America’s cities are the vital engine of the nation’s growth. Through boom and bust, they have shown a talent for reinvention. Urban America needs to mobilize that talent once more. Many cities are still grappling with severe hangovers from the recession as they face a number of forces that will conspire to make future growth more challenging, write James Manyika, Jaana Remes and Tim Welsh in Bloomberg Businessweek
America’s cities are the vital engine of the nation’s growth. Through boom and bust, they have shown a talent for reinvention. Urban America needs to mobilize that talent once more. Many cities are still grappling with severe hangovers from the recession as they face a number of forces that will conspire to make future growth more challenging.
Large US cities (whose populations are at least 150,000) are home to 80 percent of Americans and generate almost 85 percent of the nation’s gross domestic product. Their dominance is greater than that of large urban areas in any other part of the world. Urban America still has significant global importance, contributing one-fifth of worldwide GDP. But as the world’s economic center of gravity shifts with unprecedented speed toward Asia and other emerging regions, US cities will need to work much harder to maintain their competitiveness and global clout. In just three years from 2007 to 2010, the GDP of large Chinese cities rose from 20 percent to 37 percent that of large US cities. Three additional Chinese cities achieved mega-city status with populations of at least 10 million—a rate of one new mega-city per year.
In the past, population growth was the major source of GDP increases in US cities. Demographics are no longer working in America’s favor. Today, seniors outnumber children in only one of every 20 cities. By 2025, one-third of US cities will have more seniors than children. The share of working-age adults is on course to decline, from 67 percent of the overall population to 63 percent. Attracting migrants could be harder too, given evidence that labor mobility—the oil that traditionally lubricated America’s economic engine—is slowing. In the 1950s and 1960s, one in five Americans changed residences every year; today only one in 10 does so.
These trends come at a time when the cities of the emerging world are competing ever more successfully. Beijing and Shanghai are each set to overtake Chicago, the third-largest US city, in GDP over the next 15 years. Securing sufficient talent to attract businesses to invest in cities and help fuel their growth will be a key battleground, not only within the US but globally.
We see three things US cities can do in this difficult environment:
Raise their aspirations. It is no longer enough to compete against cities at home. American cities need to compete with others around the world that are actively courting global companies, not just with incentives but also with personalized attention from skilled sales associates. Competition is not just about companies—it is increasingly also about people. Think of the many baby boomers that have relocated to Mexico to take advantage of a lower cost of living and elderly assistance, or of the American professors being offered attractive positions in universities in emerging cities, from Singapore and China to the Middle East. In Canada, Toronto’s Board of Trade recognizes that it has to compete globally and now annually tracks the city’s strengths and weaknesses against 24 metropolitan areas around the world.
Learn to view emerging-market cities as more than competitive threats. Take manufacturing: This is no longer a zero-sum game for plants and jobs but part of successful global design and production networks, with different regions contributing complementary capabilities and resources. Cities need to forge closer links with the new urban tigers—physical links such as scheduled flights, trade and commercial ties, and personal connections, whether through cultural exchanges, education, or simply tourism.
Recognize that urban American infrastructure is too often old and unfit. Over the past decade, the US has dropped from 7th place to 23rd in global rankings of infrastructure quality. The American Society of Civil Engineers recently put the investment need for upgrading the nation’s ports and inland waterways at $30 billion by 2020, double the amount being spent today. The slide in US infrastructure quality comes at a time when the cities of the emerging world are investing heavily in new infrastructure, from ports and mass-transit systems to fast digital networks. Worldwide, urbanization requires cities to more than double their physical capital investment, from nearly $10 trillion to more than $20 trillion by 2025. The lion’s share of that investment will come in the developing world. US cities urgently need to identify where infrastructure is creating bottlenecks, and then—even in a difficult economic climate—find the investment needed to upgrade and construct anew.
We see evidence that America’s cities are making strides in these areas. In Minneapolis-Saint Paul, for example, leaders from the business, nonprofit, academic, and government sectors are working together to address the region’s economic competitiveness through a coalition called the Itasca Project. With the goal of becoming one of the first regions to come out of the recession, the group created an economic development partnership to drive a regional vision and work directly with employers on job attraction and retention. The group is also collaborating with the leaders of higher education institutions to ensure that future workers have the necessary skills and research and innovation capabilities. Chicago has recently undertaken an audit of the city’s strengths and weaknesses, including infrastructure, on which it will base an urban plan to reverse its declining competitiveness of recent years.
In the aftermath of the recession, many US cities remain under strain. But the breadth and diversity of US metropolitan areas puts urban America in a strong position to regenerate and reinvent itself. Much is at stake.
This article originally ran in Bloomberg Newsweek.