Competitive Cities: Driving Productivity and Prosperity

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The future will be won or lost in the world’s cities. With half of humanity now living in cities – and with the breakneck pace of urbanization likely to concentrate two-thirds of the world’s population into metropolitan regions by 2050 – getting urbanization right is the over-arching challenge of this globalizing age.
Urban policy is now at the top of the news due to the bankruptcy filing of forlorn Detroit, which has long been a symbol of urban decay. Yet the urbanization drama goes far beyond the de-industrializing North: The destiny of cities worldwide will determine the success or failure of virtually every development priority – and it will be especially vital for job creation, innovation and productivity growth, environmental sustainability and social inclusion.

“Rapid urbanization is the defining trend of the 21st Century,” said Sanjay Pradhan, Vice President of the World Bank Institute, as he outlined the daunting statistics to a New York City Global Partners  conference on “Business Innovation and Entrepreneurship: City Strategies” at Columbia University. “Nearly two billion new urban residents are expected to stream into the world’s cities by 2030 – most of them, in developing countries.”

Managing the growth of emerging megacities will be daunting: The urban populations of Africa and South Asia are poised to double within the next 20 years. An additional 310 million working-age people – about 35 percent of the coming expansion of the global work force – will soon arrive in just 600 of the world’s largest cities. With a worldwide network of densely developed cities destined to become the driver of prosperity, the prime centers of opportunity will be those cities that can attract and  energize all forms of productive capital – of the financial, technological and intellectual varieties.

Cities accelerate economic transformation because of their intense population density, which encourages social and economic interactions with greater “social friction” than non-urban settings, as Harvard economics professor Edward Glaeser emphasizes in his influential work, “Triumph Of The City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier and Happier.” Spontaneous and serendipitous exchanges of ideas turn cities into vibrant hubs of innovation, helping generate 70 percent of global GDP and making cities the world’s focal points of innovation, entrepreneurship, creativity and culture.

In a relentlessly competitive world – which is both “flattened” with a level playing field (as journalist Tom Friedman contends) and “spiky” with intense concentrations of wealth and talent (as urbanologist Richard Florida argues) – competitiveness will depend on both local creativity and global connectivity.

If they can assert what Edwin Heathcote of the Financial Times calls  “urban ingenuity,” cities that clearly define their distinctive identity will thrive by embracing their economic vocation and enhancing their strengths in global value chains. Those urban nodes of creativity that are efficiently networked through technology, transportation and trade connections will be able to take maximum advantage of opportunities that require a global sensibility and a global frame of mind.

Building the urban-focused economy of the future requires looking at, not overall national trends, but the sub-national performance of cities and metropolitan areas. By 2025, 600 cities will generate about two-thirds of the world’s GDP, according to the Cities Special Initiative of McKinsey & Company. Today, cities in the advanced economies of North America and Western Europe may dominate the various surveys that measure urban productivity and cultural magnetism, but, tomorrow, about 400 fast-growing cities in the developing world will reshape the economic landscape.  As the long-established but slower-growing cities in developed nations see their relative influence wane, the surging cities of the developing world will be increasingly ambitious competitors.

The need to intensify urban productivity was an important theme of the World Bank’s World Development Report 2009, and that’s the priority that emerges from an array of recent analyses of cities’ crucial contributions to the global economy – including the Economist Intelligence Unit’s latest ranking of the cities that will be the global “hotspots” of 2025. The EIU report – released at the recent New Cities Summit in São Paulo, Brazil – analyzes how concentrations of creativity and competitiveness  will, over time, bring a new array of cities to the fore.

Although six of the top 10 (and 21 of the top 30) urban hotspots of 2025 will be the familiar world-leading cities of North America and Western Europe, a rising group of Asian and Pacific cities are rated highly in the EIU report’s “economic strength” category. They include not just familiar urban leaders like Singapore, Hong Kong, Seoul and Tokyo but increasingly vigorous competitors like Dubai, Doha and Kuala Lumpur. The  massive Chinese cities of Shanghai, Chongqing and Guangzhou continue to be far ahead of their rivals, although other fast-growing cities are closing the gap.

A global consciousness requires a new urban dialogue, and the ability to express a city’s character – and to highlight its distinctiveness in the global value chain – is  underscored in an  imaginative new Brookings Institution report, “The 10 Traits of Globally Fluent Metropolitan Areas.” Positing that gaining “global fluency” is just as difficult as learning a new language, the report champions such factors as “leadership with a worldview” and creating a “compelling global identity.”

Another Brookings study asserts that the vitality of metropolitan regions is upending traditional national power structures: Mayors and city planners often wield authority more effectively than gridlocked federal governments.

As the authors of  “The Metropolitan Revolution” – Bruce Katz and Jennifer Bradley of Brookings’ Metropolitan Policy Program – recently told a World Bank Institute audience, urban regions are the drivers of nations’ fortunes: “There really isn't a ‘national economy. There's a network of metropolitan economies” where countries’ talent, creativity and industry are concentrated. Katz noted at a recent National Journal forum on the future of the U.S. economy, for example, that the top 100 U.S. metropolitan areas comprise about 12 percent of the country’s land mass, have 65 percent of the population and generate 75 percent of the GDP – producing 90 percent of patents (using that as a proxy for innovative capacity).

Noting that diffusion of political clout, some analysts, like Parag Khanna of the New America Foundation, envision that the world is entering an age when ambitious city-states, not nations, will be recognized as the driving force of the economy. Similar logic leads Vali Nasr, the dean of the School for Advanced International Studies at the Johns Hopkins University, to foresee that “mayors will be the statesmen of the future, and pacts they forge among one another will complement global treaties.” Indeed, the C40 Cities network, organized by Mayor Michael R. Bloomberg of New York, shows how mayors can often take practical action more effectively than national governments.

How to propel such city-by-city competitiveness? Katz – quoting, improbably, the entertainer Dolly Parton – quips that the formula is for cities and metros to “find out who you are, and do it on purpose.”

Helping metropolitan regions  enhance their productivity is the aim of the Competitive Cities initiative, a part of the World Bank’s practice group on Competitive Industries. Helping cities succeed, by tailoring solutions to meet each metropolis’  particular needs, is crucial to achieving the Bank’s mission of eliminating extreme poverty by 2030 and building shared prosperity – not only in the already-successful capitals of middle-income countries, but also in fast-growing secondary cities in low-income countries.

Given cities’ central role in innovation and job creation, maximizing their economic potential – by applying customized approaches in the emerging megacities – is vital to the development agenda.

“The first truly urban century” will present complex, city-by-city development challenges. If this summer’s turmoil in roiling Istanbul and São Paulo (as well as beleaguered Cairo) is any indication, city leaders will be hard-pressed to fulfill the expectations of a restless middle class that seeks ever-rising standards of living and broader civic inclusion.

Analyzing urbanization through the competitiveness lens is indispensable in designing effective pro-growth strategies. “The trick, it seems, really is connectivity – not just in the fashionable digital sense, but in the notion that the city is a machine for creating and sustaining relationships between people,”  says Heathcote. “The city, though it may not often feel that way, is a machine for improving human life.” In the accelerating global economy, building on the creativity that’s concentrated within competitive cities offers the best chance of delivering transformative solutions.


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