It’s hard to argue with success. For instance, we couldn’t argue with the success of deregulated housing finance, at least until it proved to be totally illusory and led to the wreckage of the global economy. Now we’re arguing about who should have been arguing with “success,” at what point they should have argued with it, and what they should have done about it. Ah, to be back in the halcyon days of thirty-six months ago! During that ancient epoch, World Bank economists could report with straight faces that “experience in developed and developing countries is quite optimistic on the likely growth trajectory for housing finance.”

After all, the total value of home property in wealthy countries had just increased by nearly 50 percent, or $20 trillion, between 2000 and 2003 alone. Hmmm…how could professional economists at the world’s premier development lending institution be expected to see the irrational exuberance there? All of this new found valuation was driven by the ubiquity of easy credit rather than by actual demand for houses. Unchecked by the so-called experts, this easy money lubricated urban expansions nearly everywhere, from audacious mega high rises like the now halted Chicago Spire, to bloated, cookie cutter suburbs out in the desert that were sold (potentially fraudulently) as the American dream.

Still, I worry the most for cities from China to Africa that, for all their growth, have not become rich yet. They could find their upward mobility halted by the global recession and collectively ask: Is this it? The World Bank saw the West’s acid-induced experiment with unregulated housing finance as a promising model for poor countries, at least back in 2006 when U.S. companies like Lehman Brothers and Merrill Lynch were scoring big with securitized mortgages. The Bank spent billions and utilized its tremendous influence in developing cities to promote drastically deregulated mortgage markets like the ones in the U.S. and Europe that are now in embers. It held up our model as the wave of the future for housing finance in poor countries, and framed market deregulation as a “genie” that is “out of the bottle, and if prudently managed, can be expected to confer enormous benefits.”

Luckily, developing economies are far less saddled by mortgage debt than Western countries. But they have nevertheless followed our lead and liberalized real estate lending. Even though lending in the developing world has been generally cautious compared with that in the U.S. and Europe, mortgage debt in some countries now equals 20 percent of GDP. Land has become such a hot commodity in cities that millions of people can’t afford small plots of their own, and are left segregated from the glittering commercial and entertainment districts that rest alongside squatter communities from Shanghai to Sao Paulo. An explosion of unregulated housing finance schemes—a la the US—was supposed to be the final frontier for this global privatization movement in housing.

Now that we’re no longer blinded by the bright future that unbridled financial markets were supposed to bring, it’s time for some clearheaded reconsideration on the part of the experts responsible for urban development. Western governments need to stop foisting our own failed system on developing cities through (often coercive) multilateral institutions like the World Bank and International Monetary Fund. So far the World Bank has invested $16 billion in housing projects—some of it productive, some of it simply proffering the same “market based” nonsense that helped get Western countries where they are now.

While supporters of the free market consensus have been quick to point out the evils and inefficiencies of publicly financed urban development, they haven’t at all come to grips with the instability and inequalities that checker their own preferred laissez-faire system, both of which are on cruel display in any archetypical third world city. Ameliorating these problems requires something akin to what New York Times economist Paul Krugman recently called a “boring” system of finance. That is, a system that uses public and private resources to put people in homes instead of producing hallucinatory profits. That’s what the Bank should market to developing cities in the wake of this disaster. It might be at odds with their anything-goes free market approach to urban development, but, alas, it’s easy to argue with failure.