How can we best talk about people in a finance course?

By John Macomber

A student wrote to me offline with the observation I’ve paraphrased below. My email reply follows below that. I’d be interested in thoughts on how to expand an infrastructure finance course from “develop property” into “develop human beings” while continuing to exercise a finance, investment, entrepreneurship, and big business toolkit.

This passionate pain point (sorry about the PPP again ) is a good angle for final essays on the blog (should you be looking for a topic later today).

To me this conversation also underscores the potential learning value of this experimental blog in drawing out points of view or lines of reasoning that didn’t get expressed in class (for any number of reasons). Other recent posts expanding on what was not said in class include but are not limited to:

Other Recent:

And the counterpoint “cities = cash flow for services” view is in this comment:

Student wrote:

I deeply appreciated a late comment in our class on Masdar and KAEC. The observation came up that in the previous 115 minutes of discussion, we hadn’t focused on the people necessary to populate two of the world’s newest cities. This was spot-on. Perhaps my biggest takeaway from this semester is that when we talk about cities, our gaze is often misdirected. We focus on the hard infrastructure—roads, water pipes, power plants, houses, hospitals, malls, high-rises, etc.—all of which are important components of cities. But cities are literally nothing without people to inhabit them.

I was struck by the difference between KAEC and the Kumbh Mela. To me, KAEC is nothing more than a cautionary tale—how not to construct a “city.” KAEC was all about the infrastructure—big, important, expensive projects, spread over a huge area, that now lie half-completed and empty, with no people and no path forward. The failure to plan for workforce housing epitomizes the hubris of KAEC’s top-down, central planning—the infrastructure and buildings, it seems, were to appear magically, with no people even necessary to construct them.

The Kumbh Mela, on the other hand, is all about the people—100 million people flowing to one spot in a condensed period of time. The infrastructure is barebones at best—roads, bridges, lights, some toilets, some tents. But once the people arrive, a flourishing place arises. People eat, drink, sleep, buy, sell, worship, and celebrate—the people themselves create commerce and culture.

Cities are largely self-generating. This is true even in the world’s richest country in the 21st century. As Joe Nocera noted recently in the New York Times, the recovery of New Orleans’ Ninth Ward is largely happening in spite of, rather than because of, top-down official action.[1] The returning residents are doing it themselves.

Masdar, KAEC, and South Saigon —a rich suburban satellite—are not the answer to the urbanization challenge the world now faces. The millions of people migrating to cities worldwide are not rich, and, the cities where they are settling are not rich either, and often not well-governed. The result, of course, is massive, unorganized slums.

Kumbh Mela, however, may be the solution. The Indian government successfully housed 100 million migrants for $200 million. That is an astounding return on capital. There is no reason Kumbh Mela can’t happen ten times, or a hundred times, the world over. The demand is there—the people are coming. [See my comment post here – John M]. Governments can lay down roads and provide basic utilities—requiring neither great expense nor great expertise—and get out of the way. Once the people arrive, they will erect shelters, raise families, open businesses, and spend and earn money. Land values will increase. A virtuous cycle takes hold. The government can then grant title to the migrants, formalize their businesses, and begin to collect taxes. A portion of the new revenue can fund schools, hospitals, police stations, permanent utilities, and other more expensive infrastructure projects.

Government, big business, small entrepreneurs, and NGOs all have a role to play in urbanization. But ultimately, people—not government, not business—build cities. When we talk about cities, we need to talk about people.

I replied:

This argument is well taken. I wonder how we could structure that conversation with a beginning, a middle, and end, and some takeaways?

One factor is to consider scope of the material. This course is framed as infrastructure finance course (that’s what the IF is for in SC:UIF), but exercising finance and construction tools alone is no more working on the whole system than the orthopedics course alone addresses the whole body in med school. Ideally the material provides students with a piece of the toolkit, as do FIN and TOM and LCA, then you use the tools as you see fit.

A number of other students also wrote about Kumbh Mela. I was very moved to be at the Mela and that’s why I showed the KM slides (and why I went). Check out Deepa’s post here in which she challenges me and the class with respect to Ho Chi Minh City and the role of government.

Another theme for a post would be to develop what to talk about when we talk about people. What would we cover? As you know my particular focus is on water, transit, and electricity so that people can then make their own opportunities. Many other scholars and investors and agencies emphasize soft infrastructure like schools, hospitals, social safety net, fire department and police, or courts and banking infrastructure. Others emphasize the basic elements of employment and urban development – feeling that jobs will follow. I’m out of my element if we are going to “talk about people” other than on the above indirect criteria. What would the ideal course module be? I’d love to be able to add something that was more than Oprah.

Anyway I think your essay is excellent and I will look forward to seeing if you develop this idea further with respect to PlaNYC (also light on “human beings” in 202 pages) or blog responses.



4 thoughts on “How can we best talk about people in a finance course?

  1. This is a great discussion. Acknowledging that the Mela lacks an economically viable ‘reason to be’ is essential as we consider how to use it in a course like this.

    I think one interesting way to frame the discussion going forward is to ask: what public services are actually economically appropriate for the government to provide? For example, what if the government in KAEC stopped at building roads, utilities, and perhaps working dormitories? (Note: I think of the port in that case as an investment, rather than a public service.) Is there any reason for the government to actually build a public school? Most of the construction and port workers will be blue collar workers—at the scale of poverty and urbanization we’re seeing, the harsh reality of this type of immigration is that KAEC should be able to find plenty of these workers willing to come without any family or children. As the city develops and new businesses grow (think of PlanIT Valley at the opposite end of the spectrum), perhaps the workers they will attract will now demand educational opportunities for their kids. But at the point that enough local businesses require a secondary school in order to recruit top workers, could the businesses themselves to pay for the school, for example in a private school?

    When would the city itself want to start offering public schools? First, when the local population demands it. But when the population of a city like KAEC or the UAE is entirely expats, the government may not really accountable to the requests of most of those residents (they can get free education in their home country). Alternatively, there may come a point where the city could benefit from a steady supply of educated worker in order to continue to grow and develop. It is at that point that the city would start considering technical training programs as well as primary and secondary schools. Exploring these tipping points—when it becomes worth it for government to put in something more than roads and utilities as public services—should continue to be a part of the conversation in this course.

  2. Pingback: How can we talk about people and cities in an infrastructure finance course? | JohnMacomberWeblog

  3. By John Macomber

    I like the general argument a lot but wanted pre-empt comment on one point: “Why can’t Kumbh Mela happen 100 times?” Largely because there is no economic value creation in Kumbh Mela. It’s not a real city; it’s a festival (that’s what Mela means). There is not farming, or manufacturing, or mining or services. The cash to pay for the event comes from the general revenues of Uttar Pradesh and the Government of India. Those funds are collected through taxation of economic activity elsewhere. There are only three ways to pay for public services and infrastructure: tariffs, taxes, or transfers. Kumbh Mela is paid for by transfers from other places, as is the Charles River Riverfest.

    My other observation of the Kumbh Mela is exactly in line with the student query. Government allocated land, put down roads, provided electricity (a lot of electricity), provided police and fire protection, and largely got out of the way so that the non-government actors could do the rest.

    John Niehaus’ post articulates this a little differently: a city needs a reason to be! The people have to want to go there for something (this is also a theme throughout the KAEC case). John expresses this as “natural gathering points”:

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