Introduction:
Large cities like New York, Chicago, and Los Angles have been the centers of foundation for the American economy throughout the 1900's. However, with recent increases in factors such as pollution, immigration, and cost of living, what does the future hold for these metropolises? In this paper I will look at the factors that threaten the future success of large cities and asses the validity of concern. First I will briefly discuss the state of large cities in Latin America and secondly, the body of this paper, I will discuss the factors that threaten the future of large American cities.
Latin America
Historically, cities in Latin America have experienced strong urban growth,
with the exception of the recession in the 1980's. In 1950, most literature
regarding the future of urban centers in Latin America was highly pessimistic,
however, Latin American cities performed quite well, where most countries
were based on a closed economy with import-substituting local industrialization.
In the mid-1970's and early 1980's foreign investors became increasingly
interested in the cheap labor and production costs associated with Latin
America. Slowly, tariffs were lowered and the economy was opened, shifting
from an import-substituting industry to an export-oriented industry. Though
the opening of the Latin American economy did spur growth, it also led to
a significant recession during the 1980's. Due to corruption, poor investing,
and oil prices, per capita income dropped almost 5% between 1980 and 1984
(Gilbert, 1998). However, by the late 1980's the economy of Latin America
had recovered and was beginning to flourish under the neo-liberal open economy.
The only drawback to this system is the opening of the economy gave the
government less control over the economy, as now foreign investments had
more vocal power in the shaping of Latin American economies. This also leads
to potential corruption, where officials may make policies putting their
own welfare before the welfare of the general public.
In light of the evolving and flourishing economy (except the early 1980's),
the period from 1950-1990 saw a large increase in urbanization. The economy
now favored workers in the "formal" labor sector (i.e. workers
involved with corporations, firms, etc.) and hurt those in the "informal"
sector (i.e. street vendors) Latin American societies became increasingly
wider, in terms of income; the rich got richer and the poor got poorer.
Individual countries will be responsible for the democratic redistribution
of wealth if high levels of poverty and unemployment are too be avoided.
The future for large cities in Latin America will be shaped by the aforementioned
factors: international economic stability, government legitimacy, and economic
democracy. In addition, as cities continue to grow, they will face the typical
problems of all large cities: pollution, traffic, housing cost increases.
So far, most cities have failed to do so. In addition, most cities will
be dependent on their governments ability to improve the quality of political
and economic democracy. Overall, urban centers in Latin America do have
the potential to be successful in the future, however there is a lot of
change necessary to achieve that goal.
United States
Large cities in the United States also face an ominous and uncertain future.
In this section I will discuss the following factors that feed this uncertainty
and their legitimacy: technology, knowledge sharing, immigration, domestic
migration, firm transportation cost, housing/transportation costs, pollution,
crime, poverty.
Knowledge Sharing: Perhaps the most controversial topic in regards to the importance for large cities in the modern age. The basic idea follows the logic that firms that are within close geographic proximity (i.e. in a large central metropolis) will have a positive external effect of sharing information. For example, when one employee switches firms within the same location, he brings the information of his previous firm and assimilates it with the knowledge of his new firm, increasing that workers productivity. The often cited "case study" for this idea is Silicon Valley, where young workers that are specialized in technology are all located in an urban dense environment, which speeds up the accumulation of human capital and the result is the booming tech industry in Silicon Valley. However, there is no conclusive, unified evidence that Silicon Valley's takeoff was the result of the externality due to proximity. This assumption fails to recognize that the tech industry is perhaps the fastest growth area ever seen in the history of the American economy. Moreover, the tech industry is extremely mobile and new locations with new firms do not incur disadvantages to those located in big cities.
Immigration:
The influx of immigrants to the United States in recent years has been said to increase the United States diversity. However, immigrants to the United States generally only settle in large cities (i.e. L.A., Chicago, New York, etc.) and specific areas surrounding the boarder. Most immigrants come to the United States with hopes of increasing their economic welfare; however, it's been shown that the quality of life for immigrants is worse than immigrants in previous years (Hansen, 2001). Most modern immigrants come in to fill low-skill positions in the labor market and make little to no progress, which brings down the total productivity per labor and overall productivity of the city. Furthermore, immigrants are becoming an economic burden on some cities, such as San Francisco, where the cost of providing services to immigrants have significantly increased the fiscal burden of California.
Technology:
The telephone and internet have shaped our modern global society. The immediate, free, and easy access to global information and communication creates a controversial debate among economists: is technology reducing the necessity of physical interaction? Is technology making the big city obsolete? As mentioned earlier, the external phenomenon of knowledge sharing resulting from a large urban environment is inconclusive. There is no hard evidence that personal, face-to-face interaction drives knowledge sharing anymore than tele-com interaction. In fact, studies have shown that telephone communication has not reduced face-to-face communication nor has it reduced business travel (Gaspar, 1996). The data suggests that telecommunications has not reduced the necessity for an urban location; however, neither does it show that it will not happen.
Domestic Migration:
Big cities that have experienced high immigration have also had a high level of domestic out-migration (defined as: commercial/individual relocation away from the big cities) of the population. As the cities become less productive (on the margin) with immigration, firms and individuals seems to relocating to more productive, less urban areas. Eight large metropolitan areas with populations exceeding 5 million people (combined account for one-third of the U.S. metropolitan population), all had a net domestic out-migration from the period of 1990 and 1997. Thirteen of nineteen of the largest metropolitan areas in the U.S. had net out-migrations. Dallas, Atlanta, and Seattle were the only three that had an in-migration (Hansen, 2001). As a result of the out-migration from big cities, many mid-sized urban areas (approx. 1-2.5 million population) grew rapidly.
Firm Transportation Costs:
During the rise of the manufacturing market in the 1900's, transportation
costs were a significant concern for firms. As the locomotive became a part
of American industry, a firm's desire to reduce costs could be solved by
relocating operations closer to the final destination of the product. The
classic example of this is the rise of the city of Chicago. Chicago became
a center of commerce, which allowed producers to reduce the distance their
products had to travel, in turn reducing costs (giving rise to the Chicago
Board of Trade). However, as the American economy has evolved and technology
improved over the past fifty years, transportation costs have become less
of a concern for firms. As the U.S. economy became more services based and
even recently, tech based, transportation costs became less important. Manufacturing
has almost vanished from the American economy in recent years, as a result
of outsourcing and globalization. Though reduced transportation costs were
once a benefit of having large cities like Chicago in the U.S., are now
essentially no longer existent and therefore provide no benefit.
Housing/Transportation: The cost of housing increases proportionally with
city size (Glaeser, 1998). As big cities grow bigger, there needs to be
more housing to support a larger population. The greater demand for real-estate
will drive the cost of housing up, and studies have confirmed that housing
prices are positively correlated to the size of a city (measured by population).
However, this must be supplemented with the fact that larger cities have
shown declining transportation costs. Still, there is no study with conclusive
evidence (nor does it seem intuitive) that the increase in housing is offset
by the decreased transportation.
Pollution:
Big cities are often known for their high levels of pollution, as a result of another negative attribute: excessive vehicular congestion/emissions. Currently there is no penalty for pollution/emissions, as the environment is an open-access resource with no ownership and therefore no one bears the burden of pollution. However, it does affect the welfare of the elderly and sick in the city, as high pollution has negative health affects. There is no monetary cost for pollution in big cities, however, cities realize this is an issue and are making steps to reduce pollution levels.
Crime:
Crime is historically associated with large cities. In large urban areas (greater than 250,000 people) the violent crime rate is 346 per 100,000 inhabitants and the property crime rate is 1144 per 100,000 inhabitants compared to 176 per 100,000 and 875 per 100,000 (respectively) for areas with less then 10,000 inhabitants (Glaeser, 1998). Often this is due to the fact it is 10%-15% less likely to be caught for a crime in a larger urban environment. Domestic migration suggests that individuals desire to live in less densely populated areas to avoid crime, which, we can only assume, will get worse as cities grow.
Poverty:
Historically large cities have all had lower-income areas, however poverty has become increasingly present in recent years. For cities with a population over 1 million the poverty rate is 16.7%. The share of children living in families below the poverty line in the United States is 17.9%; 30.2% of which is from cities with a population over 1 million (Glaeser, 1998). Moreover, poor individuals are attracted to poor cities for the low-transportation costs and high social welfare spending. Unfortunately, as cities attract more poverty they also attract everything that comes with it: crime, lowered productivity per worker, addition economic burden in fiscal and social cost.
Conclusions:
Large American cities do have a unsure future; increasing pollution, crime, and immigration have driven domestic migration of the wealthier classes and taken away from potential productivity. The telephone, internet, videoconferencing, though it has yet to be proven, may potentially reduce the necessity for face-to-face interaction thus reducing the necessity of large cities. However, most of the largest corporations and firms that drive the American economy are based in large cities like Chicago, New York, and Los Angles. Regardless of increases in technology, business will never outgrow the necessity of face-to-face interaction. Physical presence shows commitment. Deals will always be sealed with a hand shake and a signature. Moreover, the largest airports are based around large cities and will continue to feed the metropolis until the days of teleportation come. Large cities will always be a haven for youth entering the labor force and it would be interesting to see the correlation between population aging and domestic migration. Lastly, domestic migration seems to only be a momentary phenomenon; as more people/firms migrate domestically, from large cities to medium cities, won't medium cities eventually grow into large cities? If large cities can control factors like pollution, crime, housing costs, and poverty, there should be no question that they will continue to be the center of commerce in American society.
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