Cities have been missing from analyses of the crisis and debates about how to generate a sustainable recovery. Illuminating recent trends and emerging risks, Cities and Crisis is about the future, starting where we are. A fresh assessment is needed of what has changed since 1990 and what has not, of policy assumptions about urban economies, of the lessons of experience. Cities and Crisis looks at the strengths and weaknesses of macro-economic and sectoral policies to guide urban development in both declining and growing cities and regions. Without higher levels of urban innovation and infrastructure investment, growth will remain below potential. Stronger urban economies is not our only challenge. We can expect more frequent and more costly environmental, health, and even economic crises. Cities and Crisis frames a discussion of the vulnerability of cities, resilience, and the limits of domestic regulation to cope with mega-disasters and cross-border risks. The urban transformation which covers what must change in cities, to reduce the infrastructure deficit, improve productivity, and cope with emerging and known risks, must accelerate from the historical trend of 1-2% to 3-4% per year. This is unlikely to happen as long as governments seem unable to set out a vision of the future of cities. The urban agenda, including security and cross-border risks, will have a major impact on nation-states in the 21st century. The level of uncertainty must be reduced if people are to have confidence to invest for the future. The West has always resolved once-in-a-century crises with a paradigm shift that speaks to our collective fears and hopes. Drawing on dozens of OECD reports on economic, environmental and governance, Cities and Crisis provides a “long-term, big-time” framework to put cities at the centre of policy.
The 1990s began with a major recession and geo-political shifts which focused policy on making cities better. Major problems included an emerging urban underclass, deferred infrastructure investment, and significantly more costly natural disasters. The OECD dramatically expanded its capacity to cope with urban policy. Europe took more of the lead in innovative strategies for cities, including on urban regeneration and governance. The decade ended on a more optimistic note, anticipating future growth. Policy and investment have not caught up with the acceleration of spatial change. Although the 1990s introduces the key themes of the book, it also highlights how different were the reactions of governments then, when urban policy gained a degree of importance it now seems to lack.
Cities are the engines of the economy, but the are running low on two key inputs, infrastructure investment and innovation. The image of the engine calls attention to flawed assumptions made about how urban economies function, linked to the dominance of macro-economic and sectoral policies. There are problems related to data which make it difficult for policy makers to anticipate the dynamic effects of urban change; as a result they are not able to enhance the positive effects of density and specialization (agglomeration effects). Governments need policies for cities – forward looking, not remedial. The chapter highlights the costs of the 2008 crisis before ending with a series of 9 questions about the future of economic and political systems and of the role of cities in them.
Problems in housing markets trigged the crisis of 2007-08. Housing policies which treated housing in relation to macro-economic trends and finance failed in many countries. Housing has been used as a tool for labour mobility, to shift unemployed people to areas of labour demand, and to generate higher levels of home ownership to stabilize society. A reassessment of the assumptions embedded in these objectives is overdue. Needed are policies for housing which maintain and even increase the positive agglomeration effects of cities and metropolitan regions. Making the transition calls for a political strategy based on green growth, social change and ageing, and risk reduction.
The stimulus packages since 2009 have not generated as much infrastructure investment as anticipated, despite convincing evidence that before 2008 there was a significant investment deficit. The same can be said for innovation for cities. What’s the problem? Reluctant to act, governments trusted markets to shape demand, assuming that supply would follow. Each sector looks after itself, but the whole is less than the sum of the parts. Innovation as an urban activity, and to improve cities, suffer from similar handicaps. In any case both innovation and infrastructure will call for changes to cities as they are, highlighting the need to make cities more easily adaptable. Yet governments, having downgraded strategic planning for years, seem unable to generate a vision of the future of cities which could generate innovation and the investment to incorporate innovations into everyday life.
Some cities and regions have untapped resources which should lift their growth and enhance their attractiveness. Detroit and Greece however are examples of places where the process of decline itself has to be managed, perhaps for a long time, before there will be growth. Regeneration in other places which have suffered economic and structural shocks highlight the kinds of things that most cities and regions can do to generate new sources of growth. Case studies and theory are congruent, but still leave politicians with decisions to take about more extreme situations of decline when recovery seems hopeless.
There has been a fundamental shift in urban economies as manufacturing has declined: the service sector, including culture, generates trade for cities but is difficult to measure according to the traditional “basic/non-basic” model. In the knowledge economy, firms want to locate where the people they employ want to live. This puts more emphasis on the specific, immovable assets of places. Livable cities put more emphasis on the quality of life; they do not compete for investment and jobs in the same way as competitive cities. Mega-events such as the Olympic Games which call attention to the tension between competitiveness and livability also highlight the need for long-term strategies and for delivery on legacy promises. In both kinds of cities, the waterfront and the coastal zone are the next strategic frontier, posing many seemingly insoluble problems around conflicts over land use and amenity values. Resolving these issues is the challenge of strategic planning.
The ultimate test of how well prepared a society is to cope with and recover from a crisis is another crisis. The lessons of the economic crisis of 2008 show how long it takes to bring about reforms, and how difficult international co-operation to achieve greater coherence can be. Looking to the future, disasters – global and local – are likely to exceed past trends, challenging the capacity of individual countries to absorb their impact. Cross-border, cross-sectoral, place-based strategies will be difficult for governments to introduce and implement, as illustrated by examples from the past two decades, and by the risks associated with flooding. Earlier in the 20th century, modern networked infrastructure utilities were seen as a point of vulnerability, but bombing in war did not bring about an expected collapse of urban societies and economies. Instead, this experience highlighted the factors of resilience. Strengthening resilience makes sense but it is not a cost-free strategy. The greatest risk to resilience comes from the fragmentation of society and a loss of social capital.
Governments regulate in response to crises of all kinds. Regulatory policy has emerged as a distinctive field of government in the past 25 years, with standards for cost-benefit analysis, impact assessment, consultation, and compliance. But many 21st century risks linked to innovation or cross-border risks are not easily addressed through regulation; international regulatory co-operation works best on technical issues. Political leadership will be needed to create new alliances or frameworks to address global catastrophic risks. The private sector and government face security risks but of very different kinds, affecting hard and soft infrastructures. The new security economy defined by states has led to a revival of command-and-control regulation, and to something new on a global scale, extra-territorial regulatory reach. Expanding the scope for innovation will help the commercial economy generate solutions to collective problems.
Paradigm shifts in economic governance have occurred at intervals of a century or more; we may be at a point of transition comparable to that of the early 20th century, a point of conjuncture between short and long term trends. History becomes all the more relevant therefore because there is no living experience of what such a paradigm shift entails. It is part of a process by which crises are resolved when the previous paradigm no longer provides effective or credible solutions. The challenge today, to make cities safer in the 21st century, calls attention to problems which the macro-economic and sectoral policy frameworks of the 20th century are ill-equipped to address. Each paradigm shift in the past was associated with a major increase in the scale of urbanization. This analysis introduces the distinction between meta-regulation, which operates at the level of a paradigm, and regulation in the form of specific roles. Meta-regulation helps to keep the entire system going in reference to basic values, defined in terms of society’s deepest hopes and fears.