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Conceptualizing Urban ProsperityBox 1.1.1Crises, Cities and ProsperityThe financial crisis: Borrowing, borrowing, borrowingProminent scholars such as Joseph Stiglitz ascribe the 2008financial crisis to rising income inequalities in countriesaround the world. In the face of stagnating real earnings, thosehouseholds in the lower- and middle-income brackets wereforced into more and more borrowing in order to maintain orimprove living standards. With financiers experimenting with riskyschemes at the other end of the credit chain, this situation led toa spate of defaults and, ultimately, the financial crash of 2008.The double irony of this crisis is that it originated in the efforts ofa supposedly sophisticated financial system to give low-incomecategories a much-desired access to housing finance – and afoothold in prosperity.The democratic crisis: “We are the 99 per cent!”The recent crisis is more than just an economic one. Morefundamentally, it has exposed a number of risks to social justice,fairness, participation and, ultimately, democracy. Systematicdecision-making in favour of those better-off is, in itself, a form ofdemocratic deficit, and one that has led to popular movements likeNew York’s Occupy Wall Street. The movement “calls for a societyorganized around the needs, desires, dreams, of the 99 per cent,not the one per cent.” The other major uprisings of 2011 – theArab Spring in North Africa and the Middle East, and Spain’sown Indignados – were also motivated by similar demands forbetter and deeper democracy as essential for overall prosperity.These protests highlighted the fact that economic growth was anecessary condition for prosperity, though insufficient on its own:social and political inclusion is vital for prosperity.The environmental crisis: The convergence of climate changeand urbanisationThe current pattern of urbanization both in developed anddeveloping countries converges on one and the same model: lowdensity-based suburbanisation. Land speculation is associatedwith indiscriminate conversion of rural land to urban uses in theperipheries; this phenomenon combines with a growing reliance onindividual motor vehicles and new-fangled middle-class lifestylesto expand urban areas way beyond formal city boundaries. Avariety of economic agents can typically be found behind thistrend, including real estate developers, home- and road-builders,national and international chain stores, among others, more oftenthan not with support from banks and finance houses. Wastefulexpansion of cities in endless peripheries is a major factor behindclimate change. Beyond the physical threats from climate change,some cities stand to face an array of additional risks related tothe provision of basic services and public goods (water supply,physical infrastructure, transport, energy, etc.), affecting industrialproduction, local economies, assets and livelihoods. Climatechange may have ripple effects across many sectors of urbanlife, affecting the potential for prosperity of the more vulnerablepopulations: women, youth, children and ethnic minorities. 1Cities: Remedy to the Global CrisesIf anything, the recent crises have demonstrated that citiesaround the world are, to varying degrees of intensity,exposed at least as much to the destructive as to the morebeneficial effects of international markets, including socialand political repercussions. In this sense, these crisesdid more than expose systemic market failures: they alsohighlighted major imbalances at the core of economicpolicy-making. 2When responding to such crises, nationalmacroeconomic policies definitely have a major role to playthrough countercyclical public expenditure, strengtheningbank supervision and financial regulations, introducingprogressive income taxation, and reinforcing worldwidefinancial governance mechanisms, among other solutions.However, responses to global crises must also allow fora vigorous role for cities. So far, cities have been perceivedas the ‘engines’ of national economies and there is noreason to depart from that view. Indeed, urban authoritiesfind themselves, at least notionally, in a position to boostproduction in the real sector of the economy at local level,with attendant employment and income generation. Ifurban responses to economic crises are to be effective on alocal scale with positive regional or national repercussions(‘multiplier effects’), then efficient, multi-way institutional,policy and budget linkages are required between all relevantFACTCities are a remedy to the global crises. They provideready, flexible and creative platforms that can mitigatethe effects of regional and global crises in a pragmatic, balancedand efficient way. Cities can act as the fora where the linkages,trust, respect and inclusiveness that are part of any remedyto the crisis can be built. Acting locally in different areas andspaces, urban responses to the crisis can be structured andincluded in national agendas for more efficiency, with betterchances of flexible responses and more beneficial effects.Although not immune to divisive partisanship and ideologies thatcan paralyze decision-making, cities find themselves in moreprivileged positions than national governments to negotiate andagree on responses with local stakeholders. They can forge newpartnerships and local social pacts which, in turn, can strengthennational governments in the face of global challenges.11
State of the World’s Cities 2012/2013policyCities can devise a number of safeguards against avariety of socioeconomic risks. Municipal authoritiescan prioritize expenditures on social security nets, local/regionalinfrastructure and other types of development, with a view tosecuring longer-term growth while stimulating consumption and/or employment in the short term.policyCities can also deploy safeguards against the risksinternational markets may bring to bear on localsocioeconomic conditions, deploying redistributive policies inclose collaboration with central government in order to reduceincome gaps and other local structural problems.FACTThis edition of theState of the World’sCities Report presentsa fresh perspective onprosperity based on fivedimensions – productivity,infrastructures, qualityof life, equity andenvironmental sustainability.China: busy traffic on one of Beijing’s boulevards. Wide avenues such as this bring a sense of space to city centres but increasing wealth hasled to a massive growth in private car use.© Yu Yang/Shutterstock.com12
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Part ThreePolicies forProsperous Ci
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From Comparative Advantage to Urban
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Chapter 3.2Innovating to Supportthe
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Innovating to Support the Transitio
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Statistical AnnexTable 1City Prospe
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Statistical AnnexTable 2Proportion
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Statistical AnnexUrban Slum Populat
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Statistical AnnexTable 4City popula
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Statistical AnnexTable 5Urban Popul
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