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Conference on Urban Challenges, hosted by La Conférence Olivaint
Remarks by Angel Gurría, OECD Secretary-General
Paris, 12 July 2008
I am honoured to address the question of urban challenges in the Conférence Olivaint, one of the oldest student organisations in France. If I went back in time to 1875, when the Conférence Olivaint was founded, I would have prepared a quite different speech. At that time I would have addressed a world where less than one in ten people lived in cities and the debate was not how cities could flourish, but how their growth should be curtailed. The vast majority of workers were still engaged in agriculture, lived in a quasi-feudal environment or arrived to dystopian cities. In 1885 this situation led Josiah Strong, an observer from the United States, to claim that “The city has become a serious menace to our civilization.”
Nothing could be farther from the reality of today, when cities are most often cited as “engines of growth.” The fact that almost 180,000 people migrate to cities every day testifies to the somewhat unprecedented importance of urban to our civilisation. As a recent article put it, “Homo sapiens has become Homo urbanus.” An urban age is upon us and at this point beyond recall.
Thus, I would like to talk about the importance of cities in this urban age.
Let me pose a question: “How are urban problems different from others we face, such as the food crisis, rising oil prices or global epidemics?” In 1973, at the height of the energy crisis, two urban planning professors at the University of California in Berkeley posed similar questions and suggested that we think of complex urban dilemmas as “wicked problems.” Professors Rittel and Webber claimed that “wicked problems” are essentially different from what could be called “tame problems,” which have a relatively well-defined problem statement, a point where a solution is reached, and where solutions can be tried and abandoned with relatively little impact.
With “wicked problems” you never come to a "final" or "fully correct" solution since the problem constantly evolves. Solutions to “wicked problems” are not true-or-false, but simply better or worse. Every “wicked problem” is entangled with another “wicked problem.” Traffic congestion, for example, is linked to historical decisions on infrastructure, zoning, and land use. Though at the OECD we strive to provide comparative data, we do not in any way suggest that all countries should follow the same path to economic development or adopt identical urban policies.
Just to recall: in some countries, one or a few cities produce the bulk of output and jobs. For instance, one Hungarian out of five lives in the city of Budapest which produces 34.5% of national GDP. The metro-region represents 42.2% of national GDP and 65% of total foreign direct investment. The capital region of Seoul concentrates more than 45% of the South Korean population, nearly half of the national GDP, 45% of total employment and 56% of foreign direct investment. Almost one-half of the Danish and Irish GDP and more than 40% of the Finnish and Belgian GDP are produced in Copenhagen, Dublin, Helsinki and Brussels, respectively. One-third or more of Norwegian, New Zealand and Czech GDP are based in their national capitals - Oslo, Auckland and Prague. And Paris, London and Tokyo also account 30% of their national output.
These regions have emerged as the key conduits of transnational flows; it is now usual to hear talk of “a common market of metropolitan economies.” Cities have become drivers of innovation and entrepreneurship, where new ideas are developed and turned into commercial opportunities, leading to new products, services, and jobs. Economic ties between global cities such as London and New York are stronger than the ties these cities have with other regions in their own countries.
It would be foolish to understand countries’ dynamics without looking at what happen within their regions. Today the OECD is working on and has developed a variety of methodologies to capture urban and regional phenomena at a deeper level. We developed a common methodology for defining metro-regions and produced a metropolitan database that includes 78 metro-regions with populations of more than 1.5 million inhabitants. This database confirms that metropolitan regions are the dynamic engines of national growth. In most cases, metro-regions exhibit higher GDP per capita than their national average. Similarly to GDP, productivity is typically higher in metro-regions than in the national economies – in many cases well beyond – in some cases, a kind of “superproductivity”.
This work has also been incredibly helpful to benchmark cities and for comparative regional economic analysis, which is summarised every year in one of our best selling publications, OECD Competitive Cities in a Global Economy. We have complemented this analysis with nearly 20 in-depth books on city regions that explore issues of governance, infrastructure, housing, and development strategy in cities such as Montreal, Istanbul, Madrid, Stockholm, Milan, Copenhagen, Mexico City, and Seoul.
The particular challenges that reverberate throughout the OECD are threefold:
1) “What elements have to be present for a city to remain economically competitive in light of global competition?”
2) “How can cities most effectively deal with enduring poverty and new forms of social exclusion?” and;
3) “how can cities adapt and respond to climate change?”
1. URBAN ECONOMIC DEVELOPMENT
Let me start by exploring the question of economic competitiveness. In our research, we have found that a number of factors explain the advantages of large cities in generating higher output per capita and productivity. Agglomeration economies allow large metro-regions to attract global or regional corporate headquarters, offer a wide range of choice in resources—labour, supply chains, and research institutes—and concentrate more specialised business services and infrastructure. Such agglomeration economies are confirmed by a positive correlation between metro-regions’ size and income, especially when they concentrate over 20% of national GDP. Capital cities, favoured by being the centre of political – and in many cases also economic – decisions in their countries, are at the forefront.
In our studies we have also found that productivity emerges as the key factor in metro-regional performance, explaining most variation in GDP per capita among metro-regions themselves. Performance in productivity level of many (though not all) metro-regions is strongly linked to their association with certain kinds of economic activity, in particular high-tech and advanced services. For instance, well-performing metro-regions such as Stockholm and Helsinki have developed strong value-added clusters in telecommunications and biopharmaceuticals, and to a lesser extent and especially in Stockholm, financial and other business services such as transport and logistics. In Milan, the percentage of people working in knowledge-intensive activities stands at 45.9% against a national average of 32.1%.
Metro-regions typically present a large degree of specialisation, which in turn raises efficiency. Specialisation takes place in high value-added activities and metro-regions’ industrial mix tends to produce a greater predisposition to concentrate R&D activities and generate innovation. For instance, more than 81% of OECD patents are filed by applicants located in urban regions. In Ireland, Greece, Finland, the Netherlands, Japan, Korea and Canada, a single region is responsible for almost half of the national patenting activity. In France and the United Kingdom, Paris and London account for more than 40% of the country’s total applications.
Metro-regions also have become magnets for highly skilled labour. For the majority of metro-regions that we have studied, the level of skills and education are higher than the national average. Metro-regions also have a younger demographic structure and lower dependency ratios than their respective national averages. They often attract highly skilled foreign labour, a reality that has been dramatic. Based on an analysis of the World Intellectual Property Organization (WIPO) patent databases, the contribution of non-citizen immigrants to international patent applications filed from the United States, for example, increased from 7.3% in 1998 to 24.2% in 2006. Similarly, in Silicon Valley over half (52.4%) of the existing start-ups had one or more immigrants as a key founder in 2005.
It will be good news to the civil engineers in the audience, that physical infrastructure plays a critical role in metropolitan economic development. Metro-regions have a higher stock of physical capital measured by the equipment of firms and the stock of buildings and infrastructure facilities. Capital provision in metro-regions not only increases the ratio of capital per worker, but can also allow R&D activities within firms and innovation arising at the production site. We have also found that better transportation and telecommunications infrastructure confers significant advantages of accessibility. In light of the need for better and long-lasting urban infrastructure, we are currently encouraging our partners to use capital planning tools that go beyond the political cycle to plan for long-term development. This usually means budgeting and planning in the 10 to 20 year time frame though some countries have done more. Japan, for instance, recently unveiled an ambitious 100 year infrastructure plan.
A strategic vision is required to foster a metropolitan infrastructure and competitiveness plan and its constant updating. Our work encourages metropolitan regions to form this vision through the participation of a large number of actors, especially citizens, nongovernmental organisations, and different levels of government. Given that citizen participation in the planning process of these cities is often as contentious as your own student debates…well, maybe not that contentious…we describe mediation tools garnered from the experiences of many cities in the OECD. Conflict is a part and parcel of the process, as one urbanist observed, “In our profession, a plan that everyone dislikes for different reasons is a success. A plan everyone dislikes for the same reason is a failure. And a plan that everyone likes for the same reason is an act of God.”
As part of the work of the OECD, we analyze a wide diversity of metropolitan governance models that facilitate collaboration and co-operation. The main rationale behind metro-wide co-operative arrangements is that in most metro-regions, the functional area has spilled over existing local government boundaries—strategic decisions need to be made, and services provided, at a larger, regional level. This is one of the most politically challenging areas given the reluctance of local governments to sacrifice power to build regional institutions. Even the most advanced regional institutions, such as those in Stuttgart, London and Montreal, have been allocated limited autonomy.
The most radical solutions involve the establishment of new authorities at the functional level, either by interposing an additional layer of government (for example, London, Stuttgart, Portland) or by expanding the boundaries of existing cities (such as in Montreal, Toronto, Busan or Istanbul). In Mexico City, a city where I spent much of my professional life, the OECD Territorial Review of Mexico City, discovered cross-sectoral co-ordination institutions to control sprawl and catalyze economic development. An OECD study on the Oresund region, which encompasses Copenhagen, Denmark and Malmö, Sweden, has explored the synergies in economic development strategy and regional governance in this transnational area. This has offered critical lessons for other binational or trinational metropolitan areas, such as Helsinki/Tallinn, Detroit/Windsor, and Metropolitan Bratislava which overlaps Slovakia, Hungary and Austria.
2. POVERTY AND SOCIAL EXLUSION
So far, in discussing cities I have stressed their strengths, but as you and I know, just as cities can be a stage for growth, they can also entrench poverty, social segregation, congestion, crime, pollution, and urban sprawl. Not all OECD metro-regions are synonymous with success. One-third of the 78 OECD metro-regions have above national average unemployment rates. Between 1999 and 2002, about one-third of 38 metro-regions also registered lower performance in employment growth than their country’s average, including cities such as Paris, Milan, Barcelona, Tokyo and Vienna. Large cities also tend to contain disproportionate numbers of people who are inactive (or who work in the informal economy).
Exclusion and poverty in most OECD countries have become urban phenomena. These issues are prominent not only in less developed metro-regions, but also relevant for cities that have faced strong industrial decline (Rotterdam, Lille, Detroit) as well as in the “ghettos” or “banlieues” of some of the richest metro-regions (Paris, London). Poverty and social exclusion may lead to significant costs including high levels of criminality which tends to be 30% higher in urban areas than national averages. Deprived neighbourhoods often have reduced access to public infrastructure and services, and in many cases, feature lower levels of investment per capita than other richer neighbourhoods.
A particularly vulnerable portion of the metro-regions' population comprises immigrants and their descendents, who tend to cluster in large cities. Many of them have lower skills but even skilled immigrants find it difficult to integrate into economic networks (for example, in Stockholm only 40% of foreign-born university graduates from non-EU countries have a qualified job compared to 90% for native Swedes). This creates a need for integration strategies in relation to urban services, job opportunities, housing, and the like.
At the OECD, we have examined the question of distressed neighbourhoods and exclusion, questions which defy even the most elaborate econometric analysis. Poverty and spatial polarisation are probably the most difficult challenges for metro-regions, especially given that financial power has often been drained from these areas and that markets alone are insufficient for regeneration. In these areas, public sector investment in urban revitalization can provide the “enabling conditions” which reduce risks for private investors and also to provide the framework for job creation. Rather than encourage governments to cosmetically beautify blighted areas, we encourage them to tackle the underlying economic challenges, namely joblessness. That means connecting people living in deprived areas to jobs, which often lay outside social networks in areas with high unemployment.
3. SUSTAINABILITY & GREEN URBANISM
The third contour shaping urban policy’s new topography is sustainability and green urbanism. Cities generate almost 80% of the world’s total CO2 emissions and thus are the main culprits for global warming. There is no doubt that improvements in urban design, housing stock, traffic congestion and accessibility, disaster prevention and waste management, are crucial components of a strategy to combat climate change and improve the physical health of urban dwellers. If cities fail to deal effectively with environmental challenges, our planet is in serious trouble. The good news is that many cities have already realized this message and are on the front lines of climate change mitigation and environmental conservation.
Throughout the OECD a large number of cities are seriously adopting measures to curtail their environmental footprint. The first measure of course is measuring just how big that footprint is and producing a system to hold governments accountable for recycling, waste management, and the reduction of air pollution. Some of the most promising initiatives include the installation of offshore windmills to generate renewable energy for 150,000 homes around Copenhagen, the development of green areas in Seoul, transit-oriented real estate development in Melbourne, congestion pricing in London, tree planting programs in New York, the development of green building guidelines worldwide, and one of my favourite initiatives, Paris’ public bicycle “velib” program.
I am delighted to see that the environmental dimension is recognized and taken on board by local government. Though at the international level, negotiations are trying hard to advance to post-Kyoto Accords, action at the local level shows that mayors are taking unprecedented leadership on climate change. For example, in the United States, the U.S. Conference of Mayors galvanized more than 700 Mayors to formally agree to meet or beat the Kyoto Protocol targets in their own communities. This October in Milan, the OECD’s “Competitive Cities and Climate Change Conference” will bring together mayors and ministers from over twenty countries who have implemented progressive environmental policies. These leaders are in close contact with the energy consuming public and local utility boards that are critical, but often unacknowledged actors in the global environmental movement. Unlike other climate change conferences, multi-level governance questions will be emphasized as mayors dialogue with international organizations and national government officials.
At the OECD we argue that the transformation of metropolitan areas into “green cities” will indeed produce significant economic advantages for cities. Decreasing contamination could improve a city’s image and improve living conditions, which are essential for attracting and retaining workers. In light of the expanding global market for renewable energy and environmentally friendly businesses, cities stand to benefit from instituting policies that encourage the development of businesses in the fields of innovative new low-carbon technologies. To this end, local governments could design environmental job-creation strategies to integrate linkages between research institutes, environmental protection services, and recycling-focused enterprises. Additional programs could be developed to enlarge the “green economy” through ecotourism, sustainable public transport systems, and the green building sector.
CLOSING STATEMENT
Throughout this speech I have underscored the emerging challenges in economic development, social exclusion, and sustainable urbanism that confront cities among the OECD’s 30 member countries. Though an enormous diversity of urban practices circulate throughout these nations and form the basis of my comments, the OECD’s expansion will only enrich the debates that I have broached in this speech. I am fortunate to serve the OECD at the time of its most ambitious expansion with the accession of Chile, Estonia, Israel, the Russian Federation and Slovenia and the “enhanced engagement with a view to possible membership” with Brazil, China, India, Indonesia and South Africa. The participation of these countries will only widen the scope of OECD’s inquiry into urban issues and increase the cross-fertilisation between countries.
How can we overlook urbanisation in China for instance? Which over time has transformed into the world’s largest urban nation with 600 million urban citizens? A figure that is projected to increase up to 900 million in 2030! The scale is unprecedented. To give you an impression: the increase of urban population in China from 2005 to 2015 will be larger than the total population of OECD countries like Germany, Japan, Mexico or France. Impacts will be felt on a global scale – China is already the second largest contributor to global warming –but there will be as well a tremendous economic impact: China’s cities are becoming the world’s factories and their new urban consumers are changing what global firms produce and their marketing strategies.
OECD and non-OECD countries are intricately connected in this new urban millennium. One of my favourite poets, Octavio Paz, beautifully summarised the spirit in this new era, noting:
Today we all speak, if not the same tongue, the same universal language. There is no one center, and time has lost its former coherence: East and West, yesterday and tomorrow exist as a confused jumble in each one of us. Different times and different spaces are combined in a here and now that is everywhere at once. (Alternating Current / Corriente alterna, 1991)
In closing, I would like to return to the original question of “wicked urban problems” that I posed earlier in this speech. Perhaps the most important criterion of these problems is that with “wicked problems,” as in life, you never come to a "final", "complete" or "fully correct" solution. The complexity of urban challenges evolves with the addition of each urban resident and in the time I have spent talking with you, another seven thousand migrants have arrived to cities. I hope that you will contribute to the work that lies ahead in the construction of better cities and better urban policies.
Thank you.
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