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Two problems, location and access, may inhibit such strategies. Although brownfield sites are often
close or adjacent to traditional city centres, they may still suffer from a psychological barrier,
particularly as regards activities such as banking which require face-to-face contact. A negative image
of heavy, unpleasant manual work and polluting industry, stemming from the past, may compound
such an effect. Major transport investment may solve access problems, as, for example, the Docklands
Light Railway and Jubilee Line Extension in London Docklands. Similarly, the area may be ‘put on
the map’ by a major, highly visible development such as the World Financial Center in New York or
Canary Wharf in London Docklands. Such regeneration schemes can be used to generate a critical
mass of key tenants, in the hope that others will follow later.
Implementation mechanisms raise related problems. The scale and scope of such operations, together
with the need for clearance and decontamination of former uses, puts them beyond the capacity of
even large private developers. During the 1980s, such urban mega-developments have required
special mechanisms and large amounts of public money to secure leveraged investment by the private
sector. The London Docklands Development Corporation (LDDC) is a typical example, using large
sums of public money in a highly entrepreneurial way to attract private investment. A key mechanism
was the Enterprise Zone status, which allowed the LDDC to offer incoming investors major tax
concessions in the form of a ten-year holiday from property taxation, a reduction in the rate of
corporation tax and write off facilities of construction costs. Out of the pioneering redevelopment
projects of the 1980s and 1990s will grow a best practice which can be used by many cities which will
have to solve similar problems in coming decades, as deindustrialization becomes a worldwide
phenomenon affecting many different types of cities.
Experience suggests that such developments carry high risks because of their dependence on business
cycles, which affect property development in particular. The Canary Wharf development collapsed for
a year in the early 1990s after its developer, Olympia and York, had ceased trading. The reclamation
and development of Tokyo Bay was stopped because of the collapse of the Japanese real estate boom.
A number of mega-developments in Asian cities, financed by Japanese banks, succumbed to the
recession of the late 1990s. Indeed, these developments may have constituted a significant part of the
bad loans which have created problems for major Tokyo banks.
4.2.8 Cities, Economic Policy and Levels of Governance
On the whole, cities cannot function on their own. They could benefit from partnerships with central
governments to promote macro-economic stability. This means keeping public debt low or in balance
with the economic potential of a city, especially when tax revenues fluctuate and borrowing tends to
follow suit. Traditionally, it is the role of central governments to control access to capital markets and
to assess ability to carry debt services. Where political difficulties exist – especially in the case of
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very important cities – banks could take over the monitoring of urban budgets and the assessment of
credit-worthiness. Rating of cities should become an important task. It has the advantage that cities
carry the ultimate responsibility for their loans.
The distinction between tradable, non-tradable and merit goods persists, with macroeconomics
focusing on tradable goods, central government dealing with merit goods (e.g. education and health),
and local entities being more responsible for non-tradable goods. Akin to central-local relations,
similar interdependences could be formalized between citywide government structures and localized
entities, such as neighbourhoods, including those driven by informal mechanisms.
The informal local economy will continue to make up the bulk of urban activity in the cities of
hypergrowth. Here, the informal sector generates and produces non-tradable goods and services which
also supply mainstream parts of the city. In the mature cities self-employment – as opposed to formal
employment – together with greater self-reliability may have led to similar structural changes in the
urban economy. Informal practices are here to stay, although they are likely to change their
relationship with the formal urban economy and the tradable sector over time. Cities have to accept
these emerging economic realities and indeed to promote them, as people rely on functioning
networks and supportive environments.
Just as with merit goods, the tradable sector has an impact and draws on the non-tradable sector.
Globalization is considered to drive the tradable goods and service sector. It brings with it greater
concentration, mergers and acquisition, asset stripping, out-sourcing, down-sizing, loss and
casualization of employment, footloose production and services which exploit temporary transient tax
conditions without territorial loyalty to specific cities. All these structural changes have a direct effect
on the urban economy and demand permanent compensation urban strategies. They create new losers
and winners among cities, but they also tend to displace local production, networks of local suppliers
and purchasers within cities. They perturb the local labour market and indigenous support structures,
raising both expectations and despair and increasing income disparity. The local economy provision is
further undermined by boom-bust real estate cycles, accelerated by globalization of footloose and
liquid capital and its effects on municipal income in most cities.
Following the erosion of the productive sector, a fundamental shakeout in the service sector is now
also under way, partly through decentralization towards the developing world, partly through
capitalization and application of information and communication technologies. These processes are
most noticeable in cities, albeit not only in the developed world. So far, central governments have
been expected to deal with their adverse effects on employment and income polarization by resorting
to top-down redistribution and allocation procedures, while cities were supposed to provide
infrastructure despite weakening powers and reduced resources.
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When the deficiencies of the welfare state are eroding, the living standards of the urban population
tend to decline, causing the worst afflicted groups either to withdraw into resignation, or to resort to
direct action, boycotting banks, fighting developments imposed from outside (such as motorways,
closure of public services, etc.), infringing social and environmental law, and refusing to follow
official procedures. The black economy is increasingly making up for loss of jobs and earnings,
together with greater reliance on family and friends, barter and social solidarity, active and productive
leisure activities. The markets which satisfy local needs have an influx of home-made products, local
currencies and secondhand trade.
At the level of the individual, the consumer tends to become an entrepreneur, taking an active part in
the process of supply and demand. Among these local consumer entrepreneurs, common values may
emerge despite the diversity of urban groups and their uneven chances of survival or betterment. Skill
exchanges, credit unions and mutual assistance networks all enable people to trade tuition, cultural
activities and support services. Local associations are turning into small businesses, often run by
women outside the formal system of employment. Work in formal employment is diminishing and
changing. Flexible working hours, measured by targets, early retirement, part-time work, contracts
allowing for time off work, learning periods, a shift between salaried and self-employed work and
greater geographic mobility, are changing the status and value of formal work.
Meanwhile, the formal sector of the urban economy is reacting to the values of the informal sector by
producing more durable goods which consumers can maintain and repair. Products become less
technically sophisticated and more user-friendly, and are more concerned with environment, leisure
and culture, thus more sustainable. Information technology is in growing demand by ‘smart’ or
networked communities to organize their protests, compile their knowledge banks, constitute their
local webs. They account for a significant proportion of the buoyant information and communication
technology market, and they affect product requirements.
All these trends indicate that the traditional tripartite power relations between government, industry
and employee organizations at the central and local levels may require change. A new relationship
between the state, the market and the citizens needs to be devised to achieve a viable synergy between
the demands of globalization in cities and expectations from local economic development.
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5.
Managing Social Change
5.1 Fundamental Social Changes and Types of City
Reducing poverty and inequality remains the overriding task of social policy and urban development.
Greater equality can be achieved through a number of linked strategies: better education, especially
for children of poorer families, growth policies generating high demand for labour, more integrated
urban planning, and provision of infrastructure.
In the European mature city social security systems have reduced poverty among older people: one of
the great accomplishments of the welfare state. They have improved the income position of families
with children, but usually not enough to overcome the growing disadvantages of urban life for
families with children (growing relative prices for services; high housing costs; progressively longer
education, producing a longer period of life in which raising children must be balanced against the
demands of professional life; a higher percentage of working women). In income-rich, time-poor, big,
stressful cities, families have thus been outstandingly the losers.
Mature wealthy cities rarely provide an adequate environment for families. Overbstretched mothers
are no basis for a long-term balance between different age groups or a happy family life. Urban
development policy must ensure that families can establish themselves in more supportive
neighbourhoods, supportive workplaces or supportive regulatory frameworks. Scandinavian cities
have demonstrated how this can be achieved. Urban environments should become family oriented,
more supportive to mothers and fathers. Labour markets should not discriminate against parents. This
is easy to say, but it necessitates many different policies forming an effective set of changes which
make urban family life less stressful. The instruments range from low-priced kindergartens, flexible
opening hours of public and private services, to special vacation days for mothers, and incentives for
private companies to hire more mothers.
Social policy measures have also been less successful in reducing poverty for the young and
unemployed. One of the great disappointments of the late twentieth century is the failure of the
welfare state to reintegrate the long-term unemployed into society. The poverty trap, a new kind of
barrier to re-entering the workforce, has become almost a symbol of the limits of traditional welfare
policy.
High rates of immigration of low-skilled labour, in a situation where unemployment levels among
(foreign) low-skilled workers are already high, will put additional stresses on the urban system and on
the welfare state. The high percentage of school dropouts among young immigrants or the children of
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