The economic case for density: how Australia can fix its cities

Melbourne: probably not dense enough. Image: John O'Neill/Wikimedia Commons.

It was a time of extraordinary change. Cook had not long named New South Wales, the American Revolution was well underway, and in towns and cities of England, the Industrial Revolution was about to begin.

Rivers were taking industry out of cottages. Machines made possible through advancements in ironwork required greater scale, more people and more power, and so were being housed in purpose-built factories and mills adjacent to running water. Individuals who once were generalists, and who had owned production from beginning to end, became part of a process: specialists, narrowing what they did, becoming better at it, and producing more.

It was a process observed by the father of modern economics, Adam Smith. In his 1776 magnum opus The Wealth of Nations, Smith identified the key to increasing productivity as specialisation achieved through scale and density.

As populations swelled in cities, poets wrote of dark satanic mills, painters portrayed industry as hell incarnate, a new world formed of developed and developing nations. It was not the same scale nor pace as today, but it too was a period of great disruption.

Cities and the economy of us

Much has changed in the quarter of millennia since.


Whereas cotton from the fields of the Mississippi delta was the raw material of the industrial revolution, and gold caused the rush across the states of Australia, in advanced economies, the raw material is us. It is our ability to generate work with our heads and not with our hands, our mind and not with what is mined, our knowledge and innovation capacity that is the main source of wealth.

Rivers are no longer the driver of density: they’ve been replaced by the location of skilled workers, a steady flow of graduates, and the need to be close to likeminded firms. Specialisation which once took place within firms now takes place across firms, through clustering, benefitting through economies of agglomeration. Machinery to produce more tangible goods and drive economies of scale has been replaced by how efficiently we transport ourselves in and out city districts, producing more intangible goods.

These days we talk less of scale and specialisation, and more of cities as the manifestation of Smith’s fundamentals for a productive economy. Rightly so: as Dobbs, Woetzel and Manyika say in No Ordinary Disruption, with each doubling of population every city dweller becomes on average, 15 percent wealthier, more innovative, and more productive.

Half the planet’s population are city dwellers, but they generate three-quarters of the world’s GDP. In Australia, that figure rises to 80 per cent: it is one of the most urbanised countries in the world, with three quarters of the population living in cities of 100,000 people or more, compared to 68 per cent of Americans, 71 per cent of  Canadians, and 62 per cent of Brits.

So, there is some evidence that Australia’s prime minister Malcolm Turnbull is asking all the right questions with his newly formed portfolios on “innovation” and “cities”.

Cities and productivity

Yet not all cities are good productive cities. Africa has the highest average city density of all continents yet is nowhere to be seen on global productivity tables. India has 8 of the world’s top 10 densest cities – yet none of them are close to being the most productive.

In contrast Australia has some of the most productive cities in the world: Sydney, Melbourne and Adelaide placed 10th, 13th, 35th on GDP in the 2010 Global Urban Competitiveness report. Yet when looking at GDP per capita, this slips to 97th, 110th, 121st respectively; and on patent applications, it’s even worse, and those rankings are 281st, 237th, and 260th.

There are infrastructure problems, too. Enright & Petty declare in Australia’s Competitiveness: From Lucky Country to Competitive Country that Australia has “some of the worst exemplars of urban sprawl in the world”. The independent statutory body Infrastructure Australia estimates “congestion is likely to cost Australians $53bn by 2031.”

Meanwhile, in Mapping Australia’s Future, the independent think-tank, the Grattan Institute, found that residential patterns and transport systems mean that central business district employers “have access to only a limited proportion of workers in metropolitan areas”.

The lesson here is that good productive cities require planning. Policymakers and politicians need to encourage density to increase the strength and scope of agglomeration economies, to develop skills matched to jobs being created, to strengthen supporting the local economy that benefits from both.

Good productive cities require high connectivity, too. Leaders need to facilitate quality exchange through infrastructure and transportation – to connect firms with each other, to connect workers to firms, to connect consumers to the local economy, to build the economic competitiveness of human capital: the economy of us.

The better connectivity, the more exchange, the greater innovation, the greater productivity. This is why the 3m people living in Silicon Valley have an economy larger than the 90m living in Vietnam. It is what Venables from the London School of Economics described as the New Economic Geography – the value in interaction and exchange brought about by clustering of firms.

Innovation and the importance of exchange

“More densely populated cities are more attractive to innovators and entrepreneurs,” explain Dobbs, Wetzel, Manyika, “who tend to congregate in places where they have greater access to networks of peers, mentors, financial institutions, partners, and potential customers.” It is no coincidence that those who excel online and can locate anywhere in the world choose to neighbour offline, clustering in places like Silicon Valley, Bangalore, and Silicon Wadi in Tel Aviv.  

Face-to-face exchange has been necessary for innovation in cities “since Plato and Socrates bickered in an Athenian marketplace”, explains economist Professor Edward Glaeser in his book Triumph of the City.  “Innovations cluster in places like Silicon Valley because ideas cross corridors and streets more easily than continents and seas. Patent citations demonstrate the intellectual advantage of proximity.”

But innovation is about more than STEM graduates, the co-ordination of government and industry on R&D, the promotion of entrepreneurship: it is about cities that can develop and retain innovation through quality exchange; it is about cities where firms will choose to cluster because they can see the value in exchange and infrastructure is in place to facilitate it.


This is the fundamental difference between providing skills for ideas born elsewhere, or providing skills for cities where ideas are exchanged, innovation occurs, patents formed, and productivity increases.

It is why Malcolm Turnbull’s two new portfolios must be intrinsically linked for long-term economic growth. The more complicated the world becomes, the more value there will be in proximity to those who may have the answer; the more value there will be exchange with those who may have the answer; and the more value there will be in connectivity to those who may have the answer.

The more complicated the world becomes, the more it will value cities with answers.

The challenge is to make them Australian.

Kevin Keith is an Australia-based researcher who helped research Alastair Campbell’s book Winners and how to Succeed. He now works for the built-environment body Consult Australia.

 
 
 
 

“A story of incompetence, arrogance, privilege and power”: A brief history of the Garden Bridge

Ewwww. Image: Heatherwick.

Labour assembly member Tom Copley on a an ignominious history.

The publication last week of the final bill for Boris Johnson’s failed Garden Bridge has once again pushed this fiasco into the headlines.

As well as an eye-watering £43m bill for taxpayers for this Johnsonian indulgence, what has been revealed this week is astonishing profligacy by the arms-length vehicle established to deliver it: the Garden Bridge Trust. The line by line account of their spending reveals £161,000 spent on their website and £400,000 on a gala fundraising event, amongst many other eyebrow raising numbers. 

Bear in mind that back in 2012, Johnson promised that the bridge would be entirely privately funded. The bridge’s most ardent advocate, Joanna Lumley, called it a “tiara for the Thames” and “a gift for London”. Today, the project would seem the very opposite of a “gift”.

The London Assembly has been scrutinising this project since its inception, and I now chair a working group tasked with continuing our investigation. We are indebted to the work of local campaigners around Waterloo as well as Will Hurst of the Architects Journal, who has brought many of the scandals surrounding the project into the open, and who was the subject of an extraordinary public attack by Johnson for doing so.

Yet every revelation about this cursed project has thrown up more questions than it has answers, and it’s worth reminding ourselves just how shady and rotten the story of this project has been.

There was Johnson’s £10,000 taxpayer funded trip to San Francisco to drum up sponsorship for the Thomas Heatherwick garden bridge design, despite the fact that TfL had not at that point even tendered for a designer for the project.

The design contest itself was a sham, with one of the two other architects TfL begged to enter in an attempt to create the illusion of due process later saying they felt “used”. Heatherwick Studios was awarded the contract and made a total of £2.7m from taxpayers from the failed project.


Soon after the bridge’s engineering contract had been awarded to Arup, it was announced that TfL’s then managing director of planning, Richard de Cani, was departing TfL for a new job – at Arup. He continued to make key decisions relating to the project while working his notice period, a flagrant conflict of interest that wouldn’t have been allowed in the civil service. Arup received more than £13m of taxpayer cash from the failed project.

The tendering process attracted such concern that the then Transport Commissioner, Peter Hendy, ordered an internal audit of it. The resulting report was a whitewash, and a far more critical earlier draft was leaked to the London Assembly.

As concerns about the project grew, so did the interventions by the bridge’s powerful advocates to keep it on track. Boris Johnson signed a mayoral direction which watered down the conditions the Garden Bridge Trust had to meet in order to gain access to further public money, exposing taxpayers to further risk. When he was hauled in front of the London Assembly to explain this decision, after blustering for while he finally told me that he couldn’t remember.

David Cameron overruled the advice of senior civil servants in order to extend the project’s government credit line. And George Osborne was at one point even more keen on the Garden Bridge than Johnson himself. The then chancellor was criticised by the National Audit Office for bypassing usual channels in order to commit funding to it. Strangely, none of the project’s travails have made it onto the pages of the London Evening Standard, a paper he now edits. Nor did they under his predecessor Sarah Sands, now editor of the Today Programme, another firm advocate for the Garden Bridge.

By 2016 the project appeared to be in real trouble. Yet the Garden Bridge Trust ploughed ahead in the face of mounting risks. In February 2016, despite having not secured the land on the south bank to actually build the bridge on, nor satisfied all their planning consents, the Trust signed an engineering contract. That decision alone has cost the taxpayer £21m.

Minutes of the Trust’s board meetings that I secured from TfL (after much wailing and gnashing of teeth from the Trust itself) reveal that weeks beforehand Thomas Heatherwick had urged the trustees to sign the contract in order to demonstrate “momentum”.

Meanwhile TfL, which was represented at board meetings by Richard de Cani and so should’ve been well aware of the mounting risks to the project, astonishingly failed to act in interests of taxpayers by shutting the project down.

Indeed, TfL allowed further public money to be released for the project despite the Trust not having satisfied at least two of the six conditions that had been set by TfL in order to protect the public purse. The decision to approve funding was personally approved by Transport Commissioner Mike Brown, who has never provided an adequate explanation for his decision.

The story of the Garden Bridge project is one of incompetence, arrogance and recklessness, but also of privilege and power. This was “the great and the good” trying to rig the system to force upon London a plaything for themselves wrapped up as a gift.

The London Assembly is determined to hold those responsible to account, and we will particularly focus on TfL’s role in this mess. However, this is not just a London issue, but a national scandal. There is a growing case for a Parliamentary inquiry into the project, and I would urge the Public Accounts Committee to launch an investigation. 

The Garden Bridge may seem like small beer compared to Brexit. But there is a common thread: Boris Johnson. It should appal and outrage us that this man is still being talked about as a potential future Prime Minister. His most expensive vanity project, now dead in the water, perhaps serves as an unwelcome prophecy for what may be to come should he ever enter Number 10.

Tom Copley is a Labour member of the London Assembly.