Cities And Structural Adjustment

Nigel Harris, Ida Fabricius

• Publisher: Routledge
• Year: 2005
• eBook ISBN: 9781135362331
• Edition: 1
• Topic: Architettura
• Subtopic: Sociologia

This work addresses the challenge faced in the management of major cities throughout the world as they adjust to economic reform and, in particular, to becoming more open to the processes operating in worldwide markets. Such processes have already had some dramatic effects on large cities in developed and developing countries - the rapid decline in manufacturing in older industrial cities and the emergence of the servicing city are but two of the more striking outcomes. Based on substantial case studies of cities in the developed and the developing world - Sheffield, Barcelona, Lille, Mexico City, Monterrey, Santiago de Chile, Bogota, Kingston Jamaica and Johannesburg - themes are drawn out, extending from structural economic change to policy reactions, new city initiatives, management, planning and finance.

CHAPTER ONE
New economic roles
The changing structure of the city economy

Peter M.Townroe

Introduction

The physical fabric of cities, once established, changes only slowly. But the nature of the economic and social activity undertaken within that fabric may be transformed rapidly—within decades rather than over decades. And in any case the overall balance of that activity may shift as the physical fabric is extended, pushed ahead as the population and the income of each city increases. These changes will reflect a redefinition of the role played by each city within the wider national society and within the international economy.

At the end of the twentieth century, coming from a variety of circumstances in their individual histories, cities in both the richer and poorer countries of the world find themselves facing a new degree of exposure to external social and economic forces. Their internal forces for change, forces of growth, of marketplace inventiveness, of developmental investments and of evolving local policies and institutions are being reinforced by a particularly strong set of external pressures. These pressures are coming both from the impact of worldwide new technologies and from related international policy developments. The relevant technologies have to do with transport and communication, and the policy developments have to do with the reduction of barriers between nations in the traded flow of goods and services and in the varying flows of finance capital.

This introduction offers a brief reflection on this new context of the international economy for the cities of the world in the last quarter of the twentieth century, The evolving economic environment may be seen as pushing the economies of the major cities in a country towards playing new roles in their relationships with other cities, as well as in their linkages with their hinterlands. These new roles are redefining urban policy agendas across the world, requiring a broadening of perspective by urban governments. For in this new world, cities can be seen to fail, at least not to maintain real income per head, or perhaps to lose population. The adjustments required to the structures of the urban economies for the new roles have a tendency to result in losers as well as winners in the inhabitants of each city.

Changing roles for cities are coming at a time of a worldwide explosion in city growth. United Nations population estimates (UN 1994) indicate that, by 1990, 43% of the population of the world (or 2.3 billion people) lived in urban areas.¹ The urban population is growing some two and a half times faster than its rural counterpart. By the year 2025, the forecast is for a worldwide urban population of well over 5 billion, three-quarters of whom will be living in countries currently regarded as “developing”. By the year 2010, 26 urban agglomerations will have a population in excess of 10 million, 21 of these being in developing countries. A further 33 or so cities will lie in the population range of 5–10 million. To a greater or lesser degree, the growth of these cities is fuelled by their participation in the international economy.

Taking the term “structural adjustment” in its conventional meaning—of liberalization of economies to market forces; of a relative withdrawal of government from price setting and marketplace control, of movement towards orderly public finances, and of an opening up towards an export focus in international trade relations—there is a danger in seeing it as a one-off change. After all, a given regulation can only be removed once without being reimposed, a public sector budget can only move from deficit to balance once without moving back into deficit. Present discussions of macroeconomic reforms, especially in relation to poorer nations, have the danger of seeing the adjustments as a process to be passed through, to come out on the other side into a new, and more desirable, steady state. Although that may be a justifiable perspective in terms of policy regimes, it may blind observers to the obvious truism that economic structures will continue to change, under the new policy regime as under the old. And indeed, one of the prime consequences of the new policy regime is that, other things being equal, economic structures henceforth will tend to change more rapidly than hitherto. In this sense, the message for city governments is that structural adjustment is never ending.

Human creativity combines with the rich random and planned information environments of cities to ensure a continuing dynamism. And although this dynamism is obviously more active in some cities than in others, no city stands still. Its economy, its society, its institutions and culture—all are in continuous movement. The concept of “management” in cities in relation to structural adjustment has therefore to be based on an evolutionary view of strategy and on a flexibility of response to changing circumstance. City governments are necessarily working in a tension: to provide specific infrastructures and required urban services, while trying not, in so doing, to impose rigidities of response in the future. As a city develops, certain options for the future close off; or can only be reopened at great expense. The location of the city airport is one example; reclaiming built land for public parks is another; widening key arterial roads another. At the same time city governments face a further tension. On the one hand, this is between supporting the producer interest in the city economy, seeking to facilitate change to meet opportunity and to raise the productivity of land, labour and capital; and, on the other hand, defending the consumer interest, an interest buffeted by changes in incomes, in access to services and facilities and in possible degradations to the local natural environment.

It might be argued that the idea of city and national governments seeking to reintervene in order to manage the forces released by policies of disengagement and liberation involves a contradiction. But experience shows that management is needed. This is demonstrated in the case study cities in this volume. The opportunities provided by the policies of structural adjustment, of greater international involvement and faster aggregate economic growth require governmental responses. This is most clear in the provision of infrastructure, of facilities, of necessary public services. At the same time, the relative losers in the process require protection, or at least a framework for reorientation and redeployment. And for many cities in the world there is a severe management requirement imposed by increases in population, and in levels of income, increases that would be there with or without the particular national economic policy changes termed structural adjustment that have been introduced since the mid-1970s.

In the next section, some points are made in relating new economic roles in cities to the continuation of existing roles. The fundamental reasons for the existence and maintenance of cities have not changed. Contrasts are then briefly drawn between dominant characteristics of cities in richer and in poorer countries. The context of the world economy enlarges on the comments made above in relation to the changing context of the world economy, in particular the forces of “globalization”.

New roles for cities in MDCs and New roles for cities in LDCs explore the implications of these external economic changes for cities in the more and less developed countries, in both cases pointing to opportunities as well as problems. A conclusion here is that, in both cases, the changes in the world economic system are exposing the urban economies to a requirement for repeated change as perhaps never before: a need for dynamic response, with failure to respond resulting in relative economic decline.

Emerging urban geographies and Emerging structural issues point towards emerging urban geographies and structural profiles in major cities. It is then from these geographies and profiles and the questions they generate that the urban policy agenda is emerging. Reflection on the experience of the past two decades or so demonstrates how in so many cities the rapidity of change seems to have pushed city governments into a policy of “coping incrementalism” rather than of pursuing a bold-but-informed strategy. There are important lessons to be learned here from the exchange of experience between cities.

The final section of this introduction underlines a tension that is fairly recent on the agenda of city governments worldwide. A combination of rising public awareness and concern, and international pressures from agreements such as Agenda 21 (reached at the Rio Earth Summit in 1992) require city governments to confront the grosser environmental consequences of urban growth. Conflicts between producer and consumer interests, and between rising GDP income and a quality-of-life adjusted income, were always present for city governments. Arguably, structural adjustment towards more open and market-orientated economies will force urban governments, and their national counterparts, to respond to these conflicts, openly and explicitly, as never before.

Cities, rich and poor

Cities reflect a tension between centripetal and centrifugal forces. The abstractions of the standard urban economic model highlight the resulting balance (Henderson 1977). On the production side of the urban economy there are, relative to the size of the city, both internal and external economies of scale, which encourage spatial agglomeration. These economies of scale are particularly strong in many of the infrastructure services in the city, both in “hard” infrastructures such as transportation networks and utilities as well as in the “soft”, such as universities and hospitals. These economies typically (but not always) build upon an initial natural advantage—a harbour, a river crossing, a water supply—an advantage that can possibly turn out to be a disadvantage as the city becomes over time very much larger.

The centripetal forces of agglomeration are countered by centrifugal forces that encourage dispersal of both residence and workplace from the earlier growing urban core. These are, for example, the forces of commuter costs in time and money, and of land costs at the centre, which rise faster than other factor costs for both housing and industrial and commercial activity. The costs rise with a rising population, but especially with rising real incomes in the city. At the same time there are non-market costs in both production and consumption, which encourage decentralization. These may be, for example, the costs of congestion and pollution.

In both rich and poor cities, policy-makers have frequently sought to reinforce these centrifugal forces by land-use controls or financial incentives. The basic but sometimes unspoken rationale for this lies in an imbalance between the advantage of private cost and benefit for the marginal household or industrial or commercial producer, and the social costs and benefits of the existing or average household or producer already located in the city. However, the arithmetic here is problematic. Such policy regimes have had mixed success, often with what have come to be considered deleterious side effects for the strength and flexibility of the urban economy.

Fundamentally, cities exist and grow around a core dynamic scale-economy. This core advantage rests in the economic value that results from the exchange of information and knowledge. It is an advantage that builds upon the accumulation of all forms of capital in the city, both physical and human. This simple notion, which reflects a complex reality, provides a basis for understanding the relative growth and decline of cities in richer countries, as well as in the newly emergent industrializing and in the poorer and predominantly agricultural countries.

Worldwide, the sharing of the essential economic forces of concentration and deconcentration in cities is also seen in the sharing of the essential technologies that support both the centripetal and the centrifugal forces. For all of their differences, the major cities of the world share broadly similar technologies of transportation, of energy supply and of services such as education and health care. The major technological differences lie in the degrees of capital intensity (metro systems, water-borne sewerage, etc.), rather than in fundamentally different technologies. They also share the characteristic of dependence upon external trade linkages for their prosperity. The linkages are with their immediate hinterlands, with other cities across the country and, increasingly, with other cities across the world. A city’s capability to sustain and to develop these linkages, whether the city is rich or poor, in per capita terms, is fundamental to its economic sustainability and growth.

Given the comments above, with their emphasis on the similarities of the forces within the cities of both rich and poor countries, wherein lie the major differences? At the risk of sweeping and inappropriate generalization, the following six differences are important to bear in mind when considering a global picture.

Size

Until the middle of the twentieth century, the global experience of large cities, of a population in excess of one million, was very much concentrated in North America, Europe and Japan. This is now rapidly changing, as the world gains many more cities of this size, principally in developing countries, in both middleand very low-income countries. As noted earlier, the number of cities in poorer countries with populations in excess of 5 million and 10 million is also increasing.

Rates of population growth

The historical experience of most cities in developed countries was of a period of rapid growth, fostered by both high rates of in-migration and a young and fertile resident population (as seen in England: Williamson 1990). This experience translates to the cities of the developing world in the late twentieth century, but with a dimension of greater speed (discussed by, for example, Gilbert 1992, or modelled by Kelley & Williamson 1994, or related to two specific cities in Colombia by Mohan 1994). Population growth rates of 5% or 6% per annum in Third World cities have not been unknown since the mid-1960s, almost twice as fast as rates reached in mid-nineteenth century England for example. It remains true that in the USA, in particular, high growth rates in metropolitan areas in southern and western states are still being experienced, reflecting a very mobile society, but this pattern is uncommon in other industrialized countries.

Income levels and distributions

Average incomes in the cities of poorer countries, whether measured on a household or a GDP per capita basis, are by definition lower than in cities in richer countries; but also for those poorer cities:

• incomes are higher in the city than in the rural areas
• incomes exhibit extremes in distribution between high and low
• real household incomes, allowing for public services and so on, are closer to money incomes than in richer countries
• over time there is considerable mobility of individuals and individual households between income categories, especially in rapidly growing cities
• even in the cities that are very poor on an average per capita basis, there will be a sizeable middle class, with expectations in their patterns of consumption approaching world standards.

Formal and informal activities

Even cities in the richest countries have a proportion of their economic activities centred in what may be regarded as the “informal” sector: unlicensed, untaxed, unprotected and without involvement in legal contracts. But this proportion is higher in poorer cities, and is particularly high in rapidly growing poorer cities. It is high in Sub-Saharan Africa for example.

Manufacturing activity

The proportion of the labour force engaged in both formal sector and informal sector production of goods rather than of services tends to rise as income levels rise as a city grows within an industrializing economy. The proportion then falls away again at higher levels of income, as manufacturing is decentralized or moved offshore and the export base of the rich city becomes concentrated on the provision of services.

Urban bias in public expenditure

Large cities in poorer countries receive larger amounts of the available public expenditure on a per capita basis than do surrounding towns and villages.² This seems to hold true in many countries, for both investment expenditure and revenue expenditure on public services, perhaps reflecting the relative productivity of the spending. The reverse has been true for many large cities in the richer countries, particularly if income support expenditure is set to one side and a comparison is made between spending in core areas and in the outer suburbs of metropolitan areas.

The list of contrasts could be extended: to norms and standards applied in public services for example, or the role played vis-à-vis rural hinterlands. In many developing countries, the single largest city plays a particularly dominant and significant role in terms of acting as the key hub for all forms of communication and interlinkage with the rest of the world. This dominance is less marked in all but the smallest of the richer countries.

The context of the world economy

New economic roles for an individual city emerge as it grows, in terms of both population and income. These new roles also emerge as the national economy within which the particular city economy is located grows and structurally evolves. And these evolving roles in turn respond to economic growth in other countries, both rich and poor, as trade links extend and modify. All of this would happen just as a result of overall economic growth. But the picture is in fact more complex, as suggested earlier. A combination of new technologies and new worldwide policy regimes is adding pressures for the emergence of new roles. These pressures have economic consequences for the structure of urban economies. Four particular categories of added pressure may be noted as providing a new con...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Foreword
• Preface
• Notes on contributors
• Inauguration of the symposium The management of cities during structural adjustment
• Introduction
• Chapter One: New economic roles: The changing structure of the city economy
• Chapter Two: The city as development agency
• Chapter Three: Finance and governance
• Chapter Four: Bombay and the international experience
• Chapter Five: Summing up
• Chapter Six: Barcelona: economic development 1970–95
• Chapter Seven: Kingston, Jamaica: structural adjustment and policy
• Chapter Eight: Bogotá, Colombia: restructuring with continued growth
• Chapter Nine: Mexican neoliberalism and urban management in Monterrey
• Chapter Ten: The changing structure of Johannesburg’s economy
• Chapter Eleven: Sheffield: restructuring of a city economy over two decades
• Chapter Twelve: Santiago de Chile: the second turning point
• Chapter Thirteen: “La Métropole du Nord”: a frontier case-study in urban socio-economic restructuring