Fridays Academy: Urbanization and Growth

During this and upcoming Fridays we will be looking at the relationship between urbanization and growth. These postings are based on a text by Raj Nallari and Indira Iyer.

Urbanization and Growth

The common elements that underscored successful growth and development strategies in a number of countries which were on a high and sustained growth path elements included the maturation and deepening of the market institutions, effective macroeconomic policy management, high levels of savings and investment, openness to trade and financial flows (and adoption of technology), and fast-growing urban areas. During the next few weeks we will analyze one of these elements, the urbanization process, and discuss its contribution to growth and poverty alleviation as well as lay out the major emerging issues in the urbanization process of developing countries.

Trends in Urbanization

The year 2008 was a landmark in history as for the first time more than 50 percent of the world's population lived in urban areas (see graph below). Urban cities cover just 2 percent of the world's land area, consume over 75 percent of the world's resources, and generate more than 70% of the world's greenhouse gases. Urbanization signals modernization and industrialization and is viewed as a natural part of the transition of an economy from low-productivity agriculture to higher-productivity industry and services. Historically too, there has been no country that has industrialized without also urbanizing. At the same time, however, many critics view urbanization not as a natural process but as one that results from a bias toward cities in government policies and investment, a bias that presses people to migrate from the rural areas to the urban cities in search of jobs. Rapid urbanization puts stress on the provision of basic infrastructure services-water, sanitation, electricity, and roads- as well as leaves many fast-growing cities with disorderly and unplanned growth, sprawling slums, rising levels of inflation, poverty and crime and environmental damage. Given the current and projected global trends in urbanization, it is important to understand and resolve these opposing viewpoints and develop effective programs and policies for sustainable economic development in the years ahead.

Urban and rural populations of the world, 1950-2050

                                                                                                                                                                                                             Source: United Nations Department of Economic and Social Affairs/Population Division 5. World Urbanization Prospects: The 2007 Revision.