FT.com / In depth - ‘I made a mistake,’ admits Greenspan: "Alan Greenspan, the former Federal Reserve chairman, said on Thursday the credit crisis had exceeded anything he had imagined and admitted he was wrong to think that banks would protect themselves from financial market chaos.
“I made a mistake in presuming that the self-interest of organisations, specifically banks and others, was such that they were best capable of protecting their own shareholders,” he said."
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For almost 30 years neoclassical economics has steered public policy, on the assumption that "free markets" run better with the least possible oversight and regulation by government. We may be at the end of that paradigm. For the foreseeable future it seems that government will have the stronger hand. It will be hard to sell the idea of deregulating anything in these times, after what happened to the financial markets.
Which brings me to common interest communities. If ever there were a creature that epitomized the neoclassical economics approach to governance, it is these things. And I think the libertarian argument that we should just leave them alone and they will not only succeed, but replace municipalities, will now be falling on deaf ears.
If there isn't more oversight and regulation of CIDs, there will one day be a massive sectoral collapse or a rolling disintegration. And that day may not be too far in the future.
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"If there isn't more oversight and regulation of CIDs, there will one day be a massive sectoral collapse or a rolling disintegration. And that day may not be too far in the future."
Prepare for the massive collapse and rolling disintegration scenario.
The privatization of local government into CIDs mandated by local government land use policy was driven by fiscal constraints over the past four decades that we now have in spades. Privatization means less money spent on regulation, not more. Especially when state and local governments are facing billions of dollars in underfunded liabilities for infrastructure and public employee pensions.
Additionally, more regulation and oversight of CIDs cannot address the fact they have never been able to establish themselves in their eyes and those of their constituents as true local governments. Consequently, they have never developed a public governance culture (hardly surprising since they are de jure private corporations) and thus lack a public service ethic, transparency and accountability.
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