Cities thrive in mix-and-match economy

Cities thrive in mix-and-match economy

Today, many scholars agree that cities are the geographic centres of the future.

If this sounds like a truism at a time when the majority of the world's population is urbanised - currently around 52 per cent - and more than 80 per cent of world gross domestic product is concentrated in urban clusters, in fact, it is not.

As recently as the 1990s, many commentators and scholars argued that technology would make cities irrelevant. The Internet and mobile communications, then infant technologies, would make it unnecessary for people to live and work in urban concentrations. Why live in crowded and expensive Manhattan or Hong Kong, so the argument went, when one can work from the ski slope? Yet cities have boomed like never before in the last two decades.

McKinsey Global Institute estimates that 600 of the top urban centres, accounting for a fifth of world population, generate 60 per cent of global GDP.

In the United States, cities with a population of more than 150,000 account for 84 per cent of GDP. Even in newly urban China, cities with more than 200,000 inhabitants account for 78 per cent of the economy.

The dominance of cities is likely to increase in the coming decades as Africa and South Asia begin to rapidly urbanise. Discussion of the world's socio-economic trajectory revolves invariably around cities.

Cities enjoy enormous economic power as nodes in an interconnected, globalised world.

According to a recent MasterCard Worldwide survey by economists Yuwa Hedrick-Wong and Desmond Choong, the world's top 132 urban hubs saw an estimated 30 per cent increase in international visitor arrivals and a 39 per cent increase in their cross-border spending between 2009 and 2013. This was even as the world's real GDP rose by a mere 16.8 per cent during the period.

Why have cities been so successful in the 21st century?

The triumph of cities

A combination of factors explains the phenomenon and can be summarised in two broad categories: 21st century lifestyles and the importance of density.

Lifestyles have fundamentally changed in the last two decades.

In the last century, life was based on regular cycles. People worked in offices and factories, returning home in the evening for dinner with the family, watching television before falling asleep and repeating all of this the next day. Weekends and holidays were spent doing chores and relaxing.

Such regular cycles do not apply any more. People now mix and match activities - they work at their desks but they may also meet friends for lunch, do chores, visit the gym, make a presentation, shop online, travel on business and so on.

Similarly, life at home is not clearly demarcated as people work online or attend to conference calls even as they fit in time for family and leisure.

The nuclear family is no longer the standard social unit and has given way to a multiplicity of household arrangements - singles, multi-generational families, couples with/without children, friends sharing and so on.

This universe of multi-tasking and social multiplicity means that 21st-century lifestyles require a dense concentration of amenities that the average citizen can mix and match according to their requirements.

This includes easy access to hard amenities like airports, bars, restaurants, shops, hotels, public transport, schools, theatres, offices, sports facilities and parks. It also requires soft amenities like clubs, religious and political communities, and social networks.

The Internet has allowed more people to access a greater multiplicity of these amenities, and consequently has made cities attractive places to live a lifestyle defined by diversity and multi-tasking.

Breaking down silos

Cities have become the hubs for innovation and creativity as value-generation has become more about breaking down silos. Until the late 19th century, most innovation was driven by generalists and tinkerers.

While knowledge accumulation was relatively slow, its application across different fields was quick.

In the 20th century, knowledge-creating became the job of specialists in universities and government/private labs. This dramatically sped up knowledge accumulation within silos but slowed cross-disciplinary application and understanding.

But this source of technological change is slowing.

Estimates by economists Pierre Azoulay and Ben Jones suggest that the productivity of an American R&D worker in 2000 was a mere 15 per cent of a similar researcher in 1950.

Yet we seem to live in a world of constant innovation - where is all this innovation coming from?

Value-generation and innovation today are increasingly about connecting the dots between different silos. Extraordinary innovations in diverse fields such as gastronomy, entertainment, media and lifestyle are made possible by mixing different technologies and skills.

Facebook and Twitter, for instance, are not technological innovations but are better seen as social innovations made possible by the application of communications technology.

This environment dramatically increases the economic value of certain kinds of cities that concentrate different kinds of human capital, and encourage random connections and face-to-face interactions between people.

This, in turn, allows the urban economy to flexibly mix and match different skills and knowledge silos that generate large productivity increases.

Studies show that a doubling of a city's population can increase economic productivity on average by 130 per cent. Certain kinds of cities can do much better than the average.

There is an underlying similarity between the social and economic factors driving urban success - it is the ability of cities to "mix and match" everything from ideas to social requirements.


The inclusion of cities like London, Tokyo or New York in the global cities lists should not be surprising. They are well- established hubs backed by large national economies and the weight of history. But it is interesting that virtually every list puts Singapore and Hong Kong in the top 10.

In fact, a survey of high net-worth individuals placed Singapore even above New York by 2023.

Yet, it is often forgotten that the inclusion of the two cities in the big league is very recent and there were many commentators who would have written them off 15 years ago.

Indeed, many people had speculated that Hong Kong would not survive the handover of 1997.

The predictions for Singapore were even more dire after a series of shocks suffered by the city-state.

First, it was hurt by the Asian financial crisis of 1997-98. Even though Singapore was not directly involved, its economic hinterland was devastated. Next it was hurt by the tech downturn of 2000. And, then came the Sars epidemic in 2003 (this also hurt Hong Kong).

Till 1997, Singapore had had a dream run by converting itself from a Third World colonial outpost to a First World commercial hub. But between 1997 and 2002, it seemed like it had run out of luck and some detractors argued that it would inevitably decluster and slip into oblivion.

The Government, however, boldly decided to double its bet and convert Singapore into Asia's premier global city. This strategy was not without its critics.

As a participant in the heated debates of that time, I remember how sceptics argued that global cities had always emerged naturally and were not deliberately built up (incidentally this is not true given the evidence of Medici Florence and Hausmann's Paris among others).

Fortunately, the Singaporean authorities took the plunge. Singapore's strategy is a good example of how mix-and-match economics can be applied to cities.

The Government invested heavily in creating a human capital cluster by opening up immigration, creating new universities and think-tanks and inviting reputed foreign institutions to set up shop.

At the same time, it invested in sectors such as leisure and entertainment - Gardens by the Bay, Formula One racing, casinos and so on. Most interestingly, it actively used urban design to encourage the random interactions and networks that drive 21st-century cities.

The best way to understand this is to visit the city centre. Within a walkable radius of the financial district, one will find the Singapore Management University, the Esplanade theatre complex, the Marina Bay Sands complex (with conference centre, casino and shopping), a number of new museums, a colonial-era cricket club and the new extension to the financial district (which is also mixed in with residential buildings).

Added to the mix is a floating stadium and many hotels, bars and restaurants.

The authorities even went so far as to add a Formula One race track in the middle of the city even though it causes a great deal of disruption for a few days every year.

Not every ingredient works individually but there can be no doubt that the overall cluster is very successful.

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