Let’s Bag Bastiat and Build Parks
In the 1830’s, the French economist Claude Frédéric Bastiat outlined a parable about a shopkeeper’s windows that can be summarized: don’t break windows to keep glaziers employed. He said, “if you come to the conclusion that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, "Stop there! Your theory is confined to that which is seen; it takes no account of that which is not seen."
It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented.”
This parable has become law to economists, “one does not destroy assets to create wealth”. In today’s economy, one does not destroy excess houses or commercial buildings to create or maintain wealth in the U.S.
But would Bastiat have proposed this theory if the shopkeeper, as a result of easy money and artificial incentives to build and buy windows, ended up with too many windows? With windows everywhere in his store, the shopkeeper’s heating costs exploded during the winter and the heat was unbearable during the summer. He never had privacy, his shop had no walls for shelving, vandalism increased, and his customers just window-shopped and never walked into the store. The windows had become a liability to his store and no longer an asset. The shopkeeper became better off by breaking the windows and replacing them with walls and doors. He didn’t worry about the windows or the glaziers; he worried about his store.
Bastiat should have modified his theory, saying that if a shopkeeper has the appropriate number of windows for his building, then don’t keep glaziers employed by breaking windows.
Now, let’s replace the shopkeeper with the U.S. economy and the shopkeeper’s windows with commercial and residential buildings. The U.S. economy is like the shopkeeper who bought and built too many windows. Economists are currently saying … don’t destroy the excess buildings to keep construction workers employed.
But the vacant houses and empty retail stores are becoming liabilities to this economy. There are 19 million vacant houses in the U.S., almost 15% of the 130 million total units in the U.S. In the retail area, the vacancy rate at neighborhood and community shopping malls has risen to 9.5% from 7.7% a year ago. Between 1990 and 2005, consumer spending per capita rose 14% adjusted for inflation, yet retail space in the U.S. rose 100%. According to Ellen Dunham Jones and June Williamson, authors of “Retrofitting Suburbia”, the U.S. has six times more retail space per capita than any European country. Just check out deadmalls.com to see some of the retail vacancies. With internet shopping increasing 15% a year, the excess retail space will continue to grow. The shopkeeper known as the U.S. economy has too many windows…too much residential and commercial development.
Trying to maintain these excess buildings is draining resources from the economy. The buildings need to be heated and cooled, costing energy dollars; they need to be protected, using police and fire resources; they need to be maintained, utilizing workers who could be allocated to other projects; they need to be financed, costing capital that would be freed for other investments. These excess real estate assets are dragging down neighborhoods, local businesses and responsible homeowners. They have become liabilities for the U.S. economy. They have required the Federal Government and the Federal Reserve to commit almost $14 trillion to support the bad paper behind these excess assets.
It’s time for the shopkeeper to break excess windows and replace them with doors and walls. It’s time for the U.S. economy to replace the excess development and … BUILD more urban and suburban parks. Urban parks support public health, workforce development, the economy, the environment, education and community cohesion. From mitigating the damage of stormwater runoff to providing sports programming that supports at-risk youth; from attracting tourists to increasing property values and property taxes, they are critical to the viability and sustainability of our nation’s urban communities where a majority of the population resides.
If the federal government allocated $200 billion a year to a program of buying vacant real estate and building urban and suburban parks for the next ten years (remember $14 trillion has been committed to backstop Wall Street), the changes would be dramatic. In sunbelt cities like Atlanta, Dallas, Miami which have grown dramatically since the 1960's without substantial regard for public spaces, multi-year land-use plans could be developed, and areas could be identified that could make the cities more livable. New great parks designed and built by local citizens for themselves would blossom around the country.
Besides making the country a nicer place to live, the park initiative would have a major positive, secondary effect. Capital would be available to buy underutilized retail space and vacant homes, providing REAL liquidity in the commercial real estate market. In the residential market, homeowners wishing to “cash out” of their housing investment would have new buyers for their assets. The $14 trillion committed to Wall Street would go to Main Street where it belongs. Construction jobs would be re-ignited as demolition work and landscape architecture would turn into growth parts of the economy
The stimulus would be transformational. Those empty strip malls of the 20th century could become the Central Parks of the 21st century.