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Rivers are no longer the driver of density: they’ve been replaced by the location of skilled workers, a steady flow of graduates, and the need to be close to likeminded firms.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 Machinery to produce more tangible goods and drive economies of scale has been replaced by how efficiently we transport ourselves in and out city districts, producing more intangible goods.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.

 
 
 
 

The IPPC report on the melting ice caps makes for terrifying reading

A Greeland iceberg, 2007. Image: Getty.

Earlier this year, the Intergovernmental Panel on Climate Change (IPCC) – the UN body responsible for communicating the science of climate breakdown – released its long-awaited Special Report on the Ocean and Cryosphere in a Changing Climate.

Based on almost 7,000 peer-reviewed research articles, the report is a cutting-edge crash course in how human-caused climate breakdown is changing our ice and oceans and what it means for humanity and the living planet. In a nutshell, the news isn’t good.

Cryosphere in decline

Most of us rarely come into contact with the cryosphere, but it is a critical part of our climate system. The term refers to the frozen parts of our planet – the great ice sheets of Greenland and Antarctica, the icebergs that break off and drift in the oceans, the glaciers on our high mountain ranges, our winter snow, the ice on lakes and the polar oceans, and the frozen ground in much of the Arctic landscape called permafrost.

The cryosphere is shrinking. Snow cover is reducing, glaciers and ice sheets are melting and permafrost is thawing. We’ve known this for most of my 25-year career, but the report highlights that melting is accelerating, with potentially disastrous consequences for humanity and marine and high mountain ecosystems.

At the moment, we’re on track to lose more than half of all the permafrost by the end of the century. Thousands of roads and buildings sit on this frozen soil – and their foundations are slowly transitioning to mud. Permafrost also stores almost twice the amount of carbon as is present in the atmosphere. While increased plant growth may be able to offset some of the release of carbon from newly thawed soils, much will be released to the atmosphere, significantly accelerating the pace of global heating.

Sea ice is declining rapidly, and an ice-free Arctic ocean will become a regular summer occurrence as things stand. Indigenous peoples who live in the Arctic are already having to change how they hunt and travel, and some coastal communities are already planning for relocation. Populations of seals, walruses, polar bears, whales and other mammals and sea birds who depend on the ice may crash if sea ice is regularly absent. And as water in its bright-white solid form is much more effective at reflecting heat from the sun, its rapid loss is also accelerating global heating.

Glaciers are also melting. If emissions continue on their current trajectory, smaller glaciers will shrink by more than 80 per cent by the end of the century. This retreat will place increasing strain on the hundreds of millions of people globally who rely on glaciers for water, agriculture, and power. Dangerous landslides, avalanches, rockfalls and floods will become increasingly normal in mountain areas.


Rising oceans, rising problems

All this melting ice means that sea levels are rising. While seas rose globally by around 15cm during the 20th century, they’re now rising more than twice as fast –- and this rate is accelerating.

Thanks to research from myself and others, we now better understand how Antarctica and Greenland’s ice sheets interact with the oceans. As a result, the latest report has upgraded its long-term estimates for how much sea level is expected to rise. Uncertainties still remain, but we’re headed for a rise of between 60 and 110cm by 2100.

Of course, sea level isn’t static. Intense rainfall and cyclones – themselves exacerbated by climate breakdown – can cause water to surge metres above the normal level. The IPCC’s report is very clear: these extreme storm surges we used to expect once per century will now be expected every year by mid-century. In addition to rapidly curbing emissions, we must invest millions to protect at-risk coastal and low-lying areas from flooding and loss of life.

Ocean ecosystems

Up to now, the ocean has taken up more than 90 per cent of the excess heat in the global climate system. Warming to date has already reduced the mixing between water layers and, as a consequence, has reduced the supply of oxygen and nutrients for marine life. By 2100 the ocean will take up five to seven times more heat than it has done in the past 50 years if we don’t change our emissions trajectory. Marine heatwaves are also projected to be more intense, last longer and occur 50 times more often. To top it off, the ocean is becoming more acidic as it continues to absorb a proportion of the carbon dioxide we emit.

Collectively, these pressures place marine life across the globe under unprecedented threat. Some species may move to new waters, but others less able to adapt will decline or even die out. This could cause major problems for communities that depend on local seafood. As it stands, coral reefs – beautiful ecosystems that support thousands of species – will be nearly totally wiped out by the end of the century.

Between the lines

While the document makes some striking statements, it is actually relatively conservative with its conclusions – perhaps because it had to be approved by the 195 nations that ratify the IPCC’s reports. Right now, I would expect that sea level rise and ice melt will occur faster than the report predicts. Ten years ago, I might have said the opposite. But the latest science is painting an increasingly grave picture for the future of our oceans and cryosphere – particularly if we carry on with “business as usual”.

The difference between 1.5°C and 2°C of heating is especially important for the icy poles, which warm much faster than the global average. At 1.5°C of warming, the probability of an ice-free September in the Arctic ocean is one in 100. But at 2°C, we’d expect to see this happening about one-third of the time. Rising sea levels, ocean warming and acidification, melting glaciers, and permafrost also will also happen faster – and with it, the risks to humanity and the living planet increase. It’s up to us and the leaders we choose to stem the rising tide of climate and ecological breakdown.

Mark Brandon, Professor of Polar Oceanography, The Open University.

This article is republished from The Conversation under a Creative Commons license. Read the original article.