better cities, better economies

8/12/2019 Better Cities, Better Economies

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Urban population grew from 220 million to

2.8 billion in the 20thcentury. The next few

decades will see an unprecedented scale of

urban growth. By 2030, this is expected to

expand to about 5 billion.

Such rapid urban expansion will be

particularly notable in Africa and Asia whereurban population will double between

2000 and 2030. By 2030, the towns and

The world reached a turning point in 2008. For the first time in history, more than half its

human population, 3.3 billion people, lived in urban areas.

cities of the developing world will make up

81 percent of urban humanity.

Economic growth and urbanization are

often positively linked. Cities are the driving

force for economic development. Economic

growth also stimulates urbanization. These

positive relationships are clear in manycountries.

Xing Quan Zhang, PhD

1This story is adapted from Zhangs article in Urban World, Volume 2, Issue 4, September 2010

Better cities,

better economies1


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Better Cities, Better Lives

Urbanization andabsence of economicgrowth

Urbanization can occur in the absence

of economic growth. For example, in some

sub-Saharan African countries, urbanization

occured without of economic development.

Its processes and patterns are differentiated

by institutional settings and policies from

country to country and region to region.

Despite the growing importance of cities

in world affairs and national economic

development, the citys position is regarded

as marginal to current debates and

development controversies. Negative

over-urbanization impacts such as the

concentration of poverty, slums and social

disruption in developing cities are often

overemphasized.

Cities the best hopeHowever, cities represent the best hope

for growth and opportunities as engines

of national economic development.

They provide large efficiency benefits, which

result in unprecedented productivity and

competitiveness gains. They are centers of

knowledge, innovation and production and

services specialization.

Cities facilitate creative thinking andinnovation. High concentrations of people in

cities generate opportunities for interaction

and communication and promote creative

thinking, knowledge spillovers, new ideas

and technologies.

They also provide more learning and sharing

opportunities and facilitate trade andcommerce by providing large market-places.

Cities are production and services centers

because goods and services are more

efficiently produced in high-density urban

environments.

Cities also provide consumers with more

goods and services choices and they are

the agents of social, cultural, economic,

technological and political change.

These advantages make cities more

productive than rural areas. No country

has achieved sustained economic growth

without the growth of cities.

Driving force of nationaleconomies

Cities are the driving force of national

economies.

They generate a disproportionately higherrate of economic growth than rural areas.

In developed countries, cities have higher

productivity per capita than rural areas.

For example, Tokyo has 26.8 percent of

the national population and produces

34.1 percent of national GDP. London has

20.3 percent of the population and accounts

for 25.4 percent of GDP. Paris, with 16.2

percent of the national population, accounts

for 26.5 percent of the national GDP.

Dublin with 25.9 percent of the population

generates 32.8 percent of GDP. Auckland,

Vienna and Helsinki generate about 50

percent higher GDP than their respective

population share.


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Engines of migrationCities in both developed and developing

countries play crucial roles in driving

national economic development.

Statistics show that cities are much

more productive than rural areas in

developing countries.

However, this does not mean that cities

are more productive in developing

countries. Productivity, is generally

higher in developed countries cities.

However the productivity gap and

inequality of development between cities

and rural areas are much larger in

developing countries than in developed

countries.

The large economic productivity gap and

imbalance of development between cities

and rural areas in developing countries lead

to enlarged rural and urban income gaps,

which in turn encourages migration tocities to search for better opportunities and

prosperity.

The massive influx of rural populations to

cities creates resource shortages to provide

housing and services in cities. The engines

of economic development then become

engines of migration.

Migration that out-paces economic

development often results in urban slums.

Manila, Karachi, Nairobi, Dhaka and Mumbaiare engines of economic development but

they are also cities of slums.

National economic growthThe contribution of cities to national

economic growth is very significant in

developing countries. The economic future

of developing countries is highly dependent

on the growth of its cities.

However, cities are seriously under-resourced

to fulfill their potential as drivers of national

economic development and prosperity.

Cities face many challenges, fromaccelerating growth, massive influx of

rural migrants, deteriorating infrastructure,

environmental degradation, social exclusion,

violence, under-investment, lack of fiscal

freedom and policy choices.

Municipal governments often lack financial

means to address the vast challenges facing

them. For example, of the total government

revenues in Canada, the federal government

receives 39 percent; provincial governments

receive 50 percent and municipal governmentsonly get 11 percent.

Municipal governments in most countries

have less than a quarter of total government

revenues. In many countries such as

Afghanistan, Armenia, Australia, Chile, Cyprus,

El Salvador, Greece, Honduras, Iran, Jordan,

Lesotho, Malta, Mauritius, Mongolia, Morocco,

Paraguay, municipal governments receive

less than 10 percent of the government

revenues.

The international development community

also ignores the needs of cities. For example,

the total urban assistance to developing

countries from 1970 to 2000 was about $US

60 billion, about $US 20 per capita - less than

a dollar per capita per year.


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Cities need powers togenerate revenue

To maintain vital economic growth and

competitiveness cities (1) should have the

power to generate revenues and make

development decisions; (2) have sufficient

investment to provide adequate infrastructure

and services, such as transportation,

communications, power supply, water and

sanitation, housing, as well as financial and

business services; (3) should develop and

attract high quality human resources fortechnological innovation, entrepreneurship,

and knowledge development; (4) should

provide an enabling national environment

for market development.

Should we focus our attention on the

development of cities and ignore the

development of rural areas? The answer

is no.

The huge disparity and divide between

cities and rural areas in terms ofproductivity and wealth are often signs of

under-development. Developed countries

experiences indicate that more balanced

development between cities and rural

areas occurs when national development

reaches a higher level.

Cities work better if they have between-cities

efficiencies but also in-cities efficiencies.

City regions

City regions have emerged as most

important growth poles. Transport and

communications technology improvements

stimulate rapid city region developments.

As modern products and services become

increasingly sophisticated, producers and

service providers gain significant advantagesfrom new transaction networks.

These networks facilitate products, services,

technology and market information

exchanges, and foster economic creativity

and innovation. Network participants

receive tremendous efficiency boosts by

being part of tightly-linked and spatially-

concentrated clusters.

These networks, production and services

modes foster the development of urbanagglomerations and city regions. Today,

city regions have emerged as economic

development driving-forces in many

countries.

For example, the Tokyo city region has more

than 40 cities and towns with a population of

33.2 million, and generates more than 34

percent of national GDP.

The Pearl River Delta in China has a

population of 30 million. New York cityregion has a population of 22 million;

Sao Paulo, 17.7 million; Mexico city region,

17.4 million. Changjiang River Delta in China

has emerged as the worlds largest city

region with a population of about 100

million, generating 26 percent of national

GDP.


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