• 1 Thus the German weekly paper Die Zeit reports: “In the mega cities of the South the rich are fleein (...)

3The interest of the media1 and the social sciences in private neighbourhoods has primarily focused on guarded neighbourhoods. Contemporary processes of urban development seem manifested in the gates, walls and fences of these complexes. Thus, the guarded private neighbourhoods are taken by many authors as an extreme form (Gmünder, Grillon and Bucher, 2000, p. 193) of a “privatisation of public spaces” (referring to the USA for example: Judd 1995, p. 163; Lichtenberger, 1999; Frantz, 2000, p. 112; Le Goix, 2002; and referring to other regions of the world for example: Connell, 1999, p. 417; Meyer and Bähr, 2001, p. 316; Coy and Pöhler, 2002, p. 355).

• 2 www.gated-communities.de

5Based on the writings of some colleagues in the “research network on private urban governance”2 as well as on empirical work in the US, Lebanon and Europe I will propose two analytical approaches which heuristically might be more fruitful. In order to understand the economics of private neighbourhoods I will use the club goods theory. Furthermore, in order to portray the political changes underway I will analyse the private neighbourhoods as private residential governments. In this perspective, the spreading of private neighbourhoods might be described as the establishment of a new territorial organisation on a local level which enables the exclusive consumption of collective goods, and in which political decisions are taken in a kind of shareholder democracy.

• 3 In the nomenclature of the CAI private settlements with predominantly single family homes and a cor (...)

7There is a correlation between the physical structure of the neighbourhoods and the form of organisation: Most private apartment complexes are organized as condominiums or cooperatives. Private settlements with predominantly single family homes are most often organised as corporations3. In many countries of the world the first private neighbourhoods have been secondary residences – the so-called resorts. Investors who combine such secondary residences with hotels or other tourist facilities tend to organise them as proprietary neighbourhoods in order to keep the power of decision over the development, the management and marketing of the whole complex.

• 4 Goods in the sense of any material goods, services or infrastructure.

8The self-administration of private neighbourhoods provides the inhabitants with many collective goods like green spaces, water supply, recreational facilities etc.4 Economists have justified the fact that even in market economies some collective goods are traditionally provided by public organisations due to market failure. That is to say the market fails to provide goods when nobody can be excluded from consumption and there is no competition, no rivalry in consuming. Free-riders could profit from goods like clean air or urban green spaces without paying for them. Then, these goods are not sufficiently provided by the private sector and the public sector has to step in. On the other hand, for private goods like food there is rivalry about the consumption and third parties can be excluded from consuming. Sometimes, commons are differentiated as a third category of goods which are competed but for which the exclusion criteria are hard to meet. Consequently, these goods often suffer from overuse, as for example the fish population in the deep sea (fig. 1).

• 5 The other assumptions of Tiebout might be neglected in this context.

9However, already in 1956 the American economist Tiebout pointed out that many collective goods which were generally described as public goods are local public goods in the sense that they benefit primarily people who stay at a certain locality. He gave local security services, green spaces or public swimming pools as examples of such local public goods. According to Tiebout, these local public goods could be provided by competing neighbourhoods if the following conditions were met5:

• 6 For a detailed analysis of the privatisation of formerly public provision one would have to differe (...)

13Webster (2002, p. 398) and Nelson (1989) have argued that in an economic perspective public municipalities are not as different from private neighbourhoods as it is usually assumed. Regarding the supply side, one has to state that the differences between municipalities and private neighbourhoods are at least shrinking: Municipalities in the USA, as in Europe and many other parts of the world “in recent years have been turning away from direct governmental provision of local services, instead contracting for these services with private suppliers” (ibid., p. 47) just as it is the practice in private neighbourhoods6.

• 7 At the same time these suburban municipalities protect themselves from social spending. Comparable (...)

15In a pure federal system, where the municipalities are exclusively or predominantly financed by local property or income taxes as in the USA, the funding is quite similar to private neighbourhoods, “a set of shared goods is (…) financed by a shared cost arrangement” (Webster, 2002, p. 400). Consequently, municipalities with mostly affluent inhabitants are rich and municipalities with mostly poor inhabitants are deprived. The rich municipalities are able to supply collective goods in higher quantity and quality than the poor municipalities – more and better green spaces, swimming pools, local security services, theatres and so on. The wealthy inhabitants who finance these collective goods with their taxes profit from their high quality and quantity not only by consuming but also through stable or increasing home values. Therefore, they are likely to try preventing free riding by less affluent households, who do not generate “adequate” tax revenues. If they are able to dominate the decision-making of the council, they may use legal instruments to hinder the in-migration of poor households. Danielson has shown that many rich suburban municipalities in the USA use zoning as such an exclusionary instrument (1976, p. 1 et seqq.). Their councils establish public regulations which restrict the development of multi-family buildings and thus limit the in-migration of less affluent households7. Consequently, the local public goods in these municipalities become club goods. The exclusion mechanism is the same as in the private neighbourhoods: distancing. Hence, many rich, small, socially homogeneous and mostly suburban municipalities in the USA work de facto much like a private neighbourhood. “Zoning provides the property right [over open spaces, common facilities etc.], local property taxes provide the membership fees, and the city council is de facto a private board of directors” (Nelson, 1989, p. 46). Regarding big municipalities, Webster is certainly right when he states that “few civic goods are shared equally by all within a city and inclusion and exclusion are facts of urban life” (2002, p. 409). Even a public library or a public swimming pool has to exclude in order to avoid over-use and therefore has “club-like consumption characteristics” (ibid., p. 398). The access may be limited to people living in the specific municipality or regulated by entrance fees – offering a temporary “membership in the club.”

• 8 Article 72 of the German Constitutional Law demands from the central government despite a federal o (...)

16However, if the financing of the municipalities is not based exclusively or primarily on local sources as it is the case in countries with a centralised system like France, or if there are vertical or horizontal perequations as in the German “cooperative federalism”8, the above described mechanism does not work: the quantity and quality of supplied collective goods does not vary enormously from one municipality to another. Therefore, the motivation to prevent free-riding and to exclude less affluent households is smaller. And in socially heterogeneous municipalities the decision-making of the council has to focus not only on the economic interest of the municipality as a whole but has also to balance internally the different interests of the (voting) inhabitants.

• 9 www.caionline.org/about/facts.cfr (10.12.2000).

18In the US in the 1990s arose a discussion of the self-administration of private neighbourhoods as a new form of territorial organisation. The lobby association of private neighbourhoods, the Community Association Institute (CAI), judged the self administration of private neighbourhoods as an ideal organisation of local democracy: “... the most representative and responsive form of democracy found in America today”9. And indeed, empirical studies have shown that functioning home owner associations offer new possibilities for the individual inhabitant to become involved in the development of his neighbourhood and may foster voluntary engagement on a neighbourhood scale (Barton and Silverman, 1989; Glasze, 2003).

• 10 In Arizona (USA) has been established an assocation who acts against the decision-making in many ho (...)

20If one looks at the constitutions of western nations, one finds several basic democratic principles organising the political life on a national, regional and local scale, as for example the principle of equality, the principle of the sovereignty of the people, the principle of public decision-making and the principle of pluralistic decision-making. In private neighbourhoods, the imbalance between differing interests and missing democratic institutions often leads to the infringement of such basic democratic principles (McKenzie, 1994, p. 122 et seqq.; Scott, 1999, p. 20 et seqq.; Silverman and Barton, 1994, p. 141)10:

• 11 The term “services of general interest” cannot be found in the Treaty itself. The Commission derive (...)

23The efficiency argument speaks for the establishment of small club economies with a direct connection of shared consumption and collective cost arrangements. Private neighbourhoods give “legal protection to the economic right over shared neighbourhood attributes” (Webster, 2002, p. 409). Formalised institutions organise the property rights in these club economies and therefore enable a more efficient (private market) supply of local public goods as in heterogeneous and bigger municipalities where there are no such direct and formalised arrangements. Consequently, several urban economists judge private neighbourhoods as a “natural evolution” of urban institutions (Nelson, 1989; Foldvary, 1994; Webster, 2002). However, the focus on “preferences” as main variable explaining the differences between neighbourhoods blocks from view that “most public services [are] regarded as desirable” (Frug, 1999, p. 171) and that it is the economic (and to some extent social and cultural) capital which determines the options on the housing market (Whiteman, 1983, p. 346 et seqq.). In the long run, the spread of private neighbourhoods would lead to a territorial organisation where everybody lives in autonomous enclaves according to his financial capacity. The provision with basic services like education, environmental quality or health would directly depend on the individual wealth. Basic life opportunities would be distributed in highly unequal ways. These examples make obvious that a purely economic definition of public and local public goods which dominates the writings on territorial club economies tends to neglect the importance of a universal and non-discriminatory supply of some services for assuring social cohesion, environmental quality and overcoming of social and/or geographical exclusion. In most countries of the European Union the local authorities are partially or completely responsible for assuring a universal and secure supply of many basic services like social care, education and municipal engineering (cf. Lichtenberger, 1998). Within the European Community, at the latest with the treaty of Amsterdam, official politics began to recognize the importance of what are called “services of general interest”11 in the nomenclature of the European Commission (French: “services publics”, German: “Daseinsvorsorge”). The “green paper on services of general interest” which has been published by the Commission of the European Community in 2003 judges these services as “part of the values shared by all European societies, (...) an essential element of the European model of society, (...) [and] a pillar of European citizenship” (Commission of the European Communities, 2003, p. 3). That is not to say the European Commission promotes a provision of these services exclusively by public organisations – on the contrary, it is highly probable that the Commission is continuing to encourage the liberalisation of further markets. Nevertheless, the green paper allows the assumption that for social and ecological reasons the Commission tends to leave the responsibility for assuring a universal and non-discriminatory supply of these “services of general interest” at accessible prices to public and most often local authorities. These public authorities may either provide these services themselves or contract for these services with private suppliers (Prodi, 2002; Commission of the European Communities, 2003).

• 12 Reich R. B. (1991), “Secession of the Successful”, The New York Times Magazine, 20 January 1991, pp (...)

24Regarding the question of democracy one has to differentiate between the internal decision-making and the external politics of private neighbourhoods concerning their social environment. Keating (1991) and Frug (1999) fear that the external politics of socially homogeneous municipalities and private neighbourhoods will be absorbed by the search for an optimal satisfaction of the inhabitants and won’t bother with concepts aiming at a social balance on a bigger scale. The attempts of several homeowner associations in the US and other parts of the world to secede from wider public territorial organisations (cf. Anderson, 1996) validate that fear of a “secession of the successful”12. Furthermore, in several years, the home owner associations of private neighbourhoods in the USA might become a powerful lobby association on a regional and even national scale. Therefore the institutionalisation of a new form of private urban governance risks (further) complicating social balance and raising new social barriers. Internally, the social homogeneity, the small scale and the institutionalisation of a neighbourhood organisation may foster a sense of community and voluntary engagement. However, several studies have shown that the internal decision-making in private neighbourhoods often violates basic democratic principles. While the basic ideals of contemporary civil democracies are “equal rights and chances for every citizen”, the private neighbourhoods can be interpreted as territorial shareholder democracies, which bind political influence and individual life opportunities closely to individual economic strength – the shares in the neighbourhood (Fig. 2). Therefore, the political organisation in private neighbourhoods is returning to the days of a census suffrage where political influence is institutionally based on status and class. If one bears in mind that the local arena is the “school of democracy” (Tocqueville), one has to ask whether the private neighbourhoods are a good place to learn democracy.