In this second conversation in a series on cities (the first is here), Mercatus distinguished visiting scholar Alain Bertaud discusses housing challenges in the developing world, what the poor really need and how markets provide opportunities to thrive. Other topics include poverty traps, the “lost wisdom” surrounding regulations and the length of Malaysian fire hoses. Bertaud covers all these matters—and others—in his book, “Order Without Design: How Markets Shape Cities.”
ROBIN CURRIE: To begin with, tell me about the main housing challenges in the developing world.
ALAIN BERTAUD: Most cities in the developing world face the same challenge: Urban planners rely on minimum standards for planning that are adapted to the middle class. That’s a problem. They should instead recognize that there are people who are not part of the middle class and have to live in informal and illegal settlements. These people simply can’t afford to meet the legal standards that apply.
CURRIE: Is that the main challenge Porto Alegre faces?
BERTAUD: Happily, no. For the most part, Porto Alegre is rather enlightened in this regard. The city planners understand that they can’t simply bulldoze the informal settlements that have developed in the city. They know that people don’t live there because they want to break the law—they live there because they can’t afford to live anywhere else.
That was a reality I wanted to reinforce in my talks and meetings in Porto Alegre—at the city council and with the mayor, at the university and with the press. My message was a simple one: You have poor people in your city. Allow them to establish their own standards in their parts of the city.
CURRIE: This visit was your first time in Port Alegre. What would a first-time visitor notice?
BERTAUD: The city works well. The center is very pleasant and well maintained, with good parks and nice neighborhoods. The poor are in the suburbs. In some parts of the city, the authorities have legalized one-time slums. But like everywhere, there are always moves to regulate.
When you visit a city for the first time, you see things that may seem abnormal and wonder why they are that way. In the poorer areas of Porto Alegre, for example, I noticed a lot of commerce being conducted from carts on the sidewalks, but no businesses operated out of the buildings that fronted onto the sidewalks. That’s because the area was considered residential only—regulators turn a blind eye to the carts, which are only “semi-legal.”
Now, we don’t want people to do things that cause negative externalities to their neighbors, like dumping dirty water in the street. But if they want to open, say, a bakery in their home, let them do it. Leave it to others to decide whether it’s a negative or a positive externality. My guess is that in poor areas, people would like to have a bakery or a shop next to them.
Besides, the business will only survive if it has clients. If nobody buys what it has to sell, then it will close. That’s the wonder of the market. The market works well for the poor if they are allowed to engage in it.
But we shouldn’t conclude that there’s a conspiracy against the poor at work here. It’s not that city planners are trying to keep the people down. It’s more a case of the oppression of the weak by the ignorant.
CURRIE: So what do city planners generally want for the poor?
BERTAUD: They think that what the poor need is more order. And their vision of order is a middle-class residential area. Also at play is a base tendency of humans: If we are in control, we must show we are in control. And to show we are in control, we must impose measures and restrictions and rules on others.
CURRIE: What has been Porto Alegre’s approach to housing the poor?
BERTAUD: Overall, Porto Alegre’s approach has been good. Many of the poor were migrants who first arrived in the city 30 years ago, when Brazil began to switch from coffee production to the less labor-intensive soya. The government was not rich enough to provide for the new arrivals, and the poor have had to fend for themselves. That’s why the objective of government should be to integrate them into the economic life of the city—and to do so as quickly as possible.
CURRIE: How can a city best integrate the poor into the economy?
BERTAUD: The government should spend whatever money it can on education, healthcare and water—not on housing. And it should allow people to develop the land how they want to. The priority should be access to land and access to transportation. That’s the best way for the poor to integrate into the economy.
CURRIE: Why shouldn’t the government spend money on housing?
BERTAUD: To provide cheap land for the poor, the government has to find it far away from the city. But when the poor settle there, they are cut off from jobs. So the settlements become poverty traps. The poor remain there, they have to rely on government and they can’t integrate. In “Order Without Design,” I argue for a better way: Allow people to consume as much land and floor space as they can afford, and link them to the labor market through transportation.
CURRIE: What should be the measure of success when it comes to housing?
BERTAUD: One thing that does not measure success or failure is the existence of slums. Many people live in slums before they are integrated. A slum should be a waiting room—and the shorter the time that people stay there, the better.
The experience of cities all around the world bears out this truth. You can’t simply demolish slums and hope people will return to the villages they came from. People vote with their feet, and they won’t go back.
We city dwellers may feel appalled at the existence of slums, without really knowing what conditions in the countryside are like. If things were better in the countryside, then people would stay there. But they know about the state of rural healthcare, job prospects and education for their children, and if people decide to leave, we have to respect their judgment. We have to trust that they know what is best for themselves.
CURRIE: What specific recommendations did you have for Porto Alegre?
BERTAUD: I recommended that they conduct an audit of the city’s land use regulations. That’s important because somebody at some point decided they needed these regulations, even if today we no longer understand why. Everyone just assumes they were established based on some “lost wisdom” and that it might be hazardous to remove them from the books.
When I was in Malaysia, for example, I noticed that regulations required city blocks of 60 meters or less in residential areas. That took up a lot of land that could have been used for housing. Nobody in the Kuala Lumpur planning office knew why they needed such short blocks but assumed there must be a good reason—drainage during the monsoon season, perhaps. Finally I found a municipal engineer who knew why: The normal practice was to locate fire hydrants at the end of a city block. And because the fire hoses used by firemen were 30 meters long—probably a holdover from British colonial rule—the blocks could not be more than 60 meters in length!
CURRIE: So should we have no regulations?
BERTAUD: No, not at all. We need some regulations—for sanitation, fire and so on. Otherwise things would be unmanageable. But we have to find a justification for a regulation.
Years ago I worked in the city of Tlemcen in Algeria, and I saw that homes had to have a setback of five meters on the sides of the lot. I asked the local officials why. “In case we ever want to build a new road or a wider road,” they said. I asked if they had ever had to do that. The answer was “No, but we have the setback just in case.”
“Just in case” is an expensive price to pay. It’s better to leave matters to the market. In the United States, for instance, some homeowners may want to have 50 feet between their house and their neighbor’s house. That’s up to them. Others would prefer to live closer to the city and on less land. Again, that should be up to them.
In a way it all goes back to Friedrich Hayek and the knowledge problem. An urban planner doesn’t really know what is and what isn’t a priority for the poor who come from the countryside and settle in the city. But we can assume they are not stupid, that they are making decisions in their own best interests—that they know things that the rest of us don’t.
This approach is not how the planning school works, of course! The planning school thinks this way: “The people who live in slums are uneducated and don’t know how to build properly. So if they have narrow streets, it’s only because they don’t understand that it’s good to have wide streets. In other words, they’re stupid.”
The poor build the way they do because there is so little land and land is expensive. So they make a tradeoff between land used for dwellings and land used for streets. They build the way they do not because they are stupid, but because they are smart.