Global cities: New York, Paris, London, Toronto, Hong Kong, Shanghai, Vancouver, Mumbai and a few dozen others. The cities with wealth, culture, talent and brand recognition. The winners. List after list after list ranks cities by their economic power and their international connections. According to many theorists, notably Richard Florida and Edward Gleaser, these alpha cities drive global innovation, trade and commerce. Without these triumphant cities, the world would be poorer, more ignorant and more provincial. So goes one theory.
A related theory holds that these cities are not just powerful and wealthy, but are increasingly powerful and increasingly wealthy. Technology and global networks are not creating an even playing field, they are instead driving more talent, innovation and wealth towards the small number of global cities. The world is spiky, and getting spikier. The rich get richer. Everyone else struggles to stay afloat.
There are critical question to ask about these theories. Are they realistic descriptions of the modern economy? Is it inevitable that a small cluster of well-connected cities will become increasingly wealthy and powerful? What does inequality between cities do to a national economy? What does extreme wealth do to the global cities themselves?
I can’t address these questions in a single blog post. I pride myself on concise writing, but that’s a bit much. I couldn’t address these questions in a single book. But I do think we need to push back on these theories.
First, inequality between cities mirrors inequality across our society. Over the last thirty years, income inequality rose in Canada. It’s likely that wealth inequality also rose. More wealth and income is concentrated among fewer people, just as more wealth and income is concentrated in fewer cities. This is a vicious cycle. Concentrating wealth in fewer cities helps drive up housing prices, which fuels inequality. This has three pernicious results: a small group of people get very rich, very fast without producing any real wealth; middle-class people get priced out; and social resentment grows. At the extreme end, the world’s most elite neighbourhoods are places for the ultra-rich to park their wealth. In London and New York, prestigious addresses have extreme prices (tens to hundreds of millions for units), but owners often don’t even live there. This is not the way to create vibrant or successful neighbourhoods. This certainly isn’t the way to fairly distribute wealth and opportunity.
Second, we are not passive travelers floating down an economic river – our destination is not inevitable. Whether we call it the global economy or the knowledge economy, we, the people, can set many of the rules. Some of those rules are deeply ingrained in our culture and economy – private property and wage labour are two big ones. Our economic system is capitalist. But we are not powerless before the free market or the invisible hand, despite the rhetoric since Thatcher, Reagan and Mulroney. Economic forces should not dominate at the expense of individuals, communities or the environment.
Many of the cheerleaders for globalization and the global city argue that the triumph of cities (especially the well-connected, wealthy cities) is inevitable, or at the least a desirable and predictable outcome of the knowledge economy. The knowledge economy requires massive amounts of talent, specialized industries, large sums of venture capital, and a global reach. Only some cities can provide these things, so it is only natural that these cities will thrive. Other cities and regions will be left behind.
Perhaps this is the whole truth, but I’m doubtful. Clearly some industries require very specialized services, and these industries will necessarily cluster. But if high-tech growth industries – clean energy, biotechnolgoy, advanced manufacturing, automation, web design, programming – are really mass-market growth industries, shouldn’t there be enough economic activity to benefit more than a handful of places? Shouldn’t some of the back-office, branch plant jobs end up in places like Sydney, Saint John, Trois-Rivieres, or Summerside? True, more and more of these support jobs are being off-shored to countries with lower wages, and weaker labour protections.
But more is happening than off-shoring: our economies are dominated by a handful of huge, global firms, like Microsoft, Apple, Google, Walmart and Amazon. These are the new masters of the universe – the new monopolies – which have immense power over their employees and over their suppliers. Even investment giant Goldman Sachs is worried that economic concentration is harming workers, consumers, and the economy. Increasingly, these behemoths have huge power over which cities are winners, and which cities are losers. More and more wealth is controlled by fewer and fewer firms, and that wealth is concentrating in fewer and fewer places. Successfully courting a major player is more important than ever.
Amazon is the perfect example, with hundreds of cities pleading to be the location of its second headquarters, HQ2. The lucky winner will almost certainly gift Amazon enormous tax breaks, subsidizing one of the world’s wealthiest corporations, at the expense of local investment. The leading locations for HQ2 are reportedly Boston, Chicago, Washington and New York, already wealthy and powerful global cities. The eventual winner will probably have been a front-runner all along. But if a few billion in tax breaks is needed, better safe than sorry. To paraphrase both Bernie Sanders and Donald Trump: the game is rigged.
The theorists that celebrate triumphant, wealthy global cities as natural economic drivers are not necessarily wrong. Cutting edge research and specialized businesses need sophisticated suppliers, seed money, a deep talent pool and global connections. Robotics firms cluster around Boston; video game designers flock to Montreal. This is no accident, as each city excels in that field. But surely the growing size of firms explains some clustering. Meanwhile, low interest rates and a tax structure that rewards profits over investment helps fuel real-estate markets in global cities. Large flows of money from country to country exacerbate both problems. These failures – among others – are not automatic outcomes of a free market. They are political choices. We can make other choices, if we have the courage.
Two narratives need to change. First, it is not true that only a small set of wealthy, elite cities can and should power economic growth. The extreme concentration of wealth in global cities harms the winners and the losers. Second, the triumph of elite cities is not an inevitable outcome of the market. Economic forces can be regulated and directed by governments at all levels. We have a range of choices, even within a capitalist economy. Only if we allow it, are we at the mercy of the market.
There is massive inequality within cities and between cities. This is unhealthy for our society, and unhealthy for our economy. There are no simple solutions, but pushing back on the hype about global cities is one place to start.