The Wealth of Cities


Recommended reading: Parag Khanna's "Beyond City Limits" in the September/October Foreign Policy. While I definitely don't agree with everything Khanna says, it's the core concept here that's important—the idea of a world where cities can be as important as nation-states:

Someone should start a baseball association called the Hanseatic League.

New York and London together still represent 40 percent of global market capitalization. But look at the economic map today, and a major shift becomes apparent. Asia-Pacific financial hubs such as Hong Kong, Seoul, Shanghai, Sydney, and Tokyo are leveraging globalization to spur an accelerating Asianization. Money floods into these capitals from around the world but tends to stay within Asia. An Asian monetary fund now provides stability for the region's currencies, and trade within the Asian sphere has grown much larger than trade across the Pacific. Instead of long-haul flights, the story here is of low-cost carriers connecting planeloads of travelers from Ulan Bator to Kuala Lumpur to Melbourne.

Accelerating this shift toward new regional centers of gravity are port cities and entrepôts such as Dubai, the Venices of the 21st century: "free zones" where products are efficiently re-exported without the hassles of government red tape. Dubai's recent real-estate overreach notwithstanding, emerging city-states along the Persian Gulf are investing at breakneck speed in efficient downtown business districts, offering fast service and tax incentives to relocate. Look for them to use sovereign wealth funds to acquire the latest technology from the West, buy up tracts of agricultural land in Africa to grow their food, and protect their investments through private armies and intelligence services.

Alliances of these agile cities are already forming, reminiscent of that trading and military powerhouse of the late Middle Ages, the Hanseatic League along the Baltic Sea. Already, Hamburg and Dubai have forged a partnership to boost shipping links and life-sciences research, while Abu Dhabi and Singapore have developed into a new commercial axis. No one is waiting for permission from Washington to make deals. New pairings among global cities follow the markets: Witness the new Doha to Sao Paulo direct flight on Qatar Airways or the Buenos Aires to Johannesburg route on South African Airways. When traffic between New York and Dubai dried up due to the financial crisis, Emirates airlines rerouted its sleek Airbus A380 planes to Toronto, whose banking system survived the economic shake-up in better shape.

The topics Khanna covers range from a vast private city being built in South Korea to the urban squatters who "form functional, self-organizing ecosystems that are 'off the grid.'" Read the whole thing here.

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  1. Someone should start a baseball association called the Hanseatic League.

    Maybe the lack of a clever name is why this failed.

  2. Where’s the Shire on that map? I want to live there.

    1. I thought it was some fancy game of Risk.

      1. What game is that map board for, and who publishes it? Or have you decided that the controversy around intellectual property should be raised as a side issue on this thread?

  3. But, but, globalization kills poor people!

    Progressives are trying to kill our economy and the rest of the world is already moving on without us.

    1. If Dubai only had a Second Amendment…

  4. I thought China was the only asian nation building empty cities. Boy was I wrong!

  5. One thing I covet is a globe that marks cities but not borders. I have never actually seen one.

  6. Yup. The modern world is about networking. Nation-states are an ill-suited relic of another age.

  7. Melbourne: Not part of Asia.

    1. Geographically? No.

      Economically? May as well be.

      1. Soccer-ifically, too – Aussie-land moved to the Asian confederation a couple of years back, leaving New Zealand as the big dog (tee-hee) in Oceania.

        1. Yep. Great move for them since Asia only has 3 or 4 consistently good teams.

          1. better than winning oceania ever time, then losing to the 5th placed south american team.

            this way we get to go to the world cup and THEN lose to the 5th placed south maerican team. its much more fun.

    2. “Asia-Pacific financial hubs”

  8. In the 14th Century Munich and Frankfort were just wide paths in the road while Rothenburg ab Tober was where it was at. York was a much bigger deal than Sheffield of Leads. Wealth changes places. Just because New York was the dominant world city in the 20th Century doesn’t mean it won’t be a backwater in the 21st.

    Basically the governments of New York and LA and Chicago and Detroit have done nothing but destroy wealht for the last 40 years. It is a testiment to the amazing wealth and reliziancy of America that those places are even still there. Our current political class has no imagination. And it doesn’t understand that yes, the lights really can go out.


  10. I’ve said it before – with web enabling, there is no need for a single great financial center.

    The days of New York being able to collect an economic rent from the rest of the world by virtue of dominating the world’s finances are numbered.

    1. That is a great point. I think New York is headed to the fate of Venice; Disney Land for rich people. It makes me sad. I would love to see New York be a vibrant real city again. But my mind says you are right.

      1. I’m not sure it would be a good for a city full of tall buildings to vibrate, but perhaps I don’t know the full story.

        1. Tokyo periodically does.

    2. I agree. Most people don’t understand that the great cities, especially the great financial cities, arose in large part owing to the limitations of pre-internet communications.

      The only reason to build skyscrapers is to be able to cram a lot of people together physically so that it is cheap and easy to share information that has to be moved on a physical medium. For nearly 50 years, New Yorks primary advantage was an enormous and complex airtube system that could move dozens of tons of paper a day from peer-to-peer. (No other city even came close.) Elevators gave personal contact between thousands of people in the same building. Even telegraphs and phone required localized switchboards to route telegrams and calls to multiple people.

      All these practical technological limitations required that the information processing of commerce and government occur in physically dense areas. The great downtowns grew up solely to provide that information processing capability.

      Today, none of that is necessary. People can communicate with someone on the other side of the world as they can in another part of the building. The great urban cores simply have no practical efficient reason to exist in the form they do. They are instead evolving into lifestyle and entertainment centers. Unfortunately, the expectations of their political class and their tax structures are still stuck in the times when they were the technological nerve centers of our civilization that could charge a pretty penny.

      The great cities are fading away. They will always be there in some form but will never return to their former glory. They have not been the place to be for nearly 30 years and that will never change.

      1. Wow, Shannon, I had never checked out your link before. Cool blog! Liked the article about 1979 vs. current prices; I was expecting bad news, so it was a pleasant surprise.

    3. I’d say the great financial centers of tomorrow are going to be wherever businesses can find some sane and long-term stable commercial law to operate under.

    4. Shannon, good point about “lifestyle and entertainment centers”. No reason those places need to be co-located with financial centers, except that I wouldn’t discount many people’s desire to live near where they work, socialize with co-workers after work, etc. At least some people will want their work life to center near their home life, and vice versa.

      1. Very much. But that will still mean that there will be many more cities, in many more places, but few as large and with as large a share of the world’s wealth as any 20th Century behemoth cities.

        1. And the most desirable lifestyle or financial centers don’t even necessarily have to be traditional cities. Silicon Valley, for example, is one big power suburb. A place like the Cayman Islands is a power beach town.

  11. These arguments are always overwrought. These big cities are take up a decreasing amount of their respective country’s economic share and population because as they grow, the piss-poor also-ran cities like Chicago and the 200+ cities that have 100K+ population grow as well. Second, all but the few island city-states in Asia, these cities are under the heel of their county/state. They have very limited autonomous sovereignity. It’s like LA: it’s run by the state, the county, an independent school district, utility board, a transportation board mostly made up of suburbs, and the northernmost 10 states of Mexico. Try to get that arrangement to get together and rule the world. Today, these ballsy plastic-fantastic cities thrive as their respective national government grow stronger. The cities’ strength is to suppose to serve the nation, and not just the city itself. So it’s pretty ridiculous to say that the “nation” is over when we see a shitload more of evidence that it’s becoming stronger.

  12. Try to get that arrangement to get together and rule the world.

    By rule the world, do you mean in the peaceful, business dominance sense, the military sense, the “realpolitik” sense of crony business and military combined, or ???

  13. I think it is interesting point that cities may be more important in some respects than states because there is precedence for this in the emergence of Northern Europe and evolution of capitalism.

    One of the major historically anomalies of northern Europe was the degree of separation between political seats of power and the cities. Cities in southern Europe and virtually everywhere else in the world were tightly controlled seats of power. The palaces of rulers looked down on the market place and they interfered continuously.

    Most cities in northern Europe began as voids of state power when nobles granted charters of liberties to groups of merchants and artisans to set up cities which would the merchants and artisans would administer themselves as corporations. The nobles didn’t much care because they didn’t view the production of merchants and artisans as economically or politically significant. The cities managed their own law and even their own foreign policy. Only when cities grew to produce significant wealth did the nobles attempt to reimpose control but buy that time centuries of tradition had entrenched the idea of self-governance and rule of law.

    You can predict the degree of democracy and capitalism in northern Europe circa 1750 by looking at a map of free cities in the 1400s. When seaborne trade and nascent industry of the cities because major sources of the society’s power and wealth, the free cities pulled the rest of the society along in their wake.

    It’s the void of state power that really mattered in the end. Cities became bubbles of relatively voluntary association, voluntary law and non-violent conflict resolution. This allowed the business, scientific and intellectual creativity and experimentation that allowed northern Europe to pull away from the rest of the world.

    1. With a very significant exception: northern Italy cities were every bit as advanced in 1400 as North Sea and Baltic cities. By 1750 they were no more advanced than the rest of Italy and Southern Europe, not even the most resilient, Venice. I won’t hypothesize why, but your sea hypothesis (as most Italian cities were really land cities, only Genoa, Naples and Venice having a true maritime vocation) sounds right to me.

      1. Actually, the mercantile cities of Italy fit this pattern as well. Venice in particular was founded on a marshy island by people fleeing the wars on the mainland. They turned to trade of necessity and built a commercial empire. The city was governed somewhat like a corporation.

        There is a definite difference between the dynamism of very old and large Italian cities like Rome or Naples and the new, smaller cities like Venice and Florence. The latter two almost single handed launched the Renaissance.

        One of the major causes of the decline of Italy in the late 1500s was the political absorption of the city state governments by the rural military aristocracy. Whereas in northern Europe the pattern of cities was imposed on the aristocrats, in Italy and other places the reverse happened.

  14. Hanseatic League jokes? +10 points, sir.

    1. My German neighbor, the one with the leg pain, is starting up a group for fellow sufferers.

      He’s calling it the Hans Sciatic League.

  15. “No one is waiting for permission from Washington to make deals.”

    what an odd statement. did they ever? and if they did then those days are long gone.

    the last 5 years have seen the US steadily dropping down the list of Australia’s main trading partners, which is what saved us from a recession of any sort (technically anyway). we’ve been trying to sort out what kind of surface and sub harware we need to live in an asia without a couple of US carrier groups, which is looking like sooner rather than later.

  16. I recommend Martin van Crevald’s 1999 book ‘The Rise and Decline of the State’.

    In it he delineates the differences between older forms of governments such as chieftainships, kingdoms and empires and the relatively new concept of states.

    He traces the origins of states and why they grew and what is keeping them in power.

    I’m not yet at the “decline” portion of the book but I’m guessing it’s going to include concepts such as this article puts forth.

  17. City states flourish in an enviornment of economic weakness. No city, however vibrant, can build an army as big and bad as can a nation state, unless are the nations that would form a state are too poor. Barring a massive economic collapse, a dark age sort of collapse, city’s will be less powerful than nations. Unless we’ve suddenly stopped being violent that is.

    1. I don’t think we are less violent. But I think both modern terrorism and Iraq/Afghanistan (in some ways, even Israel/Palestine) prove that neither numbers nor firepower is all that it takes to fight, or win, a war.

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