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Chapter No. 8
Urbanization and Development

The bidirectional link between industrialization and economic development is urbanization. Like conjoined twins, urbanization and development are never observed alone. The story of economic growth and human development is the story of civilization, the growth of cities.

All human achievements are the result of ideas, and the city as an idea must rank among the greatest and the most ancient of ideas.

It is an analytically and empirically verifiable fact that cities are the engines of growth that power all economic development. Therefore it is argued that for catalysing economic development, a policy of assisting the inevitable (and indeed desirable) urbanization through the creation of livable deliberately designed cities is effective and efficient.

Services and Cities

The development of economies largely follows a predictable trajectory where the majority of the labor is first employed in agriculture, then in industry, and finally in services. With rising productivity, agriculture releases labor to industry, which in turn through the use of technology becomes more efficient and releases labor to the services sector.

The services sector is of particular importance because it’s where research in the sciences and development of technologies occur; it’s where ideas are generated. Those ideas are critical for greater productivity and production in the two older sectors – agriculture and manufacturing – which consequently release more labor for the services sector. The production, delivery and consumption of services happen more efficiently in cities.

The Urbanized World

Humanity is getting rapidly urbanized. About 27 million people – about three percent of 900 million – lived in cities in 1800; by 1900, 10 percent of 1.6 billion were urban; now over half of the world’s 6 billion live in cities. It is estimated that over 70 percent of the world’s 9 billion people of 2050 will be urban.

Despite all the negatives such as crime, pollution and overcrowding associated with them, cities are disproportionately productive. Today around 1.2 billion people living in 40 mega regions of the world produce two-thirds of the world’s output of goods and services. They also produce more than 85 percent of all global innovation. A person living in a mega-region compared to a person not living in a mega-region is eight times as productive in terms of goods and services, and in terms of innovations is about 24 times as productive.

The Urbanization Imperative

Cities “manufacture” wealth. This is literally true as most manufacturing occurs in urban locations. That is why rich economies are predominantly urban, and those economies that are largely rural are relatively poor. The transition from a poor economy to a rich one depends on the transition of the majority of the population from being rural to urban.

The central concern of economic growth is the development of people. The development of rural populations must not be conflated with the development of rural areas and the rural population cannot be – and must not be – confined to villages. The rural population has as much right and aspirations to live and work in cities as we who are reading this essay do. Rural populations will get urbanized, whether one likes it or not. There’s an instinctive drive which motivates people to seek greater opportunities in places where there are greater choices. As the great scholar of urban areas Jane Jacobs put it, “The point of cities is multiplicity of choice.”

Building from Scratch

India’s urbanization cannot be accomplished with the stock of existing cities. They are already bursting at the seams and cannot conceivably accommodate the 300 million estimated to be added to the urban areas by 2030. There is an urgent need to create new urban centers that are designed to be efficient, human centric, and livable.

That is the greatest opportunity India has – of building from scratch to take advantage of all the knowledge of how to build cities and specifically to avoid the mistakes of the previous generation of cities – which is not available to any developed economy such as the US. American cities are notoriously inefficient in terms of resource use and sustainability. Their legacy urban centers will burden the transition to living in more sustainable cities.

Just like India leapfrogged the expensive landline era and became a leader in the use of cheaper, modern and more flexible wireless telecommunications, India can urbanize more efficiently and faster by building new cities instead of the costly exercise of giving old cities and towns an expensive face-lift.

Designer Cities

India needs new “designer cities”: cities that are deliberately designed and that have a distinct character to them. Complex artifacts such as computers and commercial jetliners are the product of deliberate design learned over generations of hard work. Cities are some of the most complex creations of humans and must be designed to be good.

The distinctive characters of cities arise from the major function that cities serve such as commercial, financial, educational, recreational, pilgrimage, art, manufacturing, and a hundred other activities. A city, for example, could be designed with the primary purpose of hosting a set of great universities, and so would need all associated supporting services such as theatre, art, museum, sports, etc. A city whose core function is manufacturing would have different needs such as access to ports, vocational institutions, etc.

There are many interesting ideas on how to enable urbanization. Economist Paul Romer, Stanford University, has been promoting the idea of “charter cities” which Harvard Business Review included in its “10 Breakthrough Ideas for 2010.”

A charter city is a green-field project that starts off with a constitution or a set of rules. People and organizations which like the charter come together to build the city. Romer says, “…[P]roposing some new rules [in a charter city] and then asking who would like to opt in—who would like to live under these new rules—could give us a mechanism to reform the rules under which we live, to change them, to improve them much more rapidly.”

Charter cities for India would be excellent for India.

Policy Matters

India is at that stage of its development where bold policy decisions have the potential to accelerate its economy and thus lead hundreds of millions out of poverty and into prosperity. The time is ripe for a national policy that allows new cities to develop and permits the market mechanism to fund them. India needs to adopt big ideas because the idea of India is too big to be paired with little ideas.

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