Making city sense

References updated November 2006
OECD Observer

Cities are economic drivers at the heart of globalisation. Policymakers should look more closely at their potential, too. Here is why.

“A street as if in full daylight lit by neon lights and topping them, oversized, luminous advertisements, moving, turning, flashing on and off, spiralling…the buildings seemed to be a vertical veil, shimmering almost weightless, a luxurious cloth hung from the dark sky to dazzle, distract and hypnotise.”

When German film director Fritz Lang made these remarks, he was describing not the city of the future as depicted in his 1927 masterpiece, Metropolis, but New York, as he viewed it from the SS Deutschland anchored in the harbour in 1924. And that was a decade before the construction of the Empire State Building! How cities have evolved since then.

Cities were not born in 1920s America, of course. Memphis in Egypt was perhaps the first. Athens and Rome were the eyes of civilisation, education and power for thousands of years. Babylon, according to research by Tertius Chandler, was the first city to exceed 200,000 people, around 600 B.C., and Baghdad was the first city to reach a million inhabitants, around 775 A.D.

A thousand years later, the industrial revolution and trading ports began asserting themselves. By 1850 Beijing, also by then with a million people, had been displaced by London as the world’s largest city. Indeed, whereas in 1800 six of the world’s top ten cities were in China or Japan, by 1900, only Tokyo was in the top ten, behind London (6.5 million), New York (4.2 million) and Paris (3.3 million).

The 20th century was the era of urbanisation, though. In 1900, only 14% of the world’s population lived in cities, compared with about half today. In 1950, there were 83 cities with over a million people; by 2000, there were over 400. The last 40 years saw the emergence of huge agglomerations and conurbations, starting in the developed world. In studying the urban area stretching from Boston to Washington DC in the early 1960s, French geographer Jean Gottmann reinvented a Greek term “megalopolis” to describe conurbations that run in chains across the countryside.

Today “megacities” of over 10 million are not uncommon–Tokyo, Seoul, Mexico City, Mumbai, Sao Paulo, New York, Lagos–the list goes on. By 2015, there will be more than a score of them. In Europe, Istanbul, Moscow and Paris are now megacities, and under a broad OECD definition based on metropolitan regions, so too is Germany’s “megalopolis” of the Rhine-Ruhr, which sprawls between Essen, Dusseldorf, Cologne and Bonn.

Cities are not just about size, of course, they are the way we live. Today around half of the population in OECD countries live in predominantly urban areas, while up to nearly 80% live in less densely populated countries, such as Iceland. Business, property developers, families, conservationists, education, transport, environment, architecture: cities are today’s theatres of economics and power. That means politics, which is appropriate, since another Greek word, polis, means “town”.

Cities raise great passions. Some people love them for their architecture, their vibrancy, others dismiss them for their crime, the land and resources they consume, their overcrowding and stress. In the 1960s and 1970s, with protest movements in full swing, particularly in the US and France, they became the focus of intense research into social conflict, led by Manuel Castells, an icon of the French urban sociology school and now at Berkeley, and later on, by the likes of Italy’s Enzo Mingione.

As Charles Abrams, a renowned urban civil rights activist from the US, put it, “A city has values as well as slums, excitement as well as conflict, a personality that has not yet been obliterated by its highways and gas stations.” Another North American activist, Jane Jacobs (who died in April 2006), raised the alarm about uncontrolled property development crowding out central city neighbourhoods. Her 1961 book, “Death and Life of Great American Cities” became a leitmotiv for planners concerned about inner-city ghettos and suburban sprawl. The business district of La Défense outside central Paris reflected similar concerns. It was conceived in the 1960s in part to siphon real estate pressures away from the fragile and heavily protected historic core of the French capital.

A century of urbanisation has helped planners to see cities in a pragmatic light. Rather as architect Le Corbusier saw houses, cities began to resemble machines for living in. They could be directed, equipped, oiled and tuned to achieve goals, like employment, innovation or economic growth. Growth poles, technopoles and clusters sprung up.

Some excelled, others struggled and waned. Planners have discovered that transport links and tax breaks, even skill pools, are not always enough. Tricky economic laws of how value operates in space–what influential British geographer David Harvey characterised as capital flows into the built environment–also count. French planners trying to replicate the success of La Défense in an area east of the city where land values were historically far lower, found this out the hard way.

Above all, planners have realised that a key ingredient is governance. This is to power and planning what wheels are to a car. It is partly for this reason that the OECD’s work on cities concentrates on metropolitan regions, which are the places where people live and work. They are, in a way, the policy expression of urban areas.

A difficulty for policymakers is that many administrative zones have often been overtaken by history as major cities have spilled past old boundaries, and have joined up with other towns and cities, even across national borders. Urban fiscal management has been complicated by these divisions, as tax revenue can flow to one local authority while public needs are concentrated in another. There are also relationships between second and third tier cities, debates about the services these should have, fiscal arrangements to manage tax transfers and competencies, co-operation over roads, schools, transport, and so on. Many cities have long worked together on transport and physical planning, and more of them co-operate on fiscal management issues, through tax base sharing, such as in Pittsburgh and the Twin Cities in the US.

Also, defining where cities begin and end–the zones where policies can reach in effect–is difficult. Does population size count, transport commuting belts, educational authorities, cultural catchments or satellite images of sprawl? Metropolitan regions comprise a mix of these. According to the OECD ranking, Tokyo is the largest metropolitan region with nearly 35 million, followed by Seoul at 24 million, and New York and Mexico City, both with nearly 19 million. The contribution of metropolitan regions to national output is striking, often higher than for population: nearly the half for Seoul, Budapest, Copenhagen or Dublin, and about 30% for London, Stockholm, Tokyo, and Paris. Globalisation is also a new dimension for policymakers to deal with. New York, Tokyo, Paris, London, once exotic names on perfume bottles and cigarette packs, are now locked into each other as part of a network. Other rapidly expanding cities, from Seoul to Sao Paolo and Shanghai, from Mexico City to Manila, are also plugged into that network, as are smaller metropolitan areas like Dublin, Helsinki and Montreal. As Castells put it, having by now switched his sights to globalisation and technology, cities are nodes in a networked society.

Global cities compete head on with each other, but also can have more in common than with other cities in their own countries. They share problems associated with scale and size and, whereas planning is traditionally concerned with local or regional spacial issues, now they must think internationally as well. Global civil society movements, from labour unions to environmental campaigns, also bind cities together. In many ways, national territories have been overtaken by a separate, though networked and interdependent, global metropolitan marketplace.

But this does not make cities hostage to fortune. Rather, as British urban expert Michael Parkinson puts it, they are capable of shaping their own development trajectories. Speaking at an OECD conference on cities in 2004, Parkinson outlined some very practical reasons why city policy matters. Successful cities tend to drive successful economies, are more innovative and comfortably outperform national GDP. They retain their populations too, whereas less competitive ones lose skills and see their tax bases weaken.

The OECD, which has long been involved in regional development issues, has further tested such practical thinking, carrying out in-depth reviews of 15 metropolitan regions. According to a forthcoming OECD publication, City Competitiveness in the Global Economy, government action in cities must now combine “remedial” action aimed at correcting the usual negative effects of urbanisation, such as sprawl and social deprivation, with “proactive” measures for competitiveness, such as enhancing local social capital networks, developing links between higher education institutions and industry, and strengthening communications, from roads and airports to information highways. They point to strong leadership to build a common strategy, such as in the Öresund region straddling Copenhagen in Denmark and Malmö in Sweden.

Concept painting for Fritz Lang’s 1927 movie, Metropolis, by Erich Kettelhut. ©Filmmuseum Berlin-Deutsche Kinemathek

City competitiveness also relies on educational attainment, and the provision for adult education and skills training counts. While experts tend to point to places like Mexico City or Istanbul, where education efforts are clearly challenged in a context of very small, often informal firms, large cities in rich countries, from New York to Sydney, also suffer. It is something of an urban paradox: in wealthy cities, the highest incomes in the land cohabit with some of the lowest, the most skilled with the least. Exclusion and segregation are marked in wealthy cities like Milan and even egalitarian Stockholm, where 40% of foreign-born university graduates from non-EU countries have a skilled job compared with 90% for Swedes.

Still, large cities need migrants, and not just for the hotel, catering or care sectors, but high tech and even finance too. Indeed, many leading firms hunt for their talent in India and China. Madrid, for instance, boosted its immigrant population from 2% to 16% in six years to meet demand in the local economy.

US cities like Boston, San Francisco, Seattle and New York dominate the top of the OECD’s competitiveness ranking based on GDP per capita for 78 metropolitan regions of 1.5 million inhabitants and more, with cities like Naples, Athens or Seoul in the bottom half of these rankings. The gap can be explained by productivity issues, local unemployment rates, and so on. Improving these fundamentals alter city competitiveness, too. Also, there is the degree of specialisation in low-productivity industries, quality of capital, etc.

Holding onto competitiveness is not a given. Policymakers the world over know that a city’s fortunes can change. The once great port of Liverpool still boasts fine buildings with grand entrances and ornate ceilings as testimony to a time not long ago when it was at the centre of world trade and commerce.

Today, metropolitan authorities work hard with each other to keep their cities vibrant and alive. Many cities rely on their image as tourism centres, capitals of culture and entertainment, even of food and business. The quality of life has improved in many, with populations returning to renovate inner cities, such as in Dublin’s Temple Bar. In Seoul they have reclaimed land by demolishing elevated highways, in London and Paris they have created cycle ways and new parks.

Building cities is about building competitiveness and attractiveness, as well as being drivers of regional and global economies. Balancing these forces is the crux of the challenge facing cities in today’s globalised world. Ultimately, what the OECD can do is help policymakers set sensible policies to create successful cities for their citizens. As Shakespeare put it, “what is the city but the people?”

Rory J Clarke, Lamia Kamal-Chaoui


Update November 2006, Out now!

OECD (2006), Competitive Cities in the Global Economy, Paris. Issued November. Order it at

For video stream on this report, see

See also

Chandler , Tertius (1987), Four Thousand Years of Urban Growth: An Historical Census, St. David’s University Press. Some data rankings by period available at

Clarke, R, (1988), La Production Immobilière des bureaux en Ile de France, 1960-1985, dissertation, Paris Sorbonne.

OECD (2005), Regions at a Glance, Paris.

OECD Territorial Reviews on 15 metropolitan regions, available at

©OECD Observer No 255, May 2006

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