Tuesday, January 22, 2019

Non-industrial urban centers

I've often wondered about fast-growing cities today that seem not to have an underlying logic to their growth.  There have been lots of articles published about cities like Kinshasa or Port-au-Prince where urbanization has not necessarily led to the improvements in economic wellbeing that we have historically seen when people move to a city.  In other words, there are cities today that seem to buck the logic of people moving to them because their earning potential and general wellbeing are vastly better than if they stayed in a rural setting.

This article lays out the general panorama:  urbanization has not always gone hand-in-hand with a country's economic growth, neither as a cause nor an effect.  There have been periods when urbanization has tracked closely to growth, most notably the trajectory of now-developed countries in the 19th and 20th centuries, but there have been other periods, including the present, when the two are less tightly linked. 

The question of individual wellbeing is slightly different, but related.  I have heard somewhere that life expectancy in London and many cities up until the early 20th century or so (when municipal sewer systems greatly reduced disease burden) was lower than in their countries' rural areas.  Population growth in such cities is driven entirely by in-migration, because many of the newcomers survive only a few years before they die of typhoid or something.

Anyway, it has all led me to continually wonder about today's fast-growing cities.  I do believe that people's wellbeing is often vastly improved by moving to these new boomtowns.  If you're earning five dollars a day or so farming to support your family, then even doing something as menial as selling Kleenex to cars in traffic jams in a city can net you that with a few hours of work.  But even when the economic perspective is a wash between the city and the country, cities everywhere continue to grow rapidly.  Often these cities depend a lot on imports, especially in countries where poor transportation infrastructure makes it easy for coastal cities to receive goods from abroad than from their rustic interior.  I always wonder then where the money comes from ultimately to buy these imports.  It may make sense for one person or even a whole army of migrants to sell Kleenex in traffic jams, but ultimately the money their customers have to buy the Kleenex must come from somewhere.  In the 20th-century boomtowns of Europe  and the US, the source of this money, this "created" wealth that could finance purchase of imports, was often industry.  If Chicago's industry (and the workers paid by it) was producing steel or cattle or even software or tourism that brought in money, then it stands to reason that those workers will have money to buy Kleenex etc. from abroad.  But if a country lacks major industry, where  is it getting the money to buy its imported Kleenex?

I recently came across this useful article that explains the phenomenon for me.  The authors talk about consumption vs. production cities.  The latter are like the Chicago case I've described; these cities produce something for export, and can thus finance their own consumption.  But the former, the so-called consumption cities, tend to get their money from resource extraction.  This begins  to explain for me how even a mega-city like Lagos in a mega-country like Nigeria can lack a lot of industry, and have its rich people linked more to real estate or government, neither of which are productive in themselves.  In countries that export primary resources like oil, timber, or minerals, relatively few people are actually employed in these sectors, which explains why a large proportion of the population in their major cities are employed in services like Kleenex-selling.  And the money to import said Kleenex wholesale and then buy it at retail, is ultimately the trickle-down from the riches accruing to the few involved in the oil or mineral extraction.  You can imagine then that this would lead to a situation where a few  people would accumulate a lot of wealth, either saving it or spending it on lavish consumption from abroad, and ultimately not much of it would be available to spark real local entrepreneurship and economic growth.  In such a setting, importers and retail prosper, as do sectors like security guards and lottery shacks.  But there's not a broad base of well-earning, socially-organized industrial workers to really drive equitable, widespread development.

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