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The New Localism: An Interview with Bruce Katz

Through many different ventures, Bruce Katz is currently one of the leading voices on metropolitan finance and public policy. After graduating from Brown University and Yale School of Law, Katz worked in the Senate Subcommittee on Housing and Urban Affairs, eventually ascending to become Chief of Staff of the Department of Housing and Urban Development under Secretary Gil Cisneros. In the 2000s, he left public service for the Brookings Institute to start a think tank on cities, where he became the Institute’s inaugural Centennial Scholar. It was during this time that he wrote The New Localism and Metropolitan Revolution, two books which have been widely influential in urban public policy since their publication. Katz currently leads the Nowak Metro Finance Lab at Drexel University, serves as a visiting Professor at the London School of Economics, and continues to advise leaders from the municipal to the international levels on innovations in metropolitan finance.

James Hardy: For those who haven’t read it, could you give an elevator pitch for new localism?

Bruce Katz: Well, I wrote the book in the year after Donald Trump was elected president and after Brexit passed in Britain and the rise of the far right in multiple countries like Germany and Sweden. So the book was really about how cities could be a counter to the rise of populism in the West. And it was basically to say that cities are not governments. They’re not like the federal government or state governments or provinces, they’re networks of corporate, civic, public institutions, and leaders. And therefore they tend to be hyper-pragmatic and hyper-focused on problem solving in innovative and inclusive ways. So the book was really written to basically say populism is on the rise in many of our countries, but cities, if they strengthen these collaborative networks of leaders, can navigate through this period and still get stuff done and still leverage up large amounts of capital for transformative effect.

It’s really a statement that this is a century of networks. The 20th century was more about big government in many respects, the 21st century is more about agile, entrepreneurial, multidisciplinary networks. That describes cities. And if you believe that power belongs to the problem solvers and that a good portion of those problem solvers concentrate in cities and metropolitan areas, the real question is, just how do you organize for success? And how do you prioritize those challenges and those real concrete, specific projects and initiatives that need to get designed, financed, and delivered? So the book is really about positive, affirmative progress that is consistently being made in cities and metropolitan areas across the US. And in many ways, in my view, when we think about the hierarchy of power in the US, cities are at the top of the hierarchy, because they’re the ones actually doing the work. The federal and state governments, in my view, are really in service of that as opposed to being the apex of power in the US.

JH: When I spoke with Chattanooga Mayor Tim Kelly, who named your book as part of what inspired him to run for office, he talked about cities needing to cut all “extraneous crap” to be competitive in a few specific areas. You wrote about how cities’ poorer residents are often left behind in this kind of development. How do you compromise the extremely business-like mentality required to chase that growth with the need for often costly reforms in a city?

BK: This is very timely because I’m writing a paper about how the post-pandemic economy can be more inclusive and sustainable, because in many cities in the US, there are neighborhoods that were really segregated by large federal infrastructure spending going back to the 1950s, and then by redlining, going back to the 1930s. These are places that have really experienced decades of disinvestment. I think when cities unlock the true power of their economies and their anchor institutions, their universities, their hospitals, their corporations, their governments, there’s enormous power and potential to raise incomes, build wealth and regenerate neighborhoods for the people who live there, but it’s got to be intentional and deliberate. The market won’t do this by itself, the market won’t regenerate commercial corridors in disadvantaged neighborhoods by itself. That requires certain kinds of community equity institutions.

The market won’t use the procurement of goods and services from universities and hospitals and infrastructure agencies to grow Black and Latino business, that has to be deliberate. Workforce diversity, upgrading the skills of residents in low-income neighborhoods to participate in next generation infrastructure, particularly around renewable energy—that has to be deliberate. So I do think that what cities provide is sort of an economic platform and a network governance, and that enables them to ensure that you can lift all boats. But there’s no program for this, really. This is more about an ethic and a modus operandi. It’s a way of operating, it’s a way of thinking. So, I do believe that as we’re making equity and inclusion and diversity a high priority, even the central priority of our work post-pandemic—as we should—cities really do have the civic agency, the market power and the network power to unlock the full assets of these disadvantaged communities.

JH: A problem that I see development facing is the intentions of creators clashing with their financing. As an Atlantan, one example that comes to mind is Ryan Gravel leaving the BeltLine partnership because he felt they weren’t creating enough affordable housing around it. When you have a formal structure of cooperation like that, and we still face these issues of the initial goal of the creator being thwarted, in a way, by capital, where do you find compromise? How can you create sustainable, equitable, or “clean” development?

BK: So you gotta fight fire with fire. I mean it’s the bottom line. Collaboration is not enough to avert the market effects of large-scale public infrastructure, whether it’s the Beltline, whether it’s the High Line, whether it’s a transit extension, you name it. There’s a chapter of the book on Copenhagen. I do think what differentiates the Nordics, the Germans, and the Dutch from the US, is they have institutions—sometimes they’re public, in the US they probably would be public-private or private-public—that have a capacity in the capital and in the community standing to have a portion of the revenue, the value that’s created by these large infrastructure investments, to then be used for public purpose. To build that affordable housing, to mitigate the gentrification or displacement effect. In Copenhagen the value rise along the harbor front and between the downtown and the airport was used, in part, to back the financing of a 21st-century transit system. In the US, you would basically tax yourself usually through a sales tax to build a transit system, like Los Angeles has done. In Denmark, in Copenhagen, they use the rise of value along the waterfront to finance their transit system; there was no taxation of their citizens to do that. They use an interplay of public investment and public wealth, as opposed to just using public investment to spur gentrification and private wealth. It’s a different balance. And I do think we have examples of this in the United States, in Cincinnati with the Central City Development Cooperation, in Tulsa now. Tulsa is creating an authority on economic opportunity based on the Copenhagen model, which I’ve written about. I wrote about Tulsa last year because this is the first time that someone is trying to take what is a public asset corporation model developed in the Nordics and Germany and bring it into the US. And that leads me to believe that if Tulsa can do it, other places can do it. And then we’re off to the races.

JH: What I’m gathering from your description of the Copenhagen model, it sounds like there’s still gentrification, there’s still the surge in prices, but it’s just financing public goods.

BK: We have a different interplay between the public and the private in the US. We don’t have these intermediaries or institutions that have a different balance around who owns the value when it’s created by the public sector. Now, the pension funds are making very positive returns in Denmark. Developers are doing quite well, thank you, but the public is basically also experiencing a portion of the rise in value so that they can reinvest and there, they decided to do it around a transit system. In Hamburg, it was more around renewable energy and the clean energy transition, but affordable housing could clearly be an eligible use of public wealth or public reinvestment. I think the US tends to be a highly parochial place, really, and so the reason why we brought in the Danish and German models, Singapore, obviously, is we can learn a lot from others around the world. And then we have to retool our institutions—most of which were built in the 30s or the 50s—like what Tulsa is doing. Then we can essentially bring other people along for the ride, so to speak, and mitigate the externalities of these large infrastructure investments, gentrification, and so forth. I think in the end, every place can decide what they want to do with this revenue. In Copenhagen they decided, “We want to build a world-class transit system.” All power to them, but that may not need to be the investment in another place and affordable housing probably is the existential crisis of many of these cities today, so [financing affordable housing] makes an enormous amount of sense.

JH: I feel like I see a lot of community organizers in the United States talk about preventing new projects in neighborhoods specifically to prevent gentrification, but this is kind of a model that says, “We know that if we improve this neighborhood gentrification is going to occur, it’s just about where the profit goes.” It’s very interesting to see this kind of acceptance.

BK: Well, also you want value because, with these deep racial and ethnic disparities of wealth in the US, if we want to basically reduce those disparities, most wealth is created through home ownership or business ownership, or investment in the stock market. I think we really have to focus on what the end game is here. And in many respects, a lot of my focus is on how, in these disadvantaged communities, we upgrade skills, we raise incomes, we increase ownership of land, buildings and businesses, and we build wealth. I think that has to be part of our focus. At the same time, we have mechanisms to mitigate the effect of gentrification and disinvestment. Or gentrification and displacement.

Actually, I think in most disadvantaged communities in the US today, the issue is not gentrification, the issue is disinvestment. We tend to sort of treat our country as if it’s a one-size-fits-all. It’s so varied. It’s so big that when everyone says, “Okay, we’re all now gonna stop gentrification.” What you’ve really done, in most parts of the US, is stop positive investment and positive wealth building. It’s the opposite really of what I think many residents want at the end of the day.

JH: You noted the importance of aggregating municipal powers to develop these strong innovation districts, partnerships, etc. Many cities have seen the reverse, moving toward further splintering of jurisdictions. So what do you do when the pendulum is swinging the opposite direction?

BK: In some respects, the suburbanization of the United States is really about segregation by race and class, and particularly given the radical decentralization of the American population that followed the Second World War, facilitated by interstate highways and FHA mortgages and all the rest of it. I think these efforts within cities to sort of separate themselves are not really likely to succeed, and frankly, we should be moving in the opposite direction of trying to find ways to—as New York City did in 1898, really, Toronto has done more recently—aggregate up municipalities into strong metropolitan areas, because that’s the real unit of the economy. And the bigger your city landscape is, the more likely you have sort of the ability to cross-fertilize and have sort of a fiscal shed and an economic platform that are going to have a large effect.

NIMBYism and the desire to separate yourself are always going to be built into our culture, but to a large extent, they go against the grain of, I think, the way in which the 21st century operates. We’re a very philanthropic-oriented culture in many ways. And because De Tocqueville, going back couple of hundred years, I think really understood how much more the US gravitates towards voluntary civic participation, I think the major ethic in this country is around giving back in many respects. You go outside the US, the distance between the public sector and its role and the private and philanthropic sectors are vast. Most of these other countries are really public sector led. The US is somewhat of an outlier by being network-led in our cities and metropolitan areas, and that allows for more creative solutions, more sustained efforts.

But there is a segment of our population that wants to draw up the drawbridge. “We have ours. We’re gonna keep it. We don’t want anything changing.” So we need to constantly try to have leaders who remind all of us about what is possible when we work together and work for the broader good. But what may be worse now, much worse, I mean much worse, is the poisonous partisanship in this country. Cities and metropolitan areas may be the last bastion where Republican leaders and Democratic leaders do work together around very specific things. We need to expand our airport. We need to modernize our port. We need more investment in our manufacturing platform. We need to find nodes of commerce that can really be bulked up. Main streets across cities and suburbs that might have common purpose. So there still is a bipartisan collaboration that happens at a natural level, at the local level, that doesn’t happen nationally or in many states. But that doesn’t mean that segments of our population try to wall themselves off from social ills or, “We have ours. We’re done.” But I don’t think that’s the majority. I still think that that’s a sort of very vocal, a very powerful minority. But it just requires places to collaborate, coordinate, marshal their energies to get back to the broader purpose.

JH: Now you mentioned siloing, in the book, of responsibilities at the local level. What are common forms of silo busting that you’ve seen in the country right now at that level?

BK: Well, this is a very timely question because the siloing in the US, which is quite similar to outside the US, is around national governments. And to some extent, because of the power of national governments in the 20th century, a lot of states and provinces and even cities reflect bureaucracies that are highly compartmentalized. We have a Department of Transportation. We have a Department of Housing. We have a Department of Environmental etc., etc. At the local level, what’s different is that cities in metropolitan areas tend to think about places: The waterfront, the downtown, a commercial corridor, an innovation district, an industrial corridor. And when you think about territory as opposed to just a subject matter, you tend to think across. You tend to think horizontally as opposed to vertically. And you tend to think about how do you integrate and combine different kinds of infrastructure investments, energy, transportation, digital, with housing workforce and economic development, etc.

So to some extent what’s happening right now, because of this unprecedented federal investment in infrastructure, is the feds are sending down literally hundreds of programs across dozens of agencies. It’s a Rubik’s Cube of investment, which is fairly typical of national government. It’s at the local level when you think about, well, what do we really wanna achieve with all this? And where do we wanna achieve it? It becomes coordinated and blended. I think what’s interesting about cities is they’ll take a challenge like climate change and they’ll create these climate commissions that cut across multiple agencies, multiple investments, public, private, and civic. Or they’ll take an issue like racial disparities, neighborhood distress—like in Charlotte, they’ve had this racial equity initiative that cuts across many different kinds of interventions, which in government tend to be completely balkanized and fragmented. So I do think what happens in cities almost organically is it has different sectors coming together. They do tend to think about these issues in radically different ways.

At the federal level, if you talk about traffic congestion, the answer is widen the road. That was the traditional answer. At the local level the answer might be, well, maybe we should have people living closer to where they work, or maybe there’s a technology. They always tend to think more broadly, more horizontally about these challenges as opposed to these rigid, specialized, almost deified, separate areas of our economy and society.

JH: On the note of federal funding, what are the changes that we’re currently experiencing and how are cities’ policies reflecting that?

BK: The Department of Housing and Urban Development in the ’90s was already beginning to lose a lot of staff, like the bulk of the federal government. So the federal government has been degraded. It’s like a shell of its former self. What it then has done is, de facto, it’s delegated a lot more responsibility down to cities, suburbs, metropolitan areas and states. No one wrote a memo from the federal government and said, “Hey, by the way, we’re gonna cut our staff. We’re gonna drive early retirements. We’re gonna lose our expertise, you’re in charge.” But that’s essentially what’s happened.

So they’re an investor—and right now they’re a very big investor—but frankly, all the prioritization is happening at the local level and that’s how it should be. Pittsburgh is not Phoenix. They need different kinds of interventions to match their different market and social conditions and past investments and all that. So in a country our size, I think this decentralization of decision-making is very healthy if it’s matched by local capacity and local vision and local networks. But the reality in the US circa 2022 is we focus a lot on what Congress is deciding about investments, when the real action is on the ground. And new localism to me is just the reality of how our country functions, but we still act as if we’re waiting for permission from the President or from the Senate or the House, which is absurd really. It’s not how Americans operate. We don’t ask for permission, we barely ask for forgiveness. We just sort of do and a lot of that doing is local.

JH: In his critique of the book, Joe Cortright likened new localism to devolution. Is that accurate? Would you say it’s devolution, or would you say it’s something else?

BK: I actually wrote a paper for the Brits about this because they’re going through their own devolution effort. Britain is a highly centralized system. All the power really sits in Whitehall within London. I think the US is a combination of devolution of power from the federal level down, and evolution really of network governance from the bottom up. And I think evolution probably is as important if not more important than devolution at times, because so much activity in the US is driven by the private, the nonprofit, and the philanthropic sector. If you think of any city—I was on a call with Detroit this morning—what Ford Motor Company’s doing in Courtown, what Dan Gilbert’s companies are doing in downtown along the Riverfront, so much of what happens in the US is driven by large private and philanthropic entities that remain seriously committed to their community. And it’s a very different kind of public-private civic partnership than what exists in any other part of the world. Where the public sector in other parts of the world would tend to drive a lot of things, in the US in many cities, it’s driven by the private and the civic. And I think that just works. I think that enables again, more innovation, more creativity, more variation of responses that ultimately can be scaled and replicated and done. But I think that the US is just a fascinating place, and it’s not the way we describe it is. I mean, I think new localism more accurately describes how we actually function as a country, than older views of federalism. So devolution, yes, but evolution, it’s the de Tocqueville vision of the United States that is brought to its full realization.

JH: We mentioned the changes post-pandemic and the paper you’re writing. Is there anything that you would’ve wanted to add to this book? If you had written it after the pandemic, what would be different?

BK: Yeah, I think that’s a really good question. I just gave a speech called “The New Disorder.” Not “The New Normal.” I don’t think there’s a new normal right now. I think there’s a new disorder, and we’re not entirely sure what is gonna happen. So we’re gonna go through a fog of uncertainty here for a period of time. I would say that if I was writing the book now, I think I’d be more worried about the rise of what I call parasitic capital. There’s so much private money in the US, and global funding, that is looking to literally buy up whole portions of cities. They’re not locally grounded, they’re global, so they don’t have any commitment to place like Ford Motor or Dan Gilbert. These are equity firms, whether they’re based in New York or London or sovereign funds elsewhere, either the Middle East or Singapore or whatever. So I think I would probably sort of, whenever I’m in a dystopian mood, spend a little more time on the role global capital plays in cities, which I think has been unleashed and unlocked by this pandemic. It started really after the recession at scale. But now it’s just hit full fruition. So who owns the city is, I think, a fundamental question post-pandemic. I would say the other thing is just we’re not just undergoing the rise of remote work or eCommerce or dollar stores, or there’s a lot of parasitic activity or technologically driven dynamics that are underway right now. So I probably would spend a lot more time on what I call The New Disorder, the context in which cities function, because I think it’s upheaving some of our settled views about the role of downtowns, the role of production, etc.

*This interview has been edited for length and clarity.