Emerging-economy cities are key to global growthJames Pomeroy
Urbanisation in emerging markets will be the dominant force of global growth in coming decades. By 2050, some 5.2bn people – most of the world population – will live in emerging-country cities, with just 440 of these urban centres accounting for half of global GDP growth.
Economic growth rates and urbanisation are clearly linked: just over half of the world’s population live in cities but they generate four-fifths of global GDP. Currently, 80 per cent of people in developed countries live in cities compared with 50 per cent in emerging economies; however, a catching-up means that by 2030 places such as Dhaka, Karachi and Lagos will be among the world’s 10 biggest cities.
Indeed, by then, 81 of the world’s 100 most populous cities will be in emerging markets – and 42 of the top 50.
Urbanisation typically means economies of scale, higher productivity and shorter distances to market. It can facilitate better economic infrastructure, such as education, healthcare and transport, producing clusters of specialist workers that foster innovation.
However, there is a risk that emerging-market cities grow too quickly, unable to generate jobs for the rapidly growing population, either forcing people to leave – possibly migrating abroad – or causing social unrest as the rural poor become urban poor.
Many emerging-market cities lack the metro networks of western cities, for instance. The Asian Development Bank estimates that to sustain growth, Asia needs to invest $1.5 trillion a year in infrastructure – 5.1 per cent of GDP. But some cities are already so big that it is too late to undertake major improvements to water, sanitation, energy, transportation or communications.
Urbanisation has negatives too, though – congestion, crime, pollution, inequality and high property prices. So while young rural dwellers move to the cities for better jobs, developed economies with ageing populations may see workers start to turn their backs on the cities.
Technology is making the world smaller, linking societies and labour in ways that previously required proximity. With remote working, people may prefer to live and work from a country house rather than a small city flat, despite attractions such as amenities and entertainment.
Urbanisation rates have already peaked in some countries, including New Zealand, Switzerland and Poland. Given the high share of the population living in urban areas already, and shifts demographics and technology, urbanisation rates may even have peaked already.
The ten biggest cities
Säo Paulo 21.1m
Mexico City 21.0m
Mexico City 23.9m
UN population forecasts