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Daily RC Article 146

Rethinking Urbanization: Embracing the Role of Growing Cities

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Many governments have become doubtful of their ability to cope with urbanisation on an enormous scale; some have concluded that they ought to slow the process down in order to minimise social upheaval.

New research by the World Bank suggests that pessimism over the future of huge cities is wildly overdone. The bank argues that third-world cities grow so big and so fast precisely because they generate vast economic advantages, and that these gains may be increasing. Slowing urbanisation down, or pushing it towards places not linked with world markets, is costly and futile, the bank says. At a time of contagion and bail-outs, the research also reaffirms the unfashionable view that the basic facts of geography – where people live and work, how they get around – matter as much as financial and fiscal policies.

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It is true that cities are unprecedented in size. The average population of the world's 100 largest cities now exceeds 6m. In 1900, it was only 700,000.

But relative to the size of countries' populations, the current growth is far from unusual. .... Urbanisation is accelerating. But history suggests it will not go on rising at this rate forever…

As people move to the city, urban wages are typically 40-50% higher than unskilled farm earnings. But the income gaps of rich countries have narrowed, so living standards in the West today are roughly the same between town and country.

That convergence is starting in poor countries, too: in poorer Malawi and Sri Lanka, city dwellers account for a much bigger share of consumption than of population (20% compared with 10%). But in richer Chile and Brazil, urbanites account for only slightly more consumption than population.

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Why are third-world cities so big? They are not in relative terms all that large. But they are big because they do an economic job that is becoming more, not less, important. Cheap transport in the past 25 years has produced a second sort of trade revolution. Countries now sell each other not final products but intermediate ones. That has been made possible by an extraordinary fragmentation of production. Parts are made separately, then shipped for assembly. If it is so important where economic activity takes place, what should countries do if they lack big cities – perhaps because they are landlocked, or cut off from world markets or have many poor people living in rural areas? These, the bank thinks, are the real problems of urbanisation, not the multiplication of slums or congestion. The answer, in the bank's view, depends on why people are cut off. If they are trapped in underemployment in remote rural areas, the main task is to establish land markets and basic services (schools, streets, sanitation) to help cities grow. ...

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Where urbanisation has started but pockets of the population are trapped far away, governments have to focus more on transport and other sorts of infrastructure to connect lagging regions with fast-growing ones. It is not until a more advanced stage of urbanisation is reached – with 75% of the population in cities (like northern Egypt or Rio de Janeiro) – that it makes any sense to spend a lot on such policies as slum clearances, lest the now-teeming city is split apart by crime and grime.

The article challenges prevailing skepticism regarding massive urbanization, as many governments ponder slowing the process to curb social disruption. New World Bank research counters this notion, emphasizing the immense economic advantages that burgeoning third-world cities offer. Contrary to popular belief, these cities' rapid growth is crucial and might be intensifying, driven by economic gains. It highlights the significance of geography alongside financial and fiscal policies in shaping urban landscapes. The piece illustrates how urban wages surpass rural earnings, mirroring convergence in living standards between city and countryside in richer nations. It emphasizes that the expansion of cities serves as an economic powerhouse due to a global shift in trade dynamics, underlining the vital role these urban centers play in global commerce. Moreover, it suggests that addressing rural underemployment and fostering infrastructure connections between lagging and thriving regions are critical for sustaining urban growth, while interventions like significant slum clearances become relevant at an advanced stage of urbanization to avoid social divides.
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