|United Nations University - Work in Progress Newsletter - Volume 13, Number 3, 1991(UNU, 1991, 12 pages)|
By Andrew Marshall Hamer
The point was made over and over again at the Tokyo conference: huge urban conglomerations - anywhere in the world but particularly in the developing nations - tend to debase the human spirit, not lift it. But is there good news about the urban life? Might it be possible to create urban centres like those characterized by Ferdinand Braudel as "electric transformers" that "constantly recharge human life."
Today's urban planners, Andrew Marshall Hamer suggests, often overlook the positive economic aspects of urbanization. Immigrants from the countryside tend to be the best, the brightest and the youngest. Yet those who stay behind can also benefit, from tighter rural labour markets and remittances. The excerpt is taken from Dr. Hamer's paper delivered at the Tokyo mega-cities symposium. He is Principal Sector Economist at The World Bank in Washington, DC (USA). - Editor
If one were to differentiate the perspective of the urban economist from those often prevalent among other disciplines - urban planners, sociologist, geographers and demographers - it would be necessary to focus on two or three areas of disagreement, all linked by a common thread: whether or not third world mega-city development is doomed to systemic failure or not.
A major issue is the degree of rationality involved in individual, household and enterprise behaviour in the process of urbanization. Here the urban economist is more likely to conclude that the evidence suggests an absence of pathological behaviour and the essential soundness of many individual rural responses to the obvious economic incentives offered in the urban areas. One might contrast this with the social engineering approaches that seek to impose "order" on an "unruly" urban world.
Size: In the Eye of the Beholder
If one looks at the top ten mega-cities of the developing world, it could be argued that size, and its implications, are largely in the eyes of the beholder. One has to ask if, in the abstract, the sheer numbers contribute very much to our understanding of issues and options. Do these numbers, in fact, serve little more than to alarm the uninitiated and create an assumption of unmanageability? The growth rates of the constituent parts of these mega-cities differ widely from one another, with low or even negative growth rates in the densest core and higher growth rates at the low density periphery.
What we have, really, are polycentric clusters of identifiable and separate cities and towns that require both regional trunk infrastructures and local urban management - or much the same thing that a province or a small country might need. And would anyone be alarmed to hear that there are small countries and provinces with an urban population of 10-20 million? In short, to treat the totality of these residents of one city, even if we use the prefix "mega," is to pervert the common sense definition of what a "city" is. Size per se is not the issue. Instead it is mismanagement at both the regional; and local level, and wrong-headed urbanization policies, promoted by physical planners with their eyes on geography and very little sense of economics.
Why Do Mega-Cities Exist?
Economic development and urbanization are joint products of a wealth-creating process that generates large urban regions where per capital output exceeds the national average by a factor of 2-5 times. It seems clear that maximizing economic growth, a key objective for most countries that are poor, is facilitated by a concentrated "city-states" model of urbanization - at least until these countries reach middle income status.
By focusing activity in a relatively small portion of the nation's landscape when national income is low, governments reap the so-called "urbanization" economies of agglomeration - that is, for many economic activities, the production cost per unit goes down as the population size goes up.
Simultaneously, these "city-states" conserve investments in regional infrastructures for transport, communications, power and water supply. In such agglomerations, one can gather, on a cost-effective basis: a labour force with a wide array of skills; a large number of suppliers; diversified financial and commercial services; venture capital; access to information on foreign markets and technologies; as well as the social amenities (in for example, health and education) needed to attract managerial talent.
It is in such places that a low-income economy can reap the benefits of a rapid diffusion of new skills and technologies. At the same time, the local market will place concentrated purchasing power at the doorstep of the business community. In effect, the mega-city becomes a giant supermarket with the greatest array of choices in the country.
Variety: Spice of Urban Life
What proves most interesting when examining case studies across mega-cities - with regard to income distribution, poverty, access to services, and housing - is the great variety of outcomes. This immediately suggests that country-specific factors and governance issues are more important than size in almost all cases. (The exception would appear to be where environmental issues are involved. That is to say, the river basin or air shed capacity of a given land area on which a mega-city is built may be limited enough so that the mere concentration of people raises negative externality issues that require pricing or regulation action.)
Looking at these case studies, there are examples of:
· Rapid growth in average per capita incomes - in Bangkok, Beijing, Shanghai, Tianjin and Seoul - and virtual stagnation on the same indicator, in Calcutta.
· From narrow to wide disparities in household income. In Chinese mega-cities, it is about 3:1. Elsewhere, in São Paulo, Mexico City and Metro Manila, for example, ratios of 20:1 or more are common. (The ratio refers to the top decile's average household income compound to the bottom deciles. - Editor)
· The percentage of the urban population which is poor is lower than in rural areas. Because the wealthy are more concentrated in mega-cities than elsewhere, rural income distributions tend to be more equal than urban ones.
· Cases with widespread slums, and cases where these are no longer a significant problem. Among the latter are Seoul, Bangkok, Beijing and Tianjin, all in Asia.
· Public utilities that provide near universal access to public services like water or solid waste collection - as in Seoul, Beijing and Shanghai - and cities that do not.
Poverty Not a Migrant Problem
The poverty problem - even if one focuses on it after acknowledging that the poor are not representative of the mega-city population - can be viewed from a less pessimistic perspective than is currently fashionable. Much poverty is temporary and related to life-cycle factors - particularly when viewed from the perspective of individual households, be they migrants or natives. In general, the poverty problem in cities is not a migrant problem and it is not susceptible to city-size controls. When it occurs, migration is sensible; it is not an irrational form of behaviour that automatically produces poverty.
Thieves, Drunks and Prostitutes?
The revulsion caused by low-income households in mega-cities has fostered a "myth of marginality" - one in which these poor have been characterized as unemployed loafers, abandoned women and children, "thieves, drunks, and prostitutes." This view has been buttressed by the hypothesis that urban labour markets function in a kind of perverse manner.
For example, some explanations of the rural to urban movement have focused on the appeal of a high-wage manufacturing sector. In such scenarios, migrants relocate in large numbers hoping to win an employment lottery that entitles them to a secure, high-paying urban job. While waiting for a winning "ticket," these migrants crowd into slums where they experience prolonged, if indeed not permanent, periods of underemployment. This is the basis for the so-called "Harris-Todaro" hypothesis.*
* J. Harris and M. Todaro, "Migration, Unemployment, and Development: A Two-Sector Analysis," American Economic Review (1979).
Moving to the City: An Intelligent Choice
In fact, the evidence available on urban labour markets in developing countries suggests that this hypothesis is derived from poor or incomplete data. The immigrants from the countryside are, on average, rapidly assimilated into urban labour markets. Their earnings are linked not to their migrant status but their human capital endowment. The earnings of the migrant labour force are high enough, on average, to justify the decision to migrate - given the level of income they could be expected had they remained in the rural sector.
In fact, the so-called "informal" labour market, viewed as a dumping ground in the Harris-Todaro scheme, yields a distribution of income rewards that overlap to a significant extent with that of the so-called "formal" sector. They come because, on average, their youth and their above average education are best utilized in an urban environment.
The very poorest and the least educated rural workers, of course, remain largely immobilized in the countryside. But these poor who stay behind, many studies show, benefit from tighter rural labour markets and remittances. In sum, there is little evidence that poverty in the sending rural areas is worsened by migration. In addition, there is no evidence that migration causes the incomes of city natives to fall.