Is the Sun Setting on our Great Cities?
By Jason Channel
As American theologian Theodore Parker once said, "Cities have always been the fireplaces of civilization, whence light and heat radiated out into the dark." While great cities have shaped our civilizations over the millennia, sucking in resources both natural and human before radiating them back out to the world through commerce and culture, this perceived wisdom that 'cities are the engines of growth' is, we believe, failing.
Cities may generate 80 per cent of global GDP currently, but while they have historically pulled in resources as they grew via industrialisation, the current phase of urbanization has a significant component of populations being pushed into cities by rural poverty and depravation. This switch to 'population growth being the engine of cities' has profound implications: it is the people that need the city, not the city that needs the people.
Some 4 billion people, representing 54 per cent of the global population currently live in cities; the UN expects this to grow by 1 billion by 2030, and 2 billion by 2050, by which time 66 per cent of us will be living in cities. To put that in context, that is one and a half extra 'China’s' or 'India’s', or six extra ‘USA's’ all living in cities over the next 30 years. Cities may only occupy 2 per cent of our global landmass, but they already consume 75 per cent of all global resources and generate 70 per cent of direct CO2 emissions. These new urban populations will require basic services such as water, energy, sanitation, food, and housing, as well as the 'luxuries' of employment, education, culture, and recreation. What impact will an extra 2 billion people add?
The challenge though is even greater than this. Of our 2 billion new urbanites, 1.2 billion will come from Asia, and 800 million from Africa. These cities already have chronically limited revenue bases and offer meager services even to those already living there. With the lack of accompanying economic growth and financial contribution from this new populous, how can cities finance the vast investment needed to accommodate them? If these rapidly growing cities cannot finance themselves through income, and if central governments will not contribute more, then the capital must come externally.
And so with challenge comes opportunity. The good news is that trillions of dollars in capital is looking to invest in long-dated, income-generating assets, especially if they are sustainability focused. And what an opportunity! In our Citi GPS report Infrastructure for Growth from October 2016, we estimated that global infrastructure spend to 2040 was $US58.6 trillion, with the bulk of that urban — but cities are not just about physical infrastructure, they are about people, and hence there is a similarly vast 'social' spending opportunity.
So how do we make it happen? We have set out set out our 'Seven Steps for Sustainable Cities', which examine how cities can make the most of the money which they have, and gain access to greater funding via innovative new financial structures.
Those seven steps require central governments, industry, the financial community, and cities to all do their part to tackle what is one of the greatest challenges of the coming decades. With much of the infrastructure yet to be built, and with a typical life span of 30 -100 years, our choices now may resonate over centuries; we have the opportunity to reshape our future, by creating new and sustainable cities which can once again operate as 'beacons of light' radiating out into the world, or we can let unplanned urban squalor continue to sprawl. As Aristotle once said, "A great city is not to be confounded with a populous one" — let us seize the opportunity to ensure that our cities of the future are once again truly great cities and beacons of light, and not just populous ones.
Jason is Head of Social & Responsible Investment Research for Citi
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