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The writer is a professor at Oxford university and the author, with Tom Lee-Devlin, of Age of the City
The year ahead will bring continued economic misery to the US and UK, as high interest rates drag down growth and squeeze already strained households. The people and places that will suffer the most are the same ones left behind by the growth of the past decade and a half.
If we do not reverse course, soaring inequality will continue to corrode our trust in institutions and one another. Brexit, the election of Donald Trump and the pervasive toxicity of today’s political debate in many countries are all the consequence of growing anger at urban elites seen to be cloistered in thriving metropolises such as London, New York and Paris.
Yet for all the rhetoric from politicians promising to do better, little has changed. London has become even richer than the rest of the UK since Boris Johnson unveiled his pledge to “level up” struggling regions, and in the US advances in artificial intelligence have rekindled the tech bubble, driving salaries in the top cities to levels not seen elsewhere.
In the early 2000s, with trade barriers falling and the internet drawing the world closer together, conventional wisdom held that the global economic playing field would become less tilted towards a small number of winners. The world was flat, as Thomas Friedman memorably put it. Instead, our world became spiky, with economic opportunity concentrating in a few centres of global commerce and innovation.
During the industrial revolution, natural capital such as ports, streams and deposits of coal and iron ore drew businesses and workers to cities such as Baltimore and Manchester. Now, it is the ability to attract and retain human capital that matters. And today’s top talent, for the most part, wants to live in big, dynamic cities. Meanwhile, former industrial cities in the US, UK and elsewhere have suffered as manufacturing jobs have disappeared.
Cities such as London, New York and Paris have also become increasingly inaccessible. House prices have rocketed as a result of a dearth of new development combined with years of low interest rates. The decline of social housing has worsened the situation, as have underfunded public transport and education systems. Plato once observed that every city “is in fact divided into two: one the city of the poor, the other of the rich”. That is especially true today.
“Levelling up” tends to be focused on bringing new economic opportunities to left-behind places; but it should also be about fixing the deep inequalities that plague leading cities. Starving dynamic cities of resources risks levelling down everyone as national growth slows and inequalities widen.
Turning cities around is still possible. Seattle, once stuck in a seemingly unstoppable cycle of urban decay, has become a major tech centre thanks to the anchoring power of Microsoft.
Cities such as Leipzig in east Germany have, since the fall of the Berlin Wall, managed to steadily bridge the gap with wealthier cities in the west — helped by devolved decision making and federal government funding to improve public services and foster innovation.
In the UK, Bristol has turned its fortunes around, building on its universities to draw in talent, create a vibrant entertainment sector and capitalise on its beautiful surroundings.
But reversing the trajectory of cities on a downward spiral is hard. The remarkably low level of divergence in per capita incomes across cities in Japan, for instance, has been possible only thanks to the government’s commitment to the cause over many decades.
It also often requires trade-offs. Today’s globalised knowledge economy tends to favour large cities over small ones, with the geographical concentrations of the frontiers of computing and biotechnology reinforcing these divides. Unfortunately, not every languishing city will be able to turn itself round.
The rise of hybrid working raises the stakes. With vacant offices and underutilised transit lines drying up municipal funds, cities will be unable to tackle these issues on their own. Yet new working patterns also offer opportunities for a reset by converting soulless office districts into vibrant mixed-use neighbourhoods.
We live in an urban world. To understand inequality, and to tackle it, we must look to our cities. To overcome inequality, the cities that are the engines of national growth need to thrive while the deep divisions within them are addressed, along with growing regional divides. It is in cities that the battle for a better world will be won or lost.
