Shaping the Local Economic Environment

This chapter explores the attributes that help make local environments conducive to productive economic behavior. Several attributes are explored, beginning with integrity in local government and a short history of corruption and urban mismanagement in America, New Orleans serving as an instructive example. New Orleans’s sad story takes us back to Louisiana’s early history, the issue of race never far from the surface. The chapter also describes how the roots of Silicon Valley’s success go back to the California Gold Rush, helping to shape a unique institutional environment that promoted innovation. As the chapter explains, the unlikely success of Minneapolis-St. Paul, both peripheral and cold, can be traced back to Minnesota’s first settlers. Many of these early settlers were Scandinavian who traditionally placed a high value on education and work. Primary and secondary education matter as much, and often more, than PhDs. A competent and numerically literate workforce is at the core of many small and midsized urban success stories.

Shaping Cities and the Social Relationships Within Them

Some cities are more compact, and others are more sprawled; some are more segregated by class or race, and others are more socially cohesive. The outcomes are always in part shaped by national policies. This chapter first explores the drivers of urban form and of social and economic relations in cities, beginning with public policies toward transit, car use, and the consumption of land. Then it turns to the role of downtowns in shaping cities. The greatest challenge remains the promotion of social cohesion and social peace in large, diverse urban regions, notably in ethnically and racially divided societies. Instituting appropriate models of metropolitan governance, ensuring the equitable provision of people services (such as education and health), and curbing exclusionary practices (NIMBYs) are core issues, which societies have approached differently. The success of Vienna, ranked the world’s most livable city, has its roots in a unique model of metropolitan governance and housing provision but one that is difficult to transpose to other national settings.

Diverging Neighbors

This chapter compares Buffalo, New York, and Toronto, Ontario, two urban areas located on the Great Lakes with similar populations (one million) in 1950. Toronto has since passed the six million mark, while Buffalo seems trapped in a seemingly irreversible cycle of economic decline. The diverging destiny of the two cities has many roots (e.g., the St. Lawrence Seaway, the collapse of Big Steel) but invariably sends us back to the different political cultures of the United States and Canada. The government of Ontario stepped in early in the urbanization process to impose a model of metropolitan governance on the Toronto region, with the explicit aim of deterring the emergence of deep social divides, specifically between city and suburb, and ensuring the maintenance of a strong central core. The state of New York did no such thing in Buffalo, for which Buffalo continues to pay a price.

Shaping the Playing Field

This chapter looks at the conditions under which cities compete within nations and also globally. Those conditions vary across nations because of differences in geography as well as differences in political cultures and institutions. The chapter explores four factors that shape competition: (1) national fiscal regimes, including the presence or absence of equalization payments across jurisdictions (cities, states, etc.); (2) housing markets, notably the impact of regulatory regimes on costs; (3) transportation infrastructure and the formation of transport hubs; and (4) the spatial mobility of brains and talent and the economic and social consequences of the concentration of human capita in selected cities. The chapter ends by exploring the relationship between social cohesion and urban competiveness. The sorting populations across cities is a double-edged sword, a potential source of wealth creation but also of social divides.

Creating Wealth

This chapter returns to the question at the heart of economics as a social science since Adam Smith and his seminal work on the origins of wealth. Why are some nations rich and others poor? The focus here is on the role of cities, on “agglomeration” in the jargon of economics. We find little evidence in support of Jane Jacobs’s thesis that agglomeration is sufficient to independently trigger economic growth. After explaining the concept of “agglomeration economies,” the gains from spatial concentration, various obstacles to their realization are examined: deficient urban transport; insecurity; arbitrary governance; informality; and so on. Their full realization requires solid institutions, which all too often are lacking. Starting with the origins of the Industrial Revolution, we conclude that the impact of urbanization (greater agglomeration) is essentially allocational, shifting labor to more productive endeavors. The roots of technological innovation, which is at the heart of economic progress, run much deeper, taking us back to national cultures and institutions.

Urban (Economic) Success Is Never a Straight Line

Chapter 1 is in part autobiographical and invites the reader on four urban journeys. First, we go to New York, whose decline and subsequent resurgence are recounted through the author’s eyes: In this journey, we revisit the violent neighborhoods of 1950s Westside Manhattan, and we also show how New York’s unequaled concentration of human and institutional resources allowed the city to rebound. We then travel to Vienna, which went from imperial grandeur to urban hell, losing its intellectual elites and historic hinterland, only to rise up again. The voyage to Port au Prince follows, introducing us to a Third World city and the struggles of daily life under conditions of extreme poverty and institutional dysfunction, whose roots take us back to Haiti’s sad history. The final stop is Buenos Aires, which was once in the same league with New York and London but is now reduced to the status of a Third World city, providing the textbook example of the power of national government to undermine even the greatest cities.

Conclusion

Why has the richest nation in the world produced dismal urban failures: stagnating Rustbelt cities and inner-city ghettos, breeding grounds for poverty and violence? At the same time, America has produced great urban success stories, generating unparalleled wealth. This concluding chapter examines the roots of America’s unequal urban landscape, going back to the ideals of the American Revolution and the institutional legacy it spawned, and which some two centuries later would leave their mark on America’s cities. In the face of America’s urban challenges, the temptation is strong to revert to local solutions. Strong mayors and dedicated community leaders are needed. However, ultimately, fixing America’s urban failures will require leadership at the top. A socially cohesive city in a divided nation is an oxymoron. By the same token, America’s story is a warning for the wealthy urbanizing societies of tomorrow.

Paris

Paris is one of the world’s truly great cities. Yet, this great metropolis punches below its weight. Although it is continental Europe’s largest city, it is not the continent’s financial or corporate center; nor is it a leader in today’s digital economy. This chapter examines the reasons behind Paris’s apparent weakness as a global economic player. Five reasons are explored: (1) the decline of the French language and French culture on the world stage; (2) France’s highly centralized tradition of governance and rigid labor market; (3) the political fragmentation of metropolitan Paris, still in search of an appropriate model of regional governance; (4) Paris’s social divides, manifested most cruelly in the impoverished cités of its suburbs; (5) the French state’s policies toward central Paris, which have tended to favor cultural monuments over economic and research functions.

Montreal

This chapter recounts the history of Montreal since the 1950s, detailing its passage from Canada’s metropolis to second city and its subsequent rebirth as an economically vibrant and eminently livable city. Montreal is the story of a metropolis initially divided between two unequal linguistic groups that overcame their divisions, the result of provincial/state policies that explicitly favored the initially lower-income group (French Canadians), both by investing massively in education and (more controversially) by promulgating measures to promote the French language and restrict the use of English. The latter policy produced an exodos of human capital and business, triggering Montreal’s decline. But that shock also laid the groundwork for Montreal’s resurgence and a new economic elite, new economic hinterland, and new economic base. Montreal’s story demonstrates not only that social divides can be healed and that societies can change, but also that economic change often first requires social change.

Introduction

This chapter introduces the book’s principal premise, “Why Nations Matter,” and its guiding template, “The Ten Pillars of Urban Success,” which underpin much of what follows. Nations matter because the very institutional existence of “cities” as distinct administrative units is decided by national/state governments and because the principal tools that underpin the creation of wealth (monetary policy, the rule of law, sound macroeconomic management, etc.) are in the hands of national governments. Looking at cities through a national lens, from nation to neighborhood, allows the reader to uncover relationships that are often overlooked. A strong central business district (CBD) cannot be divorced from a strong national currency. The Ten Pillars of Urban Success walk the reader through the attributes that allow a city to succeed or, alternatively, cause it to fail, starting at the top with wise (or unwise) national governments to well-managed local neighborhoods conducive to productive interaction.