When the government fails, private industry springs up to take its place. In India, at least.
“The city of Gurgaon, roughly a half-hour’s drive south of New Delhi, has survived without a functioning municipal government for roughly four decades,” Dan Kedmey wrote for TED.
The city’s existence is an aberration, running against conventional economic theory about the provision of public and social services. The city remains a patchwork, as its lack of bureaucratic regulation and control allows rapid development, but public safety and basic city services can be limited to private property lines.
“There are intolerable gaps in the city’s infrastructure,” Kedmey noted, as the city has “massive security gaps,” an incomplete road and sewer system, and the poorest residents “suffer from power and electricity shortages.”
To fix that, however, the limited city government should “sell off still more of the city.” By doing so, the city becomes better connected. Private developers will then have incentives to connect their properties and provide basic services expected of large cities. The goal, as Economists Shruti Rajagopalan and Alexander Tabarrok of George Mason University noted in a 2014 study, is “internalizing externalities while still keeping the advantages of private provision.”
With privatizing, developers and businesses have to respond to the demands of citizens. If they don’t, their customers move somewhere else, as do their profits. At least in Gurgaon, providing city services is more reliable through private development than public institutions.
[youtube http://www.youtube.com/watch?v=LZiR6_cgkuQ]
