Why Europe’s capital cities are pulling away from their countries – and what we can do about it

European productivity: blue is high, red is low. Image: CER.

Europe’s capital cities are much more productive than smaller cities and towns: the average metropolitan worker produces about 50 per cent more output than workers elsewhere. The divide between capitals and everywhere else is growing, too. Europe risks becoming as divided as the US, where the economic and cultural fault-lines between the coastal ‘elite’ and the Rust Belt were one reason why Donald Trump won the presidency. At the Centre for European Reform, we’ve put together a model which explains what is behind this divergence Europe. It also points to some possible solutions.

Reason number 1: Europe’s largest cities, like black holes, have a kind of gravitational mass. Some of you may remember the gravity equation from high school: take two objects, multiply their masses together, and divide that by the square of the distance between them. We did the same equation with all of Europe’s regions, and the bigger economic heft of most capital cities make workers there more productive.

We have good theories about why that’s the case: cities allow companies, especially those producing high-value services that don’t need large factories, and workers to cluster together. Companies get the benefit of a large pool of potential workers, and can select the most productive ones for jobs. They can also cut the costs of services and goods that they need, because there is plenty of nearby competition between other firms seeking to supply them. With so many companies to choose from, workers can more easily find one that fits their skills. Result: higher productivity.

What’s a bit more interesting, though, is that how densely populated a region is doesn’t matter very much, but being close to other successful regions really does. Rural Surrey isn’t just a commuter dormitory full of antique shops, but has lots of productive businesses. That’s because it is easy to get to London by train. Berlin is the only European capital that is less productive than the rest of the country. It is still overcoming the legacy of the Berlin Wall and communist rule in the East, but it is also a long way from the heartlands of the German economy in the West.

Reason number 2: Regions with big graduate populations are more productive. If the graduate share of, say, Rome’s population rose by 1 per cent, then our model predicts output per worker would rise by around 0.4 per cent. That link between higher education and productivity has been on the rise, too. Back in the year 2000, 1 per cent more graduates would have meant 0.2 per cent more productivity.

We can’t be sure if graduates are becoming more productive, or whether they have been moving to places that are already productive. But we have good reason to suspect it’s mostly because graduates have been increasingly moving to capital cities (and other productive places). The graduate population has risen faster in most European capital cities than in the rest of the country – bar Brussels, for some reason.


Reason number 3: The older the population, the less productive the region. That link has been growing over time, too. That’s probably because Europe is ageing so rapidly, and retired people buy a lot of consumer services, like day trips, shopping and social care, which tend to involve jobs with low productivity. And, because many young graduates move away – and often abroad, if they’re from Central and Eastern Europe – we’re seeing a slow process of geographic sorting, with younger, more highly educated people clustering together.

So what should we do about it? The solutions are fairly straightforward, but they require quite a lot of public investment. First, Europe needs to bring rich and poor places closer together, with better transport and communications links between successful cities and peripheral towns. This way, the economic reach of the successful cities is widened, with smaller towns offering cheaper office space and housing that’s within reach of the metropole.

Second, post-industrial conurbations – think of the Ruhr area and Northern England – have the potential to become highly productive hubs themselves. But in order to get there, governments need to invest in universities and research centres in places like Essen, Duisburg, Manchester and Leeds, which will help to draw in a highly educated workforce.

Third, all young people should have some tertiary education. The pan-European expansion of university education in the 1990s and 2000s raised labour productivity. It’s wrong to think that there’s no point educating everyone beyond a certain point: that argument was made in the 1800s against universal primary education and in the early 1900s about secondary. In a services-dominated economy, people need to be highly numerate and literate to get good jobs – and it may be worth reforming humanities degrees to give people who take them a head for numbers.

These policies will be familiar to CityMetric readers: they’ve been suggested many times before. But action’s now quite urgent, given sluggish growth outside the metropoles, as well as Europe’s increasingly nasty politics.

John Springford and Christian Odendahl are economists at the Centre for European Reform.

 
 
 
 

Segregated playgrounds are just the start: inequality is built into the fabric of our cities

Yet more luxury flats. Image: Getty.

Developers in London have come under scrutiny for segregating people who live in social or affordable housing from residents who pay market rates. Prominent cases have included children from social housing being blocked from using a playground in a new development, and “poor doors” providing separate entrances for social housing residents.

Of course, segregation has long been a reality in cities around the world. For example, gated communities have been documented in the US cities since the 1970s, while racially segregated urban areas existed in South Africa under apartheid. Research by myself and other academics has shown that urban spaces which divide and exclude society’s poorer or more vulnerable citizens are still expanding rapidly, even replacing public provision of facilities and services – such as parks and playgrounds – in cities around the world.

Gated developments in Gurgaon, India, have created a patchwork of privatised services; elite developments in Hanoi, Vietnam, offer rich residents cleaner air; and luxury condos in Toronto, Canada, displace local residents in favour of foreign investors. An extreme example is the Eko Atlantic project in Nigeria – a private city being built in Lagos, where the majority of other residents face extreme levels of deprivation and poverty.

A commodity, or a right?

Although these developments come with their own unique context and characteristics, they all have one thing in common: they effectively segregate city dwellers. By providing the sorts of facilities and services which would normally be run by public authorities, but reserving them exclusively for certain residents, such developments threaten the wider public’s access to green spaces, decent housing, playgrounds and even safe sewage systems.

Access to basic services, which was once considered to be the right of all citizens, is at risk of becoming a commodity. Privatisation may start with minor services such as the landscaping or upkeep of neighbourhoods: for example, the maintenance of some new-build estates in the UK are being left to developers in return for a service charge. This might seem insignificant, but it introduces an unregulated cost for the residents.

Privatising the provision of municipal services may be seen by some as a way for wealthier residents to enjoy a better standard of living – as in Hanoi. But in the worst cases, it puts in a paywall in front of fundamental services such as sewage disposal – as happened in Gurgaon. In other words, privatisation may start with insignificant services and expand to more fundamental ones, creating greater segregation and inequality in cities.


A divided city

My own research on branded housing projects in Turkey has highlighted the drastic consequences of the gradual expansion of exclusive services and facilities through segregated developments. These private housing developments – known for their extensive use of branding – have sprung up in Istanbul and other Turkish cities over the past two decades, since the government began to favour a more neoliberal approach.

By 2014, there were more than 800 branded housing projects in Istanbul alone. They vary in scale from a single high-rise building to developments aiming to accommodate more than 20,000 residents. Today, this development type can be seen in every city in Turkey, from small towns to the largest metropolitan areas.

The branded housing projects are segregated by design, often featuring a single tower or an enclosing cluster of buildings, as well as walls and fences. They provide an extensive array of services and facilities exclusively for their residents, including parks, playgrounds, sports pitches, health clinics and landscaping.

Making the same services and facilities available within each project effectively prevents interaction between residents and people living outside of their development. What’s more, these projects often exist in neighbourhoods which lack publicly accessible open spaces such as parks and playgrounds.

This is a city-wide problem in Istanbul since the amount of publicly accessible green spaces in Istanbul is as low as 2.2 per cent of the total urban area. In London, 33 per cent of the city’s area is made up of parks and gardens open to the public – which shows the severity of the problem in Istanbul.

These branded housing projects do not feature any affordable units or social housing, so there are no opportunities for less privileged city-dwellers to enjoy vital facilities such as green spaces. This has knock-on effects on excluded residents’ mental and physical health, contributing to greater inequality in these respects, too.

Emerging alternatives

To prevent increasing inequality, exclusion and segregation in cities, fundamental urban services must be maintained or improved and kept in public ownership and made accessible for every city-dweller. There are emerging alternatives that show ways to do this and challenge privatisation policies.

For example, in some cities, local governments have “remunicipalised” key services, bringing them back into public ownership. A report by Dutch think-tank the Transnational Institute identified 235 cases where water supplies were remunicipalised across 37 countries between 2000 and 2015. The water remunicipalisation tracker keeps track of successful examples of remunicipalisation cases around the world, as well as ongoing campaigns.

It is vitally important to keep urban services public and reverse subtle forms or privatisation by focusing on delivering a decent standard of living for all residents. Local authorities need to be committed to this goal – but they must also receive adequate funds from local taxes and central governments. Only then, will quality services be available to all people living in cities.

The Conversation

Bilge Serin, Research Associate, University of Glasgow.

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