, often oblivious to the fact that they were acting in contravention of urban planning procedures. They settled in areas where they could find relatives or friends from their village and collaborated to build houses and obtain infrastructure. Since the municipality lacked funds to intervene directly, it evolved a form of ad hoc planning by which new settlements (gecekondus) were incorporated within the administrative boundaries of the city and received representation on the municipal council (Payne, 1982). Each ward (mahalle) lobbied for its priorities; for new settlements, this invariably involved demands for access roads and bus services. On receiving a request, the city sent a planner and surveyor to plot the best route. Rather than impose this on the community, the proposal was sent to the community for approval or modification. If there was no agreement, the road would not be approved and the planners and surveyors would move on to other areas. Objections tended to come from those residents whose houses lay in the path of the proposed road. The local community had to overcome the objections by offering alternative plots and to help in relocation in order to satisfy the wider community interest. Even when agreement was reached, the lack of funds meant that implementation could often only proceed if the residents contributed to the construction process by clearing routes and digging trenches. As the commercial value of even illegally occupied or subdivided land increased during the late 1970s and the 1980s, many residents sold their plots and houses to informal developers, who built apartment blocks for sale to middle-income households. The gecekondus were increasingly replaced by apartmentkondus, increasing land densities and values to the point where what were initially low-income households have often become more affluent than salaried professionals. Housing development and urban land development have become a means of economic expansion for the large proportion of settlers who came to the city as poor migrants. The process has enabled the supply of housing to match demand throughout a period of rapid growth and resource scarcity. Similar informal land development and housing processes operated in many other countries, such as Egypt (see Davidson, 1984, and Chapter 3 in this volume). Their increasing commercialization during the 1980s has made access to such benefits for later generations of low-income households harder to obtain (Payne, 1989). Throughout this process, local communities learned how to provide their own houses and develop their own settlements. Public goods, which all need but no individual can provide, were not delivered by the state but by communities. This is not unusual or unique. In other societies, different interest groups have formed clubs to provide public goods as diverse as lighthouses and lifeboats. The gecekondus of Ankara show that this approach can also be used in urban development to secure the infrastructure that enables communities to develop and individual landowners to exploit their property. In contrast to Ankara, Moscow shows how a powerful city government can intervene to secure urban development at a time when the state has come under
Between Command and Market Economies
157
pressure and has been largely obliged to withdraw from urban development (Grover et al, 2001). Although Moscow was founded over 850 years ago, the modern city is largely a product of the Soviet era. The population grew from 1.8 million in 1917 to 9 million in 1989. The growth was mainly accommodated in successive waves of blocks of high-rise flats. The quality of the blocks of flats varied considerably between different periods in terms of the materials used, construction methods and space standards. Those constructed during the late 1950s and 1960s were built to lower space and construction standards than those of earlier and more recent periods. They have often not been adequately maintained and are coming to the end of their planned lives. The problem faced by the city is how to replace these blocks with housing that meets modern space and construction standards. The issue is how to replace large numbers of dwellings simultaneously, rather than how to upgrade individual units. There is also the question of how to accommodate continuing migration from the less prosperous parts of the Russian Federation and former USSR. Although privatization has existed since 1992, the take-up rate has been relatively low, with just under half the dwellings in Moscow being privatized. While brick-built dwellings from the Stalin or Gorbachev eras are likely to be attractive to purchasers, the dilapidated concrete blocks, with their small flats, from the Khruschev period are not. Privatization has changed the pattern of ownership by breaking the state’s monopoly of housing provision. The institutional framework within which efficient private housing markets can flourish, though, has been slow to develop. A mortgage market has not emerged that would enable purchases to be funded from commercial sources. Proposed mortgage schemes by commercial banks were abandoned following the financial crisis of 1998. The number of mortgages granted has been small and confined to high-income groups. For example, the Russian Federation Savings Bank (SBERBANK) granted just 500 mortgages in 2000. There is a limited amount that owners of flats can do to improve their dwellings. Many aspects of flats are collective goods, including the structure, common areas and building services. Groups of owners have to come together to improve their environment by refurbishing or replacing obsolete blocks. The 1996 Law on Associations of Homeowners gave apartment owners the choice as to whether to manage the properties themselves or to leave this to the municipal authorities. Condominiums and associations of homeowners can be created and registered. Associations can set budgets, maintain common areas, undertake capital repairs, and collect charges and fees. Thus, a legal framework is in place by which groups of owners could manage and develop the collectively owned elements of their dwellings. However, by May 2000, there were just 395 registered bodies covering just 1 per cent of eligible blocks. This compares with the 11,200 associations, which existed in 1927 before private residential tenures and cooperatives were abolished. The reasons for this probably include the complex procedures needed to set up homeowners’ associations. If the municipality maintains a property, it assumes the risks of poor construction and past maintenance history. There may also be fears that subsidies from the municipality to homeowners, associations will
158
Market Economy and Urban Change
be halted in the future, to which the irregular payments of subsidies to homeowners’ associations lends credence. Until private collective bodies develop, the only effective collective body is the municipality. The property owned by the city and the relative buoyancy of its budget revenues mean that it is creditworthy even if its citizens individually find difficulty in raising finance. It is therefore in a position to intermediate between the international capital markets and the residents of the city. This has enabled the city to develop a building savings scheme with guaranteed credits, grants and access to mortgages for those in the municipal housing queue. In 2000, 16 blocks comprising 183,000 square metres were constructed under this scheme. It is also tackling the problem of obsolete apartment blocks at the end of their planned life by a mass housing programme known as the Wave. Blocks of 1950s and 1960s housing are demolished in sequence. By utilizing the areas between blocks, their replacements can be larger and incorporate higher space standards per person. In 2000, 0.5 million square metres of blocks were demolished and replaced by 1.7 million square metres. By contrast, in the Russian Federation as a whole, the role of the state housing development has declined so that, in 1998, it was responsible for only 12 per cent of the level of housing construction that it undertook in 1992. The volume of floor space as a whole, including that by the private sector, constructed in 1998 was 74 per cent of the 1992 level (Goskomstat, 1999). The land pooling/readjustment (LP/R) approach has been adopted in many parts of Asia, including Nepal, Japan, Korea and Thailand, and in Australia. It is designed to facilitate the consolidation of small land parcels under different owners for planned development. The essence of the approach is that, in peri-urban areas under pressure for urban development, the urban development authority may designate an area as suitable for an LP/R project. If a predetermined proportion of the affected landowners accept the proposal, a development plan is then prepared. Under land pooling, the landowners surrender their title deeds to the development agency once the scheme is approved and receive a receipt, which indicates the value of their parcel as a proportion of the total site area. Once the site has been developed, the development agency disposes of sufficient serviced plots to recover the costs of developing and servicing the area and returns the balance to the original owners in proportion to the value of their contribution. In land readjustment schemes, the same approach is followed, except that the original landowners retain their title deeds until the site is developed and then exchange them for titles relating to their new plots. The major advantage of LP/R for government agencies is that they do not have to undergo the time-consuming, expensive and often contentious process of land acquisition. Landowners become stakeholders in the development of their land and receive a better return than they could expect through piecemeal development. At the same time, households are able to acquire residential plots in developments, which provide best value for money. Since landowners receive smaller areas of land after development than they possessed before, the major attraction for them is that the value of their newly serviced plots is worth significantly more than their original holdings. This makes it difficult to meet the needs of low-
Between Command and Market Economies
159
income households other than through a trickle-down effect, but improves the efficiency of urban land development. Land consolidation and site assembly takes place without the need for compulsory purchase. This makes the approach suited to countries where the legal and valuation framework for compensation based on post-development market values is poorly developed. By providing landowners with an equity stake in the development, it avoids the up-front costs of compensation where site assembly takes place through compulsory purchase. The process of designation of areas overcomes the problem of lack of cooperation between landowners, which lies at the heart of the ‘prisoners’ dilemma’ problem. Another approach, which embodies a pragmatic approach to development, is that of guided land development. This has been applied particularly widely in Nepal and Pakistan. It consists of planning a development in collaboration with private developers and allowing the residents to design and manage the construction of their own dwellings. In this way, the land available is put to the most efficient use as the residents have control over the design and cost of their dwellings. The state’s objective of developing sustainable and affordable urban development for all income groups can be met. The Kudi ki Basti project in Hyderabad, Pakistan, is a good example of this approach (Ahmed, 2000), and, subsequently, has been adopted in other parts of the country with funding from the World Bank. In Nepal, the authorities even employed informal land developers in the guided land development scheme because of their considerable experience in knowing and meeting the needs of lower-income groups. Requests for proposals (RFPs) have much to commend them, especially in situations where local authorities have limited awareness of the potential costs and benefits of a particular development, or what options might be most appropriate for a particular site. They have been widely used in the transition countries of Eastern Europe and are currently being adopted in Lesotho. They are also used in countries such as the UK for town centre redevelopment and for the development of problematic sites. Under this approach, the local authority identifies a site that is suitable for development and prepares a brief. The brief stipulates the mandatory components that a development must fulfil, as well as a series of desirable optional features. Proposals for development based on the brief are invited from the private sector, landowners, non-governmental organizations (NGOs) or any combination of actors. The tender that meets all of the mandatory elements and offers the greatest value in additional features, which can include features proposed by the developer, wins the contract to develop the site. The main advantage of this approach for developers is that they know at the outset what conditions are required in order to obtain planning permission. They can then decide how many additional features they are able to provide in order to secure the tender, while making a reasonable profit. It also reduces uncertainty and costs since, once the proposals are submitted and compared, the successful bid can start quickly. The costs are principally those of preparing unsuccessful tenders. For development agencies, sites can be developed in conformity with social, economic and environmental policy objectives, without the need to acquire land or commit scarce public resources. For households, it provides a responsive form
160
Market Economy and Urban Change
of development because developers cannot sell units that cost more than people are able and willing to pay. In order to make RFPs work, development agencies must develop the capacity to assess the degree of leverage which they can exert over potential developers. By being too demanding, they will discourage potential developers from bidding. By not being demanding enough, they will lose the potential public benefits, which could have been extracted. Given that every site has unique opportunities and constraints, getting the balance right requires experience, which can only be gained from practice, while being soundly grounded in an understanding of valuation theory. RFPs have proved highly effective in stimulating the development of a local private sector where none existed before. They can also be effective in improving governance since proposals can be evaluated openly – for example, in meetings at which representatives of key stakeholders are present. Even in Cuba, one of the last remaining communist states, the authorities are considering new approaches. Increased emphasis on tourism as a source of hard currency has led to massive tourist developments. These have generated inward migration to nearby towns by people seeking employment. The need to stimulate planned housing supply under conditions of extreme resource scarcity has encouraged the government to explore alternative approaches, which place greater emphasis upon community participation in the preparation and development of residential areas. A pilot project has recently been proposed in Matanzas, near the tourist resort of Varadero, to encourage demand-led housing and urban development in the expectation that this can be adapted and replicated in other areas. Such locally based projects can provide a practical basis for repositioning the public sector within emerging land and housing markets. Of course, there is no guarantee that such linkages will occur, and there are numerous examples of pilot projects that have remained just that. However, by emphasizing the development of new relationships between all key stakeholders, confidence can be built in new ways of working, which can encourage responsive, pluralistic market systems. In all of these approaches, the state plays a key role in setting the regulatory framework. A major consideration in the application of any partnership approach is the relevance of the regulatory framework of planning and building regulations, standards and administrative procedures required by the public sector in approving a development. In this respect, a key consideration is the minimum requirements to which developments by, or for, poor households need to conform. Where requirements cannot be met, either because of costs or bureaucratic delay, households are forced into unauthorized types of housing. Establishing the terms and conditions, which determine access to the bottom rung of the legal housing ladder, is therefore a critical role for government action. For example, it is not much help requiring that roofs are designed for snow loads in countries where it never snows, or that roads are designed for heavy vehicular traffic where car ownership is virtually unknown. Yet, many countries retain regulations, standards and procedures that have been inherited or imported from the West and do not reflect local conditions. By imposing inappropriate frameworks, governments force households unable to conform into various unauthorized solutions, which could be prevented by the
Between Command and Market Economies
161
existence of a more appropriate regime. For example, by restricting the incremental development approach adopted throughout urban Egypt and imposing immediate conformity with official building regulations, the Ismailia demonstration projects were unable to serve the needs of low-income households as effectively as intended. Research is currently being conducted by Geoffrey Payne and Associates for the UK Department for International Development (DFID) into the ways in which regulatory frameworks can be made more responsive to local realities. The research, undertaken by teams in India, Lesotho, South Africa, Tanzania and Turkey, involves carrying out regulatory audits to assess which elements are the greatest constraints on affordable legal shelter.
CONCLUSIONS Governments throughout the world have been struggling to develop responses to macro-economic change that take full account of their social, cultural, economic and political realities. Within housing and urban development, such transformation has involved a move away from relying upon either the state or market to meet diverse needs, towards the evolution of more pragmatic, participatory approaches. Public-sector staff are having to learn the need to understand how land and housing markets work in order to use their limited powers more effectively in regulating and guiding them. Private-sector developers and investors have had to accept their social responsibilities towards less affluent groups and society, as a whole, if only to protect their commercial interests. The poor majority has demonstrated an ability to develop a wide range of rational and creative responses to the problems facing it. The way in which cities develop in the future will depend to a large degree upon the extent to which these challenges can be seen by politicians, professionals and other stakeholders as opportunities rather than threats to traditional approaches to urban development. The priority in many countries is to reassess options for addressing the needs of the poor within increasingly market-driven economies. This requires a reappraisal of the role of housing from a welfare burden on economic development to a more positive recognition of its role in stimulating capital formation through domestic savings and investment. Such recognition is not, of course, new. Turner (1976) advocated such an approach a quarter of a century ago. However, it remains valid in terms of current practice within many countries. This begs the question of why it has taken so long for those in positions of authority to accept this characteristic of housing. More pertinently, it raises the question as to why those of us advocating the economically productive role of housing have failed to persuade those in positions of authority of the merits of the case.
REFERENCES Ahmed, N (2000) ‘Public–private partnerships in Pakistan: Some examples’, in Payne, G (ed) Making Common Ground: Public-private Partnerships in Land for Housing, London, Intermediate Technology Publications
162
Market Economy and Urban Change
Anlian, S and Vanian, I (1997) ‘An overview of Armenia’s reforms: Housing and urban development policy, 1989–1997’, reprint dated April 1997, in Struyk, R (ed) (1996) Economic Restructuring of the Former Soviet Block: The Case of Housing, Washington, DC, Urban Institute Press Bertaud, A and Renaud, B (1997) ‘Socialist cities without land markets’, Journal of Urban Economics, vol 41, pp137–151 Davidson, F (1984) ‘Ismailia: Combined upgrading and sites and services projects in Egypt’, in Payne, G (ed) Low-income Housing in the Developing World: The Role of Sites and Services and Settlement Upgrading, Chichester, John Wiley and Sons de Soto, H (1989) The Other Path: The Invisible Revolution in the Third World, London, I B Taurus de Soto, H (2000) The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else, New York, Bantam Press Dewar, D (1999) ‘South Africa: Two case studies of partnerships in the provision of land for housing’, in Payne, G (ed) Making Common Ground: Public-private Partnerships in Land for Housing, London, Intermediate Technology Publications Ellerman, M (2000) The Social Costs and Consequences of the Transformation Process, United Nations Economic Commission for Europe Spring Seminar 2000 Papers, Geneva, UNECE Goskomstat, (1999) Russia in Figures: Concise Statistical Handbook, Moscow, State Committee of the Russian Federation on Statistics Grover, R, Polyansky, A I and Soloviev, M M (2001) The Development of the Moscow Housing Market, Oxford, RICS Cutting Edge Conference Mabogunje, A (1990) Perspective on Urban Land and Urban Management Policies in SubSaharan Africa, Africa Technical Infrastructure Department, Washington DC, The World Bank, mimeo National Commission for Statistics (1998) Romanian Statistical Yearbook 1998, Bucharest, National Commission for Statistics Payne, G (1982) ‘Self-help housing: A critique of the Gecekondus of Ankara’, in Ward, P (ed) Self-help Housing: A Critique, London, Mansell Payne, G (1989) Informal Housing and Land Subdivisions in Third World Cities: A Review, Oxford, Oxford Brookes University, CENDEP for ODA Payne, G (ed) (2000) Making Common Ground: Public-private Partnerships in Land for Housing, London, Intermediate Technology Publications Romania (2000) ‘Country note: Romania’, Workshop on Housing Finance in Transitional Economies, Paris, 19–20 June, Paris, Organisation for Economic Co-operation and Development Rothenberg, J (1969) Economic Evaluation Urban Renewal: Conceptual Foundations of Cost-Benefit Analysis, Washington, DC, Brookings Institution Turner, J F C (1976) Housing by People, London, Marion Boyars Yasui, T (2000) ‘Housing finance in transitional economies overview’, Workshop on Housing Finance in Transitional Economies, Paris, 19–20 June, Paris, Organisation for Economic Co-operation and Development
Chapter 7
Urban Land Tenure in Brazil: From Centralized State to Market Processes of Housing Land Delivery
Flávio de Souza and Roger Zetter
INTRODUCTION Housing policy has always played a central role in the political agenda of successive governments in Brazil. For this reason, the sector provides a valuable barometer, not only of the changing political economy of the country, but also of the link between national priorities and the wider framework of international development trends. Within this context, this chapter examines recent shifts in Brazilian housing policy and provision evident in the transformation from welfare to market paradigms of development. It presents evidence illustrating how the state’s current market-oriented processes and policies (perhaps by neglect, as much as by explicit policy design) essentially endorse or accede to a market-driven process of land delivery, which results not in decreased inequality, but rather in continued insecurity and marginalization for the urban poor. The argument presented here is that the state has failed to promote policies and mechanisms to tackle the growing inequality of income distribution – insofar as this is represented in the housing market. Indeed, the huge differentials between the poorest and the richest members of society are likely to worsen as the state increasingly assumes a peripheral position. Simultaneously, market-led provision of housing land seems equally incapable of tackling the growing social inequalities of the country. This argument is developed through the case study of land tenure security programmes for the urban poor in Recife, Brazil. Some of the principal attempts to develop new
164
Market Economy and Urban Change
instruments designed to tackle poverty and inequality in the housing market will be critiqued. First, a short contextual overview highlights the contrasting modes of urbansector policy-making and intervention in Brazil during the contemporary period. The next two sections then review in more detail how recent Brazilian governments have intervened in urban policies – especially housing. The aim here is to provide an insight into the main characteristics and consequences of public policies from a period of centralized state intervention to an era of market enablement. The second of these sections focuses on the changes in housing policy brought about by the neo-liberal development paradigm in Brazil. These changes are presented in the context of the reopening of democracy, followed by a period that we term the consolidation of market mechanisms with respect to tenure issues. The fourth part of the chapter turns to a specific and important set of policy initiatives adopted in cities such as Recife, designed to enhance housing options for the urban poor through the establishment of Social Interest Development Zones (Zonas Especiais de Interesse Social, or ZEIS). Given the widespread phenomenon of land invasion as the main dynamic of Brazil’s urbanization process, the ZEIS programme was designed to serve the dual purpose of promoting land tenure security through the legalization of illegal settlements and upgrading the living conditions of existing informal settlements. By shifting from direct intervention to community-based initiatives in line with the reduction of state intervention, the goal of ZEIS was to secure tenure for residents through partial governmental control of the housing market in these circumscribed areas of the cities. The analysis questions the effectiveness of these initiatives.
FROM WELFARE TO MARKET: AN OVERVIEW OF BRAZIL Since its inception during the 19th century, the modern state of Brazil has evolved in shape and function, acting to greater and lesser degrees as a regulator of social and economic life. Through its history, the state has played an important role in directing national economic politics through the mediation of internal and external relations and through the promotion of social programmes. More explicitly, welfare and social policies such as social housing programmes in Brazil, as in most developing countries, have always played an ambivalent role in the country’s development. In the case of Brazil, welfare policies were not instituted as the complementary supporting apparatus of the market economy – the case in many parts of the world and, for example, a particular feature of European experience. The ‘welfare state’, at least in developing countries such as Brazil, has had a rather different history. First, it developed not as an antidote to the free market but as an instrument of the military dictatorship with specific ends in that era. Second, welfare policies were inevitably never going to play a supporting role to strengthen the market economy, simply because the Brazilian economy was never powerful enough in its own right. Third, the delivery of welfare-oriented urban and housing policies requires strong local administrations. But Brazilian municipalities
Urban Land Tenure in Brazil 165
have always been very weak and unable to tackle a social policy agenda for many reasons, including their incapacity to collect revenues that could facilitate more socially equitable urban and housing policies. In most cases, the municipalities still rely on the federal transfer of funds. The potential to develop a local social policy agenda now exists, given the strengthened capabilities which the new institutional reforms of decentralization make possible. Yet, despite nearly two decades of postmilitary democratization, just as this window of opportunity opens, the policy agenda at both national and municipal levels has shifted sharply towards market enablement. In the contemporary period, and against this perhaps unique background, state intervention in Brazil has been called into question for various reasons. Thus, a notable era of centralized state intervention under the military regime of 1964– 1985 has been strongly criticized. It has been argued that welfare policies developed and implemented during that period did not directly target the poor who needed them the most, but rather aimed to promote mass housing construction as a means of supporting the interests of the prevailing elite. Most housing programmes for the poor led to the commodification of their homes, thus opening the housing arena to downward raiding by middle-income groups. With the downfall of the military regime in 1979 and the subsequent democratic transition period that lasted until 1986, the paradigm of centralized state intervention collapsed and decentralization started to be strongly advocated. It was in this new democratic climate that the foundations for market mechanisms were securely established. Thus, the state’s command of development processes has shifted from one of heavy market control to a more laissez-faire approach in which it assumes a peripheral or semi-peripheral role in a predominantly deregulated market system. More generally, through the lens of globalization, the state has been instrumental in reformulating its structure, roles and responsibilities in order for it to function effectively in the new global economic order. In order to achieve this new configuration, Brazil, like many other countries, has reformed its institutional structures and policies from the very localized level through to the national level. At each of these levels the common, current demand for public intervention is that it adheres to a number of fundamental attributes, which are, among other things, efficiency, flexibility and good governance – in other words, the backbone of the market enablement agenda. In the field of housing for the poor – the focus of this chapter – new mechanisms to deliver housing and services have been set up. But, as we shall see, their success is questionable.
HOUSING: FROM CENTRALIZED STATE INTERVENTION TO MARKET SUPPLY In Brazil, as in most Latin American countries, ‘welfare state’ policies were implemented during the military regime (1964–1985). Before this period, housing land provision was undertaken predominantly through the market, with limited state
166
Market Economy and Urban Change
intervention. Since markets were not providing housing land at affordable prices, the poor only gained access to urban land through illegal or informal initiatives, such as land invasions, plot subdivisions and so forth – a pattern again typical of much of Latin America. Welfare state policies purportedly sought to change that by controlling the land allocation processes from above. Statistically, the most successful attempt to provide housing in Brazil was, indeed, during the military regime through the promotion of mass housing production. The National Housing Bank (BNH) was created in 1964 with the initial goal to meet a national housing deficit estimated at 8 million units, while redistributing welfare to the families with the scarcest resources and evening out income inequalities (Portes, 1979; Shidlo, 1990a). In total, the BNH produced some 2.5 million housing units over 20 years (Andrade and Azevedo, 1982; Valladares, 1988; Klak, 1990). The principal functions of the BNH were: to orient, direct and supervise the Federal Housing Bank (Sistema Finaceiro da Habitação, or SFH) and the Federal Savings Associations (Caixas Economicas Federais); to initiate the establishment of savings and their allocation to the SFH; and to regulate housing credit agencies in the national capital market. In this way the BNH hoped to promote ‘the construction and acquisition of houses, especially for low-income groups’ (Batley, 1983, p59). The BNH organized a housing construction programme in the ‘social’ arena,1 and at the same time was charged with the task of stimulating employment among unskilled and semi-skilled urban workers. The BNH strove to create opportunities for productive employment while alleviating regional and sectoral economic inequalities (Portes, 1979; Shidlo, 1990a). However, these policies did not actually target the poor, but instead promoted mass housing construction as a means of advancing the interests of the prevailing elite. This happened in two ways. First, because the BNH was required to act as a private enterprise, it invariably satisfied less risky higher-income groups rather than the poor (Melo, 1989; Klak, 1990; Sachs, 1990; Shidlo, 1990a). The poor were provided with barely sufficient shelter, healthcare and services (Alves, 1992). Second, since the middle classes found the idea of home ownership very attractive, ‘this became a central policy of the post-1964 regime in a sense of widening the support and legitimacy’ of the regime in the eyes of the public (Shidlo, 1990a, p36). As such, the BNH, although conceived initially as an instrument for providing low-income housing, became part of a political process whereby the new government could demonstrate tangible results in relation to housing problems (Bolaffi, 1975; Batley, 1983). Of course, the military regime recognized that many kinds of investment were needed in providing state housing for the urban middle classes who supported them (Shidlo, 1990a). But the creation of a federal housing system was the principle means by which the government institutionalized and co-opted middle-class support. The BNH’s funding came from two equal sources: one was statutory, the other voluntary. The former, created in 1966, was the Guaranteed Employment Fund (FGTS): a compulsory savings scheme with an 8 per cent levy on wages to mobilize funds for the provision of low-income housing provided by the BNH.
Urban Land Tenure in Brazil 167
The second source of finance was through voluntary savings from the sale of housing bonds and from savings deposits in passbook accounts within the savings and loans system (Arretche, 1990). The BNH created a specific financing agency for each of the two segments of the housing market: the ‘popular market’, and the ‘economic market’. The ‘popular market’ was initially limited to low-income sectors where family income was less than or equal to three minimum monthly salaries. This range was later broadened to five minimum monthly salaries: ‘Up to 1975, two-thirds of the BNH’s social interest budget was allocated to families with an income range of one to five minimum salaries’ (Shidlo, 1990a, p42). However, the BNH changed direction and more housing was produced to satisfy the demand from higher-income groups. The inadequacy of the BNH housing policy in targeting the poor was illustrated by the fact that only 15 per cent of the Brazilian population could afford BNH houses. The profit margins for private construction companies, and the high demand for housing by the middle class – as well as their greater ability to pay – redirected the BNH away from the provision of housing programmes for the poor (Maricato, 1987). Furthermore, a substantial amount of BNH funds was unofficially invested directly in industrial projects, such as the Itapú Treaty, the Tucuruí hydroelectric station, the Açominas steel mill, new metro systems in Rio de Janeiro and São Paulo, and the Carajás iron mining project (Alves, 1992; Shidlo, 1990a). These latter, largely ‘unofficial’, centralized investments in the domestic capital formation of the country were a remarkable overstepping of the wider remit of BNH, identified above, which was to stimulate development and employment. But these activities came to dominate the role of BNH to the detriment of its mainstream housing responsibilities. Nevertheless, they helped to create the foundations and infrastructure for the development of Brazil: this formed the continuing basis for attracting foreign investment after the period of direct state intervention had ceased and, in turn, stimulated further development, employment and consumption. At the same time, the military government promoted housing production as a way of activating other development opportunities and markets. Housing was a leading sector that increased demand and consumption of consumer durables, goods and services – for example, the demand for public and private transportation to service the public housing estates located in the urban periphery. Moreover, the peripheral location of these public housing schemes in the subúrbios was also the predominant location for most of the new industries. But these industries demanded a more qualified labour force – not the urban poor. Thus, the combined effect of the state housing policies and the industrial location strategies was to consolidate middle-class interests while excluding the urban poor from access to both housing and the expanding urban economy. Even if the housing had been affordable, the dislocation between housing and employment centres for the poor would have imposed additional and unaffordable transport costs on the poor. The multiplier impact of these new housing estates and the industrial development policies was considerable. But the social and community aspects of the country’s housing need were barely tackled.
168
Market Economy and Urban Change
The BNH faced a financial crisis during the early 1980s (de Melo, 1989; Shidlo, 1990b), which resulted in a reform of the housing finance system engineered by the World Bank. Although the World Bank had financed the construction of low-income housing units in Pernambuco, Bahia and São Paulo during the late 1970s (Shidlo, 1990a), it had tried, unsuccessfully, to intervene more centrally in the housing policy of the BNH during the 1970s. Once the financial situation of the BNH had deteriorated so severely, the World Bank was able, finally, to assume a more central role (de Melo and de Moura, 1989; World Bank, 1989). Decentralization was a clear objective of the World Bank’s strategies, as was the implementation of a structural adjustment programme after 1982 (de Melo and de Moura, 1989). State and municipal housing societies started to look for funding from international agencies such as the World Bank and the Inter-American Development Bank (IADB). The growing housing deficit in the low-income market, coupled with the absolute growth of the urban population, compelled the BNH in 1983, once again, to reconsider the need to develop housing provision policies for the poor – its original objective in 1964 (FINEP–GAP, 1983). But within three years the BNH closed during another period of economic crisis. ‘Until 1982, the BNH expanded its activities in housing, sanitation and urban development. From 1982 onwards the Brazilian Housing Bank entered a period of severe cuts in its investment programmes as a result of the economic recession’ (Shidlo, 1990a, p43). Most of the BNH’s activities were transferred to the Federal Saving Bank (CEF) in December 1986. The CEF became responsible for increasing ‘the rate of public investment in the so-called “social-interest” housing programmes’ (Shidlo, 1990b, p69). In retrospect, it is possible to argue that state intervention during this period in Brazil continued to serve the prevailing interests of higher-income groups and the elite. In short, democratic norms were not the strong points of the urban agenda in Brazil during the period of the military regime, which was more renowned for its clientelist and elite-driven characteristics. This situation is evident in two respects in the current context. On the one hand, bureaucratic politicking and corruption were employed by officials to support themselves within the existing power structure. On the other hand, by predominantly benefiting those who supported the authoritarian regimes, the controlled supply of housing, among other public goods, provided a powerful vehicle for co-option. Tackling welfare needs, therefore, was not necessarily the main objective in the provision of housing for the poor during this period. Indeed, only those households lucky enough to afford the housing provided by BNH could gain access to some form of official housing, further reinforcing the process of co-option. Thus, in housing as in other sectors of state intervention, markedly contradictory outcomes were apparent. The official state discourse that extolled the promotion of welfare for the majority differed greatly from the actual policies being implemented, which signally failed to facilitate redistributive objectives. Access to formal-sector and state housing remained limited to those who had the ‘freedom of choice’ of when and where to move house, conferred by affordability. Furthermore, it can be argued that centralization helped to maintain existing power
Urban Land Tenure in Brazil 169
structures and, more importantly, that those same structures were used to consolidate private capital in Brazil, both in political and economic terms. That a centralized state with welfare-oriented programmes should, in effect, consolidate the private sector is a paradoxical outcome not confined to Brazil alone. Nevertheless, it does beg the question as to what might be different under a more avowedly market-oriented development policy, such as the neo-liberal economic paradigm. We return to this question later. The incapacity of the housing system to service the poor in Brazil was not only related to the inefficiency of state housing provision but also to the state’s failure to regard the informal housing sector as a productive element of the economy. Housing policies throughout this period neglected the productive potential of informal-sector housing supply, which, in turn, could not complement the formal housing market, either in the public or private arenas. To the extent that housing policies addressed the informal sector at all, then the government’s housing programmes were primarily designed as a means of replacing existing favelas (squatter settlements), and suppressing the further proliferation of these purportedly unacceptable developments in most major urban centres. After 1985, with the return of a civilian government and the collapse of the centralized housing system, an era of renewed democratization and decentralization began (Souza, 2000). But this period also saw the institutionalization of much more avowedly market-oriented government policies that, although in different ways, have similarly impacted negatively upon low-income urban dwellers. Most bodies responsible for low-income urban housing programmes in Brazil have, especially during the current period, prioritized cost-cutting, risk reduction and cost recovery over the empowerment of the poor (by way, for example, of providing incentives to the informal sector). Squatter settlements continue to expand in most large urban centres in Brazil, and yet the progressive withdrawal of the state has induced a growing deficiency of formal housing alternatives for low-income households. Self-help housing outside the private market seems to be the most effective way in which the poor can keep pace with the demand for housing. Most of the time, however, these informal housing networks are illegal, and the poor face the constant threat of eviction associated with the lack of tenure security. Formal housing providers and financiers, including private developers and financing agencies, wield significant power in housing programmes and receive profitable benefits. However, the high price and prolonged delay of public housing supply, as well as the small plot size and poor quality of building materials (which, ironically, are often more expensive than materials available on the open market), have induced some urban dwellers to enter mutirão (self-help housing programmes). Thus, the mutirante (participant of self-help programmes) obtains a house through participatory programmes in which he or she works, not out of choice but out of sheer necessity. Both municipal and central governments have initiated programmes in which favelados (squatters) are resettled from vulnerable topographies to new, distant suburban areas in the name of ‘health improvements’. These new settlements, however, are often costly to live in and far from local job opportunities and key
170
Market Economy and Urban Change
services. As such, the resettlement solution merely replaces one set of problems with another, such as the crippling impact that high monthly housing payments have on a household’s livelihood strategy, and an often sharp increase in household transportation costs. Some of these new areas are considered by the government to be temporary, but many become permanent. In response to these issues, some of the favelados return to the area of residence from where they had been evicted. These locations are often free to live in and are close to employment opportunities. Although this practice predominated during the military regime, it is still a significant element in the dynamics of Brazil’s process of urbanization. The Brazilian authorities have tolerated the increasing practice of illegal land development, arguably for electoral reasons and, pragmatically, because illegal land development is, in the end, a housing solution that requires little investment from the state. Accompanying the process of market enablement and in response to fiscal crises (Melo, 1990), there has been the inevitable process of decentralizing power from central government to local authorities. Brazil has followed this worldwide imperative (Castro, 1991). But an immediate consequence in Brazil seems to have been the swelling of poverty levels as state welfare recedes, compounded by the increasing unemployment caused by market enablement policies. The argument that decentralization might risk increasing social exclusion in municipalities more preoccupied with funding and resources than with public well-being is powerfully made in Brazil, as elsewhere (Melo, 1996). Moreover, the transition from a period of authoritarian government to an era of freedom and choice appears to be a highly uncertain time for both governments and civil society while new power structures establish themselves. These outcomes further impact upon housing policies and programmes, especially options for the urban poor. On the issue of decentralization and democratization, tensions emerge between new elected municipalities and regional and central levels. For example, efforts to promote democratic rule in municipalities can be found across Brazil (Recife, Porto Alegre, Fortleza, Belo Horizonte and others);2 but in regional and central government the stigma of the military regime, in which social policies practised unequal distribution and lacked a tradition of public participation, remains. Accordingly, while organized civil society is now constitutionally enabled to participate in the design and implementation of urban policies, in practice civic involvement can still be manipulated and co-opted by the ruling elites, as during the past, and the urban poor are marginalized. More specifically, with regard to housing, the shift from a purportedly welfare approach to a market supply system in Brazil has intensified competition that the urban poor confront in the marketplace. By neglect or an explicit policy agenda, low-income urban housing has become scarcer, while disputes about the available housing stock have become more and more complex and entrenched. Withdrawal of the state has enlarged the arena for imperfect, highly competitive markets. In an attempt to safeguard access to housing for the poor, some municipalities in Brazil have introduced housing policies that radically contrast with earlier interventions, although they do mirror approaches to slum upgrading programmes
Urban Land Tenure in Brazil 171
used elsewhere, but with some particular points of distinction. These more recent trends are now discussed.
TRANSITION IN URBAN HOUSING LAND POLICIES IN BRAZIL A consistent theme of the discussion so far has been the contradictory outcomes of the ostensibly social and welfare rationale of Brazil’s urban housing and land policies. We have seen how rhetoric and reality diverged and how the purportedly welfare objectives of the military regime, in fact, consolidated its middle-class power base. To this extent, the more recent shift to a market-led paradigm that commenced towards the end of the military government during the mid 1980s merely makes transparent what was the reality of the preceding two decades – that the poor were marginalized from state housing policies designed for their needs. This section explores the transition phase in more detail, showing how state instruments and policies to regulate and manage urban housing land for the poor have been influenced by the shift to the neo-liberal development paradigm. In the context of the economic recession of the 1980s, and the consolidation of neo-liberalism worldwide, the Brazilian state’s withdrawal from housing policy is not so much an explicit policy shift as an enforced outcome. The closure of the BNH in 1985 represented not just the withdrawal of the Brazilian government from housing policy at the federal level; it also left state and municipal housing agencies obsolete. Following the new Brazilian constitution of 1988, municipalities were empowered to set up policies to solve tenure disputes and to ameliorate some housing conditions in existing settlements. But no longer did they have an active role in construction, apart from individual initiatives in Porto Alegre, São Paulo, Belo Horizonte, Rio de Janeiro, Salvador, Recife, Fortaleza, and a few other cities in Brazil. These experiences have had very little impact upon social housing needs, as a whole. Even given that incremental changes in social housing are now considered to be a more appropriate form of intervention than the mass housing construction projects of the past, these incremental changes are still localized and have not yet altered the social construction of land rights reform. During the early 1990s, at a central government level, deregulation policies and clearly stated pro-market approaches became dominant features of Brazil’s political economy. The federal government announced, and for the first time rapidly implemented, political and economic reform measures. In a two-year period, from 1990 to 1992, a remarkable process of market empowerment took place in Brazil (Valenca, 1999b). Social reforms were linked to the ability of markets to deliver services. But the emphasis on public interests was rarely strong. Thus, in the housing sector, the focus of this chapter, finance reforms and unregulated interest levels favoured mortgage-lender groups (Valenca, 1999a). These changes negatively affected the mortgage holders’ ability to pay for their monthly instalments, since their total debt increased more than the market value of their property.
172
Market Economy and Urban Change
Many people lost their properties through repossession because of their inability to repay debts that increased extremely steeply. Even a decade later, many mortgage holders still face civil action to repossess their houses as a legacy of this drive to market enablement. In addition, the role of the SFH (the Federal Housing Bank) was drastically reduced in a number of ways, which have favoured the private housing markets since social housing was meant to become a profitable business as well. Until the mid 1990s, the social housing sector was still in a chaotic condition; but after the election of President Fernando Henrique Cardoso and the stabilization of the Brazilian economy, expectations were high that social housing policies could once again be social. In contrast, however, during both periods of his presidency (1995–1998 and 1999–2002), little noticeable or lasting effect on the social housing sector can be discerned. For example, there is little evidence of improving access to credit, building materials supply, land delivery, or more proactive policies to support low-income group initiatives to ameliorate their housing conditions, either in the case of existing housing settlements or in new development sites. Social policies existed; but their focus was public health and education, not the urban housing sector. Where positive experiences existed in the housing sector, these have been spread over the few municipalities that have adopted individual initiatives based on a willingness to tackle social housing needs; they have not been part of a systematic national policy. A potentially significant reform in the context of this chapter was the 2001 federal law known as Statute of the City – Law 1-251/01 (Estatuto da Cidade – Lei 10257/01), which has been regulated by Medida Provisoria No 2220/01 (MP 2220/01). This mandates all municipalities over 20,000 inhabitants to (among other things) review their master plans and incorporate ZEIS areas by the year 2005. These are programmes to upgrade low-income informal settlements and are discussed below in ‘Alternative land delivery systems in Recife: A critique’. This reform will certainly impact upon land markets for low-income dwellers in Brazil in potentially crucial ways, although it is still early for predictions to be made. But particular attention should be paid to the outcomes of this reform and the impacts in housing land markets. An important qualification is that ZEIS declaration alone is unlikely to make a dramatic difference. Other changes are necessary to activate markets and stimulate loan applications in this housing sector, as explained above. At present, three main housing programmes for the social housing sector remain: Programa de Arrendamento Residencial, or PAR (Housing Lease Programme), Law 10.188/01 enacted in 2001 promoted by the CEF; Programa Morar Melhor, enacted by the federal government in 2001; and Programa Habitar-Brasil BID (promoted by the IADB and the federal government in 1997). PAR is a loan programme that developers can apply for, provided that the total cost of housing units is set at a fixed price (approximately 22,000 Brazilian Reals – equivalent to US$7000). Residents apply for a lease contract for 20 years, and provided that all monthly payments are paid without interruption, the housing unit can be transferred to the leaseholder. This programme has had some impact in the marketplace since it has attracted some developers to construct in this
Urban Land Tenure in Brazil 173
sector; but little is known about the impact of the programme on public policies to address the mass of low-income group housing needs at municipal level. Programa Morar Melhor aims at promoting urban development for the regions of highest poverty concentration (complementary to the poverty alleviation paradigm elsewhere). The main goal is to broaden access to sanitation and to improve the living conditions of the poorest urban inhabitants in Brazil. However, again, there is little evidence of its impacts to date. Programa Habitar-Brasil BID is a programme for municipalities to apply for loans (with the federal government as guarantor) to legalize land tenure in illegal settlements, while at the same time upgrading the physical housing conditions – rather similarly to ZEIS instruments discussed below. In contrast with PAR, this programme is promoted by a multilateral agency (and not by the federal government through the CEF). While, in theory, the impact of Programa Habitar-Brasil BID could be claimed to be an influential policy reform addressing social needs, in practice most municipalities struggle to access the finance, having to demonstrate the familiar market enablement agenda of efficiency, efficacy and managerial capacity to deal with the growing housing deficit of low-income groups. With the election of President Lula da Silva, who took power in January 2003, another shift in social policies can be seen. This is towards the promotion of poverty alleviation (for example, Fome Zero), consistent with the new rhetoric of market enablement, but in this case almost totally dissociated from housing policies at the present time. The presence of the Partido dos Trabalhadores (PT) (Workers’ Party) in federal government has certainly provided legitimacy for further democratization at this level. However, it is premature to offer an evaluation of the impacts on the social policy arena.
ALTERNATIVE LAND DELIVERY SYSTEMS IN RECIFE: A CRITIQUE Over the last four decades, and against the backcloth of an enduringly precarious economy, misappropriated policies and weak institutional capacity, the impact of government intervention in housing supply for Brazil’s urban poor housing presents an essentially pessimistic picture – regardless of the contrasting ideologies of the different governments. Fuelled by a process of rapid urbanization (Brazil’s urban population increased from 45 per cent in 1960 to over 80 per cent in 2000), and the outcome of inadequate public policies and failed market supply mechanisms to deliver sufficient housing, the critical feature of Brazil’s housing production process for low-income dwellers has been informal urban settlement. It is almost impossible to calculate the number of invasions in Brazil over recent decades, due to the lack of available data. Characteristically, there are hundreds in each of Brazil’s large cities and they exist in smaller cities, too, almost certainly in proportion to the overall scale of urban growth. It is estimated that there are over 600 squatter settlements in Recife alone. Since most cities have quite tight administrative boundaries, the number of invasions is inevitably decreasing
174
Market Economy and Urban Change
within cities – since the stock of un-invaded or undeveloped land is declining – while the process of new invasions of informal settlements has been transferred to the peripheral municipalities where land is still available. By default, this is the predominant urban housing supply system of Brazil – as in much of the developing world. Accordingly, the implications of this process of informal settlements have always figured centrally in government policy-making. The key factor here, given the enormous scale of the process and the failure of public- and private-sector formal-sector housing delivery systems, is the different degrees of legitimacy that these settlements are afforded in the eyes of the authorities, and the different levels of consolidation that exist within them. The essential policy instrument in this respect is the ZEIS declaration, which is provided for in many of these settlements.3 It could be argued that the ZEIS process as a form of social policy or ‘semi-welfare’ intervention is aimed at resource redistribution – although it is reactive in nature in the sense that successive governments in Brazil have come to accept the need to afford minimum protection to the mass of the urban poor in an otherwise failed housing supply model. From this perspective, the use of the ZEIS instruments merits special attention in the context of Brazil, and the case of Recife is used to explore the impacts and implications. In Recife, the ZEIS zones form part of a programme in which the municipality of Recife aims at urbanizing invaded land (through the implementation of slum-upgrading programmes and regularizing land tenure) in an attempt to integrate such settlements within the urban grid (Law 16113/95). Evidence from other developing countries (for example, Zambia and Botswana) confirms that where some form of land tenure recognition is provided, such as through ZEIS, a level of tenure security is created that enables informal settlers to consolidate their housing. The PREZEIS law (Plano de Regularização das ZEIS – ZEIS Regularization Plan) of 1987 (updated in 1995 and again in 1997) has provided the legal framework for regulating disputed settlements since its ratification. However, there is contradictory evidence on the outcomes in Recife. Against expectations, perceptions that tenure security has been strengthened as a result of the ZEIS declaration appear to conflict with the actual outcome. The extent to which this recognition affects people’s perception of their land tenure security is more fully explored in de Souza (1998). But, briefly, the explanation for this muted outcome is as follows. Once an area is designated a ZEIS, the ownership of the land does not automatically change (as in some other countries where provisional rights are created), nor, more significantly, do the households’ perceptions of land tenure security increase. The efficacy of the transfer of property rights from landowners to possessors (illegal occupants of land) since 1987 has been less successful than the general public expected since the process of reconfiguring land tenure becomes highly contested. Despite the legal provisions, it is subject to endless disputes in court so that the illegal occupiers of land still face the possibility of eviction (see, for example, de Souza, 1998, 1999a, 1999b). The inelastic supply of urban land has contributed to the increase of land disputes among households in search of a house, and has sent the value of the remaining land stock soaring as a market commodity. Much
Urban Land Tenure in Brazil 175
of the time this leads to violent clashes not only between landowner and invader, but also between invaders themselves (de Souza, 1998). Nonetheless, the ZEIS programme has still been actively promoted in Recife. This is not so much from the viewpoint of enhancing land tenure security – which is not the case, in practice – but as a mechanism to reduce the risk of eviction from housing (as opposed to land), which provides another form of public recognition of illegal settlers’ rights. These objectives are buttressed by the implementation of upgrading projects to improve physical conditions of the settlements. Thus, the ZEIS mechanism has been more attractive for households, as opposed to those actually claiming a right of occupancy on the land, since improvements take place irrespective of the realization of land legalization. The provision of services and other housing resources has caught the attention of other communities wishing to apply for ZEIS status. At present, declaration of a ZEIS in Recife is the only available mechanism for the legalization of land tenure at the municipal level. In this respect, it appears that the process of recognizing minimal occupancy rights for illegal settlers functions as the only social intervention in housing supply systems in the absence of other more substantive welfare state programmes in Brazil. Even so, the intervention is severely constrained since, in practice, even though public recognition of squatters’ rights under a ZEIS declaration is evidence that the municipality is willing to make these settlements eligible for legalisation, the final guarantee of those rights has to be determined in court. Declaration of ZEIS areas is thus the initial turning point in this process; but the municipality lacks both the overall power to manage and coordinate the policy instruments and the final authority to make the declaration legally binding. Although the use of the ZEIS instrument has helped to resolve land tenure disputes and to channel resources into upgrading programmes in Recife, the impacts have served to produce both arbitrary and, possibly unintended, structural consequences. This is because the instruments used by ZEIS to legalize land tenure by individual title deeds (on private land) and lease contracts (on public land) have, in effect, become one of the main pillars of instituting formal market mechanisms in squatter settlements. Until recently, the existence of informal housing markets has enabled the poor to compete and sustain, to a degree, their stake in the housing process. However, by deploying the ZEIS programmes, the state has paradoxically played a very strong role in activating housing land markets since the ZEIS declaration commences a process of transition from informal to formal housing market processes. This has begun to attract the better-off to these areas and, in turn, starts the arbitrary process of forcing out the very poorest residents who lack the means to compete in these newly installed markets. Legalization for some thus aggravates the issues of tenure insecurity for others. A key point to emphasize here is that state intervention has played a very important role in changing people’s attitudes towards the desirability of legalizing land titles as the main response to tenure security. Some detailed examples will help to illustrate the nature of these contradictory processes.
176
Market Economy and Urban Change
A land invasion took place in Recife in January 1991 and the resulting settlement was named Iraque by invaders.4 The legal landowner claimed repossession of his land immediately after the invasion took place to avoid the loss of any compensatory payments under provisions of usucapião especial urbano (adverse tenure rights).5 Therefore, facing the prospects of eviction, Iraque was rapidly occupied and the municipality of Recife declared Iraque a ZEIS. This inevitably raised the invaders’ expectations of land legalization. But no permanent services have been provided for households (only household waste has been collected), nor has any legalization taken place. Since tenure disputes are time consuming, residents still live in the area. But after such a protracted dispute and de facto permanent settlement, the resolution of the issue is now largely a matter of defining a price for the land so that either the municipality or the state reimburses the landlord to avoid mass eviction of households. The ultimate outcome will, in all probability, protect the invaders, but at the price of commodifying the land. The example of Entra Apulso – another ZEIS originating from land invasion during the 1960s – illustrates the converse situation where ZEIS declaration fails to protect land invaders from removal as a result of formal-sector land market development pressures. The land market is very active in the area since there has been a growing demand for the construction of middle-income apartment blocks locally, and development of this kind is already featuring in Entra Apulso. Moreover, a number of invader households have been compensated for the loss of their properties caused by the expansion of one of the largest shopping centres in Latin America (Shopping Centre Recife, or SCR). Thus, householders now admit the inevitability of their removal as a result of these market pressures from formalsector demands, despite the fact that the area has been declared a ZEIS, services have been provided and the municipality has claimed that legalization of land is in the final stage of consolidation and permanency (de Souza, 1998). At present, though, clear titles have not been finally provided, and the massive presence of SCR continually threatens residents with the prospects of removal. This example illustrates how ZEIS designation fails to provide permanent protection against the operation of formal land markets. The third example illustrates how, in typical conditions, public intervention does little to protect low-income urban land invaders from the inherent vulnerability of their situation. The threat of, or actual, eviction and the emergence of land markets that are just as active as in the formal sector are continuing features of their precarious foothold in the city. Sitio Grande was privately owned land when a peaceful land occupation took place during the late 1940s. However, it was only after the main land invasion took place in 1988 that the then landowner went to court to repossess his land, winning the legal dispute in 1993. Some houses were demolished, politicians and residents clashed with the police, and some politicians advocating on behalf of the residents were arrested. The dispute became highly politicized after these violent events, and the state felt forced to assure residents of their tenure security. The state housing company COHAB-PE acquired the land with the intention to provide clear titles for residents.
Urban Land Tenure in Brazil 177
At present, no land titles have been issued, and the state authority is unsure about the kinds of land tenure that the residents will gain. Physical disputes still occur in Sitio Grande ten years after state acquisition of land, and many residents have sold their properties or have been evicted by force, sometimes because of the violent conditions of life within the settlement and disputes between neighbours. Without the legalization of land tenure, there are no means of halting tenure disputes or providing dispute resolution. Internal markets have been operating, without state intervention, in similar ways as the private markets. Thus, despite the framework of public powers to protect low-income urban dwellers, a market-driven land delivery process reinforces conditions of inequality, marginalization and insecurity. Some of these structural contradictions are considered in more detail below. The fact remains, though, that even at a procedural level, the effectiveness of this land policy in clarifying and delivering land titles for the residents of ZEIS is, as we have seen, extremely limited (de Souza, 2004). Clearing titles is time consuming, expensive and encounters resistance on the part of the judiciary in Brazil. There has been a recent move in Recife towards a proactive social policy named participatory budgeting (PB) (orçamento participativo), where the municipality enables large groups of people, effectively in a commission format, to decide the priorities, objectives and goals of the future investments at municipal level. The introduction of this new policy framework is very much in line with the governance and decentralization reform agenda of the World Bank under conditions of neo-liberalism. Although there are other successful experiences in Brazil (see Souza, 2000, and Melo et al, 2000, for examples), there is a suspicion that PB priorities may undermine the more precise PREZEIS form of machinery and the objectives and priorities for the ZEIS areas. It is a matter of great concern that programmes for ZEIS areas are not apparently as active as they were during the 1980s and early 1990s. It appears that the new and largely untried but powerful PB instrument might effectively replace and, consequently, overlap with the PREZEIS forum, taking away fund allocation and priority listing from the PREZEIS programme. In a recent study in Recife and Porto Alegre (de Souza, 2004), just such an outcome was noted. PB was becoming a very attractive instrument for the ruling Labour party in Recife. Some professionals claimed that the PREZEIS forum was perceived to be in decline in almost inverse proportion to the increasing influence of PB in Recife. Personnel who had worked in the PREZEIS forum had been moved to other less prestigious sectors in the municipality and replaced by proPB personnel. Although neither the PB programme nor the PREZEIS forum are intended to consolidate market mechanisms – in fact, their objectives are the opposite – these instruments have perversely worked towards the fragmentation of social welfare policies on the part of the state. While aimed at solving entrenched inequalities, such as access to urban land, these instruments have, in effect, consolidated individual interests and rights in land delivery processes. The PB machinery, in particular, is having the effect of individualizing social interests (although in a
178
Market Economy and Urban Change
democratic arena) by pitching social needs against private interests. The PB process is predicated on the assumption that by putting all interested parties together to discuss development priorities, a balance of interests and power structures could be achieved which would per se guarantee a so-called democratic arena, while safeguarding access to social policy programmes, such as land and housing rights, for the poor. In effect, though, PB, in particular, and ZEIS designation, to a lesser extent, appear to be inviting powerful and influential class interests to dispute the rights of the destitute and the powerless to social policy interventions. The political redistribution of power, inherent in these apparently participatory mechanisms of governance, was a very influential factor in determining public acceptance. The evidence suggests that, although the initial claims have positively impacted upon the democratization process in Recife, and in Brazil as well, they have also contributed to the increasing withdrawal of the state in terms of its roles and responsibilities to promote social equity and welfare policies in land delivery programmes, such as the ZEIS case discussed above. Both the PREZEIS forum and PB neglect the recent history of Brazil where local or national elites have co-opted power structures to sustain their longer term privileges by appearing to sponsor the interests of the poor in the short term. For example, the ZEIS declaration, on the face of it, can be seen as a pro-poor policy since it has retained some degree of social housing rights for the urban poor, although it is less effective than anticipated. However, it can also be seen as a tool for more powerful interests to safeguard a long-term stake in the land market. By changing land designation in Recife, the ZEIS areas can be converted into valuable future assets in the housing land market. In effect, the ZEIS declaration can be seen as a strategy of commodifying illegal settlements by ensuring that such land will inevitably come onto the market once formal legalization is finally accomplished. The ZEIS mechanisms could be seen to satisfy the twin objectives of acceptability to the advocates of pro-poor policies in Brazil, while being consonant with the global orthodoxy of promoting cities as marketplaces in which land delivery becomes progressively reconfigured as a formal-sector commodity. From this perspective, and despite the fact that ZEIS mechanisms may be receding in importance compared to PB, it can be expected that the ZEIS mechanisms will still retain their place in the policy framework of Brazilian municipalities. Indeed, ZEIS has been enforced by Statute of the City and MP2220/01. But few studies have been produced to challenge the counterproductive consequences and the impacts of this policy in terms of activating housing land markets in the social housing sector.
CONCLUSIONS This chapter has illustrated how the state’s housing and land policies essentially endorse or accede to a market-driven process of land delivery (perhaps by ignorance as much as by explicit policy instruments), which results not in decreased inequality, but rather in continued insecurity and marginalization of the urban poor. The key conclusion to emphasize is that, regardless of the model of government,
Urban Land Tenure in Brazil 179
urban housing policies in Brazil have consistently failed to provide either sufficient new housing, or to improve the existing inadequate housing and land security conditions of the poorest citizens. Thus, the development of more effective housing for the urban poor remains a dominant issue on the political agenda for Brazilian governments. Centralized housing policies during the military regime (1964–1985) were efficient in terms of housing unit construction. However, lower-income groups were not the beneficiaries of these programmes, which, given the financial parameters under which they operated, were largely targeted at middle-class citizens. Moreover, as we have seen, the peripheral location of these public housing schemes, combined with the process of peripheral industrial development, further reinforced the exclusion of the urban poor. Indeed, the poor suffered not only as the missed target group, but also as victims of slum clearance policies, too. Yet, it was not feasible to ‘clear’ the favelas in Brazil’s cities. The state could no more mobilize sufficient resources to build enough new houses than it could resist the relentless pressure of rural-to-urban migration, which merely accentuated the demand for urban housing and, thus, new illegal land invasions and disputes. This was the only conceivable response of the poor in the face of a serious deficiency in adequate and affordable public-sector shelter provision. In this respect, the chapter has highlighted the structural contradictions of avowedly social policy interventions by the state. Thus, the development paradigm that claims social interest (as is the case with the housing land policy approach exemplified by ZEIS policy), in reality, also serves the purposes of activating housing land markets and putting at risk the survival of the very groups whom it is designed to support: low-income urban dwellers. Clarifying land titles can result in the liberalization of market forces, but this rationale should not be deployed unconditionally – as is now the case – if the social interest is clearly to target the poor who need a secure form of tenure, but which is, at the same time, affordable. After 1985, decentralization of power from the central government to local authorities and more participatory forms of governance became the dominant approach adopted by the Brazilian government. This transformation, a synonym for the withdrawal of the state from social policy fields such as housing, was consistent with the global agenda of restructuring the role of governments and decentralizing state interests stimulated by the fiscal crises, increasing unemployment and poverty (Castro, 1991). Conjointly, the poor seem to have found participation to be the most effective way of acquiring formal access to housing in Brazil. Thus, community mobilization, enabling local residents to assert their political voice over the issue of urban land allocation, finds its origins in just these national and local movements for decentralization. This period represented the beginning of democratization in Brazil, which is expressed, in the context of this chapter, as participation by the poor in the process of access to housing. It is within this context that the shift in housing policies from provider to stakeholder – which is effectively what the PREZEIS machinery entailed – could thus be construed as the result of both economic recession and local residents’ calls for affordable and effective housing
180
Market Economy and Urban Change
provision. However, alarming numbers of squatter settlements continue to exist and grow in most of Brazil’s cities. In terms of sheer quantity and scope, governmental housing programmes for the urban poor still occupy a distinct second place in comparison to private supply systems and the emergence of illegal settlements during recent decades. Previous and current interventions have not, therefore, ameliorated the substandard housing conditions endured by most urban citizens. Rather, they have reinforced the notion that formal access to housing depends upon the inhabitants’ ability to pay. At the same time, since the private land and housing market has no self-regulatory device to ensure that prices remain affordable for all social groups, the poorest in Brazil (as in the rest of the developing world), must, instead, compete for space on illegally invaded land, sub-let rooms and occupy unused space on the streets. The sustained and very large number of poor people living in urban areas in Brazil provides evidence that employment opportunities have not met the demand, nor has the housing system been able to provide affordable shelter for those households suffering from this imbalance. Democratic structures, social welfare policies of the state and markets reveal a singularly incongruent relationship in Brazil. Nowhere is this more evident than in urban land and housing provision. While a combination of these three elements would appear to be a relevant amalgam for empowering the urban poor, historically, none has yet been successful in Brazil. Even in the current circumstances the combination of democratic reform (decentralization and new governance structures) and market enablement has not been successful in tackling the endemic conditions of the urban poor. Land tenure promoted during the time of the authoritarian welfare state was highly and unarguably unjust; and yet, paradoxically, the deficiency of land tenure security in the present climate is reminiscent of previous eras and regimes in significant ways. Both the state and the market appear to neglect the demands of the poor for a better and more equitable quality of life. Sharing roles and responsibilities in the new neo-liberal models of local governance may be desirable ways of achieving better and more responsive living environments; but they may still be insufficient, in so far as the evidence from Brazil indicates, to improve the present state of affairs discussed above. Partnerships, flexibility, effectiveness and good governance are all buzzwords attracting attention from most sectors of society (both those in power and those under command). Thus, now and during the past, housing financiers, providers and developers (such as governments, private developers and international funding agencies) have helped the poor to house themselves by allocating resources to improve the supply of informal housing. These agencies have earmarked resources according to the ability of the poor to pay for land, building materials, technical support and services. However, where formal housing providers intervene, low-income groups become more economically, politically and technologically dependent upon housing bodies. Thus, the informal housing networks collapse. The poor, out of necessity rather than choice, thus continue their struggle to acquire housing through both legal and illegal self-help mechanisms.
Urban Land Tenure in Brazil 181
These apparently contradictory paradigms appear to form a continuum in space and time where the prevailing elite benefit most. By neglect or by design, the poor and the needy have been excluded from the urban agenda. At best, the poor are on the social periphery, metaphorically and sometimes spatially, as well, suffering from the consequential insecurity and marginalization of state policies. Brazil experienced 21 years of dictatorship, corresponding to the existence of the National Housing Bank. During this period, much public-sector housing was produced under the provider paradigm. But in Brazil, as in most countries subsequently undertaking the neo-liberal economic and governmental reform package, housing policies were strongly criticized for being inefficient and insufficient to tackle urban poverty and accommodate the huge number of people who needed housing most. This is certainly true in Brazil, and this chapter has presented the structural and procedural explanation for these outcomes. But during the 16 years of democracy and state restructuring since that time, there is little, if any, evidence that a market economy has been any more successful in delivering land and housing which the poor can afford. Advocates of market enablement argue the capacity of markets to be flexible, efficient and more capable than the previous welfare structure to deliver basic social commodities such as housing. Yet, in Brazil, the markets are still far from responding to the ever-increasing demand for housing land by the urban poor. It could be argued, of course, that the reform package has not been fully elaborated. But, equally, it is also the case that the market itself is unable under any conditions to provide the poor with housing land, even where there is support from the state, as the cases of Recife, São Paulo, Belo Horizonte and others Brazilian cities suggest. Meanwhile, the informal and illegal settlements continue to proliferate at an unprecedented rate. Accordingly, this chapter has argued that at the level of the individual household, neither state intervention in land and housing delivery, nor state promotion of market delivery processes have done much to reduce the problem of insecurity and marginalization of the urban poor. The failure of the state intervention model in Brazil to promote redistribution policies such as housing is attributable, at one level, to technical shortcomings, such as interest rate controls on housing lending, building standards and so on. At a structural level, this chapter has argued that the interests of the state during the military regime were played out in the cooption of the middle classes by producing an urban housing and industrialization nexus and de facto commodification of illegally settled urban land. With regard to the outcomes of a market enablement model, here the structural intentions of the policy agenda are explicitly directed to the marketing of critical urban resources, such as land and housing. Although there are fundamental structural contrasts between the two strategies, the ironic consequence is that they both essentially endorse or accede to market processes of land delivery that do little to minimize the huge gulf between the poorest and the richest. By analysing local processes of urban development ‘on the ground’ with respect to land tenure issues in Recife, the negative impacts of such policies for poor households have been demonstrated. In reviewing the response of successive Brazilian governments to urban land and housing needs, the disjuncture between macro-economic policy and global
182
Market Economy and Urban Change
trends, on the one hand, and local initiatives and outcomes to tackle urban poverty, on the other, could not be more striking. Social needs in terms of tenure security and housing supply for the urban poor remain vast. Neither the modalities of state intervention, nor the market have been able to narrow the huge gap in living conditions in Brazil’s cities and to ameliorate the housing conditions of the urban poor in Brazil. Both strategies appear to intensify the risks of promoting social exclusion. Despite the rhetoric of promoting access to legal housing land for all, which is advocated as strongly in Brazil as elsewhere in the developing world, the outcomes remain illusory.
NOTES 1 2 3 4 5
The social interest of the BNH served only the middle class. The poor benefited very little from the fruits of the programme. In 1978, only 3 per cent of the subsidies were destined for the construction of houses for the poor (Bolaffi 1988). See Souza (2000) for a comprehensive discussion on participatory budgeting in Brazil, and Tendler (1997) for the case of a successful democratic experience in Ceará state. This chapter refers to ZEIS because it is the legal instrument used by the municipality of Recife to deal with informal city sectors. For a comprehensive discussion about ZEIS, see Maia (1995). The ironic name of Iraque was used because the invasion occurred at the time of the first Gulf War. Under the provisions of Brazilian law, usucapião (in effect, loss of compensatory entitlements) can be prescribed to privately owned urban land where possessors occupy plots that are up to 250 square metres for the purposes of housing themselves or their families, provided that they have been living in the plot for five consecutive years without opposition from the landowner.
REFERENCES Alves, J F (1992) Metropoles: Cidadania e Qualidade de Vida, São Paulo, Editora Moderna Andrade, L and Azevedo, S (1982) Habitação e Poder: Da Fundação da Casa Popular ao Banco Nacional da Habitação, Rio de Janeiro, Zahar Editores Arretche, M (1990) ‘Intervenção do estado e setor privado: O modelo brasileiro de política habitacional’, Espaço e Debates, São Paulo, vol 31, pp21–36 Batley, R (1983) Power through Bureaucracy: Urban Political Analysis in Brazil, Aldershot, Gower Bolaffi, G (1975) ‘Habitação e Urbanismo’, Ensaios de Opinião, vol 2, pp73–83 Bolaffi, G (1988) ‘Para uma nova política habitacional urbana: Possibilidades econômicas, alternativas operacionais e limites políticos’, in Valladares, L (ed) Habitação em Questão, Rio de Janeiro, Zahar Editores, pp167–196 Castro, M H G de (1991) ‘Descentralização e política social no Brasil: As perspectivas dos anos 90’, Espaços & Debates, vol XI, no 32, pp80–87 de Souza, F A M (1998) Perceived Security of Land Tenure and Low-income Housing Markets in Recife, Brazil, Unpublished PhD thesis, Oxford Brookes University
Urban Land Tenure in Brazil 183 de Souza, F A M (1999a) ‘Land tenure security and housing improvements in Recife, Brazil’, Habitat International, vol 23, no 1, pp19–33 de Souza, F A M (1999b) ‘Sfidare i paradigmi della regolariizzazione fondiaria a Recife, Brasile’, Storia Urbana, no 23, July–December, pp119–145 de Souza, F A M (2004) ‘Security of land tenure revised: The case of CRRU in Recife and Porto Alegre, Brazil’, Habitat International, vol 28, pp231–244 FINEP–GAP (Finaciadora de Estudos e Projetos–Grupo de Arquitetura e Planejamento) (1983) Habitacao Popular: Inventario da Acao Governamental, Rio de Janeiro, Projeto Klak, T (1990) ‘Spatially and socially progressive state policy and programs: The case of Brazil’s national bank’, Annals of the Association of American Geographers, vol 80, pp571–589 Maia, M L (1995) ‘Land use regulations and rights to the city: Squatter settlements in Recife, Brazil’, Land Use Policy, vol 12, no 2, pp177–180 Maricato, E (1987) Politica Habitacional no Regime Militar: Do Milagre Brasileiro a Crise Economica, Petropolis, Vozes Melo, M A B C de (1989) ‘Politicas publicas e transicao ddemocratica: Notas sobre o reformismo conservador na politica social e de habitacao’, in de Moura, A S (ed) O Estado e as Politicas Publicas na Transicao Democratica, São Paulo, Vertice–Massangana, pp166–188 Melo, M A B C de (1990) ‘Estruturação intra-urbana, regimes de acumulação e sistemas financeiros da habitação: Brasil em perspectiva comparada’, Espaço e Debates, São Paulo, vol 31, pp37–51 Melo, M A B C de (1996) ‘Crise federativa, guerra fiscal e “Hobbesianismo municipal”: Efeitos perversos da descentralização?’ São Paulo em Perspectiva, vol 13, no 10, pp11–20 Melo, M A B C de and de Moura, A S (1989) ‘Politicas publicas urbanas no Brasil: Uma analise dos projetos do Banco Mundial trabalho’, apresentado no XIII Encontro da ANPOCS, Caxambu 23–26 de Outubro de 1989, Texto para Discussao No 18, Recife, Universidade Federal de Pernambuco Melo, M A B C, de Rezende, F and Lubambo, C (2000) Urban Governance, Accountability and Poverty: The Politics of Participatory Budgeting in Recife, Brazil, Report for the Project on Urban Governance, Partnership and Poverty, Birmingham, University of Birmingham, mimeo Portes, A (1979) ‘Housing policy, urban poverty and the state’, Latin American Research Review, US, vol 14, no 2, p7 Sachs, C (1990) São Paulo: Politiques Publiques et Habitat Populaire, Paris, Editions de La Maison des Sciences de L’Homme Shidlo, G (1990a) ‘Housing policy in Brazil’, in Shidlo, G (1990) (ed) Housing Policy in Developing Countries, London, Routledge Shidlo, G (1990b) Social Policy in a Non-democratic Regime: The Case of Public Housing in Brazil, Oxford, Westview Press Souza, C (2000) Participatory Budget in Brazilian Cities: Limits and Possibilities in Building Democratic Institutions, International Development Department of the School of Public Policy, Birmingham, University of Birmingham, mimeo Tendler, J (1997) Good Government in the Tropics, Baltimore, John Hopkins University Press Valenca, M M (1999a) ‘The closure of the Brazilian housing bank and beyond’, Urban Studies, vol 36, no10, pp1747–1768
184
Market Economy and Urban Change
Valenca, M M (1999b) ‘The lost decade and the Brazilian government’s response in the 1990s’, The Journal of Development Areas, vol 33, pp1–52 Valladares, L (1988) ‘Urban sociology in Brazil: A research report’, International Journal of Urban and Regional Research, vol 12, pp285–303 World Bank (1989) Sites and Services and Low-cost Housing Project, Washington, DC, Project Performance Audit Report, World Bank
Chapter 8
Market Enablement and the Reconfiguration of Urban Structure in Colombia
Andrés Ortiz-Gómez and Roger Zetter
INTRODUCTION Neo-liberal political and economic tendencies promoted during the last two decades in many countries around the world have, as one of their principal goals, the reduction of government intervention in the processes of development and the strengthening of the free market at global, national and local levels. Urban development patterns have not escaped the effects of this paradigm, especially given the marked impact of vigorously promoted deregulation of public control over land use and planning instruments and the privatization of urban infrastructure. Given the accelerated growth of big cities in institutionally weak developing countries, these effects have been particularly visible. To date, however, these transformations have largely been explored at a macro level, while local impacts have tended to be overlooked. The purpose of this chapter is to redress this imbalance by providing a micro-level study and analysis of the reconfiguration of these types of cities – using Bogotá as the exemplar. It elaborates the impact that market forces, the increasingly free movement of international capital investment and the liberalization of commercial development interests in the urban sector have produced on the pattern and distribution of urban services, especially at the intermediate level – the neighbourhood. The chapter demonstrates the progressive ‘disappearance’ of the neighbourhood as a viable element in the urban hierarchy of Bogotá. On the one hand, the chapter shows that the spatial deconstruction and reconfiguration is caused by the atomization of some urban land uses and services, which are currently being offered
186
Market Economy and Urban Change
at the micro level, and the simultaneous fusion of others that are now offered at a metropolitan scale. The chapter argues that these urban transformations are one of the most dramatic effects caused by the antagonistic interests between urban planning and neo-liberal development policies. On the other hand, the chapter also argues that this process of deconstruction and reconfiguration is also the outcome of the privatization of some services, accompanied by the deregulation of many of them. These policies have reinforced and accelerated the process of ‘dilution’ of the intra-urban hierarchies. The urgency of such an investigation at this micro level arises because the process of urban reconfiguration is bringing about the disintegration of existing social and community structures. At the same time, the new disaggregated pattern of urban development is becoming unsustainable. Based upon earlier work, which analysed data generated from four case studies of land-use transformation in Bogotá (Ortiz-Gómez, 2002a), this chapter elaborates these conclusions more precisely within a market enablement paradigm. Land uses – residential development, schools, shopping centres, parks and urban recreational areas – have traditionally been developed at a neighbourhood or intermediate level in the urban hierarchy of Bogotá, as in most other cities. But, over the last decade and a half, they have been subject to a process of fragmentation and reconfiguration in the urban structure of the city, which highlights the impact of market enablement policies. Until a few decades ago, the typical distribution of urban functions found that the most specialized services with a metropolitan coverage were located in a concentrated manner in the downtown areas of the cities, while the daily requirements of citizens would be located at the neighbourhood sub-centre level. Both urban theorists and professionals attempted to defend this spatial/functional distribution, despite the pressures of rapid urbanization in the developing world. Strategies such as the creation of satellite cities or the consolidation of land uses within city sub-centres were characteristic of these aspirations. But the level of urban and functional autonomy achieved by these sub-centres in Latin American cities has been quite low. This crucial weakness is one reason, among others, why the neoliberal and deregulated urban development policies and processes have so effectively marginalized the model of metropolitan urban hierarchy found in the past. Thus, both the new locations for, and specific characteristics of, these four uses in the contemporary spatial configuration of Bogotá have forcefully contributed to the disappearance of the urban neighbourhood level. The urban planning authorities have been unable to counteract these processes and outcomes because of their essentially weak institutional capacity, the lack of adequate policy instruments, and very limited understanding of the behaviour of the urban land and property development market – characteristics accentuated by the neo-liberal process of deregulation. At present, it is uncertain whether these trends can be reversed and the neighbourhood resuscitated as a vibrant functional and spatial component of Bogotá’s urban hierarchy. Neither is it clear, in this era of ‘de-spatialized’ communications, that the traditional association between community and place can be maintained as the basis of urban society. What is essential is the recovery of quality of life for
Market Enablement and the Reconfiguration of Urban Structure in Colombia 187
citizens and the sustainability of big urban agglomerations. For these outcomes to be achieved, a much deeper understanding of the phenomenon of urban spatial reconfiguration under conditions of market enablement is essential so that the process of restructuring that is currently taking place can be effectively managed within an appropriate urban planning framework. The general contention is that the experience of Bogotá is little different from what is happening in other cities in the rest of the country, or, indeed, in the rest of the continent, although local conditions and the speed of reconfiguration vary with local conditions. In short, it could be said that in Bogotá, as in many other cities in developing countries, ‘urban planning has been “de-territorialised” and “de-spatialised” by neo-liberal theory’ (Burgess et al, 1997, p123). The chapter demonstrates how this has occurred at the micro level.
DECENTRALIZATION, GOVERNANCE AND PRIVATIZATION The critical backdrop to these changes is the institutional structure and regulatory framework for urban planning. Colombia, like the great majority of Latin American countries, has undergone the process of the transfer of power from central government to local governments. During recent years, these reforms have ensured that state governors, the city mayors, city councils and ediles (local councillors) have been elected democratically. However, this decentralization and democratization of government from the national level has not descended to the metropolitan level where, in the case of Bogotá, the power of the city mayor over urban development and planning is virtually absolute. Yet, paradoxically, the electoral autonomy and independence held by the mayor has become a substantial obstacle for the effective planning of conurbadas (the suburbs lying outside of the metropolitan authority boundaries) and the surrounding sub-region. There are several factors at play here. In Colombia, there currently exists no legal framework, either to promote regional strategic planning or, within the cities, to promote local planning in which the communities can participate effectively. Second, compounding this problem is the fact that local government reform has tended to fragment interests, rather than introduce a cohesive metropolitan structure. Superficially, governance and the participation of citizens in the decisions of local administrations have improved since a number of statutory instruments have been enacted to this end. In 1986, 20 local municipalities (alcaldias menores), or junta administration local (JALs), were created within Bogotá. The objective was to develop a structure of local administration that would be closer to the community. The statute enabled them to manage and implement local development plans; but these authorities do not have the power to participate effectively in the preparation and elaboration of the future urban plan, the Plan de Ordenamiento Territorial (POT) of the city as a whole. Moreover, the decisions they make must conform to the POT. Nor do these authorities have sufficient resources or budgetary autonomy to make them viable agencies to represent local
188
Market Economy and Urban Change
pubic interest: for example, only 20 per cent of the city budget is delegated to these councils. After 17 years in existence, less than 10 per cent of residents vote in the elections for these community councils (JALs). Low voter motivation is a clear indication that the electorate does not consider that the JALs have substantial capacity or authority to manage the urban development process and regulate the urban transformation that has been occurring. Indeed, some researchers suggest that the JALs, instead of enhancing participatory government, have merely become co-opted by the traditional political structures and interests of the city and that their decisions are pragmatic rather than integrated within city-wide requirements and objectives (Garcia and Zamudio, 1997). Finally, the JALs were created to develop a structure of local municipalities to complement the presence of municipalities lying outside of the city boundaries. But, as a result of this decentralization, the problem remains that the latter grouping has vigorously retained its independence from the wider task of planning and coordinating the development of the metropolitan region as a whole, contending that integration would lead to a loss of autonomy. Thus, the outcome of administrative reforms that have accompanied market enablement have, indeed, shifted the balance of interests. This vacuum at local and regional levels provides the private sector with the space to oscillate between different municipalities within the greater metropolitan region of Bogotá and between different localities within the city boundaries, ensuring that development opportunities and locations (examined later) are basically governed by market forces, rather than planning policies and instruments. With regard to the urban planning process and instruments in Bogotá, this has been a typical top-down process based more on technocratic principles and precepts than on an effective participatory model of local and community representation. In addition, for many years, the city planning authorities focused a vast majority of their staff and time on the bureaucratic tasks of issuing development permits and construction licences, leaving little time for the challenging task of preparing urban planning strategies for managing the future growth of the city (Londoño, 1992). For this reason, during the mid 1990s, semi-private institutions called curadurias urbanas were created and responsibility for issuing development permits based on the city’s POT was transferred to them – incidentally, another example of privatizing services. Since then, the planning office (Departmento Administrativo de Planeacion Distrital, or DAPD) has been better able to concentrate its resources on the fundamental objective of preparing development plans. Nevertheless, the planning process has still been insufficiently participative and, in practice, continues to be top down. Finally, it is also important to note that the planning authorities have been ineffective in controlling illegal developments or barrios: large areas of the city, especially in low-income residential areas, have been chaotically developed by illegal or ‘pirate’ developers. Given the impunity with which this city building occurs, these processes are no longer confined to just the poor areas of Bogotá, but are mirrored in prosperous parts of the city as well, although their impact is less substantial and visible. In the so-called formal sector, small shops, office and
Market Enablement and the Reconfiguration of Urban Structure in Colombia 189
industrial establishments and, as we shall see below, schools, as well, are illegally developed (lacking a development permit). Turning to urban services, in conformity with the market enablement paradigm, Bogotá is a city where more and more utility companies have been privatized. This includes, for example, the electricity company, some telephone companies, waste collection, public transportation and development control machinery. A large proportion of the educational system is now also private. The only utility service that continues to be in public ownership in Bogotá is the water and sewage system; ironically, these work with commendable efficiently. In 2003, all of the almost 7 million inhabitants in the city received running water suitable for human consumption. Even though Bogotá has an excess of potable water, which it could sell to neighbouring towns and cities and which would enhance its financial profitability, it has been unable to offer this service to the other municipalities, many of whom suffer severe shortages of drinking water, because of legal restrictions and fragmentation between companies. The more significant point, in the present context, is that all these separate companies have their own pricing, growth and development strategies, which, certainly in the case of private companies, do not tend to follow the strategic spatial guidelines of the planning authorities. With privatization of water utilities set to expand, the problems of coordinating urban development plans with the different strategies of autonomous water companies will undoubtedly increase – not to mention the destabilizing impact of new pricing regimes on the urban poor as has occurred in Bolivia (Crespo Flores, 2002). Conversely, in the case of some of the public water companies, their strategies do not always coincide with the development proposals of the private sector and this leads to problems of synchronizing development and infrastructure. In short, as this review has highlighted, insofar as Bogotá is concerned, the urban-sector agenda that has accompanied market enablement – decentralization of government, reform of the planning machinery, privatization of services – has produced a complex and often contradictory set of outcomes. Far from enhancing management and coordination of the city’s growth, it has reinforced the strength of private development interests and unplanned development, which, in turn, have led to the deconstruction and reconfiguration of the city’s spatial structure. These tendencies are examined below.
URBAN PLANNING AND THE PLAN DE ORDENAMIENTO TERRITORIAL (POT) Some indication of the limitations of the urban planning instruments has already been discussed. The role of the urban plans, or rather their inability to confront the spatial reconfiguration of Bogotá, is now examined in more detail. During the last 20 years the planning of Bogotá has been based on master plans (Acuerdo 7 de 1979 and Acuerdo 6 de 1990). In outline, these statutory instruments provided for the designation of areas where development would be permitted, a primary street and highway plan, a set of construction regulations, and a zoning plan of
190
Market Economy and Urban Change
permitted and prohibited uses. The system was a typical master plan approach, which ‘takes the form of a series of interrelated policy statements, with some maps showing areas of generally preferred uses’ (Jones, 1990). The initiative to develop land, with few exceptions, was left totally to the private sector, which, as in much of Latin America, has always driven the decisionmaking process of where and when development in the city takes place. It is for these reasons that Bogotá has experienced such enormous peripheral expansion, far in excess of demand, while at the same time many of the already urbanized parts of the metropolitan area remain vacant or undeveloped. With regard to the neighbourhood level, which is the main concern here, development and planning at this and at the micro level has consistently been enacted through a project-byproject, plot-by-plot process according to the interests of individual landowners and developers with little if any attempt to integrate or coordinate neighbouring developments. In 1990 (under Acuerdo 6 de 1990), in an attempt to bring the unregulated peripheral expansion of the city within a more rational development framework, a new dynamic was introduced with the concept of ‘areas of urban incorporation’ for the development of new land or for the legalization of existing informal developments. With regard to the formal-sector land development, the initiative continued to be exclusively private sector and was led in a fractured and incoherent fashion. In the case of the barrios, by the second half of the 1990s pirate developers in Bogotá were subdividing land at the rate of more than 180 hectares per annum, which represented 42 per cent of the city’s then annual supply of new housing land (Gilbert, 1996). The dynamic intervention of 1990 simply legitimized the traditional processes – illegal subdivision of land, informal housing construction and the ‘de-marginalization’ or upgrading of urban neighbourhoods by ex-post facto construction of public service infrastructure at a high cost for the city. In 1997, therefore, the national government issued Law 388 (Ley de Ordenamiento Territorial), which obliged all municipalities in Colombia to develop and approve a city ordinance plan (Plan de Ordenamiento Territorial, or POT) before the year 2000. In compliance with this law, Bogotá approved its POT for a tenyear period in 2000. POT introduced the concept of partial (that is, local) plans for public or private initiative, with which the government intends to eliminate the property-by-property development process and, instead, create an integrated approach to the planning of localities. As well as their physical planning objectives, the local plans set out the distribution of development responsibilities and benefits between the different landowners and the local authority, including partnership between the sectors where appropriate. In addition, the POT proposed, in theory at least, a densification of the city by encouraging the development of vacant land within the already urbanized fabric of the city and, conversely, restricting new development opportunities towards the northern part of the city. To this end, POT drastically reduced plot ratio indices for development land outside designated development areas within the city in order to curb increases in land market values and, thus, speculative development pressure.
Market Enablement and the Reconfiguration of Urban Structure in Colombia 191
Although, initially, these policies in Bogotá’s POT offered a major advance on previous planning intervention, and held out the potential both for redirecting the city’s spatial development and for reasserting the neighbourhood as a key element in the city’s spatial hierarchy, the results after three years of implementation are not as optimistic as expected. There are two interrelated factors at play here. In the first place, the lack of improved institutional capacity of the city planning authorities and the excessive regulatory character of POT have meant that the local plans have not emerged as the anticipated arena to promote partnership and coordination, either between private-sector developers themselves or between the private sector, the public-sector agencies and the local communities. The aims – that the different stakeholders would each present proposals and options for use; provide densities and indices for specific parcels of land; present their aspirations and interests; and that an urban planning strategy could be agreed which might adapt to the changing circumstances of the market and the city – have not been fulfilled. Instead, the lack of institutional capacity and the fear that local plans negotiated and agreed upon between the public and private sectors would become vehicles for corruption, produced an excessively regulated POT that has not permitted the local plans to fulfil their intended functions. In the second place, and related to the failure to coordinate the interests of the competing stakeholders, the preparation and the approval of the local plans have been very slow. This has generated price speculation, especially for smaller plots that can be developed immediately without necessarily going through the full machinery of the local plans. Ironically, the new instruments have thus increased the fragmentation of the city’s spatial structure.
ATOMIZATION AND FUSION OF URBAN LAND USES The cocktail of weak planning instruments, poorly conceived institutional reform for metropolitan and municipal government, and privatization – formulated within the framework of a market enablement paradigm – has, in effect, substantially enhanced the already entrenched interests of private stakeholders, who have long been a feature of urban development processes in Bogotá as in much of Latin America. This provides the context in which to explore the spatial reconfiguration of the city that has occurred during the last decade and a half.
Residential development, the privatization of security, and the fragmentation and segregation of neighbourhoods Bogotá has a reputation as a city with one of the highest levels of crime and insecurity in Latin American, due among other factors to very low detection rates. The poor levels of security and protection provided by the military and police authorities, and the high rate of kidnappings, burglaries, armed robbery from commercial establishments and so forth, have generated an unprecedented growth in private security arrangements. Approximately 30,000 to 40,000 security guards operate in Bogotá to protect shopping malls, private homes, offices and government
192
Market Economy and Urban Change
buildings. Even though crime statistics during the last few years show an improvement, the culture of private security has become totally assimilated within the society and it will take many years of public order for this to disappear, if at all. More dangerously, within the context of privatizing most of the services – once the responsibility of the government (including security and protection) – it is increasingly forgotten that peace and security are defining characteristics of state legitimacy and should not be commodified as individual goods. Nevertheless, this ‘cultural change’ in Colombia and the acceptance of the marketization of security, in this instance, alongside many other public goods, has had significant consequences for the urban morphology of Bogotá and the patterns of urban development and architectural design. The obvious evidence is the development of enclosed condominiums. Provision of this form of residential development has spiralled and, in effect, publicizes the state of affairs that: … the city is not a liveable place … [we] live in the interior of our own world… The increase of violence, insecurity and fear comes with a series of transformations, as citizens adopt new strategies of protection. These strategies are changing the city’s landscape, patterns of circulation, everyday trajectories, habits, and gestures related to the use of streets and public transportation (Caldeira, 1996, p60). The everyday life of residents in Bogotá is deeply affected by the fear of crime and the changes in lifestyles that this provokes. This phenomenon has stimulated, within the housing market, commercial competition between residential ‘ghettos’ that can offer the maximum range of internal services to ‘defend’ residents and minimize the need to enter the city. It is now extremely difficult for housing projects developed in open neighbourhoods to be commercially successful. Indeed, this new lifestyle, which originally commenced as the privilege of the upperincome bracket, has transcended to the middle- and lower-income housing neighbourhoods, where these communities also now close off the public streets to control and protect their localities. Since urban planning and building regulations have been utilized mainly to define land uses, construction indices, and occupation and plot ratios, these closed condominiums have not been subject to any form of planning intervention and control. What regulation has been used has generally been limited to controlling the type and height of the surrounding enclosure of the condominiums and the maximum size of the land areas that can be developed. The critical relationship that should exist between private and public space within a neighbourhood or the city, as a whole, has not been considered in any depth by the planning authorities and, in any case, could not be adequately regulated within the current legal framework. Moreover, in the climate of insecurity and market-led processes that exists, it would not be well received by Colombians if the government attempted to control the type of housing that individuals could build, or to limit the type of development that the housing market appears to be demanding.
Market Enablement and the Reconfiguration of Urban Structure in Colombia 193
The widespread growth of enclosed condominiums is the principal factor in the fragmentation or atomization of local neighbourhoods. In effect, these areas have ceased to be open parts of the city, with the conventional urban characteristics of social plurality, a heterogeneous community, and a mix of uses and activity patterns. On the contrary, it is increasingly impossible to promote mixed uses and to create an urban design that facilitates an integrated community within these enclosed condominiums. Pedestrian movement, as an element of urban life, is losing importance since the moment the enclosed condominium is exited, the residents enter a city ‘that has to be avoided’: it is thought safer to reach the destination of another security protected environment, such as a shopping mall or office condominium, by car. These projects – now dominating the housing market, but widely characteristic of commercial and retail development in Bogotá as well – are the market’s response to perceptions of insecurity that are turning the public city into a no man’s land. It appears that when urban services and public goods, which should be a monopoly of the government, are privatized, the impacts can be very negative in many different ways – not least on the fragmentation of the traditional structure of urban areas and their social rationale. The privatization of security in Colombia, caused, in part, by the government’s incapacity to respond effectively to high levels of criminality, may paradoxically be one of the major factors that is actually accentuating insecurity in the city, since these ghettos diminish further the sense in which citizens feels in control of public areas and streets. The street, plaza and park and, in general, the public areas of a city are a metaphorical representation of democratic ways of life. But the combined effects of a housing market that only builds enclosed condominiums and the privatization of security simultaneously both promote and provide evidence of the fragmented and atomized cities. As a result, the urban landscape has certainly come to acquire an almost feudal character (Cámara de Comercio de Bogotá, 1996). The segmented urban morphology that these patterns and processes generate, is creating a form of urban development which is unsustainable.
Fusion of commercial uses and the large multinationals The concentration of a large variety of commercial retailing uses within an enclosed structure, often on the urban periphery and only accessible by motor car, developed as a prototype in the suburbs of North American and European cities during the middle of the last century. These contemporary shopping centres are now, of course, found in many countries across the world. This model was imported to Colombia during the 1970s; since then, these centres have been built all over Bogotá. However, Bogotá, like a number of cities in Latin America, is essentially a dense and compact city, due more to the lack of adequate road infrastructure and the economic impoverishment of a majority of the population who do not own cars than to any premeditated urban plan. For this reason, the shopping centre model was adapted in Bogotá as a form of development not located in the city suburbs, but in the most densely populated areas within the city. Additionally,
194
Market Economy and Urban Change
and against the conventional assumption that ‘most of these activities are sensitive more to the purchasing power rather than to mere mass of people, so they are much more likely to be found in the richer areas than in the poorer ones’ (Mohan, 1994), in Bogotá they were also developed in middle- and lower-income areas. During the 1990s, big multinational retail companies began to develop in Colombia; stores such as Carrefour, Makro and Home Center joined the national chain Éxito in the development of the superstore format, with more than 10,500 square metres of retailing space each. In the first stage many individual stores moved away from a street location and fused together and into one large centre. Now these stores themselves fuse together in only one building. Needing a large catchment area to ensure commercial success, their market is no longer at a local neighbourhood level, but a metropolitan level. In Bogotá, where the average income is about US$2000 per annum, it is estimated that each of these superstores requires a catchment population close to 200,000 inhabitants. For this reason, and to facilitate access, they are always located on main throughways of the city where there is public transportation. A diversity of complementary activities concentrates around the superstores taking advantage of the large inflow of consumers, whom the centres attract. Thus, their commercial reach and the diversity of services makes it very difficult for the neighbourhood stores to compete in price and service, their only advantage being that they are conveniently near residential areas. These trends replicate the pattern of retailing in Europe and North America; but they are a radically new form of commercial urban development in Bogotá. Crucially, what is different from this earlier prototype is that the development of these new centres is being driven by the combined effects of the free movement of capital under conditions of market enablement and the globalization of commercial activity, rather than by the needs of local communities. The sector is dominated by multinational corporations. And, characteristic of all the land uses examined in this chapter, the planning system has been powerless to regulate it. This destruction of neighbourhoods and the consolidation of a new urban form appears set to continue under the neo-liberal principles of an open market and the rolling back of the regulatory powers available to planning authorities. Clearly, what is needed is a reconfiguration of the planning strategies and instrument so that the negative impacts of this new urban structure of metropolitanserving retailing centres can be adequately mitigated, while at the same time taking advantage of the opportunities that they offer to city life. It is not simply a matter of regulating where these stores should not be developed, but also to plan proactively in which areas of the city they can best be located – for example, in areas of urban renovation and redevelopment where they could effectively underpin these wider objectives.
Atomized parks and privatized recreation In the majority of cities around the world, parks and plazas have traditionally been localities for social and family recreation and interchange. Bogotá was no exception. The city’s growth throughout the 19th century was marked by the
Market Enablement and the Reconfiguration of Urban Structure in Colombia 195
concept of shared space and this pattern was reinforced when the city expanded very substantially during the 1950s and 1960s. Planning policies required integrated development of parks and recreational facilities in residential areas. Until the 1970s, all the formally developed neighbourhoods had their parks. Since these newer parts of the city were developed at rather low densities, the residential neighbourhoods were extensive in size and the parks were proportional to them. By the 1970s, the city began to develop with higher densities, and the construction of apartment buildings became the norm. Because these developments occupied smaller lots, provision of space for urban parks was, accordingly, reduced by developers – an excellent example of the weakness of plot-by-plot planning and development, rather than strategic spatial planning. Urban regulations have since been revised and require a standard open space/park provision from developers of between 17 and 25 per cent of the area of the lot, rather than proportional to the density of the housing proposed. However, these adjustments have had marginal impact because, as we have seen, during the last decades enclosed communities have become the norm and the majority of the small parks are no longer accessible as part of the city’s public realm. Instead, they are illegally closed off within the condominiums, making these middle- and upper-class ghettos more attractive to the market, while rendering the city devoid of public space. In addition, mainly as a consequence of high bank interest rates and the high costs of land, the tendency now is for condominium developments to be smaller scale and multi-phased in order to ensure feasibility and to minimize financial risks. This, in turn, has effectively accentuated the reduction in park and open-space provision and introduced even more piecemeal provision. Since high interest bank loans fund 60 per cent of residential development in the city, a small reduction in development costs can make dramatic savings. Reducing open-space provision overall, or phasing development that, among other impacts, atomizes open space, are common ways in which developers respond to financing pressures. Given the prevalence of the condominium form of development, the city is growing while open-space provision is contracting: openspace provision is largely the residual after plot densities have been maximized. This outcome is not a reflection of the lack of demand for open space, but the devaluation of public goods in a market-driven urban development model. Little more than the sum of uncoordinated segments, the disaggregated supply of open space diminishes the quality of urban design and the ‘architecture’ of the city. The growing lack of public open space in the city and the demise of public recreational facilities as a result of government policies – which, under conditions of market enablement, have divested the local municipalities of these assets – have together stimulated a huge unmet demand. This demand is now being satisfied by private-sector entrepreneurs. Numerous private clubs and cooperative recreational centres (cajas de compensacion familiar) have appeared. The former facilities are characterized by socio-economic level, the latter by employees of affiliated companies and industries. These two parallel processes are having a profound and dramatic impact upon the spatial structure of the city and the concept of neighbourhood. In the past,
196
Market Economy and Urban Change
open space and recreational facilities were articulated, as we have seen, into the social and spatial fabric of the city. Now, recreation provision is being both socially sectoralized and spatially disaggregated. This has severe consequences for urban segregation and spatial inequality. On one hand, private recreational facilities are mostly located on large tracts of low-cost land on the city’s periphery; in effect, they are becoming a metropolitan serving function (rather than a neighbourhood function), competing in a free market and only viable where development and infrastructure costs are low and where facilities are accessible to clearly differentiated sectors of society. On the other hand, parks have been atomized by the condominium form of development in such a way that they have ceased to be the centre of the neighbourhood; instead, ‘private’ green areas are hidden from the city. In short, what is at play here is the marketization or privatization of public open space and recreation facilities, which planning instruments have been powerless to resist. This outcome is both an adjunct to the wider forces of ‘marketenabled’ city-building in the residential and retailing sectors discussed above, and an inevitable response to the losses incurred in the public realm of the city. The marketization of recreation has added an extra dynamic to the already powerful processes inherent in residential and retailing development, which have atomized the neighbourhood level and reconstructed it at a metropolitan level, but ‘deterritorialized’ from its social and spatial rationale. It has compounded the already severe impacts on the urban structure of Bogotá, which weak planning machinery has been unable to counter. As a footnote, it is important to observe that while the formally developed urban areas do not have sufficient recreational space, the illegal developments that comprise much of the city have no open space or recreational facilities at all. Ironically, it is the new regional shopping centres that are becoming the recreational areas for those who have no other option.
Peripheral and metropolitan schools Like the former example of open space and recreation, school location and provision is another example of public goods provision undergoing the process of atomization and spatial reconfiguration in Bogotá. Controls on public expenditure, as part of the wider agenda of neo-liberalism, have created a situation where the availability of public schools has become problematic and the quality of education that they offer in Bogotá is perceived to be poor – a perception sadly confirmed by government data (SED, 1998). These combined effects have generated an accelerated process of school privatization. As Gilbert pointed out: ‘Unfortunately, even if education standards in the public (state) sector are better in Bogotá than in the rest of Colombia, the quality is still rather low’ (Gilbert, 1996). Of the almost 1.5 million children of school age living in the city, practically half attend private schools. What is even more dramatic is the volume of provision – four-fifths of the total number of schools are private. Currently, in Bogotá, children of all social classes, even the poorest, attend private schooling. The concept of a neighbourhood school is no longer attractive or functional in Bogotá where education is now dominated by a marketized model of provision.
Market Enablement and the Reconfiguration of Urban Structure in Colombia 197
The impact of these trends, in the present context, is to further reinforce the spatial fragmentation of the city and the loss of the neighbourhood as the traditional location for community services, of which schools are perhaps the classic example. Within a free-market paradigm and with weak planning powers, private schools now choose locations most suitable to commercial priorities and maximizing catchment areas, rather than according to planning policies that favour a neighbourhood location. The new locational pattern of educational provision, like retailing and recreation, has clearly followed a process of peripheralization and metropolitanization. In the main, it is the free-market provision in response to the shortfall in providing state educational facilities that is driving this new locational distribution. But this process is compounded by other factors. In the first place, there is the lack of a clear planning strategy across the city for the location of private schools: there is no concept of school catchment areas in the planning framework. These shortcomings are replicated in the enduring weakness of powers of intervention to regulate these developments, which, as we have seen with other land uses, is consonant with the requirements of market enablement in the urban sector. Thus, there are no requirements for residential developers to provide complementary land for school provision, nor are the planning authorities able to prevent peripheral school development despite the fact that there is no zoning to permit it to take place. Also driving the displacement of the schools to the outskirts of Bogotá is the high cost of land. Like the transformation in the locational distribution of recreational and retailing land uses, school location demonstrates how, as in all cities, ‘land pricing has had a key role in shaping urban development, the effectiveness of public intervention, and the pattern and location of economic activity’ (Harris and Fabricius, 1996, p7). In the case of Bogotá, this is evident in two respects. First, a speculative development process commenced during the early 1990s whereby the great majority of already established private schools located in central areas and in the more affluent residential neighbourhoods where land prices were high, capitalized their assets by selling their existing sites for the development of office complexes, specialist shopping centres or condominium/apartment developments. With the capital receipts, they have bought land on the periphery of the city where development and infrastructure costs are low and they have been able to build schools endowed with modern installations, allowing them to better compete in the open market for a fraction of the capital returns from selling former sites. Similarly, newly established private schools, filling the void in the state sector, have inevitably located on the urban periphery for the same reasons. Second, also evident in the changing character of private education and the competitiveness of the sector, there is a trend to provide more and more specialist education and other facilities that appeal to the increasing socio-economic segmentation of the market for private education. At the same time, a tendency for schools to concentrate on the same or adjoining sites enables them to reduce costs and maximize use.
198
Market Economy and Urban Change
Providers recognize that the market is demand driven and, thus, no matter how inconvenient for consumers, a metropolitan catchment – accessible by the city’s main highway network – ensures that market area is maximized and costs are minimized; this reinforces the peripheralization of provision. Accordingly, there are parts of the city with insufficient school provision, and others where there is over-concentration. One example is on the prosperous northern outskirts of the city where more than 100 schools are concentrated in a small area (Montenegro, 1999). Students come from all over the city, enduring an average bus journey time of two hours’ duration, not to mention the high levels of congestion caused by private vehicles, as well. Unfortunately, this process is being replicated under identical circumstances in other Colombian cities such as Medellín, Cali, Barranquilla and Bucaramanga. In a free market for education provision, since families now choose schools on the basis of financial affordability and the quality and specialist appeal of the particular education provided by a private school, there no longer exist spatial ties that integrate a school with its neighbourhood or local community. On the contrary, an a-spatial framework has emerged. In Bogotá, the process of free-market education is creating the paradox of bringing together new but smaller communities with specific educational interests and levels of affordability, but from neighbourhoods widely dispersed across the metropolitan area. As a result, the distribution of education services within the city is neither appropriate as an urban function underpinning the neighbourhood as a community unit, nor efficient in terms of the city’s urban structure and transportation systems.
URBAN, SOCIAL AND ENVIRONMENTAL EFFECTS OF MARKET ENABLEMENT In Bogotá, the reconfiguration of these four land-use activity patterns echoes the experience that other researchers have observed, that ‘neo-liberal policy-makers argued that it was unwise to disturb the market determination of the relationship between location and economic activity by government regulation’ (Burgess et al, 1997). Enhanced market forces have produced the fusion and atomization of urban uses and services, a process essentially driven by the interests of private landowners and a powerful development industry. As a result, the intermediate-level neighbourhoods in Bogotá have all but disappeared as a viable element in the urban hierarchy. The city is losing its well-established internal structure and the mixed, but integrated, land-use patterns that were found at the neighbourhood level and with which people identified. Instead, it is becoming an enormous and disconnected urban conglomeration, lacking spatial coherence other than the aggregate of small ghettos of differing land uses. These outcomes have invalidated the concepts of both an urban spatial strategy at the macro scale, and territorial hierarchies displayed essentially through the neighbourhoods as coherent social, physical and functional units. Bogotá is now characterized by the atomization of land uses and sporadic development (Pérgolis, 1998), in which the concept of the
Market Enablement and the Reconfiguration of Urban Structure in Colombia 199
spatially defined community is becoming weaker because the residents have a decreasingly strong relationship with the specific neighbourhoods in which they live. The planning authorities have lacked clear strategic objectives and effective and adaptive planning instruments that would allow them to accommodate the new development paradigm. Instead, to the extent that it has happened at all, the city has been planned and managed with a series of technocratic regulations that are increasingly inflexible and irrelevant to the current circumstances. They lack the capacity to address urban development processes that are increasingly global in origin. At the same time, the market enablement paradigm has inhibited the development of more appropriate regulatory instruments and strategies by which the public authorities in Bogotá might mediate a strengthening free-market urban development process. Privatization of urban services has further weakened the capacity of public-sector stakeholders to coordinate their activities in order to provide a more coherent spatial patterning of the city’s development. In short, displacement of essentially communitarian uses and services such as schools, open spaces and recreational uses towards the periphery is promoting an uncontrolled and unsustainable growth of Bogotá. The supremacy of ‘market planning’ over urban planning has generated numerous communities who are no longer spatially aggregated at the neighbourhood level. These are spatially disaggregated communities of users, rather than uses, whereas in the past users and uses were coherent constituents of the urban neighbourhood. This new paradigm of urban development weakens the sense of cohesion and belonging by the residents, and their sense of social control over communal activities, public goods and the public realm. While more empirical evidence and analysis are needed to develop this contention, we can already detect some trends in Bogotá. From a political viewpoint, the decline in a spatially based communitarian structure and the lack of fully accountable and empowered local authorities weaken public interest in the democratic institutions that represent them. This interest is further eroded if the public agencies appear powerless to prevent socially divisive development trends of the kind happening in Bogotá. Privatization of security in condominium and retailing developments, in a real sense, further undermines the trust people have in government and community. Accordingly, if the neighbourhood no longer exists, the residents’ sense of belonging to the city is eroded and they see less value in being represented by metropolitan authorities. Partially, at least, this complex mix may explain the failure of the local councils (JALs) in Bogotá to make an impact upon development trends and outcomes. Paradoxically, one intention of the market enablement reform programme has been to enhance urban governance and increase democratic accountability by decentralization and enhancing community empowerment; but this appears to be undermined in Bogotá by the fragmentation of communities as spatially defined. From a social viewpoint, privatization and disaggregation of urban services and functions, and the reconfiguration of the residential neighbourhood in the form of small, disconnected condominiums, have generated a major segregation of the city and have accentuated problems of inequality. When schools, recreation and shopping areas are located outside neighbourhoods, and when neighbourhoods
200
Market Economy and Urban Change
themselves become a patchwork of detached small ghettos of protected condominiums, residents increasingly lose the opportunity to create and sustain communities – a fundamental basis of the city’s social structure. Rather than schools, parks and open spaces functioning as the ‘vital centre of local life, a means of expanding the aspirations of an entire community, and a foundation for integrated development’ (Bartlett et al, 1999, pp165), in Bogotá, they have become ‘privileged and exclusive territory’. Increasingly, the city is clearly divided between the private and the public realms. Social and environmental sustainability depends largely upon the balance between these two elements of urban spatiality. Even though the local administration of Bogotá has made an enormous effort to recover public spaces for its citizens since the late 1980s, and the advances have been really remarkable, efforts of this kind must be ceaselessly sustained. But the capacity, resources and powers of the public authorities cannot keep pace with the demands for strategic and local-level interventions of this kind. From an environmental viewpoint, the elimination of the neighbourhood as a key element in the urban hierarchy, and its replacement with a high degree of atomized development, radically modifies patterns of mobility. The fusion and metropolitanization of important uses, such as education, recreation and commercial uses, and their disaggregation from residential neighbourhoods, increases journey times and distances and the overall volume of journeys that have to be made in the city. This process brings with it traffic congestion, environmental pollution and urban dis-economics, such as the diminishing quality of life and dysfunctional use of time. In the case of Bogotá, as elsewhere, the new land-use pattern of the city ‘requires longer journeys for most daily activities, [and] it has become increasingly difficult to serve by energy-efficient modes of transport’ (Breheny, 1992, p86). Finally, the proliferation of enclosed condominiums and the fragmentation of the city’s open space impacts upon the morphology, character and landscape of Bogotá. Most of the green areas of the city cannot now be seen or enjoyed by the public from the street. The equilibrium that should exist, in good urban design, between hard and soft public areas is completely severed by this process of urban transformation. In summary, ‘the environmental rationale demands the reassertion of a territorial basis for planning based on a close and detailed integration of social, economic and environmental parameters at various spatial scales’ (Burgess et al, 1997, p81).
CONCLUSIONS Using four of the key land-use components in Bogotá’s urban structure, this chapter has tried to demonstrate the link between micro-level change and a macrolevel explanation of the reconfiguration of the city’s spatial structure in which the parallel processes of metropolitanization, peripheralization and atomization are occurring. Focusing particularly on the neighbourhood, the chapter has argued that its physical disaggregation reflects more than just the loss of a significant
Market Enablement and the Reconfiguration of Urban Structure in Colombia 201
component in the city’s urban structure. At another level, the atomization of the neighbourhood and development processes that have relocated to the urban periphery land uses typically found in the neighbourhoods of Bogotá reflect wider processes of transformation. The chapter has argued that these processes have underscored the ‘de-territorialization’ of social structures, while, at the same time, intensifying the spatial representation of social inequalities in terms of access to open space, recreational facilities, schools and retailing functions. The development of exclusive, closed communities in condominiums provides a dramatic representation of the countervailing tendencies of ‘de-territorialization’ and spatial inequality. This reconfiguration cannot be explained simply by locally occurring factors – important and, in some cases, unique though these variables might be in Bogotá, such as issues of personal security. The chapter has sought to demonstrate that an important part of the explanation of this profound transformation in the patterns of urban development lies in the neo-liberal paradigm of market enablement, including deregulation, the lack of effective planning and the privatization of some urban services. Of course, the changing spatial structure of the city described in this chapter is not solely the outcome of global forces and market enablement programmes. Local factors, changing social and economic needs and the struggle for power between different stakeholders competing in the process of urban development are enduring factors that drive urban change. As in Bogotá, so in Europe and North American cities during an earlier era these forces have impacted upon urban structures well before the imperatives of either enablement or globalization characterized development processes. The point here, though, is that, at a critical era in the city’s development cycle, the impact of market enablement policies dramatically shifted the balance of competing urban interests towards private and away from public accountability and responsibility. Furthermore, this shift introduced a particularly dynamic process of urban restructuring that has affected, and continues to impact severely upon, Bogotá. Whether the neighbourhood can be resuscitated and resurrected in Bogotá remains an open question, although a pessimistic answer seems more likely. In many respects, though, this is not the fundamental issue, since the chapter is neither a call simply to reclaim an urban morphology of the past, nor to freeze the city’s structure in ways that are ill adapted to the demands of the present day. Rather, it argues that the development processes, which are reconfiguring Bogotá’s urban structure and fabric, have become increasingly detached from the capacity of its inhabitants to mediate them in satisfactory and effective ways. The explanation for this outcome offered here lies in a neo-liberal paradigm of urban development processes, which, in the longer term, is creating an urban structure that is neither environmentally sustainable, nor socially coherent. As the case of the urban transformation of Bogotá demonstrates, the neo-liberal paradigm of market enablement highlights the contradictory interests, existing within the urban arena, between private entrepreneurs, landowners and developers, on the one hand, and the planning authorities and residents, on the other. Given that market enablement policies firmly tip the balance of interests to the private sector and away from social and environmental responsibilities, reconciling
202
Market Economy and Urban Change
the different positions of the two sets of stakeholders is essential in order to establish a more sustainable urban development process. This requires that the public planning authorities better understand and mediate the behaviour of market-led urban development processes as they come to be expressed at the metropolitanwide scale. In this respect, a coherent framework of land policies to regulate the land market, and urban planning strategies for the metropolitan region that coordinate all of the municipalities, are also required (Zetter, 2002). More adaptive and flexible instruments are needed which better address the connectivity between local development patterns and the national and global forces that drive them. At the same time, regulatory powers could be strengthened; but, conversely, they have been further weakened under conditions of enablement. For example, as we have seen, a norm prohibits land owned by schools to be sold and developed for other uses. But the authorities have not had the capacity to enforce these regulations and the penalties for non-compliance are ineffective in deterring developers from risking ‘illegal’ new development of school sites. The challenge, then, in Bogotá, lies in how to reconcile these competing interests and develop effective and accountable planning machinery within a context of deregulation, a lack of effective strategic planning instruments and a public who feels disempowered from local government representation. The objective, as stated above, is not necessarily to restore the neighbourhood level of the city, but to achieve a satisfactory quality of life for the citizens, to guarantee environmental sustainability, to resolve the entrenched problems of social segregation and spatial inequality, and to maintain the city’s competitiveness on a global scale. But the role that the local authorities and the public sector, as a whole, must play within the neo-liberal and free-market paradigm remains profoundly problematic. The imposition of neo-liberal politics, such as market enablement and deregulation, upon countries in the developing world and their impacts on the urban sector are, in many ways, irreversible: these impacts are accentuated by globalization and the interests of transnational companies. While Bogotá exhibits specific instances of these impacts, many of the patterns and processes of urban reconfiguration characterize cities across the developing world, as a whole. It is precisely the tension between local and global, between domestic and internationally imposed development policies, played out at the level of urban structure which the case of Bogotá demonstrates so clearly. Bogotá serves as an example of the destructive and unmanageable impact of the externally imposed neo-liberal development paradigm. For, as Jenkins and Smith observe: ‘general policies formulated by international agencies cannot be successfully applied in different national contexts without responding to the social, economic, cultural, institutional and political context in which they are meant to operate’ (Jenkins and Smith, 2002).
REFERENCES Bartlett, S, Hart, R, Satterthwaite, D, de la Barra, X and Missair, A (1999) Cities for Children: Children’s Rights, Poverty and Urban Management, London, UNICEF and Earthscan
Market Enablement and the Reconfiguration of Urban Structure in Colombia 203 Breheny, M (1992) Sustainable Development and Urban Form, London, Pion Limited Burgess, R (1998) ‘Urban violence: The next agenda?’ Newsletter, CENDEP, Oxford, Oxford Brookes University Burgess, R, Carmona, M and Kolstee, T (1997) The Challenge of Sustainable Cities: Neoliberalism and Urban Strategies in Developing Countries, London, Zed Books Caldeira, T (1996) Building up Walls: The New Pattern of Spatial Segregation in São Paulo, Oxford, UNESCO, Blackwell Publishers, pp55–72 Cámara de Comercio de Bogotá (1996) Estudio Prospectivo de Seguridad, Misión Siglo XIX, Bogotá Crespo Flores, C (2002) ‘Structural adjustment and water supply in Bolivia: Managing diversity, reproducing inequality’ in Zetter, R and White, R (eds) Planning in Cities: Sustainability and Growth in the Developing World, London, ITDG Publishing, Department for International Development Departamento Administrativo de Planeación Distrital (2000) Plan de Desarrollo Territorial, Acuerdo 7 de 1979, Acuerdo 6 de 1990, Bogotá, DAPD Devas, N and Rakodi, C (1993) Managing Fast Growing Cities: New Approaches to Urban Planning and Management in the Developing World, Essex, Longman Group UK Limited Fernandes, E and Varley, A (1998) Illegal Cities: Land and Urban Change in Developing Countries, London, Zed Books Garcia, M and Zamudio, J (1997) Descentralización en Bogotá Bajo la Lupa (1992–1996), Bogotá, Cinep Gilbert, A (1996) The Mega-City in Latin America: Santa Fe de Bogotá, a Special Case, London, Tokyo, United Nations University Press Gilbert, A and Gugler, J (1992) Cities, Poverty and Development: Urbanization in the Third World, second edition, Oxford, Oxford University Press Harris, N and Fabricius, I (1996) Cities and Structural Adjustment, London, UCL Press Limited Jaramillo, S and Cuervo, L (1993) Urbanización Latinoamericana, Bogotá, Nuevas Perspectivas, Escala Jenkins, P and Smith, H (2002) ‘International agency shelter policy in the 1990s: Experience from Mozambique and Costa Rica’ in Zetter, R and White, R (eds) Planning in Cities: Sustainability and Growth in the Developing World, London, ITDG Publishing, Department for International Development Jones, B (1990) Neighbourhood Planning: A Guide for Citizens and Planners, Chicago, American Planning Association Leguizamón, L (1997) Manual de la Administración Local en el Distrito Capital, Bogotá, Librería Ethos Londoño, J L (1992) Bogotá: Problemas y Soluciones, Bogotá, Departamento Nacional de Planeación Mohan, R (1994) Understanding the Developing Metropolis: Lessons from the City Study of Bogotá and Cali, Colombia, Oxford, World Bank, Oxford University Press Montenegro, E (1999) Bogotá: Zona Norte, Bogotá, Departamento Administrativo de Planeación Distrital Ortiz-Gómez, A (2002a) ‘Urban planning and the rationale of the market: The elimination of the intermediate urban level in Bogotá’, in Zetter, R and White, R (eds) Planning in Cities: Sustainability and Growth in the Developing World, London, ITDG Publishing, Department for International Development
204
Market Economy and Urban Change
Ortiz-Gómez, A (2002b) ‘Incidencias del plan parcial y su plusvalía en la valoración de terrenos bajo este régimen’ in Valuación para el Desarrollo Sostenible Lonja de Propiedad Raíz de Bogotá, Bogotá, pp39–52 Payne, G (1997) Urban Land Tenure and Property Rights in Developing Countries, London, IT Publications/ODA Payne, G (2000) Making a Common Ground: Public–private Partnerships in Land for Housing, London, Intermediate Technology Publications Pérgolis, J (1998) Bogotá Fragmentada Cultura y Espacio Urbano a Finales del Siglo XX, Bogotá, T M Editores, Universidad Piloto de Colombia Renaud, B (1981) National Urbanization Policy in Developing Countries, Oxford, World Bank, Oxford University Press SED (Secretaria de Educación del Distrito) (1998) Plan Sectorial de Educación 1998–2000 de Santa Fe de Bogota, Bogotá, SED Zetter, R (2002) ‘Market enablement or sustainable development? The conflicting paradigms of urbanisation’, in Zetter, R and White, R (eds) Planning in Cities: Sustainability and Growth in the Developing World, London, ITDG Publishing, Department for International Development Zetter, R and White, R (eds) (2002) Planning in Cities: Sustainability and Growth in the Developing World, London, ITDG Publishing, Department for International Development
Index
Africa 13, 97, 133, 137–8 see also sub-Saharan Africa; individual countries aid/aid agencies see donors Algeria 45–6 Ankara, Turkey 33, 155–6 Argentina 128–9 Armenia 32, 149, 151, 152–3 Asia 45, 50, 57, 66, 158 see also individual countries Asian Development Bank (ADB) 45, 63 BNH, Brazil 33, 166–7, 168, 171, 181 Bogotá, Colombia 35–6, 185, 186, 187–202 Bolivia 13–14, 189 Brazil democratization 33, 34, 164, 165, 169, 170, 178, 179 housing provision 33–4, 51, 163, 165–82 informal settlements 34, 173–4 land tenure security issues 33, 34, 129, 137, 164, 174–8, 181 market enablement 33–4, 164, 165, 170, 171, 173, 181 squatter settlements 64–5, 164, 169–70, 173, 179, 180 welfare policies 164–5, 166, 168–9, 173 see also BNH; ZEIS programmes Buchanan, James 57, 58, 62 Bulgaria 151 Cairo, Egypt 55, 89 Cameroon 135 Central Europe 51, 151 see also individual countries Chennai, India 54, 63 Chile housing provision 24, 46–8, 50, 51, 54–5, 61, 62, 63 land tenure security issues 128 China 46, 49, 51, 134 cities economic importance 4, 5, 6, 13, 14 environmental issues 4, 13, 22, 200 government policies 5, 9, 14–15, 16 infrastructure supply 1, 6, 15, 99, 185
management 15–20, 22, 187–9 market enablement affects 4–5, 13–22, 185–7, 195, 198–200, 201–2 public sector’s role 2, 15, 17 security of tenure and property rights 33, 34, 60, 98, 125, 128–34, 137, 140 urban poverty 4, 5, 100–3 see also peri-urban space; rural–urban interface; urban development city government see local government civil society 11, 17, 104–5, 170 Coase, Ronald 57, 58–9, 60, 61, 62, 68 Colombia crime and security 191–3 governance reform 36, 187–8 land use 35–6, 191–9, 200–1 local government authority 36, 187–8 market enablement 33, 35, 185, 186, 188, 195, 198–200 neighbourhood development 35–6, 186, 190–202 squatter settlements 188, 190 urban development 19, 33, 35, 36, 186, 187–98 command economies 32, 148–50, 153, 154 community-based organizations (CBOs) 17, 106, 108, 112, 113 Costa Rica 135 crime 103, 191–2 Cuba 51, 160 developed countries 3, 8, 9, 13, 49, 55 DFID aid conditionality 87–8 poverty reduction programmes 11, 105, 107–8 on the rural–urban interface 29, 30, 125, 126 donors conditional aid 8, 9, 11, 62–3, 64, 90 housing policies 26, 32, 44, 51, 63–6, 68, 77–8, 87–8 infrastructure supply involvement 65, 97, 99 in market enablement 1, 151 in poverty reduction programmes 11, 98, 113–14, 115, 116, 117
206 Market Economy and Urban Change on the rural–urban interface 126–7 in sites-and-services projects 27, 53–4, 63, 88, 98–9 in squatter settlement upgrades 45, 98–9 structural adjustment policies 7–8, 12, 16, 168 see also International Monetary Fund; USAID; World Bank Eastern Europe 51, 151, 159 see also individual countries economic growth capability approach 42, 43, 67 in cities 4, 5, 6, 13, 14 economic crisis affects 6–7, 22, 44–5, 50, 57 growth-with-equity paradigm 6–7, 9, 21, 24, 26, 27, 33–4, 88 housing provision relationship 43, 44–5, 48, 50–1, 54, 57–8, 65–6, 69 ideological approaches 48–9, 56–8 institutions’ role 59–61 neo-liberal theories 2, 6, 8, 9, 12, 24–5, 97, 169 poverty relationship 20, 51, 57, 69, 101 supply-side approach 7, 15, 21–2, 32 welfare relationship 23–4, 42, 57–8, 124, 125, 164 Ecuador 13–14 education 10, 13, 35, 48–9, 189, 196–8 Egypt aid conditionality 63, 78–9, 87–8, 90 economic policy 26, 78, 81–6, 90–2 housing provision 26–7, 78, 80, 82, 84–90, 91, 92, 161 market enablement 26, 78 private sector influence 82, 83 reform programmes 26, 82–4, 86 social issues 78, 80, 82, 83–8, 91, 92 structural adjustment policies 83, 84, 86, 91 urban development 19, 82, 83, 87 welfare 26, 78 environmental issues 4, 13, 20, 22, 56, 62, 65, 200 equity issues growth-with-equity paradigm 6–7, 9, 21, 24, 26, 27, 33–4, 88 in housing provision 24, 25, 33–4, 45, 49–55, 67, 153 of land tenure security 34, 52, 55, 138–9, 178–9 of poverty 25, 117 of rural areas 138–9 of squatter settlements improvement 27, 50, 51 Estonia 151 food aid and subsidies 10, 13, 80, 82 Ford Foundation 63–4 foreign aid see donors
Ghana 10, 134 globalization and market enablement 3, 5–13, 14, 165, 201, 202 governance housing provision relationship 25, 45, 46, 57–61 ideological approaches 57–62 institutional-organizational form 55, 57–8, 59–60, 61, 68 market enablement relationship 8, 9, 15–20, 188, 199 the poor affected 18, 34, 111–12, 170 reform 9, 15–20, 22, 27, 28, 36, 165, 187–8 stakeholder involvement 9, 17–18, 20, 22, 28, 132, 160, 161 Guatemala 19, 136, 137 health issues 10, 11, 13, 52, 69 Honduras 134, 135, 137 Hong Kong, China 49 households financial issues 50–5, 57, 89, 100–3, 104, 118, 135, 150 in housing provision 24–5, 45, 46–8, 65, 66, 152, 160–1 livelihood strategies 10, 27, 100–1, 102–3, 118, 170 welfare issues 42, 43, 60, 65 houses and housing enclosed condominiums 35, 192–3, 195, 199–200, 201 financial aspects 19, 25, 47, 57, 89, 150 see also subsidies flats and apartments 46, 148, 149, 152, 156, 157–8, 176, 195 at neighbourhood level 35, 59, 154–5, 186, 191–3 in poverty reduction programmes 52 public housing 32, 47, 80, 87, 88, 155, 167, 169 rent and rent controls 53, 80, 82, 87, 89 self-help housing 24–5, 44, 45, 46–8, 60, 87, 169, 180 sites-and-services projects 27, 48, 53–5, 63, 64, 87, 88, 98–9 slums 18, 52, 59, 87, 88, 170–1, 174, 179 subsidies 25, 46, 47, 49–55 see also informal settlements; squatter settlements housing provision in command economies 32, 148–50 community participation 64–5, 68, 156, 160, 179 in developed countries 49, 55 donor involvement 26, 32, 44, 51, 63–6, 68, 77–8, 87–8 economic crisis affects 44–5, 50, 66
Index 207 economic growth relationship 43, 44–5, 48, 50–1, 54, 57, 65–6, 69 equity issues 24, 25, 33–4, 45, 49–55, 67, 153 externalities 154–5 financial aspects 157–8 governance relationship 25, 45, 46, 57–61 household involvement 24–5, 45, 46–8, 65, 66, 152, 160–1 housing market distortion 88–9, 92 housing reform 46–7, 48, 50, 54, 65, 67–8 ideological approaches 24–6, 32, 33, 44, 48, 49, 58–62 international housing policies 63–6, 67 local government policies 68, 157–8, 169–70, 171 market enablement relationship 148, 151, 163, 164, 171, 181 national government policies 68, 148–53, 158, 167, 169–73 see also public sector for the poor 52, 68–9, 165, 166, 167, 168, 170–1, 179–80 by the private sector 45, 46–8, 54–5, 80, 87, 151, 152, 154 privatization 32, 150, 151, 157 public sector involvement 25, 32–3, 45, 46–8, 57, 80, 85, 181 technocratic responses 2–3, 26, 45, 78, 84, 92 transaction costs 58–9, 68 welfare relationship 24–6, 45–6, 150, 153, 164–5, 166, 168–9, 172–3 whole-housing sector approach 24–5, 45, 46–8, 51 Hungary 45, 151 India 45, 49, 52, 54, 63, 137 Indonesia 13–14, 45 informal settlements growth of 4, 22 land tenure security issues 34, 169, 174–7 poverty reduction programmes 106–7, 112 upgrading projects 45, 98, 99, 104, 164 see also squatter settlements infrastructure supply in cities 1, 6, 15, 99, 185 donor interventions 65, 97, 99 importance of 45, 103 local government responsibility 16, 102 national government responsibility 64, 65, 67, 83 poverty relationship 44, 99 privatization 16, 20, 185 Inter-American Development Bank 54, 62, 168 Inter-American Development Foundation 63–4 International Monetary Fund (IMF) 6–8, 10, 26, 32, 45, 81, 83, 151 Jamaica 135 Jordan 59
Kenya housing provision 51 informal settlements 4 land tenure security issues 135, 137 local government 28, 118 poverty reduction programmes 28, 105, 106–10, 112, 116, 118 Kerala, India 49 land issues economic aspects 21, 31, 134–8, 140 government policies 32, 33, 152–3 land conversion 29, 127, 128, 132 land market 29, 30, 125, 127–31, 136, 137–8 land reform 30, 31, 125, 128–31, 132, 134, 136, 137–8 land uses 6, 29, 35, 153, 185–6, 191–9, 200–1 for local communities 31, 34 of peri-urban space 29, 30, 128 of the poor 17, 20, 33, 34, 99, 125, 129, 138 privatization 35, 36, 152, 153 see also land tenure security land tenure security 29, 33, 52, 128–39 in cities 33, 34, 60, 98, 125, 128–34, 137, 140 equity issues 34, 52, 55, 138–9, 178–9 in informal settlements 169, 174–8 in peri-urban space 30–1, 130 for the poor 21, 27, 33–4, 69, 98–9, 129–30, 181–2 property rights 31, 34, 52, 61, 128–39 in rural areas 29–30, 31, 130, 131, 132–3, 134–6 rural–urban issues 30–1, 130–1 in squatter settlements 34, 99, 173 see also ZEIS programmes Latin America housing provision 44, 47, 165, 166 land tenure security 128–9, 130 market enablement 66 poverty and poverty reduction 20, 112 urban development 186, 190 see also individual countries Lesotho 33, 159 local communities in housing provision 64–5, 68, 156, 160, 179 local government relationships 112, 177–8, 179, 180, 187–8 in participatory budgeting 177–8 in poverty reduction programmes 28, 104, 106, 108, 110, 112, 113, 116 in squatter settlement improvement 64–5 in urban development 17–18, 155, 156, 160, 187–8, 199, 202 see also community-based organizations local government accountability 111, 112, 116 capacity-building required 19, 113–14 constraints 19–20, 36, 102, 104, 111–12
208 Market Economy and Urban Change housing provision policies 68, 157–8, 169–70, 171 infrastructure responsibility 16, 102 local community relationships 112, 177–8, 179, 180, 187–8 participatory budgeting 177–8 in poverty reduction programmes 28, 101–2, 103–10, 111, 117, 118 urban development policies 19, 36, 155, 157, 159, 187–8, 190, 202 Manila, Philippines 55 market enablement cities affected 4–5, 13–22, 185–7, 195, 198–200, 201–2 in developing countries 8–11, 9, 10, 13, 14, 20, 22 donor involvement 1, 151 globalization relationship 3, 5–13, 14, 165, 201, 202 governance relationship 8, 9, 15–20, 188, 199 government involvement 2, 15, 150–1 housing provision relationship 148, 151, 163, 164, 171, 181 the poor affected 10–11, 20, 22, 171 private sector involvement 8–9, 15, 17, 21 social issues 10–11, 13, 21, 170 structural adjustment policies 1, 5, 10–11 vs welfare 26, 33, 77, 78, 124, 133, 137, 163–82 Mexico 7, 19, 33, 52, 128, 130, 136 Mombasa, Kenya 107–8, 110 Morocco 13–14 Moscow, Russia 33, 149, 155, 157–8 municipal government see local government Nairobi, Kenya 4, 20, 112 national government decentralization see local government externality control 147, 149–50, 152, 154 housing provision policies 68, 148–53, 158, 167, 169–73 infrastructure responsibility 64, 65, 67, 83 land policies 32, 33, 152, 153 in market enablement 2, 15, 150–1 policy-conditioned aid 2, 62–3, 64, 78–9, 90 in poverty reduction programmes 27, 102, 110, 111, 116, 117, 173 social contracts 22, 58, 78, 84, 91, 92 urban development policies 5, 9, 14–15, 17, 32, 147–52, 154, 160–1 see also public sector National Housing Bank, Brazil see BNH neo-liberalism in development 1, 2, 5–20, 27, 30, 97, 164, 171, 185 in economic growth 2, 6, 8, 9, 12, 24–5, 97, 169
in urban development 1, 154, 185, 186, 196, 198, 201–2 Nepal 33, 159 Nicaragua 136 non-governmental organizations (NGOs) in housing provision 54 in poverty reduction programmes 104, 106–7, 108, 109–10, 112, 113, 116, 118 in squatter settlement improvement 45 in urban governance 17–18 North, Douglass 57, 60–1, 62 Pakistan 33, 159 Paraguay 134, 135, 137 peri-urban space defined 29, 124, 127 land issues 29, 30, 128 land tenure security issues 30–1, 130 policy opportunities 29–31, 124, 125–7, 140 urban development 30, 158 Peru 130, 136 Plan de Ordenamiento Territorial (POT), Colombia 187, 188, 189–91 poverty and the poor in cities 4, 5, 100–3 coping strategies 10, 27, 100–1, 102–3, 118, 170 economic growth relationship 20, 51, 57, 69, 101 equity issues 25, 117 governance issues 18, 34, 111–12, 170 housing provision 52, 68–9, 165, 166, 167, 168, 170–1, 179–80 infrastructure relationship 44, 99 land issues 17, 20, 33, 34, 99, 125, 129, 138 land tenure security 21, 27, 33–4, 69, 98–9, 129–30, 181–2 market enablement affects 10–11, 20, 22, 171 structural adjustment policies affect 10–11, 20, 97, 117 poverty reduction programmes community participation 28, 104, 106, 108, 110, 112, 113, 116 donor involvement 11, 98, 113–14, 115, 116, 117 funding 116–17 housing provision 52 key principles 28, 104–5 local government involvement 28, 101–2, 103–10, 111, 117, 118 monitoring and evaluation 105, 107, 115, 116 national government involvement 27, 102, 110, 111, 116, 117, 173 NGO involvement 104, 106–7, 108, 109–10, 112, 113, 116, 118 partnership approach 104–5, 106, 108–10, 114–15, 118 private sector involvement 104, 109
Index 209 problems 27, 29, 107, 109–10, 115, 116, 117–18 project preparation 105–10, 113–14, 115 public sector involvement 97, 101, 103, 104–5, 107, 114, 116–17 public services provision 11, 13, 104 stakeholder involvement 11, 28, 104–5, 106, 108–9, 112, 113, 116–17 see also Poverty Reduction Strategy Papers Poverty Reduction Strategy Papers (PRSPs) 10–11, 20 private sector in housing provision 45, 46–8, 54–5, 80, 87, 151, 152, 154 market enablement involvement 8–9, 15, 17, 21 in poverty reduction programmes 104, 109 in urban development 36, 82, 83, 147–8, 154, 161, 188, 190–6 see also privatization privatization of housing provision 32, 150, 151, 157 of infrastructure supply 16, 20, 185 of land 35, 36, 152, 153 of public services 12, 16–17, 20, 104, 186, 189, 193, 199 public–private partnerships 32–3, 148, 154, 155 public sector in housing provision 25, 32–3, 46–8, 57, 80, 85, 181 in poverty reduction programmes 97, 101, 103, 104–5, 107, 114, 116–17 public services responsibility 7, 16, 104 in urban development 2, 14, 17–18, 154, 155, 160, 161 see also local government; national government public services in poverty reduction programmes 11, 13, 104 privatization 12, 16–17, 20, 104, 186, 189, 193, 199 public sector responsibility 7, 16, 104 Recife, Brazil 33, 34, 129, 164, 173–8, 181 Romania 149, 151, 152 rural areas equity issues 138–9 land tenure security issues 29–30, 31, 130, 131, 132–3, 134–6 property rights issues 31, 128, 132–3, 134–5, 138 urbanization 29, 123, 140 see also peri-urban space; rural-urban interface rural–urban ‘interface’ defined 124, 127 land tenure security issues 30–1, 130–1 policy opportunities 29–31, 124, 125–7, 140
promoting 29, 126 Russia 149, 150, 151, 152, 155 see also USSR shelter see housing provision Singapore 46, 47, 48–9, 50, 51, 55, 63, 67 Slovenia 151 Social Interest Development Zones, Brazil see ZEIS programmes social issues of market enablement 10–11, 13, 21, 170 social contracts with government 22, 58, 78, 84, 91, 92 social safety nets 10, 103, 153 socialist countries 32, 44, 45–6, 51, 59–60, 148–50 South Africa 137, 150 South America 149–50 see also individual countries Soviet Union see USSR squatter settlements equity issues 27, 50, 51 housing subsidies 54 land tenure security issues 34, 99, 173 legalization 34, 129–30, 164 resettlement programmes 169–70 upgrading projects 27, 45, 47, 54, 61, 63, 64–5, 66 see also informal settlements Sri Lanka 49, 54, 55, 113 St Petersburg, Russia 149 stakeholders in poverty reduction programmes 11, 28, 104–5, 106, 108–9, 112, 113, 116–17 in urban governance 9, 17–18, 20, 22, 28, 132, 160, 161 state see national government structural adjustment policies case studies 83, 84, 86, 91 of donors 7–8, 12, 16, 168 in market enablement 1, 5, 10–11 the poor affected 10–11, 20, 97, 117 sub-Saharan Africa 11, 14, 32, 47, 52, 57, 149 subsidies 10, 13, 25, 46, 47, 49–55, 147 Taiwan 49 Tanzania 135, 150 Thailand 66, 116, 135, 137 transitional economies 32, 148, 150–1, 153, 159, 161 UK Department for International Development see DFID UN-Habitat 4, 6, 18, 63, 105 unemployment 11, 20–1, 83–4, 170 UNICEF 98, 107 United Kingdom 110, 159 United Nations Centre for Human Settlements (UNCHS) see UN-Habitat
210 Market Economy and Urban Change United Nations Development Programme (UNDP) 5, 63 United States 7, 79–80, 81–2 United States Agency for International Development see USAID urban development community participation 17–18, 155, 156, 160, 187–8, 199, 202 externalities 147, 149–50, 152, 154–5 land pooling/readjustment (LP/R) approach 158–9 land use relationship 6, 29, 35, 153, 185–6, 191–9, 200–1 local government policies 19, 36, 155, 157, 159, 187–8, 190, 202 national government policies 5, 9, 14–15, 17, 32, 147–52, 154, 160–1 at neighbourhood level 35–6, 185, 186, 190–202 neo-liberalism affects 1, 154, 185, 186, 196, 198, 201–2 parks and open spaces 35, 193, 194–6, 199, 200, 201 in peri-urban space 30, 158 by the private sector 36, 82, 83, 147–8, 154, 161, 188, 190–6 public sector involvement 2, 14, 17–18, 154, 155, 160, 161 see also local government; national government requests for proposals (RFPs) 159–60 residential areas see houses and housing schools 35, 49, 189, 196–8, 199, 201, 202 shops and shopping centres 35–6, 176, 186, 188–9, 193–4, 199, 201 spatial development 9, 17–18, 30, 35, 185–7, 191–8, 199 technocratic responses 2, 188, 199
urban planning 12, 19, 147, 186, 187–92, 194–6, 197, 199–202 urbanization 3–5, 20, 21, 185 USAID 26, 32, 54, 63, 81, 87, 97, 151 USSR 59–60, 148–9, 151 Washington consensus 7, 66, 68 welfare capability approach 25, 42–3, 46, 50, 61–2, 65, 67 economic growth relationship 23–4, 42, 57–8, 124, 125, 164 of households 42, 43, 60, 65 housing provision relationship 24–6, 45–6, 150, 153, 164–5, 166, 168–9, 172–3 vs market enablement 26, 33, 77, 78, 124, 133, 137, 163–82 World Bank conditional aid 63, 64, 151, 152, 168 in economic crises 6–7, 45 housing finance 32, 46, 47, 53, 54, 62–3, 64–5, 168 infrastructure supply involvement 65, 97, 99 international housing policy 63–5, 66, 67 on land tenure security 30, 31, 133, 134 on market enablement 4–5, 7, 8, 9, 10, 14–15, 16, 151 on the rural–urban interface 29, 30, 126, 127 sites-and-services projects 53, 63, 64, 97 squatter settlement upgrades 63, 64–5, 66, 107 structural adjustment and lending policies (SALs) 7–8, 10, 12, 16, 168 urban management programmes 16, 19 Zambia 13–14 ZEIS programmes, Brazil 34, 129, 164, 172, 174–8, 179
