Even If Everything Is Privately Owned, Some Infrastructure Will Be Free
Private cities are being built across the developing world. India's first private city, Lavasa, is being built near Pune. But Lavasa is not an unprecedented break from India's past. Jamshedpur, which was built by the Tatats, is the only Indian city with over one million people but does not have a municipal corporation. Gurgaon too was built largely on private provision of services. For much of its history after separation from neighbouring Faridabad, it did not have a municipal corporation. India is not an exception. Renaissance Partners, a Russian firm, plan to build a 6,400-acre city in Congo. They are also building a smaller city, Tatu, outside Nairobi.
Private cities are being built in developing countries because the urban population is growing faster than ever. Developed countries have become almost as urbanised as countries can ever get. But, developing countries are still urbanising, and it is not anywhere close to the saturation point. It is expected that hundreds of millions of people in India and China will move to cities by 2030. Political constraints make it very difficult for governments to build infrastructure in such a short period. So, the private sector chips in.
Disney World in Florida is, technically, a private city. The Walt Disney Company makes sure that people do not litter on its premises. This is because the Walt Disney Company assembled a parcel of land that was large enough to build infrastructure profitably. It is impossible to build roads, sewage, water mains and fire stations when the parcel of land is small because that makes it difficult to spread the cost over a very large area. In Gurgaon, the parcels are so small to support the infrastructure a city needs. The office parks and skyscrapers in Indian cities have internalised the externalities to some degree, but such plots are too disjointed to be called a private city. Real estate developers develop infrastructure within these plots, but not between these plots. So, economists like Alex Tabarrok think that developers would have been able to build infrastructure if the plots were large enough.
Gurgaon, for example is seven times the size of Disney World. So, it is possible to divide Gurgaon into seven functional cities. It is likely that such private cities within Gurgaon will compete with each other for residents if this happens. Real estate developers who build residential projects do compete with each other for residents. So there is no reason why this cannot happen on a much larger scale.
Many fear that the poor will not have access to basic infrastructure in a privately run city. But the truth is that in Indian cities, this is already the case. The wealthy can afford to live in private island where developers or firms that have built infrastructure. So, there is no reason to fear that private cities will be oppressive. As Tabarrok points out, hotels are small cities. The common areas in hotels are clean and beautiful. There are washrooms that are commonly used. There are restaurants and other avenues of entertainment. Visitors do not necessarily pay for everything that they use. As long as people are willing to pay for the services that hotels charge, they can use the rest without any charge. Private cities are more likely to be run along these lines.