Development of cities

But why is this urbanisation phenomena happening? Why do cities matter? It has been observed that most countries have transitioned from poverty to prosperity through urbanising. Growth and development is mainly an urban phenomena. Cities hold great potential for economic growth, job creation and innovation and this is why they play a very important role in local and national economies.

Cities are productivity boosters due to several factors; specialisation and competition is greater because of the presence of a critical mass of workers, producers and consumers. Moreover, we know from economic growth theory that an increase in productivity contributes to the growth of income per capita. This growth in income per capita provides incentives for entrepreneurship which later become large industries and generate economies of scale. Growth results in investment in infrastructure and services to support firms and labour force, thus, generating aggregate economic growth and prosperity.

Living in cities has many advantages. In cities people have faster and better access to infrastructure and services. Cities offer better transportation, better health services, better educational institutions and access to recreational, cultural and community facilities than cannot be provided in smaller settlements. And, what is more important, the wide range of benefits generated in cities do not stop at their boundaries and are available to the population in their hinterlands.

Despite these advantages, not every major city in the world performs to their potential. Governments still need to tackle a range of issues including congestion, pollution, crime, and environmental damage. These issues need to be addressed in order to make cities the engine of transformational change rather than places of social and political instability.

What policies ensure that cities become more productive liveable, and sustainable?

There is a common list of policies that have been accepted globally as the recipe to transform cities into hubs of economic growth and human development. It begins with a clear and broad vision for the city in the future. However, without a plan a vision is just a dream. Successful cities take the next step by planning to implement the vision and developing local action plans. As an example, Box 1 summarises the main goals and objectives of Australia’s National Urban Policy published in May 2011.

Australia’s National Urban Policy goals and objectives (2011)

Goal 1 Productivity

1. Improve labour and capital productivity
2. Integrate land use and infrastructure
3. Improve the efficiency of urban infrastructure

Goal 2 Sustainability

1. Protect and sustain our natural and built environments
2. Reduce greenhouse gas emissions and improve air quality
3. Manage our resources sustainably
4. Increase resilience to climate change, emergency events and natural hazards

Goal 3 Liveability

1. Facilitate the supply of appropriate mixed  income housing
2. Support affordable living choices
3. Improve accessibility and reduce dependence on private vehicles
4. Support community wellbeing

Source: Department of Infrastructure and Regional Development

If the required development policies are well known, why is there such a wide variation in the performance of cities?

A major flaw with the top-down approach – like the national urban policy goals above, is that it requires coordination and cooperation between different levels of Government all of whom share the responsibility for city development. The fact that the political cycle is shorter than the policy cycle makes this extremely problematic. 

Problems also arise when policy goals ignore the underlying economic incentives. An example of this problem can be found in Latin America. National governments sought to decentralise economic activity from large capital congested cities. The goal was to reduce the inequality gap and the costs associated with congestion, pollution and the difficulty of providing adequate services in very large cities. However, people continue to be drawn to the large congested capital cities from outer areas. What failed? Was decentralisation a really desirable policy from an economic efficiency perspective? Is it possible to restrict some economic activities to preselected cities and what is the cost of doing it so? For some countries, economic decentralisation was crucial, however, for some others capital cities are strategically located and have become main centres for trade and investment, raising demand for labour force in these areas which becomes a constant incentive for migration from rural areas to the city. They still have economic advantages that outweigh their disadvantages.

A broad scope of action for each and every city may not be sufficiently targeted to the circumstances and stage of development of all cities. Development policies for cities should be designed taking into account factors such as location, current level of development, composition in terms of population characteristics (age, sex, level of education, cultural issues, etc.), main economic strengths and weaknesses and how these factors interact with each other. Effective economic development strategies for cities should be bespoke.

Policy makers need to be sufficiently engaged with a community to understand its preferences. National and State governments face an enormous challenge in this regard.  City governments should be identifying the priorities for cities. They also need to be able to implement policies and it is here where they face major capacity hurdles (legal, financial and personnel). Assigning responsibility to city governments does not mean that the different levels of government should disengage from the development of cities. Each level of government has to understand its role in economic development and contribute appropriately. For example, city governments will not have the constitutional power to apply the appropriate policy instrument or do not have the expertise needed to implement certain projects and programs. The support and guidance from national and state governments are necessary elements when cities try to shape their own future.

Urban planning fails when top-down policies, programs and projects are imposed on communities. Social and economic development of cities cannot be defined according to a macro vision of problems and needs. These should be solved taking into account particular features and characteristics of each city rather than following ‘standard’ development recipes. Solving urban planning problems requires effective collaboration from all parties involved. Consultation, dialogue and consensus play a key role in defining cities priorities at every government level and for all stakeholders.

These are crucial aspects that policy makers and planners need to recognise as the key to unlocking the potential of cities, however understanding them is still one of the greatest challenges of this century.