BON APPETIT BERLIN
22.03.2018 | Viktor Hildebrandt
Should metropolises behave more like businesses? An Interview with Prof. Greg Clark, global advisor and senior fellow at the Brookings Institution, about the role of global cities in today's society.
Greg Clark is a global advisor, author and senior fellow at the Brookings Institution. Clark supports and guides metropolitan strategies world-wide as Professor of City Leadership at UCL, a global fellow for LSE Cities at the London School of Economics, as a senior fellow at the Urban Land Institute, a strategic advisor for the OECD's Local Economy Programme, and a fellow at Future Cities Catapult in the United Kingdom.
Greg has received numerous awards including the Freedom of the City of London and Commander of the Order of the British Empire (CBE) by HM Queen Elizabeth II for services to city and regional economic development. He is a Fellow of the Academy of Social Science and was selected as a Harkness Fellow by the Commonwealth Fund of New York. He currently serves as a Board Member of the London LEP (Mayors Economic Development Board), Transport for London, and the Centre for Cities. He is chairman of the JLL Cities Research Centre.
Viktor Hildebrandt: Prof. Clark, what characterises global cities?
Greg Clark: Global cities have five key attributes that we can observe throughout history. Above all, they are trading cities engaged with the exchange of goods, services, capital, and ideas across borders. They are nodal points in globalising value chains. Because of their extensive trading activity, global cities have always been very well connected. They have contacts in other cities and extensive networks around the world. Trade through connectivity is the first and perhaps the most fundamental characteristic of global cities.
The second feature concerns the population: Due to their affinity for trade, global cities attract diverse and particularly entrepreneurial groups of people. These fellows make global cities the most innovative places in the world since new ideas are usually born where differences interact; and they can only become reality (and thus actual innovation) if there are people around who have a hands-on, entrepreneurial mindset.
This is how, among many other things, navigation, boat-building, insurance, and banking were discovered or invented. Of course, innovations regularly lead to the discovery of new markets as well as to the development of new products and practices - this is the third characteristic. Fourthly, these things have spatial implications: they lead to the formation of economic clusters and agglomerations within global cities which in turn boosts urbanisation. Finally, global cities are very good at taking advantage of geopolitical changes. When for example an empire collapses, a dictatorship ends or an economic recession kicks in, global cities are the first to react. They recognise windows of opportunity and, if necessary, they adapt effectively to new situations and power relations.
These five characteristics are not meant as a strict definition and obviously I do not claim that all of them are always present in the same proportion in every global city throughout history. Yet, if we look at the past 4.000 years, it is these five aspects that we can observe continuously. They have been present in one way or another in the global cities of every era. In other words, they are what links ancient Alexandria, Athens or Rome with Hong Kong, New York or London today.
… or with Berlin?!
Indeed, Berlin has also become a global city once again.
Could you please elaborate?
We all know Berlin’s great history and its DNA. For centuries, it had been a diplomatic, cultural, industrial, technological, educational and scientific global hub. But due to massive destruction during World War 2 and the subsequent division of the city, Berlin could not keep up with the development of other major European cities such as London, Paris, Milan or Frankfurt. Today, however, Berlin is definitely back on the map.
What are the main drivers of Berlin’s “recovery”?
The last cycle of globalisation was driven by the global integration of the so-called ‘advanced producer services’, namely services in media and information, accountancy, law and especially in finance and banking. In this period, cities like London and New York, Paris and Hong Kong, Tokyo and a few others established themselves as the most global of all cities. Berlin was definitely not a part of this group.
Now the current cycle of globalisation is very different. Today global integration is mostly driven by sectors that are impacted by new technologies. Digital and green technologies are particularly important. Berlin has “re-globalised” as it has developed into a leading centre for digital technologies and start-up culture in Europe. Moreover, the political “soft power” of the city has been growing permanently ever since the German federal government moved back from Bonn. And when the new central airport finally opens its gates, Berlin’s global connectivity is going to increase even further. That corresponds to my overall impression (I have visited Berlin between 40 and 50 times over the years) that the local population is becoming more and more international as well.
So you would say that Berlin can be compared to the great global metropolises?
Berlin is just very different from the established global cities, the so called headquarter cities, which we have mentioned above. Neither does Berlin resemble emerging global cities such as Mumbai, Sao Paulo or Shanghai. These are the major hubs of the most rapidly growing economies and as such the gateways that connect the developing countries to the global market.
Rather, Berlin belongs to a third - and from my perspective particularly exciting - group of global cities. I call them the “new global cities”. These are usually much smaller than the established and emerging global cities. They do not have a population of ten to 20 million - but often have less than five million inhabitants. They combine a smaller and usually better managed metropolitan area with an extremely high quality of life and economic specialisation. Therefore they are serious competition, especially for the established global cities where the quality of life is often lower. In the new global cities prices are lower, public services and infrastructures are top-notch. Forests, mountains, lakes or the sea are not far away and the population density is very comfortable. The cultural scene is usually vibrant. This is where I see Berlin, even though the label “new global cities” might be a little confusing at first glance. Other cities in this category are Boston, Miami, Vienna, Amsterdam, San Francisco, Tel Aviv, Melbourne or Stockholm.
Is the de-globalisation and the subsequent re-globalisation of Berlin an exception or do such processes occur regularly?
Similar processes have occurred in many other cities; but re-globalisation does not necessarily follow on de-globalisation. Most of the former Hanse cities, which used to be extremely important trade centres in the Middle Ages, have become practically irrelevant for the global economy. Bruges for instance used to be a global city. Today, as the movie In Bruges illustrates beautifully, it is a somewhat sleepy tourist attraction. Hamburg is perhaps the only member of the Hanse that is still a global port city. Also, many of the global industrial centres of the 19th and early 20th century have de-globalised. Cities like Liverpool, Glasgow, Detroit or Pittsburgh, to name just a few, suffered a lot from recent waves of de-industrialisation. Another obvious and more recent example is Milan. In the 1990s Milan was widely recognised as one of the most important urban centres of Europe. It was mentioned together with London and Paris. Today Milan is much less significant, much less global than it used to be a few years ago.
But to be clear: De-globalising cities are still affected by globalisation. Unfortunately, the impact is mostly negative. At the same time, even the most global of cities always remain local in many ways. They still have residents, a local economy, a local identity etc. The crucial point to keep in mind is that globalisation and urban development are cyclical processes, which are related to the overarching geopolitical and technological developments. And with each new cycle there are some cities that become global, others that adapt and remain global, and some that lose their significance as international nodal points of value creation. But of course, this is always a matter of degree and it surely does not happen overnight.
Do you consider de-globalisation as a failure?
Let me put it this way: I certainly do not think that de-globalisation is a success. Quite to the contrary, it is usually a pretty reliable indication for decline. Businesses shut down or relocate elsewhere. This means that people lose their jobs and might leave the city to start over in another place. The municipal government has less money to spend on public services and infrastructure because of a decrease in tax payments. This again makes the city less attractive in the eyes of businesses, investors and residents. This easily becomes a vicious circle that is hard to break. So, it is one thing to be a city that has never been global and perhaps does not aspire to ever attain importance on a global scale. It is a very different thing to lose a global trading network, to see businesses leave or go bankrupt, to feel less attractive, to be left behind paying off the costs of infrastructure investments that seemed necessary a couple of years ago but are no longer needed today.
Nevertheless, de-globalisation is not necessarily a failure. It is not necessarily the sad outcome of somebody’s mistakes. Sometimes - as in the case of Berlin in the second half of the 20th century - it is rather the result of really unfortunate, really unexpected events. But of course, we should be careful and critical. De-industrialisation for example was a very long process that had been noticed early on by attentive observers. The cities that de-globalised because of de-industrialisation could have reacted sooner and more decidedly. Many of them just weren’t prepared to do so. So yes, oftentimes de-globalisation is indeed a failure.
While de-globalisation goes hand in hand with decline, globalisation leads to growth. But is growth really a success? It usually leads to congested roads, massive air pollution and overcrowded busses, trams and metros, to sharp increases in property values and rent prices. This, in turn, is followed by the expulsion of long term local residents, growing social inequality and inner-city divides ...
All of these problems are very serious indeed. However, I see them as the unintended, negative consequences of a development, which, at its core, is a clear indication of success. A city grows when more people want to live there. If more people want to live in your city, that means that your city is attractive - and that, undoubtedly, is a good thing. Nobody can seriously want his or her city to be unattractive. And the more attractive it is, the more people will want to move there, the more investors will come knocking at your gates looking for opportunities to fix their capital and so on. Now the real question is of course how you can accommodate this growth which - and in that regard growth is very similar to new technologies - in and by itself is neither good nor bad.
The main reason, I believe, why so many people resist growth or are at least sceptical towards it, is that, in recent decades, we have witnessed a veritable explosion of unmanaged, unregulated, unchanneled growth that was not anticipated, not prepared for and thus not coupled with an increase of the housing stock, improvements in the public transport system, investments in public space and so on.
What can attractive cities do to manage their growth well? And what are typical obstacles when it comes to the implementation of general strategies and specific measures for growth management?
Governance capacity and investments are key. In order to spare cities the negative externalities of growth - some of which we have just mentioned -, municipal governments need to invest wisely in housing, roads and other urban infrastructures as well as in public space, public facilities and municipal services. Which particular investments are most urgent, how they should be structured and how they can be combined meaningfully, all of that of course differs from case to case.
Now I see two great challenges that cities usually face when they try to accommodate growth. The first, as usually, has to do with money. How can a city finance the necessary or desired investments? Traditionally, public investment is financed through taxes. But most cities, even the global ones, are not in a position to set and adjust tax rates according to their own needs. What is more, they have to forward significant shares of the taxes they receive, to the region or the state they form part of. A city like Singapore which, since it is an independent city-state, can freely determine tax rates and use 100% of the tax money, is the absolute exception. The other extreme - also rare but not as rare - are cities like Dublin or Tirana which control only a tiny percentage (less than 5 per cent) of the tax money that is collected from local residents and companies. Most cities are somewhere in between.
But even if the municipal government is equipped with the right to determine (some of) the tax rates, it might not be very promising to raise them as much as needed to finance certain investments, because increased tax rates have a tendency to scare away those investors and companies on whose contributions the city relies most heavily and whose exit could even reverse the positive trends that lead to growth. That is a serious problem and I think we urgently need to find ways to raise the financial capabilities of cities. Only then will they become bankable enough to obtain the money they need to finance big, long term development projects.
Hamburg, by the way, is a very good example for how well municipalities can manage growth, if only they are equipped with the rights to determine tax rates and to keep a large share of the inflowing money instead of passing it on to the higher levels of government. (As one of three German city-states it enjoys more fiscal sovereignty than most other European cities.) At the same time, Hamburg also demonstrates that money is not the only thing you need to accommodate growth. It also takes - and that is the second big challenge - skills, readiness and a long-term strategy. I think that in order to be successful, city leaders need to further develop the skill of managing their balance sheets and of composing, as it were, a set of growth management initiatives. This is not easy, especially because some of these measures will reveal their effects only after many years, perhaps under a new government.
Are you implying that cities should act like businesses?
Obviously, cities are very different from companies in many ways. A city is much more complex than a company and city governments are focused primarily on public well-being, not on private profits. But there are also similarities between the two: Both have to make sure that investments - whether they are financed with tax money or sales or bank loans - pay off on the short, medium or long term. Both have to make sure that stakeholders - whether we are talking about employees, shareholders or residents - are satisfied. Moreover, since people, companies and capital are becoming more and more mobile, cities find themselves in an increasingly competitive environment. Just like companies compete with one another for customers and market shares, cities also compete, be it for talent, firms, visitors or the Olympics. With regards to the twin challenges of management and competition cities can - I even think that they have to - learn a lot from businesses.
What happens to the cities that lose in those competitions?
There are different ways to think about the competitiveness of cities, but I am wary of ideas that assume that all cities are in a kind of zero-sum competition with one another. Given that the majority of people now live in cities, and the vast majority of work and investment is done in cities, and more than 75% of carbon emissions come from activities in cities, I think we have a shared interest in how all cities can progress and succeed. We should not think that one city beats another in a contest. My primary preoccupation is with improving how all cities perform.
What makes a city competitive?
There are several core ingredients that help us to assess the relative competitiveness of a city. Population growth and change is the fundamental indicator. But it is linked to other measures that attract and retain jobs, investment, and amenities. Factors such as costs, regulation, efficiency, productivity, capability, connectivity, liveability, affordability, sustainability, governance, investment, visibility and resilience are all useful measures contributing to competitiveness.
But it is also important to keep in mind that all cities are different, and that the ability of distinctive cities to deploy unique and uncopyable assets and advantages in the competitive environment is important. The cities that succeed in the long term often play to unique strengths. Also, life-cycles and time-frames really matter to cities. In the very long term the most competitive cities are often the ones that adjust to changing requirements and opportunities best. This implies that there can be tensions between short and long term competitiveness. Finally, competitiveness is also a function of mindset and story. It is a leadership function where strategic communication and alliance building becomes very important.
The discussion about the relationship between (world) cities and the regions and nation states that these cities are a part of is ongoing. It is often claimed that as cities become more populous and also economically more important compared to their hinterlands and nations, they should also be trusted with more political power and economic freedom. Some authors - most prominently perhaps the recently deceased Benjamin Barber - have even argued that cities should replace the nation states. Would you also go that far?
No, not that far. To be sure, I very much appreciate the work of Benjamin Barber and I agree with him in several ways: Yes, we do live in an urban age. Yes, many of the wicked problems we face land in cities. Yes, mayors should therefore be granted more political influence. Yes, the cities of this world - and especially the world cities - need to create strong networks; not only to have a firm stand when negotiating with national governments and international institutions, but also to learn from one another and to avoid that investors, big business and other market based players can pit cities against one another!
However, I completely disagree with his attitude towards the nation state. Though we do live in the century of cities, we have nonetheless inherited the institutional framework of a world of nation states. The state may become less important in the 21st century, but it is far from becoming politically irrelevant or incapable. Barber’s book If Mayors Ruled the World insinuates that (global) cities should seek to create new forms of governance, independent of their surrounding states. He basically argues that the only thing that really matters for successful cities in the 21st century are good relationships to other global cities. This is a dangerous message if taken on its own.
I think we are much better off if we improve our nation states and their relation to municipal governments, rather than attempting to replace the former with the latter. We need to make sure that cities and nation states engage in constructive dialogue about mutually beneficial ways of coexisting. The same is true for the relations between cities and their hinterlands. One of the key elements for achieving better collaboration between nations, regions and cities is mutual understanding. This can be enhanced by a “flow of leadership” between the different scales. It really helps if mayors know how regional and/or national politics works and vice versa.
You have probably heard of Ulrike Guerot and her proposal to dissolve the European nation states as layers of governance and instead create a European Republic of (50 to 60 existing) regions. Some metropolises, she says, could be represented as regions. What do you think of this proposal?
That is a very interesting way to see Europe and I support the aspiration to have 50 to 60 coherent regions rather than 20 to 30 fragmented nations. Indeed, I think this way of looking at Europe is increasingly what investors and businesses do, and what mobile people do.
But to be very honest, I see no prospect of this happening in any foreseeable future. It would require the collapse of the nation states, which might happen in one or two places, but not in many others. Such a collapse would not necessarily lead to coherent regions either. History seems to show that it can give rise to other entities. I think the transition to such a new reality would be resisted and would therefore be very costly.
But I do see a very important role for soft governance and soft power in such functional regions. It is decisive that they acquire the ability to promote their development and it will be helpful if the nation states adopt flexible policies and approaches to support them.
Municipal governments will most probably become more powerful political actors. How should they use their growing importance?
City leaders have a primary responsibility to innovate. The best way to do this, I think, is by creating deregulated, flexible environments where citizens are allowed to do things differently. Wherever such environments are created, we see that citizen initiatives pop up in huge numbers. These groups engage with the urban environment in very creative ways and they also strive to participate in processes of city planning and city making. Municipal governments should allow for and foster different types of participation.
Finally, let us come back to Berlin once again: You argued that Berlin has regained the status of being a truly global city. Do you think it will stay that way for the rest of this current technology-driven cycle of globalisation?
Berlin’s future development remains an open question, at least for me. It has a historic opportunity. It is not clear to me whether Berlin is enjoying a temporary wave of fame as a city for new technologies and start-ups, or if it has committed itself to becoming one of the great global cities of the world once again. If it aspires to the latter, Berlin will need to invest massively in housing and public infrastructures to manage different aspects of the current growth. It will need to allow for changes that usually cause resistance from parts of the population, for example a shift towards greater density and mixed use of buildings in central areas. Berlin was built for a much larger population than it now has. I wonder about Berlin’s appetite for its own future. Is it enjoying a new cycle where spare capacity is to be better used - or is it determined to grow its capability and move beyond it recent scale?
Prof. Clark, thank you for this interesting conversation.