In 2007 an extraordinary fact arose which passed completely unremarked by the media and the vast majority of academics. This was the first year in human history that saw more people living in cities than in the world’s rural areas. Cities constitute hugely important markets and centers of commerce and as such their continued success has immense implications for businesses across all sectors.
In an excellent report on the “citification” of the world, Deutsche Bank Research (DBR) gave considerable thought to the implications of the 2007 urban versus rural watershed for the world’s economy. Entitled “Megacities: Boundless growth?” [PDF, 408 KB], the report points out that by March 2008 there were over 400 cities around the world that contained more than 1,000,000 people. This is more than twice the number three decades earlier. In addition there are 20 cities that contain more than 10 million inhabitants and more than half of these are located in Asia.
If you live in a city you’re probably thinking “So what?” but just 200 years ago only 3% of the world’s population spent their days and nights in cities. The UN is one of the primary sources of research for the movement of masses of people from the countryside to the city and it says that 1.6 million people make their way from the hills and plains to one or another of the world’s proliferating urban jungles every ten days. In 25 years, the DBR Report says, nearly two-thirds of the world’s population will be citified.
The report asks, is this good or bad? A curse or a blessing? The obvious place to look for answers to these questions, the report suggests, are the megacities, since one can expect them to amplify the pros and cons of city living. However, this is not a one-size-fits-all issue. Cities can be very different, one from another, and, as the report notes, “There is no single formula that fits all cities.”
What cities have in common is high housing and population densities, often exceeding 2000 inhabitants per square kilometer. Moreover, the trend is for the big to get bigger. Over the last 30 years the number of people living in M-1 cities (more than 1 million inhabitants) has grown by 150%. However, the number living in megacities (more than 10 million inhabitants) has grown by 450%. That said, small cities are growing at an even faster pace and are turning into mid-range cities at an impressive rate.
In developed economies, metropolitan areas are growing at around 1% a year. By way of contrast, metropolitan areas in emerging economies tend to grow at a rate of between 2% and 4% per annum. The DBR report points out that at 2% the growth rate will ensure that the number of people living in the city doubles every 25 years. At 4% the doubling takes just 17 years.
While trade is partly what makes cities attractive, the main driver is the real or perceived disparity between city and rural incomes and prospects. Significant specialization goes with size, the bigger the city, the more scope for niche and specialist activities.
There is considerable evidence that governments can manage the growth of cities fairly effectively by designating a city as a special economic zone and giving it some favorable tax treatment. The comparative cost to new arrivals to a city is one of the limiting factors on city growth, particularly in megacities, where demand for land pushes prices up by comparison with smaller neighboring or regional cities—which is just as well, the DBR report points out, or all Americans would end up living in New York, all the Brits would head for London, and India would empty into Mumbai and Delhi.
Personally I prefer the sociological categorization of cities as marriage marts, an idea perfectly captured by the “Lonely goatherd” pop song:
“One day, she’ll go
down to the village in the valley,
where she’ll meet
a nice young man,
who'll ask for her hand
and they’ll be happy…”
And if they should find they’re not happy, divorce lawyers are one of the specialisms that thrive in cities…
Further reading for demographic trends
- Globalization and Regional Business Strategy, by Alan Rugman
- Toward a Total Global Strategy, by George Yip
- Viewpoint: Mike Moore, Globalization, Challenges and Threats—Where Will the WTO and Free Trade Go?
Tags: cities , demographics , exports , real economy , trade