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How Can Bright Green Cities Thrive Without Capital?
Alex Steffen, 26 Oct 09

Bakery.jpg

What do you do when things are booming but your credit's dried up? Perhaps you begin to invent new ways of doing business.

U.N. Habitat recently released a report showing that the pace of urbanization is increasing, with "200,000 new dwellers flooding into the world cities and towns each day." That's like a new city the size of Seattle, Washington D.C. or Copenhagen springing up every three days. And while it is true that in the Global North, some industrial areas have become home to shrinking cities and others are in line for massive climate troubles, the trends suggest that most cities that are growing today are going to see long sustained booms in population.

But our cities are not only growing quickly, they're getting younger. We live on a young planet, with two billion people under the age of 15 and a median age of only about 27, worldwide. Already there is a massive unmet demand for jobs, housing and services. Youth unemployment is at its highest level ever in many countries, but that doesn't mean young people stop living. Indeed, while some of their energy is channeled into destructive outlets, from gangs to terrorism, evidence suggests that there's been a much larger explosion of activity in the so-called "informal economy" -- everything from "gray market" trading to casual labor to microbusinesses and community efforts. A faltering economy doesn't mean an end to enterprise.

Bright green innovations are generating all sorts of new business frontiers as well. Green building and design innovations spur new possibilities for development and renovation. Smart technologies drive new ways of looking at shared goods and spaces. Attention to foodsheds and footprints enable new models of feeding and clothing ourselves. The list goes on.

So on the one hand, we have the material for a remarkable boom: rapidly growing cities full of energetic, young people with unmet needs but access to a wave of bright green innovations.

On the other hand, we have a worsening credit drought. An increasing number of stories warn that we should not expect much available credit at all in the short term:

Most banks expect their lending standards to remain tighter than the levels of the last decade until at least the middle of 2010, according to a survey of senior loan officers conducted by the Federal Reserve Board.

The disturbing possibility presents itself that credit may not begin to flow again for years. A growing number of pretty credible observers already warn that, Wall Street talking heads aside, several big problems may dry up credit for some time to come. The biggest immediate problem seems to be that commercial real estate loans (for building apartments, offices, stores and warehouses -- $1.7 trillion in just U.S. loans) may be following residential lending off the cliff. In addition, while it's true that "green-technology firms attracted the largest share of venture capital in the third quarter," what hasn't generally been mentioned in green business stories on that news is that venture capital funds have shrunk to a 15-year low. Then there's the planet: other factors may cause investors to be even more skittish -- from the anticipated losses caused by climate change and ecosystem service degradation to the rising costs associated with constricting supplies of fossil fuels and virgin materials.

So, what does it mean to have an expansion, in a time when capital is extremely difficult to get? What does a "dry" boom look like?

The answer, for those of us interested in urban innovation and sustainability, is far from academic. For much of this decade, some of our most beloved sustainability solutions have been blank slate answers: new cities built from scratch; new technological solutions for swapping out pieces of unsustainable systems with imagined replacements that would be less unsustainable (hydrogen cars come easily to mind); new massively-scaled alternatives for depleting fuels and materials. But blank slate answers demand capital -- lots and lots of it, at that -- and that capital is going to be hard to come by. That doesn't mean that innovation is dead, or that green tech and clean energy are over. They aren't.

What it does mean is that the kinds of innovations we most need, and which will be most widely adopted, might involve both a reinterpretation of the possibilities of the cities we already live in -- adaptive reuse on a massive scale; the reclaiming of unused spaces and the ruins of the unsustainable; a willingness to experiment with regulations and codes -- and a preference for new kinds of projects that can be capitalized in new ways, ways that lie beyond the capacities of microcredit and community commerce but escape dependence on large investment banks.

I wrote recently about the need for middle-distance citizenship. I'm beginning to think we're going to see a new boom in middle distance finance as well. If so, we may be headed into an urban future that just a couple years ago would have seemed beyond imagination. A dry boom may grow strange fruit.

What blossoms are you seeing? What local businesses, community enterprises, financial institutions or collaborative arrangements have you seen that suggest new possibilities to you? What kinds of middle distance financial tools can you imagine? What do you think the future might look like during credit-strapped boomtimes? I'd love to hear your ideas in the comments.

Image credit: Flickr, InfoMofo, of the worker-owned Arizmendi Bakery

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Comments

I've seen lots of grassroots efforts that are inspiring, in particular Portland's Ainsworth Collective, a group of 50 some families who have a little micro-economy going. They have a farmers market, car-share, daycare share, bulk food buying, communal oven, and the like. This, and other forms of extreme localism bolster local economies and create safer, friendlier, more vibrant neighborhoods. Also tech solutions like Stephanie Smith's WeCommune platform (wecommune.com) that facilitates community interaction and cost-saving moves like bulk food buying. I'd also love to see more land trusts--seems like a good middle distance finance tool.Am also a huge fan of the Pavement to Parks program in SF...


Posted by: Allison Arieff on 14 Oct 09

This is a terrific post. Community banks (and the nonbank microcredit lenders that sometimes accompany them) were created to perform just the kind of "middle distance finance" that you describe. They have done a lot of good over the last few decades, and have much more to do. But they are sometimes in jeopardy now, too, because they are embedded in the larger financial systems that are still gyrating and prone to unpleasant surprises. This is one form of what's been called "hypercoherence" or the over-connectedness of many of the systems that underpin globalization. How to detach good institutions and the people who run them from the big systems that hamper or pervert them is a problem in need of good thinking, city by city.


Posted by: Ted Wolf on 14 Oct 09

This is an interesting post. I'm still of the belief that the coming shortages of water, oil, suffient land, industrial metals are going to create more trouble than that innovations that decrease the need for them can cover. This means economic contraction as far as I understand, and it means that finance, which depends or assumes growth will be in a continual state of stress. I would assume that alternate means of finacing small green solutions and "the reclaiming of unused spaces and the ruins of the unsustainable; a willingness to experiment with regulations and codes" will become the new norm and not a temporary economic condition we wade through till credit flows again. Credit assumes growth that I just do not see.


Posted by: Bill Reiswig on 15 Oct 09

nuPolis.com looks at these issues alot.
Chris Anderson, editor-in-chief of Wired and thought leader on Long Tail economics, suggests that we are good at managing for scarcity, but lack an abundance management understanding. We live in a hybrid world, where dynamics based in scarcity, abundance, propriety, openness, individualism and community live side-by-side. It seems that our challenge is to be fluent in enough of these models to build sufficient momentum, scale, visibility or connectivity for a project to generate lasting value. Harvard B-school writer Umair Haque calls the outcome of this new channel for wealth creation "thick value" or "awesomeness."


Posted by: Jay Standish on 15 Oct 09

Great post Alex; this has been on my mind recently. I like the community sharing models: time banks, local currency, etc. but they don't reach the heart of your question. Which isn't how to thrive without capital, but to find, as you say, "ways that lie beyond the capacities of microcredit and community commerce but escape dependence on large investment banks."

I think your point about rules & regs is fundamental - especially in the US. Even when we do something small, we do it big. We build small houses, but we build 1,000 at once. We build small units in a huge apartment tower. But the innovation you mention is born in smaller, looser spaces where more resources are shared and used creatively. Instead of one massive coordinated effort, it looks like a profusion of semi-coordinated one-off efforts.

And that kind of activity - chopping up space, resources, and expectations in new and surprising ways - is anathema around here. It smacks of chaos, of the third world... Most of our best neighborhoods couldn't get legally built now, and they'd never get financed.

Think of the uproar over shared parking, or how stringently we regulate street musicians and food carts. What you're describing does not fit in with the story of upward mobility or urbanism at a suburban remove. The city itself will have to provide the flexibility, the space, to allow these new concepts to play out, and they will be strongly encouraged not to.


Posted by: Justus on 17 Oct 09

All that said, here's a financing tool I love to see: Tax Increment Financing combined with a Local Improvement District. TIFLID for the masses!

Establish a district and identify property values, then relax some codes and allow residents to improve their neighborhood unassisted - their own money, their own time. As the area improves and increases in value, the residents pocket the difference, which pays for their time and for the improvements. Tangible benefits x2. (and plenty of intangible benefits as well...)


Posted by: Justus on 17 Oct 09

Here in Pittsburgh I've noticed that the banks themselves are investing in their own "greening." For example, PNC Bank, with headquarters in downtown Pittsburgh, has invested in a green or "Living Wall" under the same principles as a "Green Roof." (See: http://www.post-gazette.com/pg/09217/988545-437.stm ) It is interesting that they will not disclose the cost, however. I'd like to see more of a competition among the other financial institutions for the "greenest" one of all. Wouldn't that be something?


Posted by: John on 19 Oct 09

we just finished a paper for the southwest energy efficiency project (SWEEP) on the variety of ways that local governments are financing renewable energy and energy efficiency (just one aspect of this, I know, but a burgeoning one). see our blog at www.conoverbrown.com for a link....


Posted by: beth on 20 Oct 09

I'm at the "Economics of Peace" Conference in Sonoma and met someone who is launching a half-dozen new community-based banks. During the sessions we spent most of yesterday considering how to make the "credit commons" a viable alternative to main-stream banking. Also, Ellen Brown's idea of a state-run and owned bank is another way to end-run our dysfunctional and corrupt banking system. I think one of the most important holes to fill right now are structural ways to channel capital into sustainable, community-based projects as well as community support agriculture (csa).


Posted by: Linda Ellinor on 21 Oct 09

Wayne Curtis' interesting article in the recent Atlantic Monthly about the architectural revolution happening in the rebuilding post-Katrina New Orleans into a sustainable city relates to all this you're asking about, Alex.

Curtis selects 4 different models for going about the transformation from ruin to sustainable.
What's interesting about them is that two are "outsider individual" models, and two are "insider/community."

(My names and terms).
Outsider/Individual:
1) Rich Green Hero. A lot of environmentalism has depended on a guy with bucks and a passion for the wild -- Rockefeller and the parks/wilderness then. Robert Redford/Brad Pitt now. Deep archetypal Joseph Campbell hero stuff. Monotheistic.

2) Design Visionary/Visionary Design: A visionary and/or movement associated with a vision gets involved in re-designing to prove vision true.

Insider/Community
3) Local Wisdom: Curtis writes about the local wisdom of the buildings that were destroyed, and a rebuilding model that draws on the local wisdom of how it was done as how it should be redone. Indigene/native fits here.

4) ____? This is the most interesting: make funding available for citizens who are passionate about their city to redo it their own way, out of love. Curtis uses the word "love," and makes the very interesting point that sustainability without love will fail. What the citizen loved about how it was, carried over into redoing the city for sustainability. Love as the driver -- not profit, not noble planet saving.

Amateurs is the right word for this, but in a deep sense. "Amateur" comes from Latin amore, for love; an amateur does what they do purely out of love. The idea of Amateur as acting out of love, rather than 'less than expert.'

I see the recreation of the city as 'deep amateurism,' those who love their city acting out of love in creative ways, infused with the kind of inexhaustible passion that we have when we do what we love. Could be the big meme, here, the Age of the Amateur. Acting of out of love as the game-changer....


Posted by: MimiK on 21 Oct 09

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