competitiveness of cities

The compeTiTiveneSSof ciTieS

United Nations Human Settlements ProgrammeNairobi 2013

The CompeTiTivenessof CiTies

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The Global Urban Economic Dialogue SeriesThe Competitiveness of Cities

First published in Nairobi in 2013 by UN-HABITAT. Copyright © United Nations Human Settlements Programme 2013

HS Number: HS/054/13E ISBN Number(Series): 978-92-1-132027-5 ISBN Number:(Volume) 978-92-1-132450-1

Disclaimer

The designations employed and the presentation of the material in this publication do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers of boundaries.

Views expressed in this publication do not necessarily reflect those of the United Nations Human Settlements Programme, the United Nations, or its Member States.

Excerpts may be reproduced without authorization, on condition that the source is indicated.

Acknowledgements:

Director: Mohammed El-Sioufi

Chief Editor and Manager: Xing Quan Zhang

Principal Author: Peter Kresl

Contributor: Xueliang Zhang

English Editor: Roman Rollnick

Design and Layout: Peter Cheseret

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Ur b a n i z a t i o n is one of the most powerful, irreversible forces in the world. It is estimated that 93 percent of the future urban population growth will occur in the cities of Asia and

Africa, and to a lesser extent, Latin America and the Caribbean.

We live in a new urban era with most of humanity now living in towns and cities.

Global poverty is moving into cities, mostly in developing countries, in a process we call the urbanisation of poverty.

The world’s slums are growing and growing as are the global urban populations. Indeed, this is one of the greatest challenges we face in the new millennium.

The persistent problems of poverty and slums are in large part due to weak urban economies. Urban economic development is fundamental to UN-HABITAT’s mandate. Cities act as engines of national economic development. Strong urban economies are essential for poverty reduction and the

provision of adequate housing, infrastructure, education, health, safety, and basic services.

The Global Urban Economic Dialogue series presented here is a platform for all sectors of the society to address urban economic development and particularly its contribution to addressing housing issues. This work carries many new ideas, solutions and innovative best practices from some of the world’s leading urban thinkers and practitioners from international organisations, national governments, local authorities, the private sector, and civil society.

This series also gives us an interesting insight and deeper understanding of the wide range of urban economic development and human settlements development issues. It will serve UN member States well in their quest for better policies and strategies to address increasing global challenges in these areas.

Joan ClosUnder-Secretary-General of the United Nations,

Executive Director, UN-HABITAT

foReWoRD

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v

ConTenTs

LisT of TabLes, figuRes, aCRonyms anD abbReviaTions vii

ChapTeR 1: inTRoDuCTion 1

ChapTeR 2: uRban CompeTiTiveness as a ConCepT anD as a poLiCy 3

2.1 Definition of Competitiveness 3

2.2 Its Application to the Situation of Urban Economies 4

2.3 Why We Are So Interested in Competitiveness Today 4

ChapTeR 3: The sTuDy of uRban CompeTiTiveness 7

3.1 The Development of the Concept of Competitiveness 7

3.2 The Relationship between Competitiveness and Cities or Urban Regions 8

3.3 The Competitiveness of Cities is especially Important in the Contemporary Context 9

3.4 Two Important Issues 10

ChapTeR 4: hoW uRban CompeTiTiveness is DeTeRmineD 13

4.1 Primary Determinants 13

4.2 Structures 14

ChapTeR 5: hoW To evaLuaTe oR anaLyze uRban CompeTiTiveness 19

5.1 Benchmarking 19

5.2 Theoretical-Structural 22

5.3 Quantitative 23

5.4 The Advantages and Disadvantages of Each Methodology 24

ChapTeR 6 hoW To pRomoTe uRban CompeTiTiveness: sTRaTegies foR pRomoTing uRban CompeTiTiveness 27

6.1 Top-Down versus Bottom-up 27

6.2 Mobilizing Local Talents and Energies 28

6.3 The Need for Effective Governance 29

6.4 The Extent or Scale of the City 29

6.5 How to Become a Creative Place 31

6.6 Path Dependency versus a New Path 32

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ChapTeR 7: gooD Cases of pRomoTing uRban CompeTiTiveness 35

7.1 Some Cities That Could Be Emulated 35

7.2 Some Pitfalls to Avoid 36

ChapTeR 8 issues anD ChaLLenges of uRban CompeTiTiveness in DeveLoping CounTRies 39

8.1 Political Stability 39

8.2 Economic Rationality 40

8.3 Adequacy of Local Assets 41

8.4 Smaller Cities and Towns 42

8.5 Participation of All Groups in Society 45

8.6 Work Collaboratively 46

ChapTeR 9: ConCLusions anD ReCommenDaTions 49

9.1 Recommendations 49

RefeRenCes 51

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LisT of TabLes, figuRes, aCRonyms anD abbReviaTions

List of tabLes

Table 1 Highest African cities in the Ni competitiveness ranking of 500 cities

Table 2 Educational attainment of females and males, 2000

List of figures

Figure 1 Competitiveness is:

Figure 2 From autarky to competitiveness, Europe and the US

Figure 3 The primary determinants of urban competitiveness

Figure 4 The industrial district of Alfred Marshall

Figure 5 The isolated cluster

Figure 6 The cluster of the multi-national firm

Figure 7 Networks

Figure 8 Agglomerations

Figure 9 Methods of evaluating urban competitiveness

Figure 10 Methods of evaluating urban competitiveness – strengths and weaknesses

Figure 11 The question of scale

Figure 12 Elements in a creative city

List of abbreviations and acronyms

EU European Union

OECD Organization for Economic Cooperation and Development

UK United Kingdom

US United States of America

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chapter 1 IntroductIon

Urban competitiveness has become one of the central issues in public policy today. This has long been the case for cities (taken to refer both to cities and urban regions) in the industrialized countries, especially during the past three decades. This increased importance is the result of substantial changes in the global economy, in the capacity of levels of government above the city, in the demographic structure of most nations, in social structures and practices, and in the dynamism of leadership at the local level in a great many cities. Today and for the foreseeable future city leaders and city economies will be challenged as never before; these challenges are accompanied by opportunities that are at least as significant. Where these challenges and opportunities are seen and acted upon effectively, city residents will be able to achieve the economic, life-style, social and other objectives they may set for themselves. In cities where this will not be seen or acted upon, the future will hold stagnation, marginalization and disappointment for both leaders and residents.

The most recent decade has shown how this combination of challenges and opportunities, and the issue of urban competitiveness, have become powerful factors in the lives of consumers, producers and other residents in the cities of the countries classified as emerging markets. The situation in these cities may in fact be even more pressing than has been the case in cities in industrialized countries. During several centuries the latter cities have developed economic assets, political and social institutions and practices that are congenial to competitiveness in the modern, high technology, fluid, and open

Chapter 1 inTRoDuCTion

global market. Cities in the emerging markets are struggling with sometimes overwhelming rural to urban migration, populations that are dominated by young and often un-skilled workers, deficiencies in transportation and communication infrastructure, inadequate housing and institutions, social practices that do not facilitate balanced growth and competitiveness, and environmental problems that overwhelm local governments that have not had decades or centuries to develop the necessary competences.

Looming on the horizon are the cities in the lesser-developed countries in Africa, Asia and Latin America. While they have huge potential if they can meet the challenges of our globalized economy, the barriers before them are substantial, but not insurmountable. In fact, in the coming decades they will have to contend with all of the problems that now confront cities in industrialized and emerging nations. Furthermore, while their residents seek better living standards, education, mobility and better health, at the same time they do not want to sacrifice the aspects of their culture that may not be congenial to development and competitiveness but which sustain them as citizens and as human beings. C. L. R. James tells us that while he became a civil human being through numerous readings of Thackery’s Vanity Fair, his experience with a British public school and the game of cricket, to be a full human being he had to immerse himself in his national culture (James).

Thus, each of the three sets of cities has its own path to competitiveness and its own set of barriers that must be overcome if success is to be attained. The study of urban

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competitiveness is central to the achievement of the development goals each population sets for itself. The residents of different cities will set their own objectives with regard to, among other things, the work-leisure trade off, the degree of social inequality and exclusion that will be tolerated, the participation in society and the work force of women and other social groups, what the first two decades of the lives of their young will be like, how open they will be to influences and ideas from other societies and cultures, and indeed immigration itself.

After a thorough examination of the concept of urban competitiveness, how it can be studied, and what lessons can be learned, we will conclude with a chapter that will offer a coherent set of policy suggestions that should be of guidance to local leaders who choose to take up the challenge of enhancement of the competitiveness of their city.

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Chapter 2 Urban Competitiveness as a ConCept and as a poliCy

Many concepts in daily language are far less unambiguous in their meaning than would appear at first glance. This is because most concepts can be applied in any of several areas of activity or discourse. A moment’s reflection will make this apparent to the reader. So it is with competitiveness. We think of competitiveness as having pertinence to sporting events, business, nations, the lives of siblings, musical and artistic prizes, admission to educational institutions, and so forth. All of the notions of competitiveness that will be noted in the section that follows can be seen in these aspects of human life. In this chapter we will first focus on the concept of competitiveness itself, and then we will elaborate on its relevance to the economic lives of cities and urban regions.

2.1 definition of competitiveness

The definition of competitiveness would seem to be rather straightforward. The variety of definitions and measurements of competitiveness are seen from a study done for the Office of the Deputy Prime Minister of the UK (Parkinson, Hutchins, Simmie, Clark and Verdonk, 28-30). We commonly think of a number of entities offering some product or participating in some activity, in which one is successful, or wins, and the others are not, and lose. This explicitly assumes that there is one clear objective and that all participants seek to gain it. However, if one has a “spirit of competitiveness” we think that that individual

Chapter 2 uRban CompeTiTiveness as a ConCepT anD as a poLiCy

has a desire to battle with others to achieve the single objective. The Oxford Compact English Dictionary defines competitiveness as “having a strong urge to win” (Oxford compact English Dictionary). When planners and consultants speak of competitiveness they tend to accept an externally defined goal of the competitive activity and orient all policies and resources toward meeting that objective. They tend to measure their performance against that of others and often generate a ranking system in which all of the participants are ranked, as in a horse race – there are win, place and show finishers, and one that is ‘dead last’.

Alternatively, if an entity exhibits a high degree of competitiveness we can also think that this entity can “play the game” with the best of them, but not necessarily beat the others. It has skill, plays hard and is respected by the others. It will make a good showing. Here competitiveness is a way of conducting one’s activity, rather than just the result of that activity.

These approaches to competitiveness have in common the acceptance of a single objective selected externally and from above, so to say, and accepted by all participants. Also accepted is a set of ‘rules of the game’ according to which the competition will be conducted. However, there is, as we shall see later in this report, an alternative means of determining the ultimate objective. This is from below, is internally generated, and emanates from the individual participant itself.

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2.2 its application to the situation of urban economies

Cities can be seen to be squarely in this milieu of competition amongst themselves. While competition among cities goes back to the ancient world and certainly to the trading city states of the 16th century, during the 19th and much of the 20th centuries most cities did not think much of international competition. Certainly cities such as New York, Philadelphia and Baltimore, in the United States, all competed for access to the westward expansion of the country. Barcelona, Marseille and Genoa competed to be the primary European Mediterranean port. But most cities were content to produce goods and services and to sell them wherever they could. Goods such as textiles and glassware were differentiated in terms of design, quality and price and many of the producers did not compete against one another. However, as the 20th century progressed, goods became more standardized, transportation costs and shipping time both fell, technological advances reduced price and cities began to bump up against one another. Internationalization and integration of markets greatly increased explicit competition among cities.

Firms certainly were primarily responsible for managing competition and for surviving in this environment, but city leaders found it increasingly necessary to form partnerships with their principle economic actors and to implement policies, such as infrastructure initiatives, better education and vocational training systems, enhancement of urban amenities to make their city attractive to skilled workers and company location, and, more recently, city marketing. Gradually the characteristics of a city became key elements in the competitiveness of the economic entities located in its space.

The partnership in competitiveness between a city and its economic actors has evolved and

become more important over time since there are important aspects of a firm’s success in producing and marketing its goods over which it has no control or authority and over which only the government of the city does. This is recognized in the widely discussed concept of the triple helix (Etzkowitz and Leydesdorff), the explicit partnership in economic development of government-the city, the firm, and the skill development institutions (schools, universities, and vocational programs) of the urban region. As the importance of this interaction has become recognized, the study of the urban economy and of the ways in which its competitiveness can be enhanced have naturally taken on an importance that has never before been so widely accepted. City leaders who understand this situation and act effectively upon it can shape their cities as strong competitors in global markets; those who do not will see their cities condemned to marginalization and stagnation.

It is these understandings that make the subject of this report so relevant and so important for city leaders and planners. In Chapter 3 we will examine the study of urban competitiveness, how this subject has developed in recent decades, and how it is important both to urban economies and in the contemporary economic environment.

2.3 Why We are so interested in competitiveness today

The notion of competitiveness has taken on its current importance with the growing awareness of the impacts of globalization, de-industrialization, restructuring of economic activities on a global basis, and the emergence of rapidly growing economies such as China, Brazil and India, among others, on the international specialization of various economies throughout the world. Economists and policy makers at the national and sub-national levels have tried to come to grips with the implications for their economies of these

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Chapter 2 Urban Competitiveness as a ConCept and as a poliCy

forces. While economists had been aware of economic specialization on a national level since David Ricardo wrote in 1817 the study of competitiveness was focused entirely on the nation as the primary actor. This focus continued during the first years of renewed interest in the late 1980s and early 1990s, with Michael Porter providing a model that did much to explain the competitiveness of a national economy. Others, such as Paul Krugman, soon shifted the focus to the traditional interest of economists, the firm. The objective of policy to enhance competitiveness and the indicator of its presence were directed at traditional economic objectives, such as productivity, per capita income, and economic growth, or at the establishment of some structure, such as clusters, that would ensure competitiveness.

While this approach was very insightful, and useful to policy makers, it was soon seen to be inadequate in meeting the needs of actual economic agents and of the residents of these nations. The first alert was given by the EuroCities Movement, when it declared in 1991 that “now is the time of the cities”. This cry opened the door to a veritable flood of research by economists and geographers,

specializing in urban economics. The OECD held a conference on “Cities and the New Global Economy” in Melbourne, Australia, in 1994, and shortly thereafter, in 1999, the journal Urban Studies published a special issue on “Urban Competitiveness”. The initial scholarly interest in urban competitiveness has been reinforced in recent years by the inability of national governments to do much to promote competitiveness, due to growing fiscal difficulties and to contentious political gridlock, such as that in the US and the EU. The responsibility for enhancement of competitiveness has drifted or been pushed down to the level of municipal government and urban regional administrative structures and institutions.

Policy makers and elected local officials have come to understand that cities and urban regions that do not study their competitive situation and implements policies to enhance their competitiveness will be condemned to a future of stagnation and marginalization. Hence, it is the importance of the issue of competitiveness, and policies that attach to, competitiveness.

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Chapter 3 The STudy of urban CompeTiTiveneSS

The study of urban competitiveness has developed considerably during the past thirty years. As cities have come to realize the importance of their own actions for the vitality of the local economy they have understood that what they do in this regard can have powerful impacts on the economic lives of their residents. An industry of planning professionals and consultants has developed that puts itself at the disposal of city leaders. Concomitantly, academic researchers have found this to be an intriguing area in which to work and many of their advances have provided the basis for planners and consultants. So the operational aspects of urban competitiveness are composed of three distinct but interrelated layers: 1) academic researchers, 2) planning professionals and consultants, and 3) city leaders and decision makers.

At first, it was thought that competitiveness had nothing at all to do with cities or urban regions. Over two decades ago, the director of a foundation in the US that advertised itself as the primary supporter of research on competitiveness said exactly this. Gradually, reality inserted itself in the thinking of those concerned with competitiveness and both research funding and space in journals devoted to economics, geography and urban studies began to give proper attention of research on urban competitiveness. Today, journals such as Urban Studies, Environment and Planning A, Regional Studies, International Journal of Urban and Regional Research, and Papers in Regional Studies regularly publish research papers on aspects of urban competitiveness, and publishers such as Edward Elgar and Routledge issue several books each year on the subject. International organizations such as the Global Urban

Chapter 3 The sTuDy of uRban CompeTiTiveness

Competitiveness Project, the Competitiveness Institute, and Globalization and World Cities support conferences and research projects on urban competitiveness, as do the Organization for Economic Cooperation and Development, the European Union, and the United Nations. So by today the study of urban competitiveness has found full acceptance.

In this chapter we will explore some of the key features of this area of study, and examine its relevance to both urban economies and the contemporary global economic situation. We will also highlight two issues that deserve our attention: one that is often overlooked, smaller cities and towns, and another that is the result of conscious decision, the skills of the entire population.

3.1 the development of the concept of competitiveness

Perhaps the first important study of competitiveness was that of a research symposium sponsored by the Harvard Business School in 1985. In the book that resulted from the symposium, Bruce Scott did two things that set the tone for much of what followed: 1) he wrote on competitiveness at the level of the nation and 2) he asserted that a rising standard of living was the primary indicator of a competitive nation (Scott, 14-15). This focus on the nation and on the standard of living set the pattern for much of the work that followed; however, both would soon be called into question. First, we can question the indicator of competitiveness. Scott and those who accept this assume, among other things, that all societies have the same work-leisure trade-off,

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that is, that we all work as hard as we can to maximize income. This may be true of South Korea where individuals work about 2,193 hours per year, but what of Hollanders who work only 1,377 hours, or the Organization for Economic Cooperation and Development, as a whole, where the work year averages about 1,749 hours (OECD). Clearly South Koreans seek to maximize their incomes but others choose to give up some income for leisure time. Since this makes it clear that residents of all cities are not all struggling to maximize their standard of living, this cannot be taken to be a universal objective of urban economic policy or indicator of competitiveness.

The focus on the nation as the subject of competitiveness finds its origin in Adam Smith’s Wealth of Nations and Friedrich List’s National System of Political Economy and continues up through Michael Porter’s The Competitive Advantage of Nations (Porter). The Global Economic Forum is one of several entities that annually evaluate and rank national economies according to some notion of competitiveness. An alternative to the nation as the focal point of competitiveness is Paul Krugman’s insistence that competitiveness is most rationally seen as being based in the firm (Krugman). Firms employ factors of production, produce goods and services, market their products, invest retained earnings and borrow additional funds, and become bankrupt if they fail to meet the test of the market. In a more recent book on competitiveness, Sharon Oster mentions the role of government at any level, from nation to city, only in reference to regulatory issues (Oster, ch. 17). However, even in Porter’s analysis, three of the four points on his famous diamond of competitiveness are at least partially under the aegis of government. This is explicitly the case with “demand conditions” for the national government, and with local government playing a major role in two of them - “factor conditions” and “related and supporting industries” (Porter, ch. 4) More recently, it has become clear that one can also consider that

the competitiveness of a nation is little more than a composite of the competitiveness of its urban economies. To paraphrase a popular slogan, all competitiveness is local. While Krugman said competitiveness cannot be a feature of sub-national territories because they do not go out of business if they should fail, as do firms (Krugman, 34), Roberto Camagni countered that while this is true when they fail they do enter a period of decline that has negative consequences (Camagni, 2396). Research has shown that factors such as urban amenities, health care, education, and recreational and cultural opportunities are increasingly important determinants of competitiveness, and each of these is essentially the responsibility of the government(s) of the city or urban region. We will explore this more fully below.

figure 1 – Competitiveness is:

• Industrial clusters (The Competitiveness Institute)

• The nation – “Why does a nation become the home base for successful international competitors in an industry?” (Michael Porter)

• The firm – places do not compete because they cannot go out of business (Paul Krugman)

• Productivity or trade performance (Donald McFetridge)

• A rising standard of living (Bruce Scott)

3.2 the relationship between competitiveness and cities or urban regions

The emergence of the city or urban region as the focal point for policies designed to enhance competitiveness has taken place concurrently with the growth in the importance of the factors detailed at the end of the previous sector. These factors are, of course, the responsibility of local governments. In the 19th century it was ‘hard’ factors such as capital stock, or proximity to a port or to a mineral deposit or other natural resource that were crucial, but in recent years

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the ‘soft’ factors have become more important as determinants of competitiveness. To a considerable degree this is due to the fact that the contemporary economy places a premium on availability of educated and highly skilled labor, and this labor is attracted to production and living locations in which these soft factors are available in abundance. While the workers themselves may not be able to take advantage of cultural or recreational facilities they often demand that they be available for their children. While many smaller cities and towns may have attractive soft factors, especially if they are host to one or more universities, rarely can they offer the rich variety and quality that is available in the large city.

While much economic activity is organized in networks that may span the globe, most of it is concentrated in Marshallian industrial districts or in the clusters that are so important in some industries. Popular structural concepts today include knowledge or learning regions, research centers, logistics complexes, local innovation regions, niche manufacturing centers, and headquarter cities, among others. All of these concepts for city economic specialization require intelligent, inspiring, and forceful action on the part of city leaders.

It is also the case that there is no other level of government that can undertake this task. Superior levels, both the national and the sub-national governments, are under severe fiscal stress these days. They have lost the capacity to introduce fiscal transfers to city governments, and it is even difficult for them to participate in joint projects. In addition to this, these levels of government are torn between the demands of rural and agricultural areas and those of urban areas. In many countries, rural electoral districts are over-weighted in the legislatures of all levels of government. In this situation, cities are rather left to their own devices, and to the leadership of local officials. Hence, for both positive and negative reasons, there is no alternative to the local leadership of a city or

urban region when it comes to enhancement of competitiveness.

3.3 the competitiveness of cities is especially important in the contemporary context

Well into the 19th and even the 20th century many cities that were not port cities were quite shielded from competition from other cities. The first major breech in the wall of relative autarky was the coming of the railroad. Suddenly local merchants and producers of consumer goods and machinery had to contend with competition from entities hundreds of miles distant. This presented a threat to them but it also opened to them the opportunity of distant markets for their own output. The co-mingling of threats and opportunities is a lesson in itself to city leaders; it is best to look to both sides of any development. In the United States, Chicago is perhaps the primary example of a city that blossomed with the advent of the railroad, evolving from a minor frontier town to the dominant city in the heartland of the country. William Cronon has chronicled how the railroad was integral to the city’s success in manufacturing, finance, and agricultural processing, as well as in transportation (Cronon). This positive impact dwarfed the threat to local producers from goods that were ‘imported’ from distant cities and the competition to horse drawn transportation.

figure 2 - from autarky to competitiveness, europe and the us

• First, the coming of the railroad: Mid-nineteenth century

• Second, cost-reducing technological change: Late nineteenth century and twentieth century

• Third, liberalization of trade in goods and services - Post-World War Two

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The second breech was technological change that greatly reduced ‘cost distance’, reduced production costs and developed new products. Some cities were centers of technological research because of the strength of their universities, the dynamism of their local firms, and the environment of freedom that allowed clever people to do new things. Today we celebrate Silicon Valley in California as perhaps the primary example of how this works; another would be the cities of the “Third Italy”, principally in Emilia-Romagna. In the 19th century we have fine examples of this in Munich, and in the cities of the Ruhr in Germany, of the Mid-lands in England, and of the Basque region in Spain. However, cities not situated in such favorable regions and that would not generate new ways of doing things, had the opportunity to apply these new technologies to economic activities that were important in their local economy.

The third breech was the liberalization of trade in goods and services throughout much of the world economy. Theory preceded practice here, as it always does, but from the mid-19th century on mercantilist protectionist measures have fallen through bilateral, regional, and global trade liberalization agreements - increasingly so since the end of the Second World War and the creation of entities such as the General Agreement on Tariffs and Trade, the World Trade Organization, and regional trade liberalization agreements in North America, Latin America, Africa, South-east Asia, and Europe. While these initiatives have brought economic efficiency and higher incomes to the participants, it is true that the benefits have not been equally distributed. It is also true that while most cities have gained from trade liberalization, many others have not been able to adapt their economic activities and social practices sufficiently.

This rapidly and dramatically changing environment has meant that cities have been forced to design effective strategic economic

plans, to ensure that the residents of the city understand what is required of them, and that the benefits of the suggested actions will be clear to, and will benefit, all. While nations can do much to facilitate these adjustments, the primary burden of action always falls on the shoulders of city leaders. Simply put, the world economy can get along very nicely if a particular city stagnates and declines - there is always another city that will be more positively responsive. In the 21st century the pace of these changes has, if anything, increased, and the burden on city leaders to respond appropriately is all the greater. The relatively autarkic city of the past centuries was required to produce almost all goods and services, although some access to things produced elsewhere was always possible. But with liberalization, internationalization and the other forces noted here, cities were forced to specialize - to produce for export some goods and to import the rest. Determination of this specialization was done by firms, but they did this in the context and with the assets that were provided by the actions of the city.

3.4 two important issuesLater in this report we will examine

two issues that have become increasingly important in the contemporary world of urban competitiveness. The first is one that has long been ignored largely due to methodological difficulties, and the second is one that emerged as social structures and relations have evolved.

3.4.1 the Place of smaller cities and towns in the competitiveness scene

The issue that has been difficult for researchers to treat is the place of smaller cities and towns in the analysis of urban competitiveness. For the past two or three decades economists and geographers have concentrated their attention almost exclusively on large cities, global cities, metropoles, and so forth. Partly this has been due to the facts that these few large entities

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are known to other researchers and readers, that we all have some understanding of their situations, that there are a limited number of them, and that one can compare the findings of several studies of the same large entities. For example, Saskia Sassen studied three global cities, New York, London and Tokyo (Sassen), and several studies have treated one or two dozen large cities in the United States (Kresl and Singh 2012; Negrey and Zickel; Pollard and Storper) or the European Union (Cheshire; Parkinson, Hutchins, Simmie, Clark and Verdonk; Carbonaro and Hay) Another difficulty in the study of the competitiveness of smaller cities and towns has been the difficulty in obtaining sufficient data for the quantitative studies that have been possible for larger human settlements. It is possible to get some data for smaller cities in some countries but the grander cross-national studies are quite impossible to do.

None of this negates the reality that a substantial percentage of the population in almost all countries resides in smaller cities and towns. Thus, even though a different methodology will have to be utilized increased objective research on competitiveness as it affects this long ignored population is called for and is now possible to accomplish.

3.4.2 the need to use the skills of the entire Population – access to education and employment for Women, as well as for men

For an economist, the essence of competitiveness is enhanced efficiency and a more rational allocation and utilization of available resources. This is achieved in a frictionless and perfectly competitive economy. All resources are used and are utilized in their most productive manner. Away from the chalkboard, real economies fall far short of this ideal. In all economies there are social practices that introduce barriers to the efficient and rational utilization of resources; total output falls short of its potential and the

aggregate income of residents is reduced.

In the ideal economy all groups in society would be given the opportunity to develop fully their talents and to have access to the most satisfying employment of those talents. Cities will never be able to achieve their true maximum competitiveness if they are components of national societies in which ethnic groups and/or immigrants are subject to discrimination and in which women are precluded from gaining access to educational institutions and from functioning as productive participants in the economy of the nation and, thereby, of the city. For a city to realize its full potential to enhance its competitiveness, both of these types of social groups will have to be integrated into the urban system of economic activity and production.

In its report on world cities, UN Habitat stresses the negative consequences for a city of its ‘divisions’. These refer to the inequalities and exclusions that relate to income, the poverty trap, opportunities, the social divide (hunger and health) and education (UN Habitat, Part 02, pp. 52-119). When a city tries to compete with other cities for jobs, production facilities, tourists, status, and so forth, these elements of division give it a handicap that is often impossible to overcome. Research has shown us that cities that lack these divisions are more competitive than are those with them.

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Chapter 4 How Urban Competitiveness is DetermineD

Chapter 4 hoW uRban CompeTiTiveness is DeTeRmineD

This report is intended to be of use to urban practitioners, that is, to be useful to those who have to manage the economic futures of their cities and urban regions. Before they can design the economic plans they will introduce they must have some guidance as to what actually determines urban competitiveness. Specifically, what factors should they take into account in the design of the plan? How can they be assured that the things they seek to stimulate will actually have the desired impact? Many factors are intuitively important – but may not be so in the reality of the individual city for which the plan is being designed. The fact is that each city will have its own characteristics, aspirations, and history, as well as its unique strengths and weaknesses. One often finds that a peripatetic consultant has travelled from one city or region to another giving the same advice to each uniquely different city. This is a situation in which it is emphatically the case that no one strategy will fit all situations. In a later chapter we will focus more closely on the specific actions that city leaders must take to make the plan they have designed be achieved in the real world in which their city exists.

4.1 Primary determinantsThe primary concerns of planners will always

be two-fold: 1) determination of what will be produced, that is, in what activities their city will specialize, and 2) the efficiency with which that production is accomplished. Other things could be listed but these are the central ones. Without question, the central assets a city has are its local institutions and local practices. We will argue this point in greater detail below, looking at both phenomena.

The institutions give structure to the activities of local actors, bringing them into contact with one another. When local actors are familiar with each other, the level of trust, that is so important in any local initiative, can be developed. Having trust in each other means that the activity does not have to be regulated by a dense set of regulations and rules. Coalitions can be formed on the spot, so to speak, and initiatives can be shaped and implemented quickly. A structure dominated by regulations and rules is inefficient, time consuming, and imperfect in shaping interactions.

figure 3 – The primary Determinants of urban Competitiveness

urban competitiveness = ∫(economic determinants + strategic determinants) Where:

• Economic determinants = factors of production + location + infrastructure + economic structure + urban amenities

• Strategic determinants = governmental effectiveness + urban strategy + public-private sector cooperation; + institutional flexibility

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Practices have to do with the inclusion or exclusion of certain social or political groups or individuals and the way in which local actors interact with each other in the local institutions. Those who have tended to be excluded, or at least under-represented, in the planning process are most prominently women, immigrants, young people, and those who have some overriding value, such as environmentalism, or social inclusion, or a specific approach to the urban space, that is to say, a value that might ‘get in the way’ of speedy decision making. Of course, this exclusion is found powerfully in some societies and not at all in others. But much of the strategic economic planning that has been done until very recently has been a game for the insiders, power-brokers, and politically dominant individuals - often relatively wealthy men.

Effective strategic economic planning in the contemporary open and competitive world requires that the most competent, knowledgeable and effective individuals should be included in the process. The term strategic economic planning is used to differentiate the planning for competitiveness enhancement from other forms of planning such as those for housing, transportation, land use, transportation, and so forth.

In addition to local institutions and practices, the firms that produce the goods and services in which the city economy will specialize are in many cases most productive and competitive when they function in one or another sort of operational structure. Here we will examining three of the most promising: the cluster, the network, and the agglomeration.

4.2 structuresThe actual production of the goods and

services that will provide the jobs for local workers, the income for the urban economy, and the exports that will promote the

specialization of local productive entities is, of course, accomplished by individual firms. There is a romantic notion in the popular literature of the producer heroically establishing a productive entity, developing the technology it will use, mobilizing the necessary resources used in production, conquering markets, expanding the enterprise, and providing jobs and income for the workers. One thinks, of course, of the novels of Ayn Rand. While some firms may function perfectly well in isolation from other firms, in most industries firms establish mutually beneficial relationships with other firms. Ideally, these relationships allow firms to share aspects of their activity that enhance their own capacity to produce. In this model, entrepreneurs and their firms are social entities that are in need of things they get from each other. The structures that support this social conceptualization of the firm are essentially determined by the spatial nature of the interaction among firms. In this section we will examine the principal structures.

4.2.1 clusters

Clusters have one of the best pedigrees of all the structures. Their origin is with Alfred Marshall (Marshall, 222-231). Marshall was an economist who was keenly aware of the actual situation that existed in England in the late 19th century. He observed the dismal plight of English workers and was moved to use economics as a means of improving their lot in life. One of the connections he made with reality, rather than with the theoretical world, was in the way in which goods were produced most efficiently in an industrial economy. His notion was that of the ‘industrial district’, which he saw in the principal manufacturing cities of the English Mid-lands. An industrial district comprised a large number of firms that were situated in close proximity. The firms were usually

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small in size, perhaps with one larger firm at the center. The important point was that these firms were in contact with one another. Through this contact individuals were able to exchange tacit information, discuss ideas with each other, become aware of what skills were present in the district, capture economies of agglomeration, discuss challenges that were common to all of them, discuss joint projects, and so forth. This interaction enhanced the competitiveness of each firm and enabled the district to compete externally. Another requirement of an industrial district has developed during the twentieth century - that the firms in the district be open to contacts, information, new technologies, and market information from outside the district. In today’s parlance, they must be internationally connected.

figure 4 – The industrial District of alfred marshall

However, in reality, this is not always the case. For example, in some industries, such as bio-pharmaceutical, the ‘cluster’ usually consists of foreign multinational firms establishing a subsidiary in a region with certain desired assets, such as labor with certain skills. The parent firms have nothing to do with each other and their subsidiaries are not allowed to make the intra-district/cluster contacts that generate so much of the benefit of the structure (Wolfe and Gertler). Other industries, such as information-communication technology, and fashion and design are famous for local interaction.

figure 5 – The isolated Cluster

A century after Marshall, in 1990, Michael Porter transformed the industrial district into the cluster (Porter). The Competitiveness Institute goes so far as to say that “competitiveness is clusters” (The Competitiveness Institute). Ideally the cluster should retain all of the characteristics and the ensuing benefits of the industrial district.

The second requirement of a successful cluster is international openness and connectedness. Many actual clusters have been inwardly focused, benefit only from advances in technology, product innovation, and management techniques that are generated within the cluster (Malmberg, 10). Lacking the information and stimulus that can be gained from contact with the rest of the world, these ‘closed’ clusters do not survive. It is difficult to say more about these failed clusters because they are no longer in existence.

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figure 6 – The Cluster of the multi-national firm

So a network is really a form of club, and only certain firms are able to participate (Johansson and Quigley). Membership will be extended only to firms that can bring something of value or benefit to the other members of the network. The connecting tissue is telecommunications and occasional air travel. The benefits are similar to those of the cluster - access to new technology, knowledge, and best practices. Members also have to possibility of exploring the options of joint ventures and of coalition building. The latter may be a valuable mechanism in having an impact on international regulations, trade policies, patent protection, and marketing.

figure 7 – networks

• Exclusive membership - “clubs”

• Global rather than regional

• Exchange of information, new technologies, “best practices”

• Possibilities for coalition building and joint projects

• Beneficial for cities on the periphery

Membership in a network is of particular benefit to firms in smaller cities or in cities on the periphery rather than in the center of the global economy, especially in being able to participate in the creation and dispersal of knowledge. While participation in a cluster can be a passive activity, being a member of a network is not. If a member is too passive, the others can simply ask it to leave the structure. Clearly this is a powerful incentive to remain an active and contribution participant. Later we will discuss the importance of networks to

cities, rather than just to firms.

4.2.3 agglomeration

The third structure we will examine is the agglomeration. This is the most narrowly economic of the three and is the easiest to describe. It is simply the co-location of a large number of firms in close proximity. The benefit

The concept of the cluster has become a primary feature of the advice given by armies of passport-wielding consultants who travel the urban strategic planning circuit (Marcusen and Schrock, p. 1319). The occasional absence of close intra-cluster interaction and of international connectedness, and the fact that not all industries lend themselves to positive cluster experience, does not seem to deter cluster enthusiasts. The point that must be made is that while the true cluster that realizes the full interactions of the Marshallian industrial district can be a powerful guide to urban strategic economic planning, caution must be taken to ensure that the cluster approach pursued is the one that is most promising for an individual urban economic situation.

4.2 2 networks

The network is like a cluster in which each of the participating firms are not in close proximity with others but rather are located hundreds or thousands of miles apart. They are global rather than local or regional. Given the distance involved, a firm has to be invited to participate in a network, whereas firms in clusters are simply located in the same area.

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from an agglomeration is that it generates certain economies, or efficiencies, as well as diseconomies such as congestion, pollution, impersonality, and less ease in establishing social capital relationships. When there is a large collection of firms in one concentrated area, there will inevitably be a better transportation infrastructure than would be the case with a smaller set of firms. The city may become a hub for national or international flight connections and there are many other public goods that are available at the same cost to all firms, large or small. Except for some sprawl cities, an agglomeration usually has higher density of population and employment, and density has been shown to result in higher productivity (Ciccone). Larger cities tend to be able to support better urban amenities such as cultural and educational institutions.

figure 8 – agglomerations

• Agglomeration economies

• Positive, and negative externalities

• Urban amenities

Another benefit to a firm of being in an agglomeration is the fact that positive externalities can be captured from the activities of other firms in the area. If one firm is able, for example, to use political connections to alter the zoning and regulatory regime, then all firms in the area will probably be able to share in this benefit. A final benefit is the fact that each firm will be able to take advantage of a wider array of professional services, labor skills, and material inputs that are available in a large agglomeration.

The agglomeration is not something that a city government can create through policy, but its leaders can initiate policies that will valorize the potential benefits of agglomeration, such as promoting air line hub status, cultural institutions, and so forth.

4.2.4 two issues for city Leaders and Planners

It has already been argued that these structures cannot simply be resorted to by city leaders and planners in all situations. They are somewhere between weeds that grow anywhere and hot house flowers that require very specific conditions. It should be clear from the above discussion that agglomerations are the least condition-specific of the three structures; they are just a large mass of activity and some natural consequences that follow from this. Networks receive less attention from the consultant industry but are clearly the creation of the firms that participate in them. These firms are the best, and perhaps the only, judge as to what can be accomplished with the structure. However, clusters warrant more attention from us. It will be instructive to take a moment to consider two of the elements in the nurturing of a cluster.

First is the issue of which industries are most likely to be good cluster industries. The key to a good cluster is face-to-face contact through which knowledge and other information is transferred. This occurs in fashion and design, furniture, information communications technology, advertising, publication, cinema, and video games, among others. These industries also have higher than average labor mobility, which has been identified as another aid to knowledge transfer (Power and Lundmark). Other industries, such as bio-pharmaceutical deal almost exclusively with proprietary information and they have no interest in informal or casual interaction with other firms at the level of the individual researcher.

Second is the more substantial question as to whether cluster growth is an organic process or is one that can be introduced and stimulated by policy intervention. The latter would be good news for strategic economic planners, but the former would not. Unfortunately, research tells us that clusters

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are long in development and the mechanism for their growth may be very idiosyncratic and non-reproducible. The fashion industry in New York developed over several decades and was aided by the efforts of a union, by changes in technology of communication and transportation, by New York’s status as a center of culture and of publishing, and by the Fashion Institute of Technology (Rantisi). The technology cluster in Ottawa, Canada, began during the Second World War through the operations of Bell Canada, Northern Telecom and Mitel. One set of authors concluded: “the cluster would not have developed as it did in the 1990s without the core institutional pattern which was initially established in the 1940’s” (Harrison, Cooper and Mason, 1067). Several other studies have come to the same conclusion that cluster development is a long process involving many social actors.

Nonetheless, one can point to other examples such as initiatives of the Research Triangle in North Carolina, the Swedish Development Agency for Innovation, and the government

of Bavaria that suggest that intervention can be productive. Closer examination of each of these initiatives would, however, show that each was built upon a long-standing structure of educational and research institutions and other valuable assets. Out of this activity come relationships of trust and familiarity that greatly facilitate the cluster growth process. This opens the door to deliberative policy intervention by local authorities, largely through funding and infrastructure development. The shorthand designation of this process is that of the ‘triple-helix’, the collaborative interaction of government, universities and research institutes, and private sector firms (Etzkowitz and Leydesdorf ). But even under the most enlightened leadership by local authorities, enthusiasm on the part of public officials alone rarely leads to a viable and competitive cluster structure, in any industry. Nonetheless, there certainly is a role for public authorities in fostering cluster development on a collaborative basis.

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Chapter 5 How to EvaluatE or analyzE urban CompEtitivEnEss

Chapter 5 hoW To evaLuaTe oR anaLyze uRban CompeTiTiveness

More promising is the work that many researchers have done with regard to the determinants of urban competitiveness. They do not all use the same methodology, nor are their conclusions always in harmony. Nonetheless, it is this body of work that will, in all likelihood, be of most interest and the best guidance to the city leader or planner. In this chapter we will review three different approaches to ascertaining the actual determinants of urban competitiveness – see Figure 9. The first is benchmarking, the second is conceptual/structural, and the third is statistical/empirical. Each approach has its advantages and its disadvantages and the city practitioner will have to study each to discern which holds the most promise for his or her initiative.

figure 9 – methods of evaluating urban competitiveness

• Benchmarking to determine how the city is ranked in important areas.

• The city should seek to adopt a conceptual strategy that will enable it to achieve what is assumed to be the most appropriate competitive objective of the contemporary economic condition.

• Quantitative/statistical analysis of the city’s objective competitive situation.

5.1 benchmarking Benchmarking is perhaps the most widely

used methodology for the evaluation of urban competitiveness. The first exercise was done by the US corporation Rank Xerox in the 1980s and has now been adopted by hundreds of firms as well as by many individual and organizational

researchers. The approach is especially well suited for the analysis of the competitiveness of an individual city or of a large number of cities. Benchmarking is attractive for several reasons. First the methodology is not challenging. Second, the result gives a set of up to 40-50 variables that the researcher believes to be valid as determinants of urban competitiveness. Third, it is easy to relate this set of determinants to policy options for city planners.

First is the methodology. Essentially this entails little more than obtaining data for the chosen variables for the cities to be included in the study. This usually requires data from both national and international sources – national statistical bureaus, the United Nations, the OECD, and so forth. This enables the researcher to rank each of the cities according to each of the variables used. The GaWC and the World Economic Forum select smaller sets of cities. The methodology of GaWC is essentially that of evaluating cities on their “level of advanced producer services”. These Global service centers are then graded for 4 aspects: accountancy, advertising, banking/finance and law (GaWC). Many, such as the MasterCard Worldwide Centers of commerce Index project (recently cancelled), the PricewaterhouseCoopers Cities of Opportunity and the Japanese Global Power Index are specifically geared toward the business community. The MasterCard index uses 43 indicators and 74 sub-indicators gathered in 7 “dimensions” for 75 of the world’s principal cities. The weighting of the dimensions was assigned by a panel of specialists. Cities of Opportunity uses 58 variables in 10 categories, and includes 26 cities in its survey. They evaluate these cities as to how they are meeting

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the challenges of the day, including, regional management, education, sustainability, density, transportation, and preservation. A recent report focused on technological readiness. The Global Power Index is based on 69 variables under 6 main functions for 35 cities. It seeks to quantify the “comprehensive power of cities to attract creative people and excellent companies from around the world” (Mori Memorial Foundation). The evaluation also included input from six major categories of actors (individuals). The ranking of these cities is clearly not done with a specific emphasis on urban competitiveness; nonetheless, they are closely related to it and their methodology is worth examining.

However, one researcher, Ni Pengfei, has a staff that gathers data for 105 variables for 500 cities throughout the world and uses a methodology that is quite advanced (Ni and Kresl); and he is narrowly focused on urban competitiveness. The 105 variables are grouped in 47 sub categories. Ni has both a

set of seven input categories, such as industrial structure, human resources and global connectivity, as well as a set of nine output categories, such as productivity, growth and innovation; these are comprised of selections of the 47 sub-categories. The two approaches yield roughly the same result, with minor differences being caused by imperfections in the data for the two approaches, but with different interpretations being possible. The methodology used to gain the results is rather sophisticated – more so than is the case with other simpler benchmarking exercises that just gather data and rank cities according to this data with a simple weighting system. Ni utilizes non-linear weighting, regression analysis and fuzzy curve analysis to achieve his detailed evaluation for each of the 500 cities and for the ranking of all of the cities.

The following Table 1 gives the ranking of the most competitive African cities in the Ni study.

Table 1 – highest african cities in the ni competitiveness ranking of 500 cities

city country ranking

Johannesburg South Africa 224

Cape Town South Africa 280

Pretoria South Africa 322

Gavorone Botswanna 344

Algiers Algeria 352

Luanda Angola 354

Tripoli Libya 358

Durban South Africa 362

Port Louis Mauritius 365

Source: Ni Pengfei and Peter Karl Kresl.

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Second is the selection of the variables. Here the advantage is that the researcher is in control over the number of variables to be included. One view is that the larger the number of variables the more precisely it will be possible to capture the competitive strengths and weaknesses of each city. Another view is that the larger the number of variables the more the truly relevant ones will fade into the background. This concern is somewhat mitigated by the grouping of 5-10 variables into a single synthetic variable that captures some aspect that is common to them all. In the final analysis of this approach, it must be noted that the researcher includes variables in his or her study on the subjective basis of what the researcher thinks would be of importance; or, less charitably, on the basis of whatever data happens to be available. Availability of comparable data for a large number of cities from a large number of national economies is often rather limited. This suggests that the benchmarking approach may have an element of chance or randomness, no matter how committed the researcher is to gaining an objective understanding of the competitiveness of any city, of a set of cities, or of as many cities as is possible.

Third is the value to policy makers. Benchmarking may give to policy makers a tour d’horizon, so to speak, of the city’s relationship to other competing cities throughout the world or whatever geographic space has been selected by the researcher. The ranking of the city by each of the variables may give good and full information to city planners, but are all of the variables of equal, or any, relevance to their task? In some situations a particular variable may have a positive impact on competitiveness, in others no impact, and in others a negative impact (Kresl and Singh, 2012). Clearly, this must be sorted out somehow by the researcher. One researcher, Ron Boschma, concluded that there are “no ready-made blueprints that can be universally applied to whatever local context...(t)his implies benchmarking...is

unlikely to be of much of a help. Much success in competitiveness enhancement is derived from region-specific assets” (Boschma, 1011).

The four benchmarking exercises explicitly focus on different aspects of urban competitiveness so it is not surprising only four cities make the top ten on all of them: New York, Tokyo, Singapore, and Hong Kong. London is ranked number 11 on the Cities of Opportunity list. Below the top cities the rankings differ considerably, as should be expected. What would be most interesting would be comparison of each of the rankings over an extended period of time. Cities of Opportunity does a one-year comparison, and Ni Pengfei has done his study for several years. The rise or decline of a city over five or ten years would be of great interest and value to city decision-makers in evaluating their strategic economic planning initiatives.

There are a couple of specific weaknesses to this approach. First, the individual has to make a subjective determination as to which variables will be included. Often this is done because of the mere availability of certain data series, without there being an objective reason for their inclusion. Second, the researcher may be dominated in his or her thinking by the notion that the contemporary economy values certain variables, such as education or infrastructure, over others, such as urban amenities. This gives priority to a specific development path, such as high technology goods, over others, such as logistics or culture and recreation, that may have more relevance to the individual city. Boschma suggests that benchmarking may be most “useful as a learning tool for policymakers when it makes them aware of the dangers of simply copying best practices developed elsewhere” (Boschma, 1011). Unfortunately, there is nothing inherent in the methodology to ensure that this is part of its application.

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5.2 theoretical-structuralThis second approach is essentially

conceptual - examining the situation in which a city finds itself and grouping it with other cities in roughly the same situation so that they can be compared and analyzed in relation to other groupings of cities. Each grouping then lends itself to a discussion as to its suitability to current economic conditions, its prospects for the future, and the policy initiatives for that grouping to be successful and competitive. These studies are more complex than the simpler one-dimensional approaches that assert that creativity, or learning, or high technology, or corporate headquarters as the variable that will confer enhanced international competitiveness to a city or urban area. A review of three of these studies will make clear the strengths and weaknesses of this approach.

Negrey and Zickel group 140 US cities into one of six ‘types of metropolitan areas’: classic de-industrializing centers, the anomalous case of Boston, stable centers in transition, innovation centers, new services centers, and new manufacturing centers (Negrey and Zickel). They then indicate the likely changes in manufacturing employment and in population, and the relationship between the two. This leads to a two-way flow of results. If a city finds itself in a particular type of area, then it should have some idea as to the coming changes in the two variables. Conversely, if city leaders want to have a particular result with regard to changes in manufacturing employment or in population, than certain area types will enable it to achieve this. For the two researchers, the study makes it clear that there is no single national government intervention that will benefit all cities; each area type will have different needs and responses.

Pollard and Storper look at three types of activity: intellectual capital industries, innovation-based industries, and variety-based industries, and give the characteristics of each in regard to technology, product

differentiation, aspects of production, and aspects of management. The indicator of success they use is metropolitan employment changes. One would think that a successful economy would be creating total employment. However, it might be that an urban economy is restructuring its production away from labor-intensive traditional manufacturing toward less labor-intensive high technology goods production or services. In this case, the successful city will find that it is losing more traditional employment than it is gaining in the expanding sectors; therefore it will experience declining employment. The city may in fact be doing the proper thing, but the indicator of success should not be total employment. Pollard and Storper conclude that while there is no single path to economic growth and to competitiveness, “the most consistent pattern…is the link between specialization in innovation-based employment and overall regional employment growth” (Pollard and Storper, 19). However they also note that “general social, political, or institutional conditions” can generate or make possible a growth path that has a broad rather that a narrow competitiveness or specialization.

The third study is that of Markusen who poses the question: “why certain places are able to sustain their attractiveness to both capital and labor” (Markusen, 291). She offers, in place of the traditional Marshallian and Italianate industrial district models, three types of industrial districts she argues are more relevant to the contemporary US situation that is the subject of her analysis: hub-and-spoke districts, satellite industrial platforms, and state-anchored industrial districts, with each differentiated according to locus of decision-making, economies of scale, degree of local cooperation, government regulation and public infrastructure support. Her districts model will, of course, have some relevance to urban areas in other industrial countries. Each of the three is characterized, respectively, by: 1) large vertically integrated

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firms, 2) large externally owned forms, and 3) large government military, educational, administrative, or health care institutions. She famously noted that “sticky places” are places of multiple forces such as structures, strategies, priorities and politics (Marcusen, 293). The final conclusion is that planners must assess the situation of their own district with regard to these factors and to base a strategic economic strategy based on them. Thus, she moves away from any notion of a universal approach to urban strategic-economic planning.

These three studies can be of use to city planners as they highlight situational aspects of individual cities with the intent of enabling planners to chart a course for the future development of their city with a good functional understanding of the possibilities that exist for their actions and the likely consequences of these actions. However, they are not sufficient in themselves as guides to policy implementation. This approach leaves the decision-makers with only a general and subjective understanding of the city’s strengths and weaknesses, and does not give them a set of objectively determined variables that should be the basis of a strategic-economic planning initiative. The decision-makers must take a leap of faith into a future that is rather generally and poorly described. Success here depends on the ability of the decision-maker to be flexible and to adapt to an evolving economic reality for that city; this may be necessary in all planning exercises but, I would argue, more so when this approach is being utilized.

5.3 QuantitativeThe third approach to evaluating urban

competitiveness is one that is based on a statistical methodology, rather than one of massing data for a large set of subjectively selected variables or of imagining possible situations in which cities can be placed. This is the approach that has been utilized by the author of this report in three studies (Kresl

and Singh 1995, 1999 and 2012). The analysis begins with a set of three variables that serves as indicators of urban competitiveness: the change over a period of years in manufacturing value added (or, in the latest study, salaries per employee), retail sales, and in a subset of professional services. This approach explicitly argues that urban competitiveness is identified by high values for a set of general economic capability variable, rather then by success in meeting certain specific performance measures. These variable will then promote productivity or growth, or attainment of some desired target such as becoming a learning region or a center of high technology production. The validity of these indicators is verified by use of discriminant analysis. The next step is to use multiple regression analysis to identify a set of independent variables that are statistically verified to be determinants of urban competitiveness. That is, that will ‘explain’ the results given by the three indicators. Studies employing this methodology have generated between 12 and 15 determinants – 8 or 9 in the initial analysis and then regression analysis of these variables generates an additional 4 to 6. From the determinants one can then derive a ranking of the set of cities being studied - 23-40 cities have been included in these studies - from most to least competitive. But this is not the point of the exercise - blaming some city for its poor showing is of little interest. It is, however, possible to use the ranking of an individual city in each of the determinants of competitiveness so as to reveal its true strengths and weaknesses. The most competitive city may have serious weaknesses in some variables, such as transportation infrastructure or cultural assets or education of the labor force, as will each of the other, less competitive, cities. Thus, the central use of this methodology is to reveal to city leaders the areas in which their city is objectively relatively strong or weak and to enable them to use a strategic economic planning process to address weaknesses and to maintain strengths, and to enhance competitiveness.

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While the results of this methodology have the advantage of being objective and statistically verified, not many other researchers have adopted it. Partly this is due to the fact that comparable data for a wide variety of variables at the level of the city are not available for many national economies - the US, China, Mexico and Italy are countries in which the data is available. Such data are not available for the EU, and even individual countries, such as Germany, lack good national data sets at the city level for the variables that one would want to test for inclusion. Another feature that may make this approach less attractive is the fact that one does not end up with 40-50 variables for the consideration of policy makers, but rather just over a dozen.

Using data for US cities over a period of three decades, the Kresl-Singh studies have been verified in three ways. They have captured the rise and decline in competitiveness of individual cities, such as the decline of New York’s competitiveness following the stock market crash in 1987. They have also confirmed the importance of location in a particular region of the US, such as the two coasts, the industrial heartland, the south, and the center, with these regions showing collective rise and/or decline of each over time. Finally, they have shown how the individual determinants have become more or less important as the nature of the economy has changed from the 1970s to the 21st century. One of these results is statistical verification of the often suggested decline of hard determinants, such as proximity to a port or mineral deposit, or the physical capital stock, and the rise of soft determinants, such as urban amenities, public safety and health care. This is reflective of the growth in importance of a mobile, educated and technologically skilled labor force. It should also be noted that the results of the studies are presented in a form that should be both accessible and useable by city decision-makers.

5.4 the advantages and disadvantages of each methodology

We have already alluded to the advantages and disadvantages of each of the three approaches to evaluating urban competitiveness, but it would perhaps be useful to practitioners to summarize them again and to offer suggestions as to their usefulness in practice. When it comes to objectivity rather than subjectivity, the quantitative approach comes out far ahead of the others. Statistical techniques are used at each step and the subjective judgment of the researcher is nowhere to be seen. The other two approaches require the researcher to make judgments with regard to the variables, and their number, to be included in the benchmarking exercise, or to imagine a theoretical structure for sets of cities. The results will be as good as the researcher. With benchmarking there is no way to verify the validity or relevance of the variables selected (is it perhaps just because the data is available?) or of the results of the exercise.

Policy makers will find the benchmarking approach to be of use because of the larger number of variables used, 40-50 versus 12-15 in the quantitative approach, and may find this of more value in designing a strategic economic plan. Its relation to reality is, of course, the issue here. The theoretical-conceptual approach is as useful as the planner is adept at characterizing or identifying the situation that best describes his or her city. What is an issue for each of these approaches is the quality of the data that is available at the level of the city. In the US there is a great number of relevant statistical series that is available for 287 metropolitan areas and also for smaller cities and towns. It is rare to find such a wealth of relevant data series at this level. This poses the temptation to researchers doing benchmarking studies to include variables primarily because they are available.

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What is an issue for each of these approaches is the quality of the data that is available at the level of the city. In the US there is a great number of relevant statistical series that is available for 287 metropolitan areas and also for smaller cities and towns. It is rare to find such a wealth of relevant data series at this level. This poses the temptation to researchers doing benchmarking studies to include variables primarily because they are available.

Finally, while it is true that data that is good enough for the quantitative approach is available for cities in the US, but not for those of many other countries, in a global economy that is open to flows of goods and services, and of capital, labor and firms, and with firms responding to the same elements wherever their production units are located, one can

figure 10 – methods of evaluating urban competitiveness - strengths and weaknesses

method strengths Weaknesses

Benchmarking Many variables – up to 40 or 50 Subjective Judgmental

Theoretical/structures Clear analysis of the city’s situation Subjective Judgmental

Quantitative Objective Specific guidance to planners Relatively few variables – usually 12-15 Requires data for a large number of cities

argue, with some care of course, that results for the US should have some application to cities in other industrialized countries, and perhaps to those in emerging or developing countries.

Obviously, each practitioner will have to determine the suitability and value of each of the three approaches to strategic economic planning for his or her city. This should make it clear that the process must essentially be that of a bottom-up exercise in which local actors in both the public and the private sectors must be engaged, rather than something that is imported from the outside and simply planted in local soil, soil that may in fact not be hospitable or nurturing for what is imported and planted from the top down.

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Chapter 6 How to Promote Urban ComPetitiveness: strategies for Promoting Urban ComPetitiveness

Chapter 6 hoW To pRomoTe uRban CompeTiTiveness: sTRaTegies foR pRomoTing uRban CompeTiTiveness

Thus far we have examined the concept of urban competitiveness itself, how it is determined, and how we can evaluate it. In this chapter we will focus on five aspects of policy to enhance urban competitiveness - why they are important and how they should be approached or implemented by local decision makers. The first is the point from which one should engage the process of enhancement, the second discusses the importance and the utilization of local talents, the third notes the importance of effective governance, the fourth recognizes the importance of creative thinking and the fifth poses the question of path dependence or a new path. Unless each of these aspects of policy is considered and given serious thought, it is unlikely that any planning exercise will be successful.

6.1 top-down versus bottom-upThere is much to be said for using experts

in strategic economic planning to help local decision-makers in the design of the initiative to be undertaken. Local leaders need access to the most relevant and current knowledge in this area of public policy. It is how this knowledge is used that is at issue. Often consultants develop an approach to urban economic development or competitiveness enhancement that is generalized for the conditions of the contemporary economy, as the consultant interprets them. This approach may then be taken to several cities or regions and presented to local leaders. The general conditions on which the approach is based may not have great relevance to the particular city or region asking for the assistance. I was recently in a region in the EU and a state in

the US when economic plans were announced for each. The two plans were almost identical in their prescription for initiatives that were needed. The plans one sees are usually filled with the same jargon - synergies, innovation, best practices, learning region, ICT, high technology, and so forth. On the one hand, this leaves little room for cities that should specialize in logistics, or cultural and recreation, or headquarters functions, or niche manufacturing. All cities are assumed to fit into one pattern. On the other hand, the consultant is often not on the ground long enough to gain a solid understanding of the economic and social character of the city or region asking for the assistance. This is top-down planning at its worst.

A less dramatic approach to top-down planning is when the mayor and his close colleagues in the city administration design the plan with little input from the population and then try to impose the plan on a rather unsuspecting public. I saw this model in a city in the eastern part of Germany several years ago. The plan was not a success and little positive was accomplished. A few years later another mayor set up a structure of a dozen committees representing sectors of the economic and society, with participation from all elements in the city. This time the plan was known by all, they accepted it and they were eager to participate in meeting the objectives of the plan. This latter experience is an example of bottom-up planning.

The bottom-up approach is grounded in a first-hand knowledge of the strengths and weaknesses of the city, of the competence of the various actors in the community, and of

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the way in which actors and institutions will, or will not, be able to work collaboratively. The objectives of the plan are then in accord with the aspirations of the residents of the city. Turok has written that cities should develop specialized activities and assets that differentiate them from other places, rather than emulating ideas from elsewhere (Turok), even though expert consultants may seek to impose them locally. Markusen and Schrock comment on the “often-mindless groping for ‘best practices’” in which cities adopt strategies that “try to match the competition elsewhere in terms of business climate, subsidies to attract or retain business, or the provision of comparable land or infrastructure” (Markusen and Schrock,1319). Each city or urban region will have its own strengths and weaknesses, options, and aspirations. These should form the base of any effort at strategic economic planning.

6.2 mobilizing Local talents and energies

The most powerful asset any city has is its local population. Charles Landry has written: “Cities have one crucial resource - their people. Human cleverness, desires, motivations, imagination and creativity are replacing location, natural resources and market access as urban resources” (Landry, xiii). These individuals have important skills on which the economy will be based, they have tacit knowledge of how the economy and society function, they are connected to other residents or know how to become connected, they have made a commitment of spending their lives in the city and are not likely to move to another place at the slightest incentive, and their presence will be important in convincing the next generation to make a commitment to the city. Nested in a set of friendships, ties to family, and affinity for the local culture, food, climate, etc., most of them are eager to become involved in building the city economy and society to which they aspire. Clearly some

specialists will have to be brought into the community to accomplish specific tasks that the local residents lack; however imported labor and specialists are usually relatively footloose and are willing to re-locate for a better job or higher income elsewhere. They will also be more costly than locals with similar skills.

The incorporation of local people in the planning process will provide planners with a more varied and even unanticipated set of skills than is the case when outsiders with specific skills are brought into the community. One team of researchers tells us that “the process involves regional or community leaders mobilizing support for change - using a range of media, community and organizational support groups to educate the community and members of organizations of the benefits of managed change - as opposed to having change imposed upon the community, which often results (in) defensive or reactionary strategies” (Stimson, Stough and Roberts, 155-158). The serendipity and spontaneity of new ideas about the ultimate objective of the planning exercise and the means of achieving it will do much to enhance the competitiveness of the firms in the local economy. Other researchers have concluded that: “A city that promotes cooperative effort also contributes to the agility needed to restructure and adapt as economic needs change” (Rondinelli, Johnson, and Kasarda, 92).

In all communities there are large numbers of residents who are willing to participate as volunteers over an extended period of time in common initiatives. Often they are simply not invited to participate or made to feel that their contribution is valued; the competitiveness enhancement projects must be opened to them. They are an asset of which city planners must take advantage and which they must incorporate into the project of designing the city’s future economy and making it competitive and vibrant.

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6.3 the need for effective governance

Government is “a system by which a state is governed”, and it involves “the State as an agent” (Oxford Compact English Dictionary). It involves elected officials and bureaucrats working in government offices and agencies. Governance, in the parlance of the urban policy community, refers to a broader management of the affairs of the State through the collaboration between government officials and agents from private sector entities including universities, business firms, professional associations, social service entities, ethnic communities, the chamber of commerce, and other similar entities. The definition of the UN Development Programme is in conformity with this conceptualization. See: http//meltingpot.fortunecity.com/ lebanon/254/cheema.htm. (United Nations). The objective of expanding from government to governance is in part to ensure the best mobilization of local talents, as just discussed. It is also to give legitimacy to the planning exercise itself, grounding it not only in elected officials but also in the entirety of the community. Effective governance must be considered the sine qua non of efforts to enhance urban competitiveness.

Governance must be effective. An example of how this can fail to be realized is that of Buffalo, New York, in the early 1990s, following the Canada-US Free Trade Agreement. The leaders of Buffalo, a border city, thought they would be able to take advantage of their location to boost the development of their economy. The basic idea was to go from moving goods across the four bridges, to transshipment to assembly providing employment for local labor. But when the local leaders met, there were representatives of two counties, two airport commissions, four bridge commissions, the chamber of commerce, the Western New York Development Agency, the city, and perhaps one or two others. Unfortunately, there was no single individual with authority over the

others in this effort to assign tasks, monitor performance and evaluate progress. The result has been a long period of stagnation. Many other cities, such as Lyon, Pittsburgh and Barcelona, have been able to assign authority, responsibility, and accountability so that the local strategic economic plan has been implemented successfully.

One problem that is found in many cities is the lack of consistency in the approach the city takes to its competitiveness. As each new mayor takes office he or she often imposes a personal vision of how the city can best focus its resources and efforts for the rest of the political term. Chicago is a good example of this. Harold Washington wanted to make the city a world class and integrated city. When he died in office of a heart attack, his successor decided to focus instead on the city’s neighborhoods. Washington’s international staff and initiatives were dropped. A couple of mayors later Richard Daley moved the city back to Washington’s international ambition. Fortunately Mayor Daley was in office long enough for this ambition, in large part, to be realized. This is the experience of many cities. An alternative is offered by Lyon, in which there is a powerful and permanent entity, the Agency for the Development of the Region of Lyon. This is a governance structure that includes the business, educational, social, and infrastructure communities. When a new mayor takes office there is a powerful inertia that maintains a consistent approach to economic activity and competitiveness. While one does not want to freeze a city’s strategic approach in the face of need for adaptation and modification to new realities, a purposeless lack of consistency leads to a waste of recourses and missed opportunities.

6.4 the extent or scale of the cityThis may seem to be a trivial question but

when we recognize the need for effective governance we have to decide what entities

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must be included in our understanding of the ‘city’ for the plan to capture the involvement of the necessary economic actors and economic space. Some cities are political entities unto themselves - Hamburg is a German land or sub-national state, and incorporation of contiguous but economically connected space is difficult; Munich, on the other hand, has gradually extended its reach and planning space into the surrounding Oberbayern district of the land of Bavaria. One researcher has given us a set of four definitions of the urban space: the built city, the consumption city, the employment city and the workforce city (Parr).

We tend to think of the city as the center of a larger urban region that encompasses the economic activities that are integrated into those of the city itself. In the US we have used the Bureau of the Census designations of Metropolitan Statistical Area and now the Combined Statistical Area. Initially they were intended to capture the commuting area of the central city. Over time employers moved to the outlying areas and work and residence areas became more complex, as did governance. Pittsburgh is a city that has moved through governance structures as it grew spatially. Initially it was the Mellon Bank and family that coordinated local activities and plans, then it grew to the Allegheny County Commission, with its Chairman being the authority figure, and now it is the Pittsburgh Greater Alliance, as the reach of the city moved beyond the confines of Allegheny County. So the governance structure must be adaptable to change in economic space over time.

figure 11 – The question of scale

City A legal, administrative unit.

A narrow focus on the central business district

Metropolitan area

Essential the commuting space

The central city and its suburbs

In the US, the Metropolitan Statistical Area

In Europe, the Functional Urban Area/Region

Urban Region

Captures the economic ‘reach’ of the urban area – takes into account transportation, finanace, corporate links

The city and its hinterland

Province The urban economy in its broadest sense

Mixes urban and rural economies

Provincial governments often have insufficient interest on the urban economy

In the UK, the structure of ‘Greater X’, as in Greater London, Greater Manchester and so forth, has been used. Three researchers argue that in the UK uncertainty as to what ‘city’ means “inhibits the development of strategy for cities as complete territorial entities” and inhibits efforts to “improve quality of life and economic conditions” (Vigar, Graham and Healey, 1407). Researchers in Europe have studied the Functional Urban Area or Region (Cheshire). The objective here is to capture the ‘travel to work’ area of a city, but its specification is flexible in accordance with the situation in difference countries or cities.

The definition of the scale or extent of the city is clearly flexible in practice, depending on the nature of the city involved and on its use - whether in planning for housing or commutation or competitiveness enhancement. Nonetheless, it is agreed by all who work in the area of urban competitiveness that for it to be enhanced through policy initiatives, some specification of what areas and towns are included in the strategic economic planning effort must be made. Obviously, this is something that only local planners can do with their intimate knowledge of the sorts of interactions that occur.

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6.5 How to become a creative Place

Creativity is one of the buzzwords that one finds throughout the urban competitiveness community. Richard Florida has fostered the growth of a “creativity industry” following publication of his The Rise of the Creative Class (Florida). His focus on creative individuals who choose to live in specific cities has direct relevance to our discussion of urban competitiveness. Clearly it is better to be creative than the alternative, but what exactly do we mean by creativity? And how does it relate to a complex structure such as a city?

6.5.1 creativity – a concept and a Policy

At one level, we speak of the creative industries – film, design, fashion, music, video, media, advertising, and so forth. Many cities, such as Montreal, have recently tried to focus their development and enhancement of competitiveness on this sector. Other cities, such as New York, Milan, Tokyo and Paris, have had this focus for decades. At another level, creativity relates to knowledge-creating and technological-development activities. This usually requires the presence of high quality universities and research communities that carve out niches for development of excellence. Munich, Randstad, Stockholm, Silicon Valley, Boston, have been successful in this aspect of creativity. Unfortunately, not all cities have the assets to create a potential to succeed in the creative industries or knowledge creating centers.

The other conceptualization of creativity, however, is available to all cities – this is using innate creativity to find imaginative solutions to the problems and challenges that face a city. The psychologist Howard Gardner has told us there are multiple intelligences. Not just the ones we test in schools, linguistic and logical, but also bodily-kinesthetic, inter- and intra-personal, musical, and spatial intelligences among others (Gardner). For a city to

respond creatively to the challenges it faces in maintaining or enhancing its competitiveness it will be necessary to integrate into the process a variety of individuals who represent most of these distinct intelligences. The set of tasks that must be faced will include those of being able to integrate disparate entities in the same activity, the ability to project into the future existing activities and initiatives, the ability to bring out the best effort from other individuals, the capacity to present the initiatives undertaken to funders, firms and talented individuals outside the community, and a host of other similar tasks.

Thinking creatively is essentially conjuring up some new and effective way to meet the objectives of whatever activity it is in which one is engaged. Capability and effectiveness must take precedence over status and position of the individuals involved, however difficult this may be to do in actuality.

6.5.2 the creative city

For a city or urban economy to become a center of creativity it must prepare individuals to take radical new paths to economic activity. The creative individuals must be given ‘free reign’ to go wherever their thinking takes them. There should be no specific objective or end specified that dominates their actions.

I have examined six creative urban areas: fin-de-siècle (late 19th century) Vienna, Paris before WWI, Berlin post-WWI, the Harlem Renaissance (the 1920s), New York during the 1940s and 1950s, and Silicon Valley during the past three decades. While each is distinctive there are four principle factors that are common to all and that may provide guidance to urban leaders today. First, each was open to inflows of people, whether it was the Habsburg Empire for Vienna, physicists from all of Europe for Berlin and the entire world for Silicon Valley. Second, these emerging artists, physicists, and computer specialists had new ideas that challenged the

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existing order. Third, as a consequence of this, they were opposed, or excluded from existing institutions, by an entrenched “old guard” that was challenged or threatened by these new ideas and ways of doing things. Fourth, each had a “patron” that was willing to supply the new creative people with financial resources. These four factors facilitated the growth of Impressionism and Abstract Expressionism in painting, post-Newtonian quantum physics, and jazz in music. Other urban economies that did not have these four factors, such as the Mid-lands in England and more recently the industrial heartland of the United States failed to meet the competition and suffered a decline in their economic vitality. Some of the cities in these areas have been able to reconstitute their economic competitiveness and their vitality; Chicago is a good example of what a city can do to resuscitate itself from becoming a declining manufacturing economy.

figure 12 – elements in a creative city

• First, open borders and inflows of people from other places

• Second, the new creative people challenge the existing order

• Third, existing structures and institutions are closed to the new creative people and they have to create their own structures and institutions

• Fourth, the new creative people require patrons to purchase their goods and service and to provide them with revenue

6.6 Path dependency versus a new Path

Local leaders will have to make a decision in formulating their strategic economic plan whether they should build on the strengths of the local economy and use them as the base for a new course of specialization in production, or continue into the future on a trajectory that is the projection of the historic strengths. The choice is thus between ‘path dependency’ according to which the future is dependent

upon the path or trajectory of the past, or designing a new path that is a break with the past into new territory.

6.6.1 Path dependency

Path dependency is relatively safe in that the decision maker has not put him or her self on the line with a new direction. The future probably will not be disastrous since it is following a path that has brought some success in the recent past. But the past is often identified with industries of the past, such as traditional methods of producing steel rails, sheet and merchant bars; textiles; furniture; clothing, shoes and hats; some manufactured items; and agricultural products. While this may appear to be a low risk strategy, in our world of rapid technological change, open borders, a transformation of transportation, and emerging economies, most traditional activities must be assumed to be at risk. It is, of course, possible to transform traditional activities with technology. For example, Chicago was a power in the steel industry when it was focused on basic steel products, but this activity was transferred to countries such as South Korea, Brazil, China and India. Chicago’s steel industry went into a rapid decline during the 1970s and 1980s, but slowly emerged as a world leader in production of specialty steels which are embedded in a sea of patents on sophisticated aspects of specialty steel production. Similarly, as Sassen tells us, Chicago’s current strength in commodity and other futures was directly related to 19th century corn and grain trading, and its transportation hub status is tied to its 19th century centrality for transportation throughout the entire Mid-west of the US and its links to East Coast cities (Sassen, p. 277-279).

6.6.2 a new Path

The high risk, high payoff approach is that of breaking direct ties with the past and charting a new course. This may be a wise approach in cases in which the traditional industrial activity is likely to be subject to powerful challenges,

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as noted in the previous paragraph, over which the city leaders and local firms have no power and to which local responses are likely to be a futile exercise. In this case, local leaders have two options: first, they can use the principle assets and resources of the local economy to develop a new specialization, or, second, they can encourage accumulation of new assets and resources that will sustain a new trajectory. The overriding criterion will, of course, have to be the probability of success in each option. Building on local assets and resources will be the quicker of the two, and probably also the less costly. It is also easier in this instance to build on the energy and commitment of local firms and residents. In the town in which I live, Lewisburg, Pennsylvania, a large nationally known furniture manufacturer moved its activity to China and closed the factory in Lewisburg. A few years after this the area had a dozen new, small-scale producers of specialty moldings, artisanal furniture, wooden children’s toys, and so forth; often started by workers who lost their jobs at the furniture factory. All this took was a bit of start-up capital and the transition was made, albeit not without cost.

Charting a completely new course is the more risky choice, but with some existing industries there may not be a natural progression to a new specialization so there is little choice. This option is also likely to bring engagement by outside firms and individuals, rather than just local ones. The advantage is that this brings new technologies, products and best practices, but the commitment of the outsiders to the local area may be very weak and not always sustainable. If this initiative is not successful in a relatively short time, the outsiders may abandon the city and move on to another more promising place. Here the issue is not whether the new activity is profitable and viable, but rather whether it is more profitable than that activity placed in another location. Once locations begin a bidding war to retain the firm, the cost rises significantly and the net gain to the city will be greatly reduced.

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Chapter 7Good Cases of PromotinG Urban ComPetitiveness

Chapter 7 gooD Cases of pRomoTing uRban CompeTiTiveness

City leaders have much to learn from the study of the experiences of their counterparts in other cities. In this chapter we will look at some examples in which city strategic economic plans were successful and others in which they were not. I would suggest that the aspects of these experiences that are of interest to us are generally those I identified in another study: 1) an objective examination of the city’s strengths and weaknesses in relation to other competing regions, 2) involvement of the general public and of all major entities in an exercise related to the aspirations of residents, 3) design of a strategic economic plan that can realize these aspirations, 4) mobilization of local human resources in the context of clear responsibilities and lines of authority, and 5) regular monitoring and evaluation of progress and performance (Kresl, 2007). The details of each experience will be only briefly related to these aspects, due to limitations of space.

7.1 some cities that could be emulated

The following five cities have all managed their competitiveness enhancement efforts successfully and in ways that should be studied by leaders of other cities seeking to achieve the same objective. Each has some special characteristics that are not transferable to other cities but, nonetheless, they have used some of the five aspects listed above to guide them in their efforts. The cities that I have chosen for this review are Chengdu, Montreal, Lyon, Chicago and Turin.

7.1.1 the importance of a good strategic economic Plan

Chengdu, China, is an example of a city that has adopted a strategic economic plan with a clear focus and adequate ancillary entities to support that strategy. The central focus of Chengdu’s approach was the fairly common information-communications technology industry. Chengdu had the advantage of being part of the Chongqing-Chendgu economic region, the first economic region that Chinese authorities established in the interior of the country. Chengdu developed an ITC university, a cluster of about 100 small ITC firms and two anchors, first Motorola and then Intel. The earthquake of 2008 set things back a bit but did not cause the initiative to fail. In a state that is directed from the top, once a path has been chosen there is a considerable, and an enviable, commitment to see it through.

Montreal is another city that has charted a course with a clear focus to its strategic economic planning (Tremblay). In this case it was multimedia, audiovisual, and film. This example shows us how the support of government, in this case that of the province, can be instrumental in getting the cluster to achieve a level of activity at which it becomes no longer dependent upon external support. Tremblay stresses the importance in this example of successful planning of the social capital that develops over time in a city that, being Francophone in North America, is not as linked to other major cities as closely as would be other Anglophone cities.

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7.1.2 the importance of a good mayor

The next two cities have been discussed briefly in the last chapter, so they will simply be mentioned here. For Chicago its past was a powerful and effective guide to its future. We saw how the three current competitive strengths of this city, transportation, manufacturing and finance are all based on what developed in the 19the century. It may appear to have been an easy transition to make from that century to today, but path dependency may be inappropriate and a trap for some city economies. In Lyon we see the importance of a steady base of consensus with regard to future economic development and the value of this inertia, if correctly designed, in avoiding short-term departures from this long-term path because of the interest of a new mayor. This is not meant to be support for constraints on democratic processes but rather to be certain that any departure is very well thought out and accepted by other social partners. Both of these cities were fortunate in that they had mayors at the crucial time who could envision the future and could also deal effectively with local power groups. In Chicago it was Richard Daly whose father had been a dominant mayor a couple of decades before him. Mayor Daly was connected to all who had ‘clout’, as they say, in the city. In Lyon the mayor was Raymond Barre. Mayor Barre was a powerful and well-regarded figure in both French national politics and the city itself. He, too, had clout with the individuals who dispensed regional development funds from the national government in Paris, as well as having a solid base in Lyon.

The final example comes from the Italian city of Turin. In the 1980s local political corruption blossomed into the ‘Tangentpoli’ scandal in both Turin and Milan. Local officials were indicted and imprisoned, and economic development became derailed. Turin was more successful in its recovery because it was fortunate in the election of Mayor Castellani. Turin was able to clean up its municipal

affairs and was the first Italian city to adopt a strategic economic plan in 2000 that made the city increasingly competitive, including a successful bid for the Winter Olympics of 2006. Milan spent the next decade without recovery. So the lesson here is that a strong and focused individual leader, such as Mayors Daly, Barre and Castellani, can make all the difference in competitiveness enhancement.

7.2 some Pitfalls to avoidThe following cities have failed to manage

their competitiveness enhancement initiatives successfully. Each shows us one glowing example of failure to adhere to the five aspects listed above. The cities included here are Buffalo, Dresden, and, from a different perspective, Turin.

Buffalo, as was noted above, gives us a clear example of the consequences of a lack of central authority, and the accompanying difficulty in assigning tasks and monitoring performance. The Buffalo plan was introduced in the early 1990s, following adoption of the Canada-US Free Trade Agreement. Little was accomplished at that time, and two decades later in 2011, when the State of New York called for regional plans for economic development, Buffalo was at the center of a Western New York “bi-national logistics” strategy to capture what was identified as the central objective in the earlier initiative (Applebome). One can only hope that lessons have been learned in the intervening years.

In Dresden, the planning exercise of 1991 was a closed process, with the objectives and tactics of implementation in the heads of the mayor and some of his senior colleagues. There was no effort to bring the residents or social groups into the process, responsibilities were vaguely assigned, and there was little performance to monitor. As a consequence, little was achieved. A subsequent effort in 2004 and 2005 was totally different. A

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Chapter 7Good Cases of PromotinG Urban ComPetitiveness

bottom-up process replaced the previous top-down approach. The elements in the strategic economic plan were generated and vetted by social partners in a dozen committees and responsibilities for carrying out the plan were clearly assigned. This latter exercise has brought much more significant and satisfying results.

As a cautionary note we can recall the situation in Turin, Italy, during the 1980s and 1990s. The city was dominated during much of he 20th century by the automobile company FIAT and the Agnelli family. This was the strength of the economy, but as the city approached the 21st century the strength turned out to be a weakness. Much

of the labor of FIAT consisted of manual workers who moved north from the south of Italy for employment. As the economy was forced to seek new activities or to increase the level of sophistication of work in the automobile factories, this uneducated and low-skill workforce was poorly suited to this new economy and became a source of unemployment, of demand for social programs and of social pathologies such as crime and drugs. This is a good example of how today’s competitive advantage can become tomorrow’s competitive disadvantage. In this case path dependency was difficult to maintain.

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Chapter 8Issues and Challenges of urban CompetItIveness In developIng CountrIes

Chapter 8 issues anD ChaLLenges of uRban CompeTiTiveness in DeveLoping CounTRies

Much of the work that has been done on urban competitiveness has used cities in industrialized or emerging countries as the subject. This is due, in part, to the fact that comparable data for a large number of cities are available in only a small number of countries, such as the US, Italy, Mexico and China. It is also due, in part, to the fact that only in a few countries is there a large number of cities in situations that are in sufficiently similar situations to make comparative study worth the effort. Nonetheless, since the majority of people live in cities in the developing world the competitiveness of their cities is a subject that warrants serious study. In this chapter we will identify some of the major issues that confront cities in the developing world that seek to enhance their competitiveness. This should be seen as an add-on to the enormous amount of work that has been done for decades on the economic development difficulties and prospects of economies in the developing world.

The aspects that are discussed here are the most important that confront these urban economies. None of them will be new to researchers and city practitioners, but mentioning them should serve as a reminder of their importance. Political stability, economic rationality and adequacy of local assets are standard issues, but the competitiveness of smaller cities and towns and inclusion of all social groups in the planning process and in the economy are often neglected.

8.1 Political stabilityBy stability we mean something that can

maintain itself indefinitely. Politically, a dictatorship can maintain itself for decades,

but, as the current situation in North Africa and the Middle East makes clear, it is not stable in that it creates the conditions for revolution and turmoil. Rigidity is not stability and only stability can allow for the continual adaptation that changing conditions require. Sadly, many of the countries of the developing world are dominated by juntas or by dictators, and have political and economic systems that ossify, stagnate and are gradually marginalized.

One of the negative features of dictatorship is its inability to bring forth the enthusiastic and productive initiative of the citizenry. People feel that any departure from what is mandated from above will be met with some form of punishment. As output stagnates, except for extractive industries which are easily managed over time, the dictator will appropriate more of the output of the economy to maintain his or her standard of living and position of power through bribes and streams of revenues at the expense of the population at large. Inevitably, this builds pressure for a violent overthrow of power.

Democracy, on the other hand, is inherently accommodative and adaptable to changing conditions. Every new administration, put in place by an election, will have its own approach to the exigencies of the day and the foreseeable future. Each new set of policy initiatives will, one can hope, be aimed at moving the national or city economy toward enhanced competitiveness. Obviously this is not always the case, as a new administration may have goals other than economic efficiency and enhanced competitiveness. But over the long run this approach has the greatest promise of doing the ‘right’ things. Clearly, some consistency in overall objectives is desirable.

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Planning for economic development through democratic institutions has the greatest likelihood of being able to bring into the process individuals from all social groups - women, young people, recent immigrants, professionals, and so forth. The importance of this will be demonstrated later in this chapter.

Democracy also goes hand-in-hand with a legislature or council to discuss and pass laws, a police force to arrest criminals, and a court system to judge and incarcerate the guilty ones. Without these institutions and processes no real economic development or competitiveness enhancement is possible - contemporary Russia is a case in point.

8.2 economic rationalityEconomic rationality entails policy decisions

and the functioning of institutions that maximally enhance the efficiency with which resources are allocated. The allocation of resources can be accomplished by primarily three mechanisms. The first is command, in which a central authority simply dictates where the next ton of steel will be used or what skills will be developed in the labor force, etc. This accepts some overriding political or social objective in place of efficiency. Total output and competitiveness will be sacrificed and these regimes rarely endure in the modern economy.

The second mechanism is via central planning. Oscar Lange showed us decades ago that it would be possible to make the transition from a market economy to one that is planned by taking the existing set of resource and product prices and then using sophisticated mathematical techniques to generate a dynamic approximation of free market prices over time (Lange). This would give us the efficiency of a free market economy, but without its cyclical instability and distorted distribution of income. While theoretically possible this has not been done in practice for any extended period of time.

The third mechanism is that which is based on markets, ideally free of any aggregation of market power. The advantage of this approach is that resources will be most efficiently allocated so that total output will be maximized as will both investment and consumption. Ideally there will be little interference with this mechanism and the competitiveness of each city will have the potential to be maximized. In practice, this ideal is never achieved as market power and other distortions insinuate themselves into the mechanism. Of the three, it is generally accepted by dispassionate economists that an economy that is based on markets has distinct advantages over the other two.

8.2.1 the Practice and the Potential

Countries in the developing world have often been governed by the command mechanism, or by some attempt to achieve a Langian ideal of the planned economy. In actual fact, neither has served them well in the long-run. The preference for a market-based approach to economic decision making should not be seen as an ideological statement but rather one that privileges economic efficiency and the ultimate benefit of the residents of the economy. If a country’s production entities are to be competitive they will need to utilize available resources to the best effect, and markets provide the best guide to this allocation.

Market-based decision making is also transparent and open. An investor has a good idea of what his or her choices are and the cost that attaches to each. For developing countries to attract foreign capital and foreign firms, transparency and some degree of certainty are absolute requirements. Command systems may work for mineral and other resource extraction where the activity and its course of development are known and predictable; but in manufacturing and the service sectors uncertainty rules and an inflexible command system stifles their growth.

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Economic rationality goes hand-in-hand with political stability as the two sini qua non of competitiveness enhancement for any country, but especially for one in the developing world. South Korea and Brazil are two of many countries that make the case for markets and democracy, while North Korea and Zimbabwe do it for command and dictatorship. The potential for most countries in Africa, Latin America, and Asia is enormous if only the right economic and political institutions and processes can be put in place. Cities cannot do much to have an impact on the national situation, but they can do much to make certain that local decision-making and interaction for firms and foreign investors are as efficacious and congenial to them as possible. If nothing else, they can make themselves more attractive than other cities in the national economy.

8.3 adequacy of Local assetsAs the city leaders chart a course for

competitiveness enhancement, they will have to take an inventory of the physical, locational, and production assets at hand as well as the skills and talents of the local residents. Most of the former are apparent to the eye, but the latter are often more difficult to discern. In many developing countries kinship ties may cause difficulties in the recognition of skills of individuals from other social groups. Some of these groups may be consigned to positions that exclude them from the main structures of governance and the high level economic activity. Lack of access to education may make their exclusion a self-fulfilling prophecy; they are excluded because they have no skills, and they have no skills because they are excluded from education and training. On the other hand, it may be easier to identify individuals with crucial skills in an urban space in which there are distinct social groups each of which is well-structured and organized.

Any strategic economic plan must include at the beginning an assessment of local talents

and skills. If these are not sufficient for the plan, education and skill training will take many years, but should be started immediately. Local people are more likely to stay in the city for a long period of time, due to family ties and attachment to local amenities, and to be less tempted by offers of employment elsewhere. One local skill that cannot be done without is effective leadership. This means a mayor who can imagine a future, energize local talents and skills, coordinate activities and monitor performance of assigned tasks.

If certain skilled workers are not available locally, it may be necessary to recruit skilled labor to the city from other cities or countries. Here it is important to recognize that skilled labor is increasingly attracted to ‘soft’ determinants of urban competitiveness - educational options for the children, cultural institutions, health care, public security, and other urban amenities (Kresl and Singh, 2012). There is much a city can do to put these features in place that does not cost very much. It can be the expenditure with the highest return. One Japanese expert wrote that: “America manages to stay vibrant because it attracts people from all over the world” (Tabuchi). Immigrants bring skills, but also new ideas and ways of thinking than can enhance the creativity with which activities are conducted. City leaders can do much to accomplish the same thing.

A very significant source of skilled labor for cities in developing countries is the usually substantial number of individuals who have gone abroad for their education, or were educated at home, and who have then chosen to work abroad. Often this is due to unsettled political and economic situations in the home country. When political stability and economic rationality have been convincingly put in place, many of these expatriates would like nothing more than to be able to return home to use their knowledge, skills and energy in the cause of competitiveness enhancement and improving the capacity of the city economy to produce

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goods and services for the world market. The case of Ireland makes this point most clearly. As the Irish economy deteriorates there is a sizable flow of talented people to the UK, the US, Canada, Australia and New Zealand, among other places; when the economy improves the flow is rapidly reversed. Both China and India provide similar examples among the developing or emerging countries, and are actively inducing their skilled expatriates to return.

The point of this is to say that talented and skilled workers are crucial to a successful strategic economic plan’s realization, and that cities in developing countries have options for ensuring they have these workers in sufficient number. While local labor has certain advantages in terms of long-term performance, it may very well be necessary for the city to make itself attractive to foreign workers.

8.4 smaller cities and townsMost of the efforts to enhance urban

competitiveness are concentrated on the capital or the largest city or cities. This is often done under the rubric of ‘global cities’ or ‘world cities’ and the desire to move the targeted city or cities up in the rankings of this set of cities, for prestige purposes. Laudable as this is, in many developing countries the majority of the population resides in smaller, provincial cities or even in small towns. If one seeks to improve the competitiveness of the cities in which they live, then these cities, or perhaps the provinces in which they exist, must undertake competitiveness enhancement initiatives. China, India, Brazil and Indonesia have enormous populations who do not reside in the largest three or four cities. When all of the attention is devoted to these few cities, the rest of the country languishes and the result is the unsustainable rural to urban migration that all of these countries are experiencing.

It is clear that the smaller cities have some disadvantages. For example, they usually lack

experience with strategic economic planning, professional staff and other resources, a vision as to what can be accomplished, and they have a limited capacity to achieve economies of agglomeration. These, along with the challenges from globalization, aging of the population, technological advances, and the fiscal difficulties of national governments, pose real disadvantages and difficulties for them. However, smaller cities do have some important advantages. In many countries professionals are finding smaller cities to be better places to work and to raise their families. In many instances pollution and congestion will be less of a problem, housing is cheaper, and schools can be as good as they are in the largest cities. The growing issue of long-term sustainability advantages many smaller cities as they may be more energy efficient - bicycles rather than cars, for example.

Effective governance may also be easier to develop since social capital - the networks of friends, family and colleagues - is often easier to develop in smaller cities than it is in larger ones. Glaeser and Gottlieb have written: “density is associated with less- not more- social capital” (Glaeser and Gottlieb, 1297), and smaller cities and towns generally have lower population density than the largest cities with their 20-40 story residential and office buildings. Many smaller cities throughout the world have begun to develop their arts and cultural institutions as a way to make themselves more attractive to skilled and high-technology workers (Americans for the Arts). This reduces one of the advantages that larger cities have always had. While larger cities have the world’s best universities, most smaller cities have one or more high quality universities - the trick here is that of linking the faculty and students of these institutions to the effort to enhance the city’s competitiveness.

Vibrant and competitive economies in these smaller cities will also do much to slow down the very substantial flows of rural to urban migration, especially the migration to the

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largest city or cities of the developing country. This migration comes at enormous financial cost to the national economy, both from accommodating the migrants in the large city and from the threat to the economy of the place from which they are migrating.

All of this makes it clear that the competitiveness enhancement of smaller cities and towns must not be overlooked either by national leaders or by their own civic authorities.

8.4.1 small cities and Large cities

Finally we can note that with large cities such as Mexico City, Beijing, Mumbai, Jakarta and Rio de Janiero there is a wide range of economic activities being done and there may be no clear specialization in which they ought to become competitive. With several universities, a labor force with a wide variety of skills, an international recognition, and the urban amenities that make a city attractive to foreign skilled workers, there will be an existing base of financial and professional services, some manufacturing, a headquarters and administrative sector that make the typical large city well-prepared to chart its course in any, if not several, directions of specialization. Hence, the task of the strategic economic planner is a relatively easy one. The capital and other large cities are often given priority for funding by the central government. For example, in the current Twelfth Five Year Plan, the Chinese government selected the Beijing Circular Economic Region for special attention; several years ago it was the Chongqing-Chengdu region in the interior of the country that was selected for special treatment.

While the rural-urban inequality in China, India and Indonesia had been declining during the 1970s and 1980s, this gap began to increase as globalization advanced from the 1990s on because foreign direct investors and corporate research and development centers

became concentrated in the largest cities (Arita, Iguchi and McCann). Large, internationally connected cities with excellent universities and an existing mass of economic activity have obvious attractions to these actors.

However, with smaller cities the range of options, based on assets, history and aspirations, will be far less extensive. Planners should be able to focus their efforts more specifically on the selection of one or two areas of specialization for development. In addition to achieving the goals of these planning initiatives, it will be their task to convince central and provincial government officials both of the feasibility of their competitiveness enhancement projects and of the value of these projects in their realization of the objectives of the plans that have been set by these higher levels.

Research indicates that there is no relationship between competitiveness and population size of an urban region. In a study done by Kresl and Singh, the three largest metropolitan areas in the US were ranked 7th, 15th and 16th, out of 23. The populations ranged from 18.9 million (New York City) down to 1.6 million (Milwaukee). Rather, what really is of importance is the region in which that city is situated (Kresl and Singh, Urban Studies, 2012).

A related question is whether smaller cities have determinants of competitiveness that differ from those of large cities. In this same study, competitiveness was measured by a set of three variables – the changes in retail sales, and some measure of professional services, and manufacturing value added or payroll per employee (in the last of the three periods studied) – so all metropolitan areas had to meet the same test, so to speak. However, as they become smaller cities of less than 1 million residents will begin to differentiate themselves from large cities in their very nature, resources, aspirations, and capacities. So it then becomes the case that the

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determinants of these small cities will indeed be different than the determinants of the large cities. In a study of smaller Canadian cities, Lewis and Donald conclude that the focus in large cities on diversity, high technology and a wide array of amenities, must be replaced in smaller cities by an appreciation of their attributes of livability and sustainability, and that smaller cities must be reconceived “as parts of regional, provincial or national urban networks, rather than direct competitors with their metropolitan counterparts” (Lewis and Donald, p. 49). This distinctive focus of the small city would, I am confident, be revealed in a research study (not yet conducted) that examined the determinants of their urban competitiveness.

8.4.2 the need for marketing and branding

Smaller cities simply do not have the name recognition and identification out of their immediate region that large cities have. Hence, a small city may have a brilliant strategic economic plan and all the assets and energy it takes to realize the plan’s objectives, but the city may still face frustration if it cannot get its attractiveness known to venture capitalists and to direct investors, to firms and consumers out of the region and to skilled labor it would like to bring to the city, and if it cannot excite the enthusiasm of its residents. In the internationally connected world of today, all production locations are in competition with each other. It is true that firms and investors scour the world to find the next ‘hot’ or undiscovered spot for their activity. As Van den Berg and Braun have written, “it is the abruptly changing rules of competition between cities and towns that explain the relevance of marketing,” and “marketing is a weapon against competition” (Van den Berg and Braun, 998). Changes in communications technology make it far easier for a small city in the developing world to get its message out, but they stress that city leaders must become

entrepreneurial in promoting their city. This final step in the planning process may be as important to the ultimate results of the initiative as the initial steps of designing the plan.

In the 19th century, England’s Mid-lands, Germany’s Ruhr, and the Industrial heartland of the United States were branded around the world as industrial districts. A century later it was the same thing with The Third Italy and Silicon Valley. All had competence and competitiveness, but the identities they were able to establish were both crucial to, and a consequence of, their success. The same possibility is available to smaller cities in developing countries. This is especially the case if, as happened in each of these instances, regional clusters or networks of firms in the same sector can be created through the efforts of local city leaders.

Place branding can be seen as just promotion or boosterism where one boasts of the attributes of a city, or as a planning instrument that will have an impact on the way a place is viewed and the expectations people have of a city, or as a component of “communicative planning” which entails “will-shaping, identity forming, and consensus creation” (Kavaratzis and Ashworth, 3). All of this is additional to the work of designing the strategic economic plan and mobilizing local resources. It may seem to be quite peripheral and subordinate to the ‘real’ work at hand, but city leaders must understand that there are undoubtedly several other cities that have attributes and advantages very similar to their own city, so no one city is indispensable. Each of them will be attempting to attract the same firms, investors, and skilled labor, and it is this that makes city or place branding and marketing such an important component in the process of realizing the objectives of the plan.

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8.5 Participation of all groups in society

The case for inclusion of all groups in society in the process of designing and implementing a competitiveness enhancement initiative was made in Chapter 4. In this section I would like to explore the special importance of this for cities in the developing world. The groups who are excluded from participation include women, immigrants, members of some ethnic or religions communities, handicapped, among others.

Limitations of space do not allow discussion of each of these groups, so I will focus only on the consequences of the exclusion of women. A recent study indicated that women had the highest rates of inclusion in the industrialized countries of North America, the European Union, Australia and New Zealand, with the

greatest exclusion in the countries that can least afford this, those in Africa and the Middle East (Newsweek). The cost of this can be appreciated when it is noted that women invest 90 per cent of their income in the community, while men invest only 40 per cent. US Secretary of State, Hillary Clinton, recently stated that: “When we liberate the economic potential of women, we elevate the economic performance of communities” (Clinton). While there are questions of cause and effect, engagement of women in the economy goes hand-in-hand with increased national productivity, food production, improved education, and political stability. These effects of excluding women can be roughly the same for the other excluded groups. Talent, imagination, skill, and creativity are not exclusively possessed by only one gender or segment of human society.

Table 2 – educational attainment of females and males, 2000

Education* Age 25 and older Education* Age 15 and over

Female Male Gender ratio Female Male Gender ratio

World 6.18 7.28 84.9 6.13 7.19 85.3

All developing 4.03 5.74 70.2 4.33 5.92 73.2

Middle East/North Africa 4.09 6.06 67.5 4.69 6.17 76.0

Sub-Saharan Africa 3.14 4.45 70.5 3.01 4.04 74.4

* Educational attainment – average years of schooling.

Source: Robert J. Barro and Jong-Wha Lee, “International Data on Educational Attainment Updates and Impli-cations”, Cambridge: Center for International Studies.

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Shabaya and Konadu-Agyemang show us that, at least in Ghana, Zimbabwe and Kenya, the access of females to education is quite entrenched and imposes a significant cost to the community, and that African women remain the least educated females of any part of the world (Shabaya and Konadu-Agyemang). The cost of this is the fact than females remain in largely menial jobs rather than being able to develop to their full potential. Part of the cause of this is large families, earlier marriage and birth of child, and lack of medical care, but it is also the case that females tend to be worse off in this regard when they live in rural an agricultural regions of the country. The positive message here is that with better family planning, the economic development of smaller towns into cities, and improvements in health care fenakes have the possibility of gaining access to education and to developing their talents and skills. None of this is, of course, to students of African society and economy.

Friedman speaks to this issue more broadly in his discussion of the importance of culture for developing countries, and we can use his ideas in our examination of urban competitiveness in this part of the world. He asks two questions: “To what degree is the country’s culture open to foreign influences and ideas?” and “to what degree is there trust within the society for strangers to collaborate together?” (Friedman, 421). Some societies are dominated by the desire to rid the country of foreign influences and/or to prohibit some groups within their country from participating in government and the modern economy. The former condemns the country to remain on the outside of the process of development through its lack of access to new technologies, products, and best practices. The latter handicaps the economy by denying it the skills, talents, and enthusiasm of a significant portion of the population who will become dependent upon, and an increasing burden on, the productive element of society. Friedman’s

good news is that cultures can change, and have changed in the past. Witness the changes in Middle Eastern countries such as Bahrain and Dubai that have occurred during the past two decades.

A nation that accepts inclusion of all social groups will have a competitive advantage over those that do not. While cities are significantly constrained by the national culture, cities everywhere create urban milieux that are quite different than is found in the rest of the country. There is always opportunity for the city to move by itself to some extent in this direction.

8.6 Work collaborativelyA city in the developing world should not

have to work on competitiveness enhancement on its own. Collaborating with other cities or levels of government will bring access to best practices, to experiences of success and of failure, and, in some cases, to additional resources, as well as to a sounding board for ideas and possible approaches, and the possibility of cooperative or joint initiatives. Of course, one thinks immediately of superior levels of government, either the national or the provincial. If the economic development of cities other than just the capital is in the national plan then this connection can be essential to any success. But more often than not, the national focus passes over the city to national or provincial economic development (to the exclusion of cities), the superior levels are torn between the demands of politically powerful rural and agricultural interests and the needs of cities, and in these troubled economic times superior levels of government are financially stressed and fiscal transfers to cities are reduced or non-existant.

In the case where superior levels of government cannot be relied upon for assistance, there are still options for cities. In Chapter 5, we examined the functioning of networks. Many countries have organizations

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of cities or of mayors that look after general needs of large numbers of cities in a variety of situations and usually serve as a lobby group for these cities with other levels of government. In Europe, Eurocities is one such initiative. These are valuable organizations, and they often serve the general needs of all member cities such as youth employment, or transportation infrastructure, or taxation and regulation, or housing. There may be little effort given to the specific needs of small groups of cities that may have a primary interest in competitiveness enhancement, other than simply the collateral impacts on it of the other activities pursued. Competitiveness enhancement for large and small cities will be different, as will that of port cities, isolated cities, and agricultural area cities. Nonetheless, there will probably be a small set of cities that confront the same challenges and have roughly the same competitiveness potential.

As was mentioned above, networks are in fact clubs of like-minded entities. Membership does not require close proximity, so a network of cities in a similar competitiveness situation need not be limited to cities in the same country, or even on the same continent. The major difficulty here is in the identification of potential member cities, although with internet access to information and to contacts this difficulty has been greatly ameliorated. Also organizations such as the UN Habitat

or the World Bank can assist in identifying potential network members.

A good network will generate the benefits that were identified in the beginning of this section. It will also allow for exchanges of key officials, and for visitations by members of government, business, and social groupings to explore successful participatory experiences. It will enable universities and other educational institutions to exchange faculty and students and for administrators to explore initiatives elsewhere to integrate learning institutions into the fabric of the economy. This, of course, facilitates implementation of the triple helix structure of government-business-university cooperation and interaction.

A well-structured and functioning network of actively engaged cities has the possibility of gaining access to funding from international organizations and foundations, as well as from their own national government. This structured effort by effectively engaged cities dramatically increases the probability that the funds will be used efficiently in successful initiatives rather than squandered through infighting amongst competing local interests or through ill-conceived initiatives. The structure of the network is entirely open to the needs and aspirations of the participants. It is simply up to the member cities to chart their course.

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49

Chapter 9ConClusions and ReCommendations

Chapter 9 ConCLusions anD ReCommenDaTions

It was over twenty years ago that the Eurocities Movement declared in its Manifesto that “now is the time of the cities” (Eurocities). The intervening time has only demonstrated how prescient their declaration actually was. Due to many of the phenomena that have been identified earlier in this text, such as the reduced capacity and participation of superior levels of government, the consequences of globalization, and the impacts of technological change, cities and their leaders have been increasingly left to their own resources, imagination and energies. In actual practice, ‘competitiveness’ has gradually, over time, been transformed from a policy area tied to nations and firms into ‘urban competitiveness’. In this context the efforts of local leaders to have positive impacts on the economic development and the competitiveness enhancement not only have greater potential but have become an absolute necessity for a city that seeks to participate in the global search for employment, production of goods and services and a high quality of life for its residents.

9.1 recommendationsCity leaders often need some guidance

as to what the most beneficial policies and initiatives will be for their specific city. We have examined a number of these in this text. Not all of them are relevant for all cities but in their entirety they should enable planners to design their strategic economic planning approach to urban competitiveness enhancement. Without being overly repetitive, I would like to highlight some of the following recommendations that are generally relevant to city leaders.

1. City leaders must understand that the strengths and weaknesses, assets and resources, history of economic development, social structures, quality of governance, size of the city in terms of population, territory and economic activity, and aspirations of their residents are specific to their city. This means that policy prescriptions that are the most recent fashion or one-size-fits-all will, in all probability, not be most suitable for their city’s needs.

2. Planners must remember that their most important and productive resource is going to be local, skilled residents. It is tempting simply to import skilled workers and professionals but many of the required skills will be available locally, although it may take some effort to identify them. In addition, through short term training and internships local workers can become suitable for the needs of the plan.

3. It is not necessary for the city to ‘go it alone’, even if assistance is not available from superior levels of government. Imaginative city leaders can develop mutually beneficial networks and other working arrangements with counterparts in other cities with which they can enter into collaborative relationships, and can learn from their experiences.

4. Any competitiveness enhancement plan must include: a) determination of the ultimate strategic objective of the exercise, b) allocation of tasks to individual participants, c) monitoring of performance in the accomplishment of these tasks, and

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d) evaluation of performance periodically through the process of realizing the plan. These are best accomplished with the broadest participation of residents at all stages. One common danger is that the leaders of the initiative will do too much of this themselves, in service of expediency. This often leads to failure of the initiative.

5. For an economy to operate at its maximum effectiveness, it will be necessary for individuals from all social groupings – women, immigrants, youth and seniors, all classes, and ethnic communities – to be fully engaged in the initiative. Talents and skills are to be found in all areas of the population and none of them can be wasted. This, by itself, promotes the more effective bottom-up approach rather than the top-down approach.

6. City leaders must give serious thought to all of the issues raised in this text, including path dependence, the value of and effective use of clusters, the need for effective governance structures, the actual economic scale or extent of their urban economy, and the necessity of developing creative thinking in all aspects of the economic and governance activities of the city.

7. It should be remembered that there are three approaches to analyzing urban competitiveness: benchmarking, conceptual/structural, and statistical/empirical. Each should be explored for its applicability in the situation of any city, keeping in mind the strengths and weaknesses of each of them.

8. It goes without saying that the most crucial element in a successful strategic economic planning process to enhance competitiveness is good leadership. In practice, this means a mayor who is focused on what needs to be done and who is committed to doing whatever is

required to realize this success. Without strong central direction the planning participants will, so to speak, mount their horse and ride off in all directions – achieving nothing in the process.

7. City leaders in the developing world will want to give some attention to the observations in Chapter 9, in addition to the great array of studies that have been done on cities in their specific situation.

Much of this may appear to be little more than common sense, but in practice competiveness enhancement initiatives often over look some or most of what has been highlighted and stressed in the text. It usually pays to ignore much of what one has come to understand about the strategic economic planning in practice and to construct an approach from the ground up, basing the initiative on the hard reality of the situation for the city at hand. There are few things city leaders can do that will have a more positive impact on the lives of a city’s residents than to accomplish this successfully, as it will result in the maximization of the utilization of the talents and energies of the residents and will enable them to achieve the economic future to which they collectively aspire. Nothing is guaranteed in efforts to enhance a city’s competitiveness, but failure to attempt to do this will in all probably leave the city in a state of decline and marginalization.

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UNITED NATIONS HUMAN SETTLEMENTS PROGRAMMEP.O.Box 30030,Nairobi 00100,Kenya;Tel: +254-20-7623120; Fax: +254-20-76234266/7 (Central office) [email protected] www.unhabitat.org/publications

Due in part to the emergence of active local leaders in many cities and in part to the fiscal weakness of most national and sub-national governments, policies designed to enhance the competitiveness of cities have become arguably the most crucial element in increasing the economic vitality of urban economies during the past two decades. The report examines the concept of urban competitiveness, how it can be determined and evaluated, as well as what policies have been shown to be most, and least, beneficial in making a city increasingly competitive. It examines the three principal approaches for evaluating urban competitiveness: benchmarking, theoretical-structural and quantitative.

Experience has shown that for cities to be competitive their leadership must focus on ensuring political stability and economic rationality; they must look to local resources, participation of all groups in society; and they must develop collaborative working relationships.

The report also examines path dependency, creativity, top-down versus bottom-up strategies, the mobilization of local actors, and the extent or scale of the urban economy. Special attention is given to smaller cities and to the need for policies aimed at the education, training and employment of all groups in the urban society. The approach taken is aimed at usefulness to both city officials and researchers.

HS Number: HS/054/13E ISBN Number(Series): 978-92-1-132027-5 ISBN Number:(Volume) 978-92-1-132450-1

The Global Urban economic DialoGUe SerieS

competitiveness of cities

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