Private vs. Public Interest: Whose City is it?
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Private vs. Public Interest: Whose City is it?

Comparing Public Space Models in Central and Eastern Europe—A Look at Bucharest, Romania and Warsaw, Poland

What defines a character of a city is its public space, not its private space. What defines the value of the private assets of the space are not the assets by themselves but the common assets. The value of the public good affects the value of the private good. We need to show every day that public spaces are an asset to a city. — Clos, Executive Director, UN-Habitat

This reflection deals with the difficult merger of public and private interests in cities—including the differentiated domains and the hard, if not impossible, contrast of goals. Also, the mechanisms leading to the rule of short-term financial profit (private interest) over long-term economic and social benefits (public interest) will be described. The Cases of Warsaw and Bucharest will be used to present various approaches undertaken by CEE countries.

In economic terms, the impact of city public spaces is mostly reflected in the reduced cost of health care and management, increased attractiveness of a place for qualified staff (creative class) and enterprises employing them; in the growth of real estate prices (including commercial), and a better image of the city, which translates into costs of marketing and city branding. Moreover, the availability of public spaces (recreational, cultural) has a positive effect on the city’s economy by raising the price of real estate (though with respect to risks associated with gentrification), an increase in quality of life. More detailed evidence of the economic value of public spaces include the benefits of compact buildings for power consumption, decreased demand for health system services (due to the restricted spread of diseases like obesity, asthma, diabetes etc.), time savings from alternative to car transport (bike lines, public transport, walking).

Public space in cities is usually identified by parks, squares, recreational areas, alleys, etc. However, if you look closer at cities, the urban development processes depend to a large extent on the spaces such as streets and sidewalks. Urban transport (network availability) – one of the most important priorities of urban management – is also carried out in the public area. Walking paths, also in the domain of public sector, serve mainly as communication features, however – from the point of view of the economy and urban society – they are also the scene of other important processes (e.g. cafes’ use public space on the sidewalk but also create it).

In urban realities, attempts to connect the public interest and private interest usually take the form of investments in the public-private partnership (PPP) formula. This type of investment is indicated as the most effective and well adapted to the specifics of urban projects which generate high financial input and high risk. Hence, the PPP is often chosen to enable the acquisition of both financial resources and knowledge of infrastructure investments from private sector. However, with access to private financial resources, usually the private sector approach, governance, objectives and specific mechanisms are accepted.

Discrepancies are further deepened by diverging institutional setting and strategies for partners.  Objectives are set differently and perceptions of interests and stakeholders is different in the two orders—public and private. Harmonious cooperation at the operational level is complicated by the large number of stakeholders and complex decision-making process.

At the operational level, problems combining public and private interests arise from trying to merge actors from two different backgrounds. The decision making process is therefore subject to influence of completely different agendas, different purposes (profit generation for private stakeholder vs. utility for public). Also public and private sides are responsible for their actions in relation to other groups. The investment in the private order is implemented so as to guarantee profit and commercialization of the project, while public investment should be accounted for in the context of residents’ needs. Hence, it is not surprising that the partners coming from two such different orders take two very different strategies.

Challenges in harmonious marriage of public and private interests in the public space can be visualized by an example of a large infrastructure investment, like exhibition, sporting event or a highway. The private partner will pursue the commercialization of the effects, an increase in real estate values, the benefits of new infrastructure resulting from new IT connections, transport or commercial real estate. On the other hand, the goal of the public sector for the same investment is to meet the needs of residents, such as security, accessibility to housing, natural environment protection, social cohesion. Domination of these needs by the need to commercialize the effects of investment usually brings social tensions.

Opposition, or at least anxiety, can also give rise to the approach adopted by some local governments, according to which the private partner has more experience and knowledge about effective management. Private sector management strategy is simply assumed to be more effective than that implemented in public domain. Bearing in mind the very different fundamental elements of both orders (profit vs. public utility; commercialization vs. public needs etc.), there is little reason to replicate private investment management mechanism in the case of public investment. Another challenge is to organize cooperation between public and private partners, so that the transfer of funds and risk-taking by the private sector would not automatically implicate its dominant position. Which is also an often circumstance in CEEC economies (emerging in terms of business practices). Common threat is the submission of public partner (and its interest). Private sector, as the supplier of financial resources and management practices, is considered to be more efficient and has a stronger position in negotiations. This may lead to modification or even elimination of public goals is PPP financed public space.  

Examples from Warsaw and Bucharest – of public interests being dominated by private interests in public space creation – are numerous. Both post-communist capitals had to overcome the transition from state-controlled urban development to free-market rule in urban affairs. Both are also, until now, arenas of large-scale private initiatives in public space development. Superseded to the private sector, public interests in spatial development is mainly implemented via office buildings, shopping malls and gated-communities.

A negative Polish example of public interests being dominated by private profit-maximization, is the former industrial district of Sluzew in Warsaw. The area is currently dedicated to business activity and has created a sort of a cluster of financial and business support services. The private interest was secured by allotting every inch of land to office buildings. However, the area (and thousands of employees of business represented there) struggle with the absolute absence of real public space. In this case, the absence does not only imply a lack of parks; it is a lack of basic infrastructure as parking space, adequate public transport and sidewalks. But, these issues or no longer being tucked away from the public eye in Poland. Instead, urban development has entered the public debate and is quickly becoming a social priority. Urban activists regularly consult the City Hall’s sessions and documents on urban planning, as well as protecting rights of inhabitants of social housing against private developers. Over the last decade, the city has seen the development of walking and cycling lines, as well as locations for entrepreneurs representing creative industries and sharing economy trend.

The case of Bucharest is considerably different than that of Poland and to bring the challenge of public space in Bucharest to it proper proportions, it is important to note that the majority of public space in the city is represented by parking lots or pedestrian areas used as parking lots (a side problem here is the issue of unauthorized car sheds built in public spaces). A second, important, factor to consider is that both the accession to NATO (2000) and the EU (2007) raised awareness as to the condition of the urban landscape which manifested itself in a multitude of new statues and memorials (which brings little value in terms of public space benefits). Second (after parking lots) the most prevalent usage of public space in Romania’s capital green areas. These are, however, the responsibility of district authorities and require an active community to maintain them. The lack of functional social capital is crucial in understanding the disrepair of public spaces in the city. With the absence of public space, segments of the private sector – those connected to key government ministries – commercialized the city and large-scale commercial centers and residential gated-communities have been springing up in the current spatial development of Bucharest—in-sync with the economically rational interest of profit maximization.

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Like Poland, Romania’s urban developments circled around symbols of communism in the constructed environment. The plan to regenerate the Civic Centre’s area in Bucharest was drafted as late as 1996 but nothing has been changed, so far, and the People’s Palace dominates the city just as it did 30-years ago. A similar problem was dealt with in a very different manner in Warsaw where the symbols of communist dominance – the Palace of Culture and Science – is now just one of many skyscrapers in the city center. So why has Romania lagged behind the others in CEE?

The fact that so little has changed as far as public space is concerned in a large EU member state capital over nearly three decades brings the issue of city management in Bucharest in general. Under the Romanian legal system, urban planning lays in the area of responsibility of local governments. And, with the recent corruption scandals among City Hall officials (the Mayor included), the challenge of merging public and private interests becomes even more complicated. With accusations of bribery in public-private relations, the municipality may not be seen as the guardian of the public interest there—which may be a leading fact in understanding the condition of urban planning and public spaces in Bucharest. Having in mind that – allegedly – private partners in PPP projects were selected by a corrupted mechanism, one cannot expect to have any signs of actions driven by public utility rather than profit maximization stimulus. According to Reuters, since 2013, prosecutors have sent to trial 92 Mayors, 24 Deputy Mayors, 22 County Council Presidents and dozens of other local officials. With local authorities of (only) Bucharest and its six district authorities having an annual budget of almost 2 billion euros (60 billion euros from the EU cohesion policy country-wide), the scale of corruption at local level in Romania is overwhelming and has facilitated government-level abuses of power…including against members of the entrepreneurial class and civil society.

The issue has also a deeper meaning for public goods and services management. The accusations of corruption in public works contracts, involving the Mayor himself and other members of staff of the municipality, reflects negatively on the entire public sector as the guardian of public interest in Bucharest. Considering that public space evolution and management involves mature social capital, events of corruption in local government block any chance of local community involvement whatsoever. With the public trust and economic power embedded in the office of Mayor in Romania, the bribery scandals in public works contracts is a significant factor explaining why so little (if any) is being done in the domain of public space in Bucharest.

The negative response to the “public living room” in the Magic Blocks project in Bucharest (a project to give physical meaning to issue of public space), as well as no social discussion over lack of public amenities in Sluzew, Warsaw, points to the urgent need of building social capital and engaging civil society in the matter of public space in post-communist cities. Public involvement in regeneration of space could be a regulatory mechanism in addition to market mechanisms which already proved effective in CEEC economies. Public is, after all, the core element of public space.

2017 - Volume 11, Issue 2