by Joan Clos*
In the
economic history of humanity, urbanization has always been an accelerator of
growth and development. The proximity of all the factors of production that
occurs in the urban settings boosts efficiency because there are lower
transaction costs; bigger, closer markets; and a natural tendency to form
high-value areas of specialization.
Indeed, it seems that no economy in the
world to date has become prosperous without becoming urban. We are, of
course, in the midst of massive urbanization.
Already 55 percent of the world’s
population lives in cities and this figure is likely to reach 70 to 75 percent
in the next 30 or 35 years.
That presents a challenge: what kind of
urbanization will nurture sustainable growth? In my view,
there are three areas that we need to address to ensure prosperous
urbanization.
First is the issue of adequate rules and regulations. Second is
having a carefully thought-out urban design. And third is putting into place a
financial plan that ensures adequate funding.
When you analyze how cities
create value and how economies of agglomeration or urbanization are created,
it’s clear that you cannot succeed without addressing every one of these areas
in parallel.
In the
first instance, it’s evident that the cities that generate the most value are
those with the strongest legal frameworks; that is, the ones that have clear,
intelligent rules that are consistently enforced.
A productive city is an
outcome of the rule of law. Why? Because no one wants to invest in a place
where their property could be seized or their rights abridged.
Just as
important is the physical plan or design, an area that has been neglected since
the Second World War. This lack of attention has resulted in a lot of cities,
especially in the emerging world, that are congested, polluted, and just not
very pleasant.
And that undermines the urban economy because people are less
willing to invest in them. It’s especially important to address design early on
because if you don’t, it is very difficult to do so once the city is
established.
Social and political issues emerge and it becomes a very complex
and expensive process. Finally, a
financial plan must also be put into place from the start.
Urbanization
generates a lot of value and, if managed well, should finance itself. But that
only happens if you have a very rigorous plan.
You need a plan for expenditures
and maintenance and a plan for income. Urbanization must be supported by policy
at the national level that leaves enough revenue with the city to sustain
itself rather than siphoning it all off for other purposes.
If all
three of these issues are addressed, urbanization can begin to produce
financial outcomes immediately. Initially, the construction phase becomes a
source of employment.
Later, the economies of agglomeration kick in and there’s
a continuous process of increased productivity.I am
optimistic.
We are still in the middle of the process. We can still address the
future of urbanization in a way that can guarantee a better future for all.
*Joan Clos is the executive director of the
United Nations Human Settlements Programme and former mayor of Barcelona.
By: N. Peter Kramer
