
Future Cities, Unequal Cities
Debunking Economics - the podcast
The Competitive Advantage of Cities
What causes innovation is rivalry between rivalries and the same area. The spirit of innovation came out of these rival groups in the same urban agglomeration. So how much of the GDP that's created in the States is coming from cities then? I mean is it just like 95 or 98% is it that dominant? Not quite that much, but it's close to 90.
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Speaker 2
And also,
Speaker 3
I mean if you take a look at books like the competitive advantage of nations, and I've currently, my mind's gone on the author at the moment, but the proposition here makes there is that it's often what causes innovation is rivalry between rivalries and the same area. And then consequently you can find that what we characterize as the output of a country is actually the output of a city. And one of the obvious examples, what used to be an obvious example is Italian sports cars, Lamborghini, Ferrari, etc. And they all came out of families in the same region competing with each other for high-end consumers. So the spirit of innovation came out of these rival groups in
Speaker 1
the same urban agglomeration. Absolutely. That's absolutely right. I have some Detroit stories that are very similar about the rise of auto in the United States. So how much of the GDP that's created in the States is coming out of cities then? I mean is it just like 95 or 98% is it that dominant? Not quite that much, but it's close to 90. And the UK is closer to the high and mid-90s according to the OECD. The United States is 85 plus closing in on 90. We've recently done some oil exporting energy exporting astonishingly and not all that comes out of cities. Although the infrastructure that ships it out is in cities. But it's well into the high 80s now in the United States.
Speaker 2
So to achieve that, I mean there has to be investment in those cities. I mean that's, you know, I mentioned that cities it's not all good. There is congestion, there's pollution, they all need to be controlled. That becomes an expense and obviously the more centralized the greater those problems are.
Speaker 1
Sure, cities have two roles, at least two roles. And now when it's simply the agglomeration of finance, just as you agglomerate other industries and innovate, whether or not we think those innovations are actually good things for the economy. But the rise of modern finance is an urban phenomenon. It's been one for centuries actually. But the financialization of the economy that we experienced I think regrettably is driven by cities as well. So just as you had innovation in automobiles and innovation and other products, you've had innovation of a sort in finance and that's part of it. But then the second part is you've got to raise money to pay for these things. Classically for standard economists, these are so-called externalities or public goods, things that the market won't take care of. Although they're quite grudging about admitting that the market can't take care of everything. But then you've got to raise taxes and pay for them. And that shows you the unequal distribution of money and power. One of the main thrust of the book is if cities, which I think they are, the hubs of innovation and growth, why are they so persistently unequal? They're both unequal internally in each city and they're unequal when you compare cities to each other. And it's not a process that market economics has eroded if anything, it's heightened that inequality.
Speaker 2
So the inequality within the city, what you're talking about, how you've got rich and poor. So you've got these sort of like in a, it tends to be the cases that are in almost everywhere in the world. You've got in a city squalor almost in many cases and then you've got the wealthy people living in the suburbs
Speaker 1
where they can have nice lawns and good schools and all that stuff. Yeah, yeah. And in a few places like London and New York, some of the super wealthy will, or extremely wealthy will live downtown in little pockets. But the bulk of it now is the suburban form really pioneered by the United States after World War II.
Speaker 2
Right. And then the difference between cities. So, I mean, you mentioned Detroit and there's a city which had its time,
Speaker 1
but it's suffering now because it was dependent on really one industry, which is in decline. So it was actually the animal industry and it's still quite thriving globally. And even in the United States, it's just not thriving in Detroit. So at one point Detroit had the second highest per capita income in the United States after New York. It even trickled down to African American workers there. They were still at a lower level of wages than their white counterparts, but they were better off than blacks other places in the United States, largely because they were in the union. And Detroit is a gigantic city if you've ever been. And at its peak, it was two and a half million people.
This week on Debunking Economics Phil and Steve are joined by Richard McGahey, author of a new book “Unequal Cities: Overcoming anti-urban bias to reduce inequality in the United States”. One of the problems the US faces is that cities, by and large, are self-funded, with little in the way of federal or state support, beyond minimal welfare programmes. And cities compete with each other to survive. As Steve points out, being self-sufficient within an organism is not how organisms function properly. But that’s how the American economy is structured. And Richard suggests that the US is losing out, because properly funded cities are the most productive aspects of an economy, provided the ills of city living, such as pollution, congestion and social inequality, are funded and managed.
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