Lucky to live in the eternal city

Telecommunications will transform, not destroy, the heart and suburbs of the metropolis
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It is the age of the city. Roughly 45 per cent of the world's population live in them, as do 75 per cent of the developed world. All over the developing world giant cities are springing up, while even the established giants - places such as Tokyo, New York, London and Paris - are still growing. Sure, the cores of these four cities may be losing population, but the overall size of the agglomeration is in each case still rising.

So cities, viewed rationally, are a success story, for they are passing the market test: people are moving to them. Yet whenever people talk about them, they focus on their problems: the loss of jobs, crime levels, pollution, breakdown of communities, and so on. Cities may be a success story, but they don't get a good press.

The future of cities was the subject of a conference in London yesterday, hosted by the UK think-tank the Social Market Foundation and what might be described as its US counterpart, the Manhattan Institute. There was, as might be expected, a measure of hand-wringing, but more surprising was the generally upbeat tone.

For example, the Prime Minister spoke of how some of the mistakes of public housing policy of the Sixties were now being corrected, with many of the sink estates being reorganised (and sometimes rebuilt) into mixed- ownership communities. The heads of the police services of New York and London, William Bratton and Sir Paul Condon, both had encouraging figures on the reduction in crime being achieved. And there was a quite inspiring account of how New York's worst school district in East Harlem is producing higher academic scores than some of the leafy middle-class districts.

Nothing wrong with all this. In fact, it is extremely interesting to see how, for example, crime has been halved on the New York subway in four years, partly by cracking down on fare evasion. Or how the giant public-sector schools in East Harlem have been chopped into more management entities so that four separately run schools live together in the same building, rather like multiplex cinemas.

But all this task-oriented, problem-solving, "what works" approach, however admirable, ignores the crucial aspect of cities as units of economic production. In an age when telecommunications is freeing people from the need to work in such central locations, will they still be needed? To put the question another way: what is the comparative advantage of a city, particularly a giant one, in producing the goods and services people want to buy?

It is a good time to ask the question, for New York, London, Paris and even Tokyo have lost manufacturing jobs in the last economic cycle. To some extent these have been replaced by service-sector jobs, but in the cases of both New York and London (and probably Paris) there has been an overall net job loss. Add to this the threat that the same sort of drive for cutting workforces that took place in manufacturing is now evident among the big service-sector employers such as banking, and you can see a potential catastrophe: much of the economic base of cities slipping away. Cities cannot just be consuming entities; they must be producing entities, too.

So what will happen to the city economy over the next generation? First, let's dismiss a widespread fear that the advance of technology will render cities redundant, that people will be able to live in their cottages in Cornwall, or the south of France, do all their work on screen, and never come into town.

There is no doubt that telecommunications will become so capable and so cheap that we will hardly have to think about the cost of phone calls to anywhere in the world, and we will be able to see each other on high- quality screens whenever we want. But that may be the saving of cities rather than their destruction. The two really expensive aspects of cities are their urban transport networks and their large office buildings. The first is used at full (actually over-full) capacity for at most four hours out of 24, while the second is used for five 10-hour shifts during the week. To keep urban transport networks going, cities have to rely on subsidies from non-travellers or even from people who live out of town. And rents of a typical central business district in a large town have driven almost all other activities out.

Technology can help on both counts. People will still need to commute to some extent, partly because employees like to see that their people are working, but more because the semi-social interaction between employees is an important aspect of most people's work. But if people were able to come into the office for, say, three days a week instead of five, or come in for half-days, not only would the pressure on the urban transport system be cut, but also the typical headquarters office could be smaller and rents would fall.

The result would be more evenly loaded public transport, but also the release of space in central locations for other activities: the entertainment and cultural products which only cities seem able to provide.

If people do not have to travel into central districts so much, they will spend more time and money in fringe locations. The fringes will cease to be dormitories, becoming fuller during the day and generating their own service industries. Meanwhile, central rents will decline, thereby bringing back many of the activities which have been driven away by high costs.

But there will be fewer jobs from the large service-sector employers; that is inevitable. What will replace these?

It is always impossible to do more than guess where the jobs of the future might be. Who, a generation ago, would have predicted the growth of such diverse activities as video games software writers (or for that matter video rental shops), bicycle messengers or modem specialists? What one can say with some confidence is that the jobs of the future will be largely in private-sector services and in small firms. My own guess is that the largest single sector of new job creation will be in the communications/ entertainment industry.

But that is an industry in which cities have a clear and powerful comparative advantage. People need to interact in large cities to create entertainment products: look at Hollywood. Most creative processes need interaction, excitement, even a little danger. These are qualities which the country cottage cannot supply.

There is, perhaps, a problem for middle-sized cities which cannot achieve the critical mass to generate the buzz that attracts the creative people. For them there are other ways forward. Look at Blackpool, which has more holiday beds than Portugal. Or Milwaukee, whose mayor yesterday told the conference that it has actually created manufacturing jobs over the past decade.

So do not despair, city-dwellers. The problems are specific and easy to identify, the benefits more general and intangible. There have been long periods of history when cities have been in economic decline - it was not until the high Middle Ages that London again reoccupied its Roman walls - but the next 25 years are not one of those times. Think of the Dark Ages and be thankful for that.