Targeted Urban Economic Growth Will Improve the Economy
Cities are huge drivers of economic growth. They have a large share of the population, both public and private institutions and infrastructure.
In 2007, just 380 cities contributed half of global GDP. Researchers project that by 2025, 600 cities will account for 60 percent of global GDP. In contrast to years prior, many of these new hubs are located outside of the United States and Europe to the south and east, especially in China.
So what can the United States do to spur economic growth as the global economy continues to shift? One strategy could be investing in the mid-size cities in the country that are on the rise.
What is it about cities that makes them so influential, and what makes some urban centers grow faster than others? If we find that out, we can identify the best strategies for investing in our cities. Professor Mario Polèse has proposed five urban economics principles that affect a city’s outcomes.
- Size and location play a major role. Once a city is a country’s largest, it will likely stay that way; continuing to grow and gain more resources.
- Outside events drive change. When things do change dramatically it’s likely because of large political, economic, or technological shifts. For example, when the demand for steel fell, growth slowed in steel-producing hubs.
- Well-connected cities grow faster, because they can more efficiently move goods and human capital to where it’s needed most. The ten most populated states lose around $62 billion each year in potential economic activity due to traffic congestion.
- A diverse set of industries is crucial to success. Every industry makes an impact, either a good or a bad one. Cities in which one industry comes to dominate the economy will likely fall on hard times in the future.
- Policies do make a difference. Well-governed places will attract new businesses, while those plagued with corruption and inefficiency will lose the businesses they do have.
The Effects of Low Economic Growth
When a city doesn’t meet the criteria or faces difficulties for other reasons, the results can be quite severe. Low economic growth in an area causes a chain reaction that can impact the welfare of the people living there.
When economic growth is low, fewer people have disposable income so they buy less and give local companies less business. As a result, these businesses struggle to grow, as do the other companies that supply them. Those firms are less likely to increase wages, meaning that disposable income levels will not grow.
Employers will not be likely to hire new workers because they don’t have the demand or the funds, so unemployment rates may increase, worsening the economic conditions. In short, low economic growth creates a cycle that continues to drive the economy down until some sort of change, such as a new technology, or a change in demand from outside the city, turns things around.
How to Improve Economic Growth in Cities
We need to create plans for growth, be open to change, and get a variety of stakeholders to participate in these plans. Here are some of the top tips pulled from research by McKinsey & Company.
Choose an Area to Target
A plan for growth should include taking stock of cities’ strengths, and areas that need improvement. City leaders should identify areas with the most growth potential and invest in them in a way that attracts people and businesses, such as by improving transportation in areas with industry facilities and available workforces.
New York City’s Association for Neighborhood and Housing Development (ANHD) took the first step in this process by creating a chart and interactive map of the economies of the city’s neighborhoods. The organization hopes that the visualization will bring more attention to local economic issues and inform leaders about how best to address them.
Cities should include the surrounding region in their plans because proximity to growth will affect the surrounding counties or states, and nearby municipalities. The city-state of Berlin in Germany and the state of Brandenburg that surrounds it realized this and began making formal collaborative arrangements with each other. They now have various joint organizations, including one that decides land use and transportation policies.
Embrace the Future
Another essential element is to keep the future in mind. Growth plans need to remain flexible to account for future technological, economic and political changes. They should also put a focus on sustainable growth and investing in the technologies and industries that will shape the future.
San Francisco’s growth plan is a “live” plan with a lot of room for flexibility. It includes certain principles, but doesn’t designate specific uses for plots of land. Instead, the planning department’s 100 or so employees assess each project proposal with the plan’s principles in mind.
Get Everyone Involved
Cities should try to get as many people involved as possible. Getting current government leadership, local business, and citizens on board with the plan can help it to succeed.
Making it easier for everyone to get to work, and live in or near the city by investing in affordable housing and transportation can go a long way. The Fix NYC initiative, for example, is working to improve the city’s buses and subway systems, as well as reduce congestion on roadways. To accomplish this, city leaders are proposing a charge of $11.52 to drive a car into the most congested part of Manhattan. Similar pay-to-drive policies are already in effect in cities like London, Milan, Singapore, and Stockholm.
Leaders should take steps to integrate groups that are not integrated into the society or are disadvantaged in some way. Doing so can bring in new ideas and more potential workers, entrepreneurs, and social and governmental leaders. The Chinese City of Chengdu’s Migrant Management Office used to primarily work to control migrant populations. Today, it has a mandate to promote migrant access to educational, health and community resources.
After all, the people living in a city make it what it is. Improving their situations and getting them involved in the process is the most critical part of creating urban economic growth.
Leave your comment below, or reply to others.
Read more from the Meeting of the Minds Blog
Spotlighting innovations in urban sustainability and connected technology
Mobility is not about a car or a bus, it’s about accessing the resources we need in a timely manner or being in contact with people we want to interact with, for any number of reasons. We have already seen how technology can enable remote access to information and some basic medical care, how people can work remotely from an office base or enable a web of delivery services to avoid the need for individual transport to and from a location. New technologies, both those we label as mobility and those we call Internet based, will continue to evolve and further alter what we think of as mobility.
It is more than ironic that well into the 21st Century, the one great disruptive change in personal mobility is built upon the increased use of the internal combustion engine. Transportation Network Companies (TNCs) such as Uber and Lyft have become major players in the provision of personal mobility, primarily in urban areas. The problem with TNCs – and I say “problem” because it relates to what I perceive as their most negative impacts – is the essential auto-centric nature of the industry.
In California, millions of homes are all-electric and 819,337 have solar roofs. Electric heat pumps can accommodate all needs for water heating, air conditioning and heating. Starting in 2020, all new California homes will be required to be zero-energy, accomplished by being well insulated, very efficient, all electric, and having solar roofs. Zero-energy homes, government and commercial buildings will allow the major cities of San Diego, San Francisco, and even massive Los Angeles to meet city goals of using 100 percent renewables.