What Matters (McKinsey) | January 2011
By Parag Khanna
Most people in the world have probably seen the famous photograph of the Earth taken from the Apollo 17 mission on December 7, 1972. Spanning a swath of the globe from the Mediterranean Sea to the southern polar ice cap, the image features lovely white cloud swirls over the grand African continental massif. Much has changed since that photo was snapped. NASA satellite images of the Earth today show a vast increase in the clusters and chains of bright dots that represent cities and their night-time lights. In forty years, a new constellation of cities has emerged.
The thing to notice is that the dots of light cascade across the Earth’s surface without any reference to national borders. That’s a good image for the global order now emerging. The 21st century will not be dominated by America or China, Brazil or India, but by The City. In a world that increasingly appears ungovernable, cities—not states—are the islands of governance on which the future world order will be built. Cities are humanity’s real building blocks because of their economic size, population density, political dominance, and innovative edge. They are real “facts on the ground,” almost immeasurably more meaningful to most people in the world than often invisible national borders.
In this century, it will be the city—not the state—that becomes the nexus of economic and political power. Already, the world’s most important cities generate their own wealth and shape national politics as much as the reverse. The rise of global hubs in Asia is a much more important factor in the rebalancing of global power between West and East than the growth of Asian military power, which has been much slower. In terms of economic might, consider that just forty city-regions are responsible for over two-thirds of the total world economy and most of its innovation. To fuel further growth, an estimated $53 trillion will be invested in urban infrastructure in the coming two decades.
How big can cities get? In terms of political and economic might, we are just beginning to find out.
The world’s most populous nation, China, is a rising empire and superpower, but its top domestic concern is the fate of its cities. Hence the theme of this year’s World Expo in Shanghai: “Better City, Better Life.” National pavilions featured the latest innovations each country had to offer in urban living. Germany’s “Balancity” pavilion took top honors and featured the longest lines as over 70 million people visited the Expo during its 2010 run. Balancity aimed to underscore both the challenge and potential of urban life. Coming from the world’ s most advanced large country in terms of infrastructure, it made a compelling case that balancing renewal and preservation, innovation and tradition, urbanity and nature, community and individuality, and work and leisure are indeed possible. Inside the pavilion, visitors strolled through a harbor, town planning office, gardens, factories, parks, downtown city square, and the main power plant. It gave not only the sense that a city can be impeccably planned, but that existing cities can be retro-fitted with impressive results. China, it must be said, wants nothing more than to be a giant Germany.
What is also crucial to note about the Expo is that, though meant to showcase countries, it also featured cities and companies—the essential pairing for a sustainable world. Vancouver, Hamburg and London all had pavilions separate from those of their home nations, while Cisco, General Motors, and Coca-Cola also invested in distinct pavilions touting their contributions to urban efficiency. Vancouver has unveiled plans to make itself the world’s cleanest big city by 2015, and “Hamburg House” was an ultra-low emission “passive building” inspired by the city’ s HafenCity district, a waterfront renewal zone curated by a public-private consortium that has already attracted progressive firms to relocate regional headquarters and inspired other forward-looking cities to break ground on similar schemes.
A thousand years ago, in the wake of the Crusades, European city-states emerged as the key engines of an important wave of commercial expansion, launching explorations that nurtured the development of the Silk Road, which ran east to west across the continent. The important hubs then were primarily in Italy, while today they are northern European ports like Hamburg and Rotterdam that aim to capitalize on industrial prowess and the renewed importance of shipping to rebuild the postmodern equivalents of the Hanseatic League. And while wealthy families such as the Medicis sponsored overseas expeditions and the urbane values of the Renaissance, today it is technological powerhouses like Cisco, Siemens and ABB whose innovations are propelling their client cities’ infrastructure into the future.
It was only in 2010 that news headlines declared that human beings had officially become an urban species—with more than half the world’s population now living in cities—but the deeper story of cities as the drivers of economic growth is at least as old as the Industrial Revolution. Today, cities offer a new meta-geography for the world not only through their physical presence but also their role in anchoring the invisible financial infrastructure of a globalized world.
Three kinds of cities are driving the new urban topology: global hubs, mega-cities, and gateway cities. While these categories are fluid and sometimes overlapping, each has unique attributes and roles in a city-dominated world. Global hubs are also global capitals, the top nodes of the world economy into and out of which much of the world’s wealth and talent flows. They are household names around the world: New York, London, Hong Kong and Tokyo, for example. Then there are the mega-cities, hugely populous magnets not just in their countries but sometimes for entire regions: São Paulo, Lagos, Cairo, Istanbul, Mumbai, Jakarta, and others. Mega-cities are so large that many, if not most, of their inhabitants are born and die within their vicinities. Gateway cities are a crucial new layer of urban development in a fast-growing world. They are regional clusters that facilitate access to frontier markets. Such cities include Cape Town, Dubai, Tripoli, Almaty, and Kuala Lumpur.
As mentioned, these categories are not mutually exclusive. Tokyo is the world’s most populous mega-city but also a top-tier global hub. Istanbul is a mega-city and also a gateway for Europeans looking to the Caucasus and Near East as well as Arabs looking to Europe. The key realization is that all of them have taken on a character and reputation increasingly recognized around the world—we think of them as much as or more than we think of the countries to which they belong. That is certainly what these cities want, for what they all have in common is a growing sense of agency in their dealings with the wider world.
Mega-cities have become global drivers because they are better understood as countries unto themselves. 20 million is no longer a superlative figure; now we need to get used to the nearly 100 million people clustered around Mumbai. Across India, it’s estimated that more than 275 million people will move into India’ s teeming cities over the next two decades, a population equivalent to the U.S. Cairo’s urban development has stretched so far from the city’ s core that it now encroaches directly on the pyramids, making them and the Sphynx commensurately less exotic. We should use the term “gross metropolitan product” to measure their output and appreciate the inequality they generate with respect to the rest of the country. They are markets in their own right, particularly when it comes to the “bottom of the pyramid,” which holds such enormous growth potential.
It is the gateway cities, meanwhile, that are competing most fiercely to brand themselves as emerging hubs, where experimentation in lifestyles and new sectors is actively cultivated, and which are networking among themselves to form new axes of exchange in finance, tourism, and other areas. Baku and Almaty are building posh new residential districts themed like those of the Persian Gulf. Nairobi and Dar es Salaam now cooperate for joint trade promotion and attracting sub-regional foreign investment. The number of gateway cities can grow limitlessly as ever more meet the criteria of price advantage, labor quality, decent lifestyle for managers, accessible transport hubs, political stability, legal protections, and reliable partners. And as they grow in population and geographic footprint, some will become the global hubs of tomorrow.
The world’s rapid, ongoing urbanization includes more than just the growth of existing cities. As Asia races to reach its potential, nations there are unveiling “instant cities,” also called smart cities or sentient cities. Quantum leaps in ambition greater than São Paulo or Canberra, these are cities designed from scratch to be the most high-tech urban environments in the world.
The most promising of these is Songdo, built on land reclaimed from the Yellow Sea near Incheon in South Korea and set to open its doors in 2015. The city-plan resembles midtown Manhattan, complete with a Central Park and opera houses, but all buildings are LEED certified and many feature Cisco’ s Telepresence systems for seamless communication across apartments, offices, and schools. Many buildings have already sold out during pre-construction lotteries. Technology crazed Koreans are now leading the pack in demonstrating that in the future, digital and physical infrastructure will be equally important.
Songdo is strategically situated within a couple hours’ flight of Beijing, Shanghai, Hong Kong and Tokyo, making it an ideally suited alternative business hub to congested Seoul. If it succeeds in attracting substantial numbers of multinationals to relocate regional headquarters there, while also luring talent from home and abroad, it will represent a breakthrough in economic and social innovation that others will want to emulate. Indeed, major Chinese municipalities such as Chongqing have already hired Songdo’s master planner, Gale International, to develop entire districts of what has become China’s most massive interior city at the base of the Three Gorges Dam. Similar smart city schemes are underway in more low-key settings such as Lavasa, a hill station outside of Mumbai in India.
Wealthy global hubs and smaller gateway cities have an easier time organizing and re-organizing their geography to create, instant, state of the art, special purpose cities. In Singapore, precious land has been appropriated for the new Fusionopolis and Biopolis developments, which include state-of-the-art research facilities devoted to information and bio-medical technology, respectively. On the road up to nearby Kuala Lumpur, capital of Malaysia, signs appear off the motorway leading to Putrajaya, the new administrative capital, and Cyberjaya, the country’ s district for high-tech start-ups. Taiwan has long had a Silicon Island, while India’s Silicon Plateau (actually the Deccan Plateau) is home to Bangalore and its IT giants such as Infosys and Wipro. Tel Aviv’s new “Silicon Wadi” has launched 3500 start-ups since 2006. Perhaps the most stunning example of mega-city planning is Shanghai, whose growth closely follows the 3-D scale plan which takes up an entire floor of the city’ s urban planning museum—both the exhibit and the city’ s scale are something to behold for a megatropolis.
These highly planned cities stand in contrast to what actually happens in most of the world. In Brazil’s Rio de Janeiro, high-density, low-rise favelas, or shanty towns, have grown far faster than the rest of the city. As Janice Perlman, director of the Mega-Cities Project and author of Favela (Oxford University Press, 2010), points out, the state can no longer ignore these settlements as it did a century ago; their community power and political clout are growing rapidly. Indeed, favelas and similar settlements worldwide create a crisis of legitimacy for federal and city governments. Providing housing for the 1.6 billion people without a roof over their heads has become a test of governability—a test which cities like Mumbai are failing despite being host to the world’ s most expensive home, the one billion dollar, 27 story residence of magnate Mukesh Ambani. Organizations like Habitat for Humanity have moved well beyond lobbying governments versus municipalities to construct and provide affordable housing for the poor—they work with whichever is willing to step up.
As the actual number of cities and the sheer populations of emerging economies increase, we could even start to see cities merging, both metaphorically and physically, further increasing their clout. In the Persian Gulf, as Abu Dhabi and Dubai build outward towards each other, the Emirates’ sandy coastline is quickly being transformed into one long urban seafront necklace. Instead of a rivalry between the capital Abu Dhabi and the flashy entrepôt of Dubai, locals now talk of “Abu Dubai.”
High-speed rail is a major contributor to this fusion of urban centers. Japan’ s Shinkansen trains make the greater Tokyo area a super city-region of close to 100 million people, while the Shanghai/Nanjing and Beijing/Tianjin corridors are also stretching and growing to nearly this size. In the UAE, a high-speed monorail is planned to physically connect all seven of the Emirates, a nation which, in one generation, has gone from barely being on the world map to becoming a world player. The Gulf Cooperation Council (GCC) is moving forward with plans for a high-speed rail to connect all its members from Kuwait and Saudi Arabia through Bahrain, Qatar, and the UAE to Oman, linking all the capital cities (except Saudi Arabia’ s Riyadh). Over a decade ago, the adventurous journalist Robert Kaplan predicted in Eastward to Tartary (Random House, 2000) that a new Silk Road would eventually emerge, linking ancient and modern cities such as Tel Aviv, Jerusalem, Amman, and Damascus, perhaps even forming a new empire of strong Near Eastern oases. Over time, there is much logic to why such a scenario should displace the current arbitrary colonial era borders that divide and sow dissent in the region today.
The underlying principle at play is the thesis that transportation is not just a competitive advantage, but a driver of economic growth in its own right. This is the argument put forward by Greg Lindsay and John Kasarda in their book Aerotropolis (Farrar, Straus and Giroux, 2011). They demonstrate how, rather than being a peripheral infrastructure to a city’s downtown, airports have become generative hubs of economic activity and allow cities to ever more efficiently serve as 24/7 nodes in the global economy in which customers across the globe may be more important than the ones next door. In America, Chicago’s O’Hare and Washington’s Dulles airport vicinities are the sites of greatest job creation, with hotels, business facilities, and consultancy offices constantly full. Anyone who has ever been in Dubai’s glitzy Terminal 3 knows that it is a perpetually buzzing hive and crossroads of all the Earth’s geographies and civilizations. China has approximately one hundred new airports planned—so new cities can’t be far behind.
As cities rise in power, their mayors become ever more important in world politics. In countries where one city completely dominates the national economy, to be mayor of the capital is just one step below being head of state—and more figures make this leap than is commonly appreciated. From Willy Brandt to Jacques Chirac to Mahmoud Ahmadinejad, mayors have gone on to make their imprint on the world stage. In America, New York’s former mayor Rudy Giuliani made it to the final cut among Republican presidential candidates, and Michael Bloomberg is rumored to be considering a similar run once his unprecedented third term as Giuliani’s successor expires. In Brazil, José Serra, the governor of the São Paulo municipal region, lost the 2010 presidential election in a runoff vote. Serra rose to prominence in the early 1980s as the planning and economy minister of the state of São Paulo, and made his urban credentials the pillar of his candidacy.
It is too easy to claim, as many city critics do, that the present state of disrepair and pollution caused by many cities means suburbs will be the winner in the never-ending race to create suitable habitats for the world’s billions. In fact, it is urban centers—without which suburbs would have nothing to be “sub” to—where our leading experiments are taking place in zero-emissions public transport and buildings, and where the co-location of resources and ideas creates countless important and positive spillover effects. Perhaps most importantly, cities are a major population control mechanism: families living in cities have far fewer children. The enterprising research surrounding urban best practices is also a source of hope for the future of cities. Organizations like the New Cities Foundation, headquartered in Geneva, connect cities by way of convening and sharing knowledge related to sustainability, wealth creation, infrastructure finance, sanitation, smart grids, and healthcare. As this process advances and deepens, cities themselves become nodes in our global brain.
Hence the answer to the question “How big can cities get?” remains open-ended. But as ever more cities become sustainable, they offer a tantalizing opportunity to stabilize the world population and neutralize the negative impacts of national borders. Their power is just beginning to be understood.