These remarks were presented at the Global Cities Summit on September 29, 2016.
Good morning! We’re here today to reflect and build on five years of a project that many of you in this room know well: the Global Cities Initiative.
We at Brookings, and many of you, have burned a lot of airplane miles—maybe earned some elite airline statuses—as a result of your participation in GCI. So, I want to thank you for coming here to Washington. It’s the first time we are bringing together leaders from across the Global Cities network. Nearly 40 U.S. and international cities are here today as well as other fellow travelers who have participated in this important work.
I have to admit: I’m simply humbled by the sea of change that has occurred as a result of GCI. Brookings scholars brought you research, roundtables, advice, and peer-to-peer learning opportunities. In turn, you have changed the field of urban practice.
When we started more than five years ago, no metropolitan area had a comprehensive trade and investment strategy. Now, more than two dozen cities are implementing one.
When we started, city leaders, firms and institutions were hyper-insular – at least in the U.S. – just focusing on doing business within our domestic borders. Today, global trade has become an essential part of regional economic development’s DNA.
And when we started, cities and suburbs competed for jobs, luring firms away from their neighbors next door. Today… well, that’s a work in progress. But cities and their surrounding counties are working together, emphasizing helping existing businesses grow through new markets.
The irony now is that all this energy and progress comes amidst a new environment: growing skepticism about global trade, concerns about immigrants and refugees, and pessimism about a slow-growing world economy.
So this summit comes at an important inflection point. How can cities deepen their efforts to be globally engaged and competitive while addressing head on the disparities and negative consequences that come with greater global integration?
To set the conversation, we released a new book and two new reports. (We’re a think tank, after all!) The book, “Global Cities: A Short History,” is written by Brookings expert and tireless globetrotter Greg Clark. It explores the origins of world cities in history and discusses their challenges today. “The Making of Global Cities,” a new paper which I have co-authored with Rachel Barker and Marek Gootman, shares stories about how cities within the GCI network have adopted new approaches to become more global. And “Redefining Global Cities,” which is authored by my colleagues Jesus Trujillo and Joe Parilla, introduces a new typology of global cities based on extensive quantitative analysis of the largest metropolitan economies in the world.
This morning, I’m going to talk about three things, building off of this body of work. First, I’ll discuss Brookings’ journey to understanding what it means to be a global city. Second, I’ll outline seven types of global cities that reflect the different paths to achieving global prosperity. Third, I’ll describe how our new typology of cities can inform future strategies to improve global growth and opportunity. My presentation will be followed by two panel discussions that will further explore what’s next for global cities.
To begin, what makes a global city? Global cities are not a new concept. Greg’s book traces the roots of global cities back to the beginnings of civilization. He finds that trade is a defining feature of global cities: for millennia, cities have been focal points for exchange of goods, ideas, capital, and people.
But our story, as it relates to global cities, is a lot shorter than Greg’s Short History. Brookings Metro began studying global cities during the Great Recession. By 2009, the U.S. economy was in free fall, losing nearly seven and a half million jobs in just two years. Consumer demand and business spending were down. What was going to be the source of economic growth going forward? The answer was not to repeat the mistakes of the past – an economy driven by debt, consumption, and real estate. With the rise of the global middle class, we at Brookings realized that it was time for cities to embrace exports as an important ingredient for long-term, high-quality economic growth.
Brookings began by examining the role that exports played in U.S. metropolitan economies. Our report, Export Nation, provided first-ever metro-level data on exports. Around the same time, President Obama introduced the National Export Initiative, a challenge to double America’s exports by 2014.
Shortly thereafter, we created what we called the Metropolitan Export Initiative, which sought to tackle the President’s challenge from the bottom-up. Through MEI, we worked with leaders in four cities – Los Angeles, Portland, Syracuse, and Minneapolis-St. Paul – to apply our new research and pilot new strategies for metro-led export growth. Their experiences led to our report, 10 Steps to Delivering a Successful Metro Export Plan, to guide export planning in other cities.
We were then pleased to find a partner in JPMorgan Chase who understood the power of cities to spur national economic recovery. With the support of JPMorgan Chase, we launched the Global Cities Initiative, which took this nascent idea to scale, broadening its reach to dozens of cities in the US and across the world.
Over the past five years, the Global Cities Initiative has convened leaders across six continents. From Jacksonville to Johannesburg, Santiago to Stockholm, Barcelona to Baltimore, we helped cities raise awareness about the importance of global trade and design strategies to bolster global competitiveness. In time, we realized that being a global city wasn’t simply about exports or FDI: to trade, cities needed innovation to create world-class products and services, a skilled workforce to deliver those solutions, and modern infrastructure to connect business travelers and goods to markets across the globe.
Today, the work to deliver global growth and opportunity remains urgent. Since 2009, jobs and productivity have grown, surpassing their pre-recession levels, but that growth remains sluggish. Meanwhile, wages have eroded for most Americans.
Furthermore, the three forces that gave rise to global cities are also challenging cities’ path to inclusive growth.
The first is urbanization. Cities are increasingly the places where global growth and economic opportunity reside. In 1950, fewer than 30 percent of the world’s residents lived in cities.
By 2014, more than half of the world’s population lived in urban areas, and that share is expected to grow in the decades to come. Urbanization has led to the rise of the global middle class, connected rural workers to jobs, and raised living standards worldwide.
However, how we manage urbanization will shape our ability to create opportunity for all. Urban infrastructure and housing supply often struggle to keep up with the influx of new migrants. 880 million people—or 30 percent of all urban residents in developing countries—live in informal housing. In the developed world, skyrocketing housing costs burden low- and middle-income urban residents.
Globalization continues to move full speed ahead. It’s true that the growth of global trade has slowed in the past couple of years. But over the longer run, cross-border flows of goods, capital, and services have exploded and now amount to 39 percent of global GDP. International trade benefits consumers worldwide by lowering the costs of goods and services and increasing the availability of new products. It also opens new markets for firms, allowing companies to grow and pay higher wages.
But, as this election cycle has reminded us, not all people and places share equally in the benefits of global trade. David Autor at MIT estimates that 2.4 million jobs, including 1 million manufacturing jobs, were lost in the United States in recent years due to import competition from China. Cities must explicitly help impacted communities and industries adjust and succeed.
The third force is technology. In recent decades, technology has spurred the formation of global supply chains and connected businesses to each other and to consumers worldwide. Today, explosive new technologies, from cloud computing, robotics, autonomous vehicles, and the internet of things, are generating massive new value in industries and creating good jobs in cities.
But new technologies can also destroy firms and displace workers. As a recent McKinsey report found, 60 percent of all occupations are at risk of partial or complete automation. Meanwhile, the rise of the gig economy is complicating the definition of stable, full-time employment.
What makes a global city? Ultimately, being a global city means being a globally competitive city. The Global Cities Initiative is no longer just a response to the Great Recession but a recognition that our cities must constantly adapt their policies and institutions in the face of rapid change to create growth and opportunity for our citizenry.
To adapt effectively, cities must embrace the core drivers and enablers of competitiveness. Traded sectors are one driver of competitiveness: every metro area relies on a set of distinctive industries, especially advanced industries, that grow through trade, bringing wealth and income into a region. Another is innovation, such as applied research capabilities, new technologies, and a culture of entrepreneurship, which allows traded sectors to grow. The last is talent: metropolitan areas also need communities that steadily produce, attract, and retain workers with the skills to power those key sectors.
Modern infrastructure and good governance enable competitive regional economies. They connect workers, suppliers, and customers together and create a climate of transparency and trust that fosters civic problem-solving.
This brings me to my second point: All cities are global, but not in the same way. Our new report defines seven types of global cities based on how they perform on these core drivers and enablers of global competitiveness.
To create this typology, we studied the world’s 123 largest metropolitan economies, nearly all of which have GDP exceeding $100 billion. These cities are economically significant: home to just 13 percent of the world’s population, they generate one-third of the world’s economic output.
We then assessed how these cities performed on three categories of indicators: their economic characteristics, including the size of the economy, their industry mix, and their competitiveness factors.
That assessment ultimately revealed seven types of global cities, each with their own distinctive roles in the global economy and pathways to future growth and prosperity.
Let’s look at each of these seven city types in turn.
First is Global Giants – including London, Paris, and Tokyo – represent the traditional notion of a global city. These are large, highly sophisticated financial hubs of the world economy. Global Giants are set apart by the massive size of their economies, and their extensive global connectivity.
New York, with a GDP of nearly $1.5 trillion and 192 million air travelers annually, is truly at the center of the world economy.
Second, Asian Anchors – including Hong Kong, Beijing, and Seoul – serve as leading economic centers for the fastest-growing continent in the world. What makes this type most distinct is that they outpace all other cities on foreign investment. With stable governance and the world’s most modern infrastructure systems, Asian Anchors are where international businesses go to establish operations in Asia.
Singapore is a good example of an Asian Anchor: this city-state captured nearly $82 billion of foreign direct investment in 2015, the most among all global metros, and has the fastest internet download speeds in the world.
Next up are Emerging Gateways – including Mumbai, Rio, and Santiago – which offer entry points to their nation’s economies. These 28 financial and political capitals have traded sectors that are on average four times more productive than their nation’s average. Yet compared to other global cities, they often fall behind on innovation.
Mexico City is an Emerging Gateway: it has a very productive traded sector, but only 6.2 percent of its research papers are frequently cited, ranking just 105th out of the 123 global cities.
Fourth, Factory China – including Chengdu, Nantong, and Wenzhou – represent China’s major manufacturing hubs. These cities are the fastest-growing economies in the world. But they are heavily dependent on production and have limited talent pools and innovative assets.
Hefei is emblematic of a Factory China metro: its economy has grown nearly 15 percent each year since 2000, ranking first among all global cities. Yet only 12 percent of its adult population holds a college degree, placing the city near the bottom of global city rankings.
Fifth, Knowledge Capitals – including Boston, San Francisco, and Stockholm – are economies bolstered by elite research institutions and industries which together create cutting-edge products and services. These cities often have an extremely well-educated and productive workforce, and boast some of the highest rates of scientific research, patents, and venture capital in the world.
San Diego is a Knowledge Capital: its output per worker is 11th highest across the 123 metros, and it produces an average of over 5 patents per 1,000 persons each year, second-best among all cities.
Next, American Middleweights – including Charlotte, Phoenix, and Kansas City – are mid-sized American metro areas, many of which have participated in the Global Cities Initiative. These cities are still trying to find their footing in the global economy. But they have valuable economic assets: each maintains at least one globally-relevant export industry, and many have elite research institutions that attract talent and contribute to innovation.
Indianapolis is a good example of an American Middleweight. The metro area’s traded sectors are less productive than the U.S. average, ranking 109th out of 123 global cities. But over 14 percent of research papers coming out of Indy’s universities are among the most cited in their field, which is 42nd best among all global cities.
Finally, International Middleweights – including Munich, Melbourne, and Montreal – are economies that, like their American counterparts, are seeking to leverage distinctive economic assets. These metros serve as gateways to smaller developed economies, and therefore have high rates of foreign investment. Unfortunately, many of them also have a growth challenge.
Barcelona is an example of an International Middleweight. Its economy has grown only 1.2 percent annually since 2000, ranking 106th out of 123 global metros. But the city is also a destination not just for foreign travelers, but for foreign capital. With $3,400 of foreign investment per person in 2015, Barcelona ranks 8th among all global cities.
There are of course many other cities beyond these 123, including cities represented by people in this room. We believe this typology helps all cities better understand how they fit into the global economy.
So, what should a local leader takeaway from this typology? First, all cities are globalizing. The world economy is hyper-connected because the firms and industries in cities are increasingly global. So the implication for metropolitan leaders is that their policies and strategies must embrace—not reject—this economic reality. Second, cities occupy distinctive niches in the global economy. Some cities are innovation hubs; others are centers of manufacturing. Some anchor the world’s largest economies, others are gateways to developing countries. Cities can use this typology to find true peer groups for learning and economic exchange, and put global rankings in context. Third, cities must continuously adapt to be globally competitive and inclusive. Metro strategies must improve a region’s value-add in global supply chains while increasing the participation of people and communities in that growth.
This brings me to the final section: how can cities increase their global competitiveness and create shared prosperity?
Our new report compares each city type on key indicators of economic growth and their competitiveness assets. These data frame general strengths and challenges facing each type of global city, based on how they perform on each indicator. Let’s take a look at a few metros in the Global Cities network that are actively adapting to the unique global challenges they face.
Global giants retain multiple advantages that have been built up over decades, even centuries. Yet, even Global Giants like London understand that no advantage lasts forever in a hyper-competitive global marketplace. Many Global Giants recognize that they need to continuously upgrade the competitiveness of their traded sectors, which are often middling in growth because of their size.
For instance, London has been seeking to diversify its economy beyond its world-leading financial industry. Now in the wake of Brexit, that objective is even more urgent. London Mayor Sadiq Khan has an International Business Programme that provides mentoring and support to fast-growing London companies in technology, life sciences, and urban infrastructure to help them export and expand.
Emerging Gateways are rapidly reaching middle-income status in their developing countries. But on a global scale, these cities still lag their more developed peers on key measures of innovation, such as scientific research and patents.
Santiago exemplifies this dynamic. The city is trying to make the transition from an economy reliant on natural resources to one that generates value through knowledge and innovation. There has been a concerted effort of both the private and the public sector to support entrepreneurship, from Startup Chile to Ideas Factory —a unique combination of makers’ space, incubator, accelerator, and shared workspace. Santiago also recognizes the need to improve access to quality education, which, if left unaddressed, will perpetuate inequalities.
American Middleweights, as I mentioned before, are wealthy by global standards, but continue to seek a new identity to break out on the global stage – and doing so requires strengthening their tradable sectors.
In Columbus, Ohio, Columbus 2020, the region’s economic development organization—in coordination with the Mayor’s office and the business community—has launched a global trade and investment strategy. With a diverse economy, the metro’s leaders are boosting their existing specializations by helping each become more trade-intensive. They are re-orienting economic development away from business attraction and towards a stronger relationship with existing firms. Their efforts have led to a more strategic and demand-driven approach to workforce development, export sales abroad, and inbound foreign investment.
Let me close with this quote from Nobel Prize economist Joseph Stiglitz: “The problem is not globalization, but how the process of globalization is being managed.” The leaders we have had the pleasure to work with are better prepared than ever to manage this process. Rather than be bystanders to global change, many of you are proactively shaping it. You know the needs of your leading industries. You know how global forces are putting pressure on them to digitize and innovate, and how that translates to demand for different kinds of skills. You may have learned about new industry opportunities that inspired you to bring different firms and sectors together to co-create new products. This newfound global awareness is empowering you to solve problems, collaborate, and create the local conditions for firms and workers to be part of global success.
Indeed, there is more work we must to do ensure that global competitiveness results in opportunities for all. But if the last five years are any indication, cities will rise to the challenge and lead the way. Thank you for a tremendous journey, and we look forward to more collaboration with you in the months and years to come.