City Limits

It has been the time to read the end of year editions of my periodicals. The double edition of The Economist is always the most enjoyable tread of the year. I am savouring it, reading a few articles each day and loving them all. The Guardian Weekly usually takes the heavy route, with lots of big picture summaries. Most are dull and predictable, and, this year especially, rather doom laden. Time has its person of the year gimmick, but also throws in some bigger picture opinion pieces, which if anything are even more dull than the Guardian’s, though I like that they tend to look forwards rather than backwards.

But this year one Time article caught my interest, sandwiched between all the pieces trying to second-guess the impact of the new president. It was by Michael Bloomberg, a man I admire greatly and whose positive legacy I observe on a daily basis in New York City. The essence of his article was that much of what happens at federal or even state level is ultimately trivial and irrelevant, and it is cities where the action happens. He uses the argument to strike a positive attitude about the future.

The article said little that was new, but it did strike a different tone from the mass of other material assailing me over the holidays, and so it made me think. Is the premise true? If so, is it a good thing? What might it portend for the future?

So is this really the age of the city? Well, more and more of us live in them. As agriculture declines as a major employer, most people choose to live in cities, both to find work and for social lives and services. In the developed world, many cities sprawled into suburbs as car ownership grew, but that trend has reversed in many places now and cities are becoming more compact again.

Where we live often determines how we live. Most important is housing, where a combination of growth rate, family size, geographical constraints and policy affect prices and rents, public and private, apartments and houses. Behind housing comes education, healthcare and transport, all areas where local policy can matter as much as national. The success of a city must be underpinned by jobs, lured by liveable cities and qualified people as well as financial incentives. A city must also provide working utilities and clean air and water for its citizens.

In the developing world the role of cities is even stronger, with massive regional variations. Chinese cities tend to specialise in manufacturing, Indian ones reflect cultural factors and in other countries, such as Indonesia, the capital could almost be regarded as its own country.

Where Bloomberg is most correct is that cities have tended to become incubators for innovation. Local needs are often urgent, and policymakers are in touch with their populace and can experiment and partner with providers. The most exciting examples of housing, education, transport or environment are found in cities, and good practice can spread. Look at Dubai and its hub policy, Rio and its carnival or the bay area and its technology start-ups. Bloomberg himself innovated in housing and in other areas such as nutrition. Many US cities are setting local minimum wages.

Further, while national politician can generalise and hand-wave at such things as pollution or integration of immigrants, cities have to find practical and immediate solutions. Look for Delhi and Beijing to find new ways to improve air quality and Malmo to lead the field in schooling diverse populations. It is cities which are finessing the rise of Uber, and which will set the trends once driverless cars change land use possibilities. Indeed, it is hard to imagine introducing driverless cars at any scale larger than a city, given the vast impacts on public transportation, layout and land use.

So in some ways it is indeed the age of the city. But Bloomberg almost makes the argument that national politics has become a sideshow, and this is just wishful thinking. Cities have partly stepped in to fill the void of an impotent congress, but there are large areas of policy where they have little relevance.

Cities can’t do much if the president chooses to goad China or Iran or Russia and sends the world hurtling towards the risk of damaging wars. Cities can’t do much if congress chooses to gut environmental regulations and take serious risks with climate. And cities can’t do much to compensate for other policy voids or missteps, whether on taxation, healthcare or immigration. They can mitigate some effects, but damage control still entails damage.

The same is true in the rest of the world. London can be open for business but it does not help much if the UK is closed. Jakarta can make social progress but only slowly if the rest of Indonesia is not ready. Chinese cities can create mini booms, but they will turn to busts if the national climate is sour.

Worse, even when cities are able to innovate, there are losers. One of the more striking charts I read over the holidays showed US inequality trends city by city. While inequality has grown everywhere, regions and cities have performed even worse than the general trend. Places with advantages, whether political, geographical or via resources such as colleges, have marched ahead while others have fallen behind. It is no wonder that politics has become even more polarised and that populism has found a foothold.

If we leave things to cities, the strong will on balance get stronger and the weak weaker. There are a few reasons for this. First, local politics can still be opaque and corrupt, and the most vulnerable places for this are those with chronic weaknesses and less competition. Chicago has been run by the mob and other vested interests for much of the last hundred years. Next, growth begets growth and debt begets debt. Debt comes from decline in population and tax revenues – poor old Detroit has to put all its efforts into paying its pensioners, and has little scope for investment. In the US, things are made worse because education budgets follow wealth, so cycles of depravity are reinforced. Lastly, people are less mobile than economists assume. People who are mobile gravitate to successful places, but unattractive cities cannot just close down like a bankrupt company.

By the way, it is not just Detroit and Chicago that will hit trouble in the coming years, as the finances of most cities are blighted by underfunded pensions, encouraged by financiers and kicked down the road by politicians. Historical errors can boomerang at any time. The Dallas police retiree fund will soon implode and may bring the finances of the whole city down with it.  

A Shell CEO once taught me a lesson about organisation. He warned against trying to find the perfect structure, instead saying that the role of senior leaders was to focus on areas where an existing structure fails. So if you organise by region, then promote cross-functional collaboration, and vice versa. You could argue that one role of national governments is to focus on where cities and regions will fail.

So, while innovative cities can be great for experimentation and creativity, I don’t subscribe to the view that the age of the city is a universal good. Bloomberg glosses over the things cities cannot fix and tendencies made worse by city-led governance. Thank you Michael for cheering me up on one dark morning this winter. Perhaps your intent was to cheer yourself up too. It was a good try, but ultimately rather a flawed argument.