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Index for my Toronto Budget 2004 project
Another Anti-New Deal Column
03/02/2004

A reader wrote to me to point out Tuesday's opinion piece in the Globe and Mail, "Save us from city saviours" by think tank fellow Patrick Luciani. (Thanks A.L.)

Following in the footsteps of Claire Hoy, Patrick Luciani has come out to bash the idea of a New Deal for Cities. Both men are particularly concerned about the prospect of giving municipalities broader taxing power.

After Patrick wastes half his space attacking a straw-man version of what the New Deal is supposed to be about, his remaining argument seems fairly simple. Let me summarize it:

Cities don't create wealth, businesses do.

Competition is between businesses, and businesses locate and flourish in places where taxes and laws are favourable.

Giving cities free reign to collect taxes will decrease competitiveness and hurt cities. What we really need to do is lower taxes!

I happen to agree with part of this. Contrary to anything I may have said before, cities do not create wealth. Of course, businesses do not create wealth either. Only people create wealth, beyond what we're given by nature.

When people talk about "cities creating wealth" in the context of the New Deal, they are talking about either, or both, of:

  • The fact that cities are where a lot of high-value productive work takes place, and as a result, city residents and businesses pay most of the tax that keeps Ottawa and the provincial governments in business.
  • The notion that cities are meeting places where a diversity of people get together, build off each other's ideas, innovate, and create new forms of work.

The first of these points, when combined with the realization that modern cities face special challenges (like absorbing foreign immigration), explains why cities need to get a bit more money back from the higher levels of government.

The second of these points -- the subject of The Economy of Cities by Jane Jacobs -- is the antidote to Luciani's anti-tax, anti-government poison. It suggests that new growth isn't simply about providing the lowest possible taxes, but rather fostering an environment where new ideas easily spin off of others. Cities happen to be very good incubators of this type of activity, and letting our cities decline into undesirability isn't going to help.

Overall, Luciani seems to argue for no new spending on cities. Here in Toronto, where we are fighting gridlock, crumbling infrastructure and overwhelmed social services, his plan doesn't seem like a winning way to improve our quality of life, in the short or long runs.


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