How can we make cities productive and reduce inequality at the same time?
Focuses on the theme of “productive” cities which although is not part of the formal SDG 11 statement, but it is an inevitable counter of the existing inequality in cities. We start the module with Aromar talking us through the what makes cities loci of production, and the forms of employment that exist in different parts of the world. Renana will lead us into the role of women in informal economy, followed by a case study on Self-Employed Women Association, India. Aromar then will also bring light to another critical phenomenon of migration, who migrates and why and what are the gaps in urban provisions and governance for them. Clare then reflects briefly on our current global debates around international migration and refugee crisis. Aromar then closes the module again with an overview of how wealth and inequality manifests itself in cities and how can these gaps be reduced .
Cities are loci of production
- What enables cities to become centers of production, and yet reproduce and accentuate the inequality gaps?
- What are the ways in which inequality can be reduced, and cities can flourish?
- What are the implications of over-consumption in cities across spatial and temporal dimensions?
In this session, we will examine how cities are sites of production driven by economies of scope and scale, how they are transforming in the early 21st century with changes in the urban metabolism and economy, new technology and innovation.
We will also understand how to address social and environmental challenges that emerge from the growth of urbanisation and the transition towards sustainable production and consumption patterns.
Since the late 19th century, and the Industrial Revolution, cities have been primary centres of production of both goods and services across the world. Since the late 20th century as more than half of the global economy has come from urban areas, cities have also become primary centres of consumption and in some cases, over-consumption and associated debt which is starting to challenge not only national economies, but also the local and global environment. A key question for us is “Why is this production concentrated in cities?”
The availability of infrastructure and basic services, access to finance and markets, lower transportation and transaction costs, better living and working conditions, the presence of government institutions, other enterprises, centres of education, knowledge and innovation – all of these spur urban productivity in almost all parts of the world and this leads people and enterprises to cluster in cities, making them more productive than villages.
This positive feedback loop where production concentrates along centres of demand or consumption is driven by economies of scale, opportunities for competitive pricing and positive externalities. The action of one enterprise, let’s say an IT firm or a market for agriculture produce in the limited confines of a city creates demands for other goods, computers, transportation, building and insurance services in the same location. As innovation, research and development, access to finance and more recently the creative economy become important drivers of economic activity, cities that are more attractive become increasingly successful and competitive. These activities drive the demand for jobs and with higher wages expand urban markets. This creates a positive spiral of production and consumption and greater concentration of enterprises, talent and creativity in networks of cities across the world.
There are two broad processes that drive this: First, Economies of Scale or Agglomeration and the Second, Economies of Scope. Urban systems tend to experience significant economies of scale, especially, around the provision of economic and social services such as potable water and sanitation, comercial energy, transportation, health and education. The cost of provision of these services reduces dramatically as the size and density of population of an urban area increases. This tends to bring down the cost of living, production and consumption in towns and cities.
But as cities grow very large, economies of agglomeration tend to slow, and sometimes stop because of the negative externalities of urban sprawl, declining environmental quality and the concentration of urban risk.
Economies of Scope is about making different but compatible products in a way that distinct goods can be produced without additional inputs. This has become more important with the growth of the internet and connectivity in both manufacturing and the services sectors and especially in network societies.
Multifunctional flexible spaces such as large wholesale markets for everything – from agricultural produce to electronics, in Asia are a powerful reminder of this. The close proximity of enterprises, creative activity and their dense inter-connectivity enables rapid gains in productivity.
For example, in Dharavi, Asia’s largest informal settlement, which is home to tens of thousands of informal enterprises, they share the same supply chains and credit services. This is often true even among competing enterprises in the same industry in the same city.
Detroit became the world’s Auto-capital in the 20th century because Ford, General Motors and Chrysler, all clustered there. This brought large numbers of skilled workers to multiple factories in the city making it cheap and easy for suppliers to transport and distribute motor parts and sub-assemblies across Detroit. But this unfortunately rarely lasts forever, especially if the productive base of the city is tied to one industry. The decline of the American Automobile Industry in the 1990s triggered a contraction of Detroit’s urban economy, many parts of the city were abandoned and finally in 2013 the city filed for bankruptcy.
The clustering of banks and financial institutions in a few global financial centres like New York, London, Tokyo, Hong Kong, Singapore and Frankfurt also reflects a similar process. The productivity gains that we see from innovation clusters like in the Silicon Valley, Cambridge and the Tsukuba Science city near Tokyo speak to the impact of economies of scope, deployment of new technologies, innovation and the power of knowledge-networks in cities.
Over many waves of globalisation, networks of different sets of cities have driven and dominated the world economy. This map shows a network of world cities of the 16th century tied to the old Silk Road and the Indian Ocean trade routes.
This next map shows a late 20th century economic network dominated by cities, trade and financial flows between the largest industrial economies. The clustering of cities and patterns of exchange are changing rapidly in the early 21st century.
This reflects shifts in the global economy as it moves from Europe and North America towards Asia and the global South. This view of night lights from space is a powerful visual exposition of this change. But even in the early 21st century, a few cities and urban regions tend to concentrate a disproportionate share of value-added. Just 100 of India’s cities are estimated to produce 40% of its economic output, the rest come from 7800 urban centres and 640,000 villages.
Contrary to the popular perception that mega cities of 10 million and above, are the drivers of the world economy, the reality is, that almost half the world economy and much of its economic growth comes from mid-sized cities of between half a million to about 10 million. This is where the battle for the SDGs will be fought and won.
The rapid growth of urban production since the mid – 20th century has had its consequences. In a bid to improve productivity of labour and capital, enterprises have engaged in competition to reduce costs and improve efficiencies. While these productivity gains signal innovation and efficiency, they can also impose severe economic, social and environmental costs.
For example, labour concentrated in and around Mexico city is much cheaper than that in the United States. Over 1.5 million children and teenagers between the ages of 5-17, are reportedly employed in garment factories near Mexico city that produce a mind-numbing item-a-minute for export to the United States. While this does provide productive employment and considerable value addition to the enterprises involved in export to the United States, the impact on human health, safety and inequality are often extreme.
The electronics industry in Nigeria has grown dramatically over the last few decades. Lagos, Africa’s largest city is also one of the largest e-waste dump sites in the world. This leads to severe water and air pollution putting the health of large numbers of people as well as the planet at risk.
These dis-economies of scale limit the expansion of cities and regions through a process of participative planning, appropriate policies and incentives, cities can define the appropriate spatial scale, density, urban form and connectivity that can enable sustainability: this will enable a holistic implementation of the SDGs in urban areas and their surrounding regions. Cities like Vancouver or Melbourne have attempted to do this through their long-term planning and sustainable development processes.
Cities now host half or more of the global population. City-dwellers typically have higher incomes and expenditures than most people who live in the countryside, hence, urban consumption will typically be higher than rural consumption. The challenge is to ensure that it satisfies two requirements: First, that it meets the needs of everyone and leaves nobody behind and Second, that it does not harm the environment.
The metabolismo of cities, by which I mean the flow of people, money, goods and services is increasingly becoming the metabolism of the world. How we transform this will determine how we achieve the SDGs. Cities and citizens of the 21st century can establish a new trend in which they are both producers and consumers. This has significant implications for urban and city design: it signals a shift from na earlier imagination in which production and consumption was separated and cities were zoned to segregate places of work from places of residence.
This implies in sustainable cities, a shift to more mixed-use, moderate to high density urban fabric and a more sustainable economy and urban metabolism. A classic example is a growth of rooftop solar PV electricity that is growing not only in high-income but also in middle-income countries. Each building can now become a centre for decentralised energy production. During electricity is produced that is required in the building, it can be sold electronically to the power grid or stored locally. The presumer that is, the producer and the consumer, is billed only for the net amount of electricity that’s drawn from the grid, deducting what they produced. Germany now meets significant proportions of its energy demand from rooftop solar power. To make cities more sustainable, urban resource flows need to be transformed from being linear to circular where there is effectively no waste production.
The waste of one process becomes a feed for the next as has been practiced by waste-pickers in many cities of the global South. Metals and other materials such as glass and paper can be separated at source and recycled multiple times.
Cradle-to-cradle production and consumption systems are starting to become mainstream in high-income economies: these need to be adapted and incentivised more broadly in other parts of the world.
The threat of climate change will require a transition away from the use of non-renewable resources like fossil energy and fóssil groundwater to renewable resources like photo-voltaic and wind energy, recycling and re-using surface and rechargeable groundwater.
In some parts of the world, this may mean embracing a steady state urban economy, in others, it will imply na aggressive transition to a productive, green and circular economy in cities.
What’ve we learned from the session?
People and enterprises are drawn to cities because of dramatic increases in economic productivity and opportunities that come from the economies of scope and scale.
The growth of over-consumption, sprawl and excessive city-size creates serious social and environmental externalities and impact, that first reduces and then negates these gains.
Addressing the urban SDGs in a holistic manner can reduce the concentration of environmental externalities and risks in cities. Citizens and cities have to be both producers and consumers in the 21st century as we initiate a shift towards a productive, green and circular economy.