city-driven growth for the uk - opportunities and threats (excerpts)

7/29/2019 City-Driven Growth for the UK - Opportunities and Threats (Excerpts)

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City-driven growth for the UK:Opportunities and threats (excerpts)

1This report has been commissioned by the UK Government Foresight Programme. The views expressed in this report are notthose of the UK Government and do not represent its policies.

An horizon scan forthe Foresight Cities Project

Written by Michael ReillyJanuary 2013

Ariel Research Services+44 (0)7986599791michael@arielresearchservices.comwww.arielresearchservices.com

Prospero and Ariel by Steering for North © 2012 All rights reserved

http://www.flickr.com/photos/steeringfornorth/



Executive Summary

What drives the development of cities?

Opportunities for economic growth

Threats to economic growth

• The industrial development of cities is driven mostly by scale economies that incentivise agglomeration

• Evidence suggests that cities grow systematically - with stability and persistence in the industrial concentration ofmany cities particularly those with mature industries – leading to a ‘portfolio of place’

• History matters through the accumulation of labour pools, capital, and development of scale economies

• Rates of urbanisation in developing countries are similar to those in 18th century Britain, Europe and NorthAmerica; but the unprecedented volume of anticipated urbanisation is a major ‘known unknown’

• Cities are people rather than infrastructure and successful cities are sustained by a creative class of individuals

• Cluster analysis could help to identify and nurture more clusters in UK cities so as to improve its ‘portfolio of place’

• Innovative international researchers are gradually uncovering a new multi-disciplinary science of cities• Adjusting the ‘urban metabolism’ of UK cities may increase their economic efficiency and improve social equity

• Smarter cities may be able to better manage the trade-off between growth and negative externalities as well asprovide tantalising commercial opportunities but some experts insist “cities are not machines”

• Skills are an crucial driver for growth but there is an historically-determined divide between UK cities;economic growth in the UK is too dependent on London and global city competition is increasing

• Long lead-times and high costs of physical infrastructure investment, pressures to decarbonise, and the widergeography of its stakeholders, make it a massive challenge for strategic governance

• Urban areas contribute to greenhouse gas emissions because of their higher levels of consumption but dense,compact cities can be especially energy- and emission-efficient spaces for growth-inducing agglomeration

• Dysfunctional planning regulations and land markets, ageing infrastructure, and the state education system

impede UK city-driven growth; and cities need to claw back more responsibility for strategic governance

• Strategic governance for urbanising countries is nuanced and depends on geography, and economic density,division and distance; negative externalities such as crime, congestion and disease incidence scale with city size

2



Executive Summary

What could drive change?

What might be on the horizon?

Concluding remarks

• Cities and their drivers of change are part of a highly inter-dependent complex system of urban systems

• Scale economies are the elemental driver of change for cities

• Strategic governance of cities has the ability to enable future economic growth or through its absence impede it

• Competitiveness and strategic positioning in a network of global cities is vital to sustaining London’s growth

• More generally, economic diversity, a skilled workforce, connectivity, strategic governance, innovation in firms and

quality of life are important drivers for city competitiveness

• Rising inequality between the creative class and other workers might inculcate an “inchoate rage” in cities

• Led by ambitious mayors, cities may bypass nation-states and the Bretton Woods system to establish new forms

and networks of strategic governance, leading to the rise of new de facto city-region states• When cities ignore the consequences of their voracious ‘urban metabolisms’ it can result in a deepening sense of

injustice within the ‘distant elsewheres’ that supply them

• If nation-states become engaged in distracting ‘culture wars’ over social values, the creative class may flee theircities seeking more diverse and tolerant centres

• Better understanding of the economic inter-dependency between cities in the UK and abroad and a credible andimaginative exercise to explore the future in those terms could enhance strategic governance of UK cities andimprove the allocation of scarce resources

• Analysis of opportunities and threats suggest that too much emphasis on physical infrastructure – whilst a crucialpublic good for strategic governance to shape – may obscure the notion that cities are people and, moreover, thatsuccessful cities are arguably creative people; an ‘integral futures’ approach points to significant uncertainty inindividual behaviour and action, and institutional composition and agency

• Looked at dispassionately, the risks to UK economic growth - especially if London loses it influence in the globaleconomy - seem to be on the down-side but the future is not written and the UK still possesses highly-valuableeconomic and cultural assets; improved strategic governance could be a game-changer

3



City-driven growth for the UK:

Opportunities and threats

1. What drives the development of cities?

4



Remarkable patterns in the development of cities

over time may offer insights into future pathways

• There is a growing body of evidence to suggest that cities will tend to grow systematically

• Cities seem to conform to a ‘rank-size rule’ insomuch as, with the exception of a few notable outliers, therank of a city in its national (and international) hierarchy is linearly related to its population8; the rank-sizerule is stable over time9; and cities seem to grow in parallel to form an inter-dependent ‘portfolio of place’10

• Historical analysis and theoretical insights from the ‘new economic geography’ suggest that rather than

“flattening” the world, globalisation, by expanding the size and scope of markets, and therefore inducing afiner division of labour, incentivises “bumpy” city formation to capture agglomeration scale economies11

• The historic rates of urbanisation in 18th century Britain, Europe and North America are consistent with the

supposedly extraordinary rates of change more recently in the developing world12

• However, it is the unprecedented volume of anticipated urbanisation in the developing world thatrepresents a major ‘known unknown’ for the 21st century

‘Rank-size rule’ for urban England and Wales, 20016 Stylised representation of urban areas7

5

0

2

4

6

8

10

12

14

16

18

0 2 4 6 8 10

Metropolises, secondary cities, market towns, and villages link through complementary functions to form an inter-dependent ‘portfolio of place’ - both nationally and internationally

Natural log scaleof population

Natural log scaleof rank





2. Opportunities for economic growth

6



Cities are people rather than infrastructure and

successful cities are sustained by creative individuals

• US urban theorist Richard Florida has developed a hypothesis that a ‘creative class’ of individuals is the

driver of regional economic growth and that they favour “innovative, diverse and tolerant” centres17

• The Nobel-prize winning economist Robert Lucas described the growth-inducing effects of humancapital clusters as a ‘Jane Jacobs externality’ after the influential Greenwich Village-based urban activist

• Evidence from the US, UK and Europe supports the hypothesis of the ‘creative class’18

• Rather than building high levels of ‘bonding’ social capital, often associated with stability, on thecontrary, creative centres favour looser networks, ‘weak ties’, and ‘quasi-anonymity’19

• There is an opportunity for those who develop cities to facilitate creative centres that rely not just on

‘crude density’ but on ‘Jacobs density’ – places for diverse street-level urban interactions to occur,which can lead to spill-overs of knowledge, ideas, insights and information

• ‘Jacobs density’ could also improve health outcomes by encouraging more walking and cycling

Density of college graduates in the US, 200016

7

The geographical distribution of creative individuals is uneven in the US, UK and Europe



Innovative international researchers are gradually

uncovering a new multi-disciplinary science of cities

• Some researchers have called for additional resources to be allocated towards multi-disciplinary

quantitative analysis of the city in order to improve scientific knowledge of urban dynamics and growth

36

• The complexity of cities and the high degree of inter-dependency between the individuals, institutions and

infrastructure from which it emerges makes intervention to shape outcomes hugely challenging

• But there is evidence of surprising regularities in the scale economies for infrastructure, and CO2 emissionsin cities with larger populations37; for example, doubling the population of a city requires only 85% of thesame infrastructure; moreover, per capita GDP, innovation, crime, congestion and disease incidence allseem to have the same increasing returns to population

• The performance of several megacities suggest there may be a sub-optimal level of economic densitypast which productivity growth is constrained by crime, congestion and health outcomes38

• A new science of city planning could help manage trade-offs between growth and its negative externalities398

Urban indicators vs population size for 360 US metropolitan areas35

Surprising regularities in the increasing returns to income, innovation and crime from population in metropolitan areas may lead to better ways to manage urban trade-offs





3. Threats to economic growth

9



Skills are an elemental driver for growth but there is

an historically-determined divide between UK cities

• An historically-determined skills divide between UK cities threatens the balance of its ‘portfolio of place’

• Analysis of census data found that a city’s skills base in 1901 was the best predictor of economicperformance in 2011 although infrastructure investment and industrial diversity were also influential52

• Improving city-driven growth is a long-term challenge because history matters to city futures

• Cities are powerful engines of social mobility53; but widening skills divides within cities may create

structural inequalities, induce spatial segregation, and dampen cultural vitality

• Rising within-city income inequality could also increase insecurity and thereby indirectly impede growth;many of those charged with offenses during the English urban riots in of 2011 lived in some of the mostdeprived areas of the UK largest cities, and in neighbourhoods where conditions are deteriorating54

10

Skill levels in UK cities, 2010 (%)51

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Working age population with no formalqualifications (%) 2010

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qualification at NVQ4+ (%) 2010

Highly-skilled cities havehistorical advantages including

established universities



Economic growth in the UK is heavily dependent

on London but global city competition is increasing

• Growth is more regionally dispersed in the UK than in other European competitors and the level of

dispersion has been steadily increasing since the 1990s57

• Around half of the UK’s growth in the last 10 years has come from London and its surrounding areas; in

2009 London had an average productivity level 32% above the UK average58; of the other regions onlySouth East bettered the UK average while Scotland equalled it59

• Growth in the UK’s ‘portfolio of place’ is therefore heavily dependent on the future of London but Londonis wrestling with other global cities in an intense competition for talented firms and individuals

• McKinsey analysis on global city-driven growth suggests that big is not necessarily beautiful because

emerging middleweight cities are projected to out-perform megacities impeded by diseconomies of scale60

• Furthermore, some experts argue that so-called ‘second tier’ cities in Europe have been neglected byuninspired and over-centralised strategic governance at the nation-state level61

Projected economic rankings of global cities in 202556

11

Rank GDP GDP Growth

1 New York Shanghai

2 Tokyo Beijing

3 Shanghai New York

4 London Tianjin

5 Beijing Chongqing

6 Los Angeles Shenzhen

7 Paris Guangzhou

8 Chicago Nanjing

9 Rhein-Ruhr Hangzhou

10 Shenzhen Chengdu

11 Tianjin Wuhan

12 Dallas London

13 Washington, DC Los Angeles

14 Houston Foshan

15 Sao Paulo Taipei

Dispersion of regional GDP per capita, 2007 (%)55

0

5

10

15

20

25

30

35

2000

2009New middleweight cities expected to account for 40 per cent of global growth in 2025





4. What could drive change?

12



Health andwellbeing

Disease

Creative class Urban design

InfrastructureStrategic

governance

Negativeexternalities

Economicdrivers

Policydrivers

Inequality

Indirectdrivers

Urban system

Demographicchange

Drivers andOutcomes

Congestion

Economic

growthCulture

Socialcohesion

Innovation

Inter-dependenturban systems

Enterprise

Technologicalchange

Water supply

Energy supply

Globalisation

InternationalInfrastructure

Urbanisation

Climate

change

Productivity

Pollution

Waste

Matter supply

Consumption

Food supply

13

SinksSources

Strategic governance of cities has the ability to enable

future economic growth or through its absence impede it

Crime

Migration

Economicintegration

Security

Unemployment

Scale economies are

the elemental driver ofchange for cities



‘Integral futures’ analysis may be more successful in

anticipating discontinuous events than scenariosInitial scan of horizon

14

Title Summary Weak signals

13 Premium

enclaves96

Capital investment for low carbon urbanisation and

smart infrastructure increases land costs. Exclusive

urban enclaves emerge with low social mobility.

Masdar City; High

capital costs of low

carbon urbanisation14 Urbanisation

trap97

Countries urbanise yet without moving successfully

from farm to firm. Negative externalities increasewithout a corresponding increase in GDP per capita.

Nigeria; Cameroon;

Madagascar; GuineaBissau

15 Ghost town98 Top-down planning and investment is ignorant of thecomplexity of urban systems. Cities new and old thatdo not attract a critical mass of talent stagnate.

Spanish propertycrisis; UK new towns;Chinese ghost cities

16 World CultureWar99

Some nation-states become engaged in a distracting‘culture war’ over social values. The creative classflee their cities seeking diverse and tolerant centres.

Culture wars in US;Arab Spring; UKconservatism

17 Middleweightknock-out100

New emerging middleweight cities dominate theglobal economic landscape. Megacities such asLondon fail to address their diseconomies of scale.

Lower economicgrowth of megacities;Increased air pollution

18 Barrios cerados101 Income inequality, cultural aversion to in-migration,and perceptions of insecurity produces more ‘closedcommunities’. Innovation and social mobility falters.

Urban segregation inArgentina and Brazil;Gated communities



‘Integral futures’ analysis may be more successful in

anticipating discontinuous events than scenariosA framework for integral futures including initial scan of horizon

15

Objective eg behaviours,actions

Inter-objective eg infrastructure,systems

Inter-subjective eg institutions,culture

Subjective eg values,goals

Individual

Collective

Exterior Interior

1. Dematerialisation

2. Rise of city-region state

4. Dumb cities

3. Schumpeter’s children

5. Invisible insecurity

6. Too tightly wound up

7. UN of cities

8. Pandemic

9. Dream society

10. Frictionless utopia

11. Clusters lose lustre

12. Ragusa cohesion

14. Premium enclaves

14. Urbanisation trap

15. Ghost town

16. World Culture War

17. Middle-weight knock-out

18. Barrios cerados

19. Deurbanisation

20. Distant elsewheres

24. African Queen

22. Sinopolis

23. Western hukou

21. Moveable feasts





6. Concluding remarks

16



Concluding remarks1. It would be possible to design a project that explores opportunities and threats to UK economic

growth from cities both in the UK and abroad

2. Focusing exclusively on UK cities would be inadequate because of the significant changesoccurring in the global economy; whereas analysing future urbanisation in the developing worldin general terms is likely to duplicate other work

3. Instead better understanding of the economic inter-dependency between cities in the UK andabroad and a credible and imaginative exercise to explore the future in those terms couldenhance strategic governance of UK cities and improve the allocation of scarce resources

4. Anticipating this future may be aided by historical analysis and a burgeoning science of cities

5. Strategic governance of UK cities has been too centralised in the past and the project shouldreach out - where capacity exists - to a wider range of local government stakeholders

6. This notwithstanding a significant amount of project resources should be allocated to exploring

the future of the UK’s global city London7. Focusing on economic growth need not be narrow if sustainable growth was emphasised and

the full range of possible negative externalities were in scope

8. The importance of scale economies to city-driven growth should be reflected in project expertise

9. Cities are primarily an innovation for improving living standards; how that growth translates intoliving standards is a wider question for the project

10. Analysis of opportunities and threats suggest that too much emphasis on physical infrastructure – whilst a crucial public good for strategic governance to shape – may obscure the notion thatcities are people and, moreover, that successful cities are arguably creative people

11. Furthermore, an ‘integral futures’ approach points to significant uncertainty in individualbehaviour and action, and institutional composition and agency

12. Looked at dispassionately, the risks to UK economic growth - especially if London loses itinfluence in the global economy - seem to be on the down-side but the future is not written;fortunately the UK still possesses highly-valuable economic and cultural assets

17

city-driven growth for the uk - opportunities and threats (excerpts)

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