Targeted Urban Economic Growth Will Improve the Economy

By Megan Ray Nichols

Megan Ray Nichols is a technical writer and the editor of Schooled by Science.

Mar 5, 2018 | Economy, Governance | 2 comments

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.

Urban Economics

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.


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  1. Good, thought-provoking article by Megan Ray Nicholas.

    Interesting point that traffic congestion can lead to economic losses of $62 billion. I wonder if the city- wise breakup of the loss numbers can be shared. Curious to know how the key indicators were used to estimate the losses attributable to traffic congestion and other relevant benchmarks such as overpopulation and unplanned growth of slums especially surrounding industrial zones and other critical factors affecting economic activity such as smog pollution and lack of parking in commercial centers.

    For example, the City of Karachi, is arguably one of the largest cities in the world with a population of over 30 million- the total population of Canada!

    Karachi Saddar – as the core downtown area is called -is practically unwalkable. The core downtown commercial zone is plagued with open sewers, broken roads, high congestion and lack of parking. Once a hub of peak commercial activity it’s now a shoppers’ night mare. Old beatup buses move at snail’s pace, belching toxic fumes. There are great restaurants and shopping malls but the traffic congestion and urban environmental degradation and destruction of historical architecture has made shopping or dining experience in Karachi unbearably stressful and hardly enjoyable. Let the tourist beware!

    Paradoxically, the traffic congestion is precisely due lack of sufficient affordable urban public transportation not because of too many buses for city commuters. There is no subway; no metro-bus system.
    A street car and city circular railway used to ply four decades ago but were closed down.

    Karachi is also among the filthiest cites globally because the Mayor says trash disposal is not my job. Watch his interview on August 12, 2019 on ARY digital

    The chief minister of Sindh province , of which Karachi is the capital, says it’s not my job but the mayor’s job to remove garbage, fix potholes, and ensure proper drainage of leaky sewers. Interestingly, the ruling party PPP has no vote bank in Karachi. Ironically, the Mayor has a 80% votebank in Karachi but wants things to get worse to build up political capital against his political opponents. The urban politics has polarized the City of Karachi. Once a City of Hope and for all diverse cultures to survive, now a City that is unlivable with a myriad of problems that nobody wants to fix and nobody knows how to fix.

    The blame-game among political rivals continues on the media while the Karachi denizens suffer the insufferable by literally walking over13000 tons of garbage produced by the city everyday scattered all around city streets!

    Professor Mario Polese must visit Karachi ( I would be happy to host the learned professor. My email: m.ali.aziz@outlook. com) to see first-hand how a sprawling unplanned city can become economically unviable and a threat to its own population. Slums have mushroomed beyond industrial zones to a peripheral area extending almost 100 kilometers to the second largest city in Sindh called Hyderabad.

    To accommodate the economic transmigration from other parts of the country, single-,storied housing societies are being torn down to build high-rise complexes, thus adding to the worsening traffic congestion on narrow roads and bylanes. The building control authority is in cahoots with the builders mafia to grant permits for skyscrapers in different parts of the city. Many of these buildings violate safety standards and pose a looming danger to the residents. Some have already collapsed.

    During the recent monsoon rains 162 people lost their lives, 32 in Karachi. Most of the deaths were not due to drowning but due to electrocution due to the negligence of the Karachi Electric Company that doesn’t do proper maintenance of power lines.

    If Professor Mario Polese can offer to fix Karachi ,then I will fix him two of the best dishes in the world: .A Balochi sajji (roasted mutton leg cooked in a pit ) and Chicken Biryani an outing this world spicy rice cuisine.

  2. Thanks for mentioning that by improving industry facilities in cities will improve economic growth. I think it’s a good idea that if a city wants to improve its economy then building more or investing in business facilities is the proper channel. It also seems like a wise investment to hire development firms to provide development assistance.


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