How can urban economies manage their affaires to enhance
their competitiveness?
The reality facing local leaders will not be entirely satisfying. When she
wrote about Global Cities, Sassen was quick to note that the work force of
what one could refer to as the command centers of the world economy was
becoming segmented into highly skilled, highly paid workers at the top (the
symbolic analysts) who managed enterprises and did the work that was
possible only in such a center – the analysis, research, manipulation of
symbols, planning and coordinating, and a mass of less skilled workers who
supported this activity as staff in back offices or in menial support tasks.
This social segmentation would create its own set of problems. Scott has
articulated this more clearly, twenty years further in time. He notes the
development of gated communities in which the skilled labor force can
retreat from the problems of society, the deepening of urban social
segregation enclaves for elite shopping and leisure, private education.
Charting a course for future development must be done on a reasonable
understanding of the city’s relative strengths and weaknesses. Two
methodologies were discussed above, benchmarking and statistical, that
could be used for this. This study might reveal the city’s situation with
regard to transportation, urban amenities, education of the labor force,
numbers of small and of large firms, fiscality, research facilities, industrial
clusters, and so forth. Then there will be the general understandings of
what is required for competitiveness at the current juncture of time –
Is this an era of learning or creativity or innovation and, if it is, then what actions
are imposed on the city?
If a plan is to be introduced it must be done in the context of an
effective structure of governance. All of the major entities in the city that
are in any way related to enhancement of competitiveness must be brought
together with clear understandings of the task of each and of the lines of
authority that will govern their actions. Many times a plan is excellent in its
structure but is destroyed by a governance structure in which participants
do not agree on lines of authority and adhere to them. For successful
implementation each participant must carry out each task allotted to it,
within the time allowed for this. Failure to achieve one task may make other
tasks harder or impossible to achieve. At all stages it will be necessary for
the leadership to monitor progress toward meeting the objectives of the
plan. This includes regular appraisal of the wisdom of including some
actions in the overall plan.
Key messages
their competitiveness?
The reality facing local leaders will not be entirely satisfying. When she
wrote about Global Cities, Sassen was quick to note that the work force of
what one could refer to as the command centers of the world economy was
becoming segmented into highly skilled, highly paid workers at the top (the
symbolic analysts) who managed enterprises and did the work that was
possible only in such a center – the analysis, research, manipulation of
symbols, planning and coordinating, and a mass of less skilled workers who
supported this activity as staff in back offices or in menial support tasks.
This social segmentation would create its own set of problems. Scott has
articulated this more clearly, twenty years further in time. He notes the
development of gated communities in which the skilled labor force can
retreat from the problems of society, the deepening of urban social
segregation enclaves for elite shopping and leisure, private education.
Charting a course for future development must be done on a reasonable
understanding of the city’s relative strengths and weaknesses. Two
methodologies were discussed above, benchmarking and statistical, that
could be used for this. This study might reveal the city’s situation with
regard to transportation, urban amenities, education of the labor force,
numbers of small and of large firms, fiscality, research facilities, industrial
clusters, and so forth. Then there will be the general understandings of
what is required for competitiveness at the current juncture of time –
Is this an era of learning or creativity or innovation and, if it is, then what actions
are imposed on the city?
If a plan is to be introduced it must be done in the context of an
effective structure of governance. All of the major entities in the city that
are in any way related to enhancement of competitiveness must be brought
together with clear understandings of the task of each and of the lines of
authority that will govern their actions. Many times a plan is excellent in its
structure but is destroyed by a governance structure in which participants
do not agree on lines of authority and adhere to them. For successful
implementation each participant must carry out each task allotted to it,
within the time allowed for this. Failure to achieve one task may make other
tasks harder or impossible to achieve. At all stages it will be necessary for
the leadership to monitor progress toward meeting the objectives of the
plan. This includes regular appraisal of the wisdom of including some
actions in the overall plan.
The Eurozone crisis, cities and economic competitiveness
The global recession and Eurozone crisis have already had a huge
impact upon the European economy and present even greater future
threats. They have sharpened the existing debate about policies for
competitiveness as policy makers struggle to make the European economy
succeed in an increasingly turbulent, global world. They have also raised
questions about the contributions that different territories make to national
competitiveness. In particular they have encouraged a debate about the
economic contribution of capital and non capital cities and whether
countries perform better if they concentrate their investment in their capitals
or spread investment across a wider set of cities Dijkstra et al (2012),
European Commission (2007, 2010). Recession in the property and
financial services sectors have intensified debates in some countries about
rebalancing economies and raised questions about which economic
activities should take place where in future. For national governments, they
pose classic questions about the relationship between territory, economy
and governance and the shape of regional and urban policy. For the
European Commission, they pose key questions about strategic investment
priorities which are sharply reflected in debates about the future of
Structural Funds.
This debate will become more important during the next decade as the
crisis threatens to undermine the real achievements made by many
European cities. In the past decade, cities in many countries improved their
economic performance and made a growing contribution to national
competitiveness. But it was a result of high performing national economies
and substantial investment of public resources. Those conditions will not be
found during the next decade. Many underlying economic and social
problems in cities - which had been masked by the boom - have already
been intensified by the crisis. There is a risk that economic and fiscal
problems and the competition for scarce public and private sector resources
will limit the growth of cities and widen economic and social gaps within
them and between them and the capitals. So the debate is crucial. This
article explores some of the policy and research questions raised by this
debate.
How do second tier cities perform and compare with
capitals?
We define second tier cities as those outside the capital city whose
performance is sufficiently important to affect the potential performance of
the national economy. To identify them we use the boundaries developed
by the OECD and DG Regio for metropolitan regions in Europe. (Dijkstra
2009) These essentially capture the functional economic urban area – the
city region - not the narrow administrative area. To capture the most
important we include all of them in the 23 countries with populations under
15 million. In the largest 8 with populations up to 85 million, we include
those cities in the top two thirds of the metropolitan hierarchy of their
country. This gives 31 capitals and 124 second tier cities. (Map 3.1) These
second tier cities constitute almost 80% of Europe’s metropolitan urban
population. They lie between the capital cities which contribute a huge
amount to their national economy and the many smaller places which
contribute rather less. They are the crucial middle of the urban system.
cities to national economic performance across Europe and recent
changes. To measure economic contribution we use evidence on total GDP
to indicate overall economic weight and GDP per capita to show
productivity. Data are primarily available for the boom period before 2007
so our analysis necessarily focuses upon that period. Nevertheless we do
include some evidence of the impact of the recession.
Total economic contribution. Capitals lead but second tier cities
matter
Capital cities do dominate their national economies. Their total GDP is
bigger than that of their leading second tier cities in all countries except
Germany and Italy. Nevertheless, 12 of the 28 economically largest cities in
Europe are second tier. Figure 3.1 shows total GDP for capital and second
tier cities and the extent of the gap between them. Germany and Italy are
the only member states where the leading second tier city has a GDP
bigger than the capital. In Germany’s case this reflects its balanced urban
system where 6 cities are of major economic importance alongside a capital
whose growth has been historically constrained. In Spain, Netherlands,
Sweden and Poland the most significant second tier city has a total GDP of
between 50-80% that of the capital. In 11 countries the largest second tier
city has a total GDP between 25 and 50% that of the capital. The capitals of
Croatia, Finland, Bulgaria, Romania and Greece dominate their urban
hierarchies with the GDP of their largest second tier city less than 25% that
of the capital. Capitals dominate most in countries where the largest
second tier produced only 10-15% of the GDP of the capital. These include
the UK and France, where global London and Paris dominate, and the
highly centralised Eastern states of Hungary and Latvia.
* For Greece Athens and Thessaloniki
Key messages
Capital cities dominate but second tier cities make an important
contribution to competitiveness
The essential message of this article is that - with the exception of
Germany - capital cities dominate the European urban system in terms of
population, employment and output. The gap between capital and second
tier cities is large and in virtually all the former socialist states of Eastern
Europe growing. The total GDP of capital cities in 2007 was greater than
their leading second tier cities in all but 2 countries, Germany and Italy. In
19 countries the total GDP of the capital was more than twice that of the largest non-capital city and was as much as 8 times greater in 4 states -
UK, France, Hungary and Latvia.
Nevertheless our evidence shows that all second tier cities made a
contribution - and some a significant one - to economic growth in Europe
between 2000 and 2007, even if many were overshadowed by capital cities
to different degrees in different parts of Europe. But many have the
potential to grow and the ability to benefit further from agglomeration
economies. The size of the gap between capitals and secondary cities
varies and in some cases is declining.
Decentralization matters
There is evidence that levels of government decentralization do matter.
Between 2000 and 2007 for example, in the Federal states, all German and
Austrian and half of Belgium’s second tier cities outperformed their capitals.
In the regionalized states, all Spanish and a third of Italian second tier cities
grew faster than their capitals. In the Nordic states, all grew faster than
their capital. In the unitary centralized states of Hungary, Hungary,
Slovakia, Slovenia, Estonia, Lithuania and Bulgaria all second tier cities and
all but one in the Czech Republic had lower growth rates than their capital
cities. Only in Romania, Latvia and Croatia did some second tier cities
outperform their capital.
How many second tier cities is enough?
The number of high performing second tier cities a country can sustain
will vary according to both the country’s size and level of economic
development. For example, in smaller countries there will be less scope for
a large number of places to complement the capital. Equally, in the
developing economies of the East, the capital city is the most significant
driver of the national economy. In both cases, capital cities might remain
the initial focus for investment because they are most likely to have the
capacity and critical mass to succeed. Nevertheless, countries must have
strategies for developing second tier cities, to spread economic benefits
and help them become the economic motors of their wider regions. In
particular, given the impact of national policies and resources, national
governments should focus their policies to encourage as many high
performing second tier cities as the pattern of urbanization and economic
development permits.
So what should the policy approach be?
Some second tier cities could contribute more if they were given greater
European and national policy support, tools and investment. Some
researchers and policy makers argue there is no need for government
intervention to address regional and urban imbalances. In their view the
market itself will self regulate and lead to increased investment in second
tier cities as the costs and price of growth in the capital become more
obvious and the opportunities in second tier cities become equally obvious.
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