Sustainable Cities: Beacons of Light against the Shadows of Unplanned Urbanization

July 2, 2018

Research translation:

Last month, Citi GPS published a report entitled “Sustainable Cities[1],” which examines how cities can foster economic growth and, more importantly, foster sustainable, inclusive growth.

Today, some 4 billion people, representing 54% of the global population, currently live in cities. In the next 30 years, that number is expected to rise by 2 billion; 66% of us will live in cities by 2050. The majority of urban areas are centers of economic activity and already play an important role in the global economy. As Citi GPS highlights, “80% of global GDP is generated by cities.” Moreover, most successful high-income countries have economically dynamic metropolises at the heart of their regional and national economies, such as Paris with 16% of the population of France but 30% of GDP or New York City with 2.6% of the U.S. population but 8% of U.S. GDP.

However, the level of income inequality in the United States is roughly what it was in the 1920s, just before the Great Depression – and in U.S. cities, the divide between a tiny sliver of high earners and the rest of the population has expanded into a chasm. In many cases, top earners make 40 or 50 times what others earn.[2]

Traditionally, urbanization has lifted many people out of poverty; however, uncontrolled and unplanned urbanization has a darker side and can lead to numerous social and human issues, including growing income and information inequality.

In this report, Citi GPS outlines many key steps to foster sustainable, economic growth in urban areas such as developing longer-term infrastructure investment plans that are insulated from short-term political consideration and leveraging the expertise and assets of the private sector.

Importantly, the report also stresses how there is an “extraordinary lack of precise and comparable data which exists in cities around the world. While there is much data around, it is often incomplete, out of date, and in most cases totally incomparable between cities.”

Recognizing the challenges at hand, Citi GPS provides a useful blueprint for how urban planners can strengthen residents’ access to critical networks through measures, such as innovative financial instruments or establishing political or regulatory stability. Creating strong political institutions and regulatory standards strengthens a city’s ability to raise revenue to fund investment for infrastructure, for example. This, in turn, enables businesses to grow and catalyzes economic growth. Innovative financial instruments such as sustainability bonds will be key to responding to rapid urbanization. Green bonds, the proceeds of which are directed towards financing projects that advance environmental sustainability, and social bonds, proceeds of which are directed towards strengthening social projects, are examples of sustainability-focused financial instruments that can attract sustainability-focused capital. Given that the financial system facilitates the reallocation of capital and thus, the restructuring of the economy that is needed to support growth[3], innovative financing tools embedded in a highly developed financial system can advance an agenda of inclusive growth.

The Center’s point of view:

During our multi-city tour, “On the Front Lines of Inclusive Growth,” we saw and heard in vivid detail how inequality and exclusion have become entrenched barriers to opportunity and success in the United States, particularly in cities and metropolitan areas.

In order to reduce, and eventually eliminate, these inequalities, solutions need to be found that ensure growth is sustainable and equitable. This begins with connecting people to the vital networks that power the modern economy, including financial services, job access, skills training and digital networks.

As the report highlights, there is a growing need for data-driven insights, metrics and methodologies to better answer key questions related to inclusive economic growth in U.S. metropolitan areas. For this reason, Mastercard and the Center have led an important advocacy effort with important organizations like the Organization for Economic Cooperation and Development (OECD) to develop norms and a methodology for private sector sharing of data for philanthropic and research purposes.

Why is it important for cities to leverage private sector data? Companies have access to data that by itself or combined with public data can provide valuable, actionable insights to advance inclusive growth. For instance, anonymized and aggregated Mastercard data was used to assess the economic impact of smart city innovations like bike-sharing programs and free Wi-Fi in New York City as well as the impact of economic development on Chicago’s Pullman neighborhood. We also combined our insights with publicly available data to evaluate how local crime may affect retail. Utilizing private sector data in this way can help inform policies, resources, development planning and more.

As the report conveys, advancing sustainable, economic growth in cities takes partnership, innovation and policies. Only by advancing an agenda of inclusive growth in this way can we work towards creating an economy that benefits everyone.

 

[1]Channell, Jason et al. “Sustainable Cities: Beacons of Light Against the Shadow of Unplanned Urbanization”. Citi GPS: Global Perspectives and Solutions. Citigroup. April 2018. Web.

[2] Sommeiller, Estelle et al. “Income inequality in the U.S. by state, metropolitan area, and county”. Economic Policy Institute. June 16, 2016.

[3] Duisenberg, Dr. Willem F. “The role of financial markets for economic growth”. “The Single Financial Market: Two Years into EMU,” organized by the Oesterreichische Nationalbank. European Central Bank. May 31, 2001.

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