Urban liveability and economic growth: Jobs, housing, and infrastructure

Liveanomics
Urban liveability and economic growth
A report from the Economist Intelligence Unit

Commissioned by Philips

Liveanomics

Preface

L iveanomics: Urban liveability and economic growth is the second of two Economist Intelligence Unit
reports, commissioned by Philips, which examine the issue of liveability in cities. The first report
in the series addressed what city residents want from their cities, and how city leaders can deliver on
citizens’ requirements. This second report examines the role of business within cities. The Economist
Intelligence Unit bears sole responsibility for the content of this report. The findings and views
expressed within do not necessarily reflect the views of Philips.
Our research drew on two main initiatives:
l In September 2010, we conducted a survey of urban professionals around the world. In total, 575
respondents took part, representing cities in Asia (30%), North America (30%), Western Europe (30%)
and the rest of the world (10%). See Who took the survey? for more details.
l To supplement the survey results, we conducted in-depth interviews with business and civic leaders
and other experts in urban affairs. See Interviewees for more details.
Sarah Murray was the author of the report, and David Gow contributed. Iain Scott and Chris Webber
were the editors. We would like to thank everyone who participated in the survey, and all the
interviewees, for their time and insight.
January 2011

Who took the survey? who work for a range of industries, with the majority
from the financial and professional services, IT
Respondents range in age, from 19-80, with most and technology, energy and natural resources,
aged between 26 and 60. More than one-third have manufacturing, education and healthcare,
lived in their city for more than 20 years, one-fifth publishing and media, and retail.
for 10-20 years, and another one-fifth for 5-10 Please note that not all figures quoted correlate
years. Three-quarters of respondents are married (of precisely with the charts provided, typically because
those, 58% have children). They are professionals of rounding.

1 © The Economist Intelligence Unit Limited 2011

Liveanomics

Interviewees
l Sam Adams, mayor of Portland, Oregon (USA)
l Andrew Carter, head of research, Centre for Cities (UK)
l Greg Clark, city expert (UK)
l Warrick Cleine, managing partner, KPMG (Vietnam)
l Carol Coletta, president and chief executive of CEOs for Cities (USA)
l Karl-Heinz Daehre, minister for regional development and transport, Sachsen-Anhalt (Germany)
l Ryan Gravel, urban designer and senior associate, Perkins+Will (USA)
l Frank Jensen, president, Eurocities and mayor, Copenhagen (Denmark)
l John Kasarda, co-author of Aerotropolis: The Way We’ll Live Next and a professor at University of
North Carolina’s Kenan-Flagler Business School (USA)
l Stanley Litow, head of corporate citizenship and corporate affairs, IBM; and president, IBM
Foundation (USA)
l Teresa Lynch, senior vice-president for research, Initiative for a Competitive Inner City (USA)
l Josh McManus, co-founder and creative strategist, CreateHere (USA)
l Harold Miller, president, Future Strategies (USA)
l T.V. Mohandas Pai, head of human resources, education and research, and board member, Infosys,
Bangalore (India)
l Wally Olins, chairman of Saffron Brand Consultants, London (UK)
l Deanna Oppenheimer, chief executive of UK retail banking, and vice-chair of global retail banking,
Barclays, London (UK)
l Professor Philipp Oswalt, head of the IBA and the Bauhaus Foundation, Dessau (Germany)
l Paul Romer, economist and senior fellow, Stanford Center for International Development and the
Stanford Institute for Economic Policy Research, and Henry Kaufman visiting professor at the Stern
School of Business, New York University (USA)
l Terry Schwarz, director, Cleveland Urban Design Collaborative, Kent State University (USA)
l Todd Sinai, associate professor of real estate and business and public policy at the University of
Pennsylvania’s Wharton School of Business, (USA)
l Fred Smith, chairman, president and chief executive officer, FedEx (USA)
l Regina Sonnabend, an urban planner at the Bauhaus Foundation (Germany)
l Colin Tweedy, chief executive, Arts & Business, London (UK)


Liveanomics

Executive summary

T here is no doubt that the lives of cities and of the businesses located in them are inextricably
intertwined. But how closely linked are cities’ economic growth and their liveability?
A survey of urban professionals conducted by the Economist Intelligence Unit shows that the idea
of liveability has a number of different components. Jobs and cost of living, public transport and
roads, safety and security and culture and nightlife all rank highly among our respondents’ list of
factors contributing to a city’s attractiveness as a place to live and work.
In the first report in this series, we spelled out the strategies policymakers need to adopt in order
to maintain and improve liveability for citizens. Some of the key steps include providing a good public
transport system, getting a bigger say in planning policy, taking a more sensitive approach to urban
design and handing over more control of public services to citizens. This second report explores the
relationship between business performance and liveability in cities, and highlights some of the ways
in which business and policymakers are working together to make cities more liveable.
Whatever the type of challenge being faced by an individual city, improving liveability can only
help to strengthen its attractiveness for residents, workers and potential investors. But coming up
with a realistic and effective strategy for boosting economic growth is a hugely difficult challenge,
particularly when wider economic forces are working in the opposite direction. History has shown
that long-term shifts in patterns of trade across the globe and the introduction of new technologies
or production methods can undermine the industries upon which some cities were built. Declining
cities in the former manufacturing heartlands of the north of England and in the “rust belt” of the
United States provide powerful evidence of this. And, try as they might, policymakers have frequently
found it agonisingly difficult to hold back the tide of change.
Even in those cities where economic growth is occurring, the challenge of enabling this can be
enormously complex. Often the problem is that those people already living in high growth areas
resent the changes associated with it and try to block the developments and investments—in housing
and transport, for example—that are needed to facilitate growth. Rather than blocking growth
altogether, however, these kinds of obstructions frequently lead to congestion and affordability
problems as more and more people and businesses try to cram into houses, offices and trains that
were simply not designed to meet such high levels of demand.


Liveanomics

It is important to look at liveability—a misunderstood and often misused term—but equally
important to understand that for citizens and companies, there is a clear hierarchy of needs. What is
clear from our research is that what business primarily wants from city leadership is policy that helps to
stimulate job creation, followed by basic liveability factors such as good infrastructure, schools and
so on.
Mayors and civic leaders can occasionally be beguiled by the “softer” aspects of liveability. Opera
houses, parks and other assets associated with liveability are all important components of great cities’
brands, but getting the basics right first helps cities to compete globally on a more equal footing.
Among the key findings of our research are:
Jobs take precedence over liveability when people are choosing where to locate
Our survey shows that the main reason for urban professionals to move to a city is its jobs market and
cost of living. Moreover, respondents say that their organisation’s main benefit in being located in
their city is its access to talent and labour. But with workforces increasingly prepared to relocate for the
best opportunities, there is a question mark over policymakers’ ability to develop local skill levels and
encourage skilled workers to remain in their city.
Deliver the housing needed to meet demand
As we spelled out in our first report, rising house prices are often seen as a sign of a city’s economic
success. One important challenge for policymakers who are looking for ways to help maintain their
city’s economic growth is to make sure that there is enough housing to meet demand in economically
dynamic areas. Failure to do so can result in housing affordability problems, dissuading talent from
moving from low-performing to high-performing areas. This is not simply an issue for policymakers. As
Todd Sinai of the University of Pennsylvania’s Wharton School of Business points out, “in a city that’s
more expensive, the first thing that has to happen is that workers need to get paid more”.
Open the door to foreign investment
In difficult economic times, policymakers are often pressured into favouring support for local
businesses over foreign companies. But such strategies are not necessarily the right way forward,
according to our survey—only 15% of respondents see that as a priority for their civic leaders, as
opposed to almost one-third who would prefer it if multinationals were encouraged to set up shop in
their city, in order to make it more competitive for business. The presence of multinational companies
in a city can raise its image elsewhere, and branding can play a big role in the business life of a city.
More than one-half of respondents regard their city’s international profile and good reputation as
important benefits to their organisation’s decision to locate there, and nearly three-quarters believe
their city’s image helps it to attract important industries.
Enlist the help of the commercial sector
Respondents to our survey consider that it is the public sector that should shoulder most responsibility
for services such as public transport and the maintenance of parks and schools. But the business sector
already plays a key role in developing cities’ liveability, supporting culture, sporting events, healthcare

© The Economist Intelligence Unit Limited 2011

Liveanomics

facilities, transport infrastructure and environmental initiatives. As civic leaders face tighter budgets
they should be prepared to take the initiative in asking business for more help. The cost to the
city of London’s ambitious cycle hire scheme, for example, would have been far greater without a
substantial investment from Barclays, a bank. Of course, in engaging in philanthropic endeavours an
organisation’s ambition may largely be to generate brand awareness. But Londoners, for their part,
have shown that they are prepared to become two-wheeled advertisements for Barclays in exchange
for a more convenient journey around town.
Focus on the basics of urban life – transport, roads, houses, schools and safety
When a city secures a major sporting event such as the Olympic Games, is it a boon for business? Urban
professionals don’t think so. They think it is far more important to get the basics right by improving
public transport and roads, providing better schools and improving safety. CEOs such as FedEx’s Fred
Smith agree. “Ultimately, you have to have both good economics and good quality of life—they feed
each other,” he says.


Liveanomics

Introduction

F rom the earliest times of human commerce, when trade crossroads became sites for settlements,
the world’s greatest cities have arisen and flourished around commerce. Florence had its Medici
bankers; Flanders its wool merchants; Manchester its cotton mills; and Detroit its carmakers.
Wherever you look around the world, business has often played a pivotal role in the story of urban
growth and change.
Business continues to play a central part in the development of the world’s cities, but the economic
role played by different cities has evolved over time as the forces of globalisation and technological
change have reshaped patterns of trade and shifted the focus of business growth. Some cities,
including Manchester and Detroit, have declined as the industries on which they were built have shed
jobs. Others, such as Bangalore in India and Beijing in China, have grown rapidly as economic growth
in developing countries has surged.
Against the backdrop of intense competition and long-term change, urban policymakers must find
ways to maximise their city’s economic growth. In attempting to do so, many have become interested
in the relationship between economic growth and liveability. The thinking is that businesses and
highly-skilled workers, particularly those in mature industrialised economies, are increasingly basing
their location decisions on the quality of life on offer in a city as well as the strength of its economy.
The basic idea, therefore, is that if city leaders can improve the liveability of their city, they can attract
the businesses and skilled workers needed to grow their economies.
This argument seems straightforward enough, but how strong is the relationship between liveability
and economic growth in cities? Can a modern city thrive without having a high quality of life? Which
other factors influence economic performance in cities? And, after looking at the evidence, what
should be the priorities for city leaders trying to stimulate economic growth in their areas?


Liveanomics

Key points
n What businesses want from cities varies enormously.
n However, some requirements are common to all: talent, transport, affordable housing and good
governance.
n Experts differ on the importance of quality of life as a driver of economic growth.

Part I: What businesses need from cities

W hat businesses want from cities varies enormously. As Greg Clark, an adviser to city agencies
around the world, says: “If you’re in film, fashion and TV you want London or New York—big
and dirty, with lots of different people and real edge that creates a buzz. If you’re doing bioscience
or pharmaceuticals, you want precision labs and so you might prefer Boston, Zurich or Singapore.”
But despite the diverse range of needs that businesses have, there are some requirements
that are important to all. We discuss these below and explain the role that liveability plays in
fostering their development.
A talented workforce
In mature, industrialised economies where knowledge-based services businesses are an increasingly
important driver of growth, having access to a skilled workforce is becoming more of a necessity than
a luxury. Cities often play a crucial role here, providing a rich source of talent upon which knowledge
intensive businesses can draw.

What were your main motivations in coming to your city? Select up to three.
(% respondents)

To seek better work opportunities
39
I was born here/it has always been my home
29
I was posted here by my employer
24
To be closer to family/friends
21
To go to school or university, or to be near to better schools or universities
15
For culture/nightlife
14
For greater personal freedom
11
For existing relationship/To find new relationship
9
For safety/security considerations
8
For healthcare considerations
3
Other
8


Liveanomics

In our survey, access to talent and labour were cited by 63% of respondents as being what makes
their city a good place in which to locate their organisation, while 58% said that their organisation
had chosen its location because it could access a happy, healthy workforce. One-third of urban
professionals say improving schooling and education would make their city more competitive for
business, making it their second-highest priority.
Businesses are looking for a deep talent pool in the fields in which they need to be successful,” says
Carol Coletta, president and chief executive of CEOs for Cities, a US network of urban leaders. “Talent
pools in places where there are other talented people. That speaks highly to the need for quality of
place and quality of opportunity.”
Cities’ power to attract talent is why KPMG sited its Ho Chi Minh City offices in the downtown area,
rather than where its clients are, in industrial zones outside the city. “The number one reason for
being located where we are is the people,” says Warrick Cleine, managing partner of KPMG Vietnam.
“What forms part of “What forms part of being an employer of choice is having a high-quality office building and shops and
being an employer restaurants around it that staff can go to.”
of choice is having a There is a question mark over just how much city leaders and other policymakers can do to retain
high-quality office skilled workers, however. “A lot of places are successful in developing talent because they have the
building and shops right higher education institutions, but they can’t necessarily hang on to that talent,” says Ms Coletta.
and restaurants Andrew Carter, head of research at Centre for Cities, a London-based think-tank, explains that this is
around it that staff because workers are increasingly mobile. “When a city is creating jobs, its population tends to increase
can go to.” and when it’s losing them its population falls,” he says. “That’s just a normal part of the adjustment
Warrick Cleine, KPMG process in all economies. Skilled people find it easier to access jobs elsewhere so they’re often among
the first to leave when the jobs begin to dry up. It’s very difficult to see how city leaders in places like
Liverpool [UK] can prevent that from happening.”

What do you think should be the main priorities for your city's mayor/leadership in order to make your city more competitive
for business? Select up to three.
(% respondents)

Improving public transport/roads
61
Improving schooling/education
33
Encouraging multinational companies to set up business
32
Improving safety and security
29
Raising the city's profile and improving its reputation
27
Reducing corruption
25
Reducing environmental impact
22
Supporting local businesses ahead of multinationals
15
Improving healthcare facilities and access to care
12
Attracting major sporting/cultural events
11
Other
7


Liveanomics

The aerotropolis Live Next), points to a shift in many places where
airports no longer simply serve the city but have
themselves become airport cities. “They’re taking
As transport and logistics companies gather on all the functions of a modern metropolitan
around the world’s biggest airports and their centre,” he says. “Upscale restaurants, casinos,
related transport corridors, a new urban form is hotels, trade and exhibition complexes and
emerging: the airport city. Professor John Kasarda financial units are all locating around the airport,
of the University of North Carolina’s Kenan-Flagler and this is creating a second downtown.”
Business School argues that airports are set to “The aerotropolis should bring together urban
shape urban development in the decades to come. and regional planning, and business strategy and
“Show me the busiest airports today and I’ll show site planning,” Professor Kasarda continues, “so
you the great urban centres of tomorrow,” he says. airports function more efficiently and the region
Professor Kasarda, who has co-authored a itself is more economically efficient, aesthetically
book on the concept (Aerotropolis: The Way We’ll appealing and environmentally sustainable.”

Transport and connectivity
Transport connections have always been a key driver of economic growth in cities and towns. In the
past, a city might have grown up around a river crossing. Today a city’s growth is more likely to be
linked to its proximity to an airport (see box), port or motorway hubs.
In our survey of urban professionals, 37% of respondents regard transport links to other key cities
and markets as being a primary benefit of being located in their city. And 61% of respondents say city
leaders should address transport, far ahead of factors such as better education (33%), encouraging
multinationals to set up business (32%), and improving safety and security (29%).
Getting people to work on time is one function of a good transport system. But our respondents’
emphasis on transport links reflects another evolving trend—the fact that the line between people’s
professional and private lives is becoming increasingly blurred.
“Time is becoming ever more valuable,” says Ms Coletta. “Technology is becoming richer and
more diverting and as a result people are living 2-7, so if you don’t provide good public transport or
alternatives to the automobile that’s a real problem.”
Deanna Oppenheimer, the chief executive of UK retail banking at Barclays, argues that good
transport systems are essential to the economic health of cities such as London, where the company
sponsors a city-wide cycle hire scheme. “Investment and improvements to London’s transport
infrastructure will assist economic prosperity in the city,” she says.
Transport systems are clearly important both in maintaining quality of life and business
performance, but policymakers should not see investment in transport as a magic solution that will
always spark growth irrespective of underlying circumstances. According to Mr Carter, “areas that have
experienced decline often have transport systems that are easily able to cope with the demands now
being placed on them because they were designed for much higher usage. The fact that some areas
have really great public transport systems doesn’t necessarily mean that they will be attractive to
businesses and workers. There are plenty of other factors at play.”


Liveanomics

Affordable housing
Liveability also means being able to find decent, affordable housing. Housing features highly among
the schemes highlighted by our respondents when asked to outline something they believe would
benefit their city. Many respondents suggest access to “affordable housing”. One respondent cites
“mass housing projects and eradication of ghettos”, while another believes it would be beneficial to curb
“certain building restrictions that artificially inflate the cost of living.”
However, high house prices are not necessarily a problem in themselves. “New York is expensive but
it has no trouble getting good workers,” says Todd Sinai, associate professor of real estate and business
and public policy at Wharton. “But in a city that’s more expensive, the first thing that has to happen is
that workers need to get paid more.”
Indeed, high or rising house prices should probably be seen more as a sign of economic success,
reflecting the fact that more people want to live in an area. The big challenge for policymakers is to
ensure that the supply of housing is meeting demand for it as this evolves over time. In the UK in
particular, the failure to build houses in economically dynamic areas where there is high demand, such
1
Nickell, S. ‘Housing’ as London, Cambridge and Brighton, is regularly identified as one of the key failings of cities policy.1
in Options for a New As a result, there have been increasing volatility and affordability problems in the UK housing market,
Britain London: Palgrave
making it harder for people to move from low- to high-performing areas where jobs are more plentiful.
(2009); Aldred, T. Arrested
Development: Are we Efficient governance
building houses in the right
Good governance and efficient permitting procedures are among the criteria companies consider
places? London: Centre for
Cities (2010) when looking at potential sites for their operations. The importance of governance and bureaucratic

FedEx in Memphis agencies providing disaster relief.”
In turn, Mr Smith says, cities need to offer
incentives to make it attractive for companies to
With around 30,000 employees in the Memphis locate or do business in them. He cites sales tax
area, FedEx is the city’s largest private sector exemptions on new equipment, tax moratoriums
employer, while the cargo shipped by the company on land or capital improvements, tax incentives for
from Memphis International airport makes a big industrial investment or the creation of jobs, tax
contribution to the airport’s economic impact exemption to encourage research and development,
on the local economy (an estimated US$28.6bn and accelerated depreciation of industrial
in goods and services and US$8bn in total wages equipment. Cities, he adds, can also provide bond
earned in 2007). financing and loans for construction and equipment.
However, Fred Smith, FedEx Corporation’s Beyond such business incentives, however, Mr
chairman, president and chief executive officer, Smith stresses that quality of life—good schools,
maintains that businesses support cities through safe neighbourhoods, cultural opportunities,
more than wealth and employment generation. reasonable living costs—is critical in attracting
“Businesses should offer their particular expertise to businesses to a city, fuelling the local economy,
the city at large and to segments within the city,” he which in turn generates more jobs and attracts
says. “We’re logistics experts, for instance, so we can more businesses. “It’s a restorative cycle,” he says.
share our expertise with any company trying to move “Ultimately, you have to have both good economics
goods, including non-profits such as food banks and and good quality of life. They feed each other.”


Liveanomics

efficiency is reflected in some of the things our respondents say they would like to implement in
their city. “Make city government more transparent and accountable,” says one. Others would like
to see a reduction in “red tape” and “barriers to business”. Meanwhile, 20% of respondents say that
good local governance and political stability are the main benefits of being located in their city. And
with most city leaders across the world facing a prolonged period of fiscal austerity, they may find it
worthwhile to increase their engagement with business to both understand their needs and draw on
their expertise.
Liveability and city growth: a mixed picture
While the idea that city growth and liveability might go hand in hand is appealing, experts’ views differ
on the importance of quality of life as a driver of economic growth.
Harold Miller, president of US consulting firm Future Strategies, argues that “Pittsburgh’s greatest
strength is quality of life. People want to come to an area with a high quality of life and lots of
amenities that were built up over decades.” And Greg Clark suggests that companies look to cities
to provide the liveability factors that can attract a healthy supply of talented workers to their doors
because “businesses follow talent and talent follows quality of life”.
Meanwhile, Mr Carter recognises that liveability can be an important factor in the location decisions
of people and businesses, but stresses that the city growth equation tends to be more complicated
than this. “Studies show that the processes of globalisation and technological change have created
a long-term shift in the geography of job creation in the UK. Improving a city’s liveability may help
to maximise economic growth, but we shouldn’t pretend that’s going to completely reverse a major
long-term shift in where jobs are being created. I’m afraid the evidence just doesn’t support that kind
of conclusion.”


Liveanomics

Key points
n Unless civic leaders are able to foster economic opportunities, their city is likely to decline.

n The benefit of tax breaks for businesses is hard to calculate—policymakers should look at other incentives.
n Branding of cities plays an important role, both in attracting talent and in boosting business
opportunities.

Part II: What the city must deliver

L iveability takes on a whole new meaning when it comes to employment—nobody wants to live in a
city where there are no jobs. Indeed, unless city leaders are able to foster economic opportunities,
their city is likely to decline. The evidence shows this clearly, with places like Detroit and Liverpool
experiencing significant population losses over recent decades as the number of jobs available in
these cities has fallen.
This point is supported by the findings of our survey. Almost 60% of respondents cite the job market
and cost of living as the leading factor in their decision to live in a city. And, of those respondents who
have moved to their current city, 89% did so because they were either posted there by their employer
or because they were “seeking better work opportunities”.
Concern about the availability of jobs and the strength of the economy over the next three to five
years is also an issue for many of our respondents. Nearly 0% cite economic uncertainty as one of the
most critical pressures their city will face over this period. And 30% say that improving the jobs market
and cost of living would be one of the first things they would change in order to make life less stressful.
In your view, which factors are most important to you in making a city an attractive place in which to live and work?
Select up to three.
(% respondents)

Jobs market and cost of living
58
Public transport, road links and parking
47
Safety and security
44
Culture, nightlife and sporting facilities/events
34
Access to decent childcare and education
28
Parks and access to green/open spaces
23
General environment and cleanliness
20
Layout of the city, quality of its buildings and housing
17
Access to quality healthcare
17
Range of shops and stores
6


Liveanomics

On the other hand, urban professionals, who are often less vulnerable to unemployment than
less skilled workers, are understandably more confident that their city can deliver on business and
employment opportunities than on other things. More than half (51%) of our survey respondents
think their city has been performing well on this issue, significantly higher than those who cite social
factors such as housing, safety, culture and community relations (37%) and infrastructure such as
transport and utilities (26%).
Policies to spark business growth
While the public and non-profit sectors contribute to city employment, the private sector is often the
main driver of growth in the jobs market. And it will need to be relied upon even more heavily as public
spending cuts are introduced by governments across the world over the next five years.
“City governments So what can cities do to try to stimulate private sector jobs growth in their areas? Some have
can use their adjusted their tax regimes; San Francisco, for example, froze payroll taxes for two years, and also
influence to speed offered payroll tax incentives to businesses creating new jobs.
up processes However, Ms Coletta warns policymakers against relying too heavily on tax incentives when trying
like getting to attract new businesses to locate to their city. “In most cases, cities don’t know what the payback on
telephone systems tax incentives is,” she says. “It’s very difficult to calculate, and most cities would be better off focusing
established, or on other incentives—on the quality of talent, quality of place, quality of opportunity and making sure
reducing the time it there’s a good business climate.”
takes from agreeing In the wake of the global economic downturn, of course, a good business climate is harder to find.
a lease to occupying “Capital requirements are rising to the surface and there’s a real sense among small businesses that
a building.” their access to capital is limited,” says Teresa Lynch, senior vice-president for research at the Initiative
Greg Clark for a Competitive Inner City, a non-profit company founded to promote private sector engagement in
inner city prosperity. “It becomes more of a concern in cities that are concentrated in manufacturing,
a sector in which there hasn’t historically been a big equity play.”
Some cities are devising innovative programmes to help small businesses expand and generate
employment. In the US, Portland has set up working groups to develop microcredit programmes that
could provide local entrepreneurs with access to capital and a micro-exchange, that would offer local
investors opportunities to invest directly in local non-public companies.2
In good times and bad, cities also need to find ways of smoothing the path to business creation.
“City governments can use their influence to speed up processes like getting telephone systems
established, or reducing the time it takes from agreeing a lease to occupying a building,” says
Mr Clark.
Many cities are using technology to do this, creating one-stop shops to which businesses can turn
when establishing their enterprises, in order to obtain permits and licences, pay taxes and so on.
Singapore’s EnterpriseOne portal offers everything from market research and information on funding
options to online business registration. But a flashy online interface means little unless there is also
2
Portland job creation and
back-office co-ordination between city departments. “It’s important to have a political decision and a
stimulus, Office of the City
Auditor, Portland, Oregon, strategy from the beginning,” says Frank Jensen, president of Eurocities, a network of major European
June 2010 cities, and mayor of Copenhagen, which is providing a one-stop-shop for businesses locating in the


Liveanomics

city. “If it’s based only on what the civil servants are dealing with, it’s much harder to concentrate all
the functions in one office.”
Civic authorities can also support business incubation organisations, often in public-private
partnerships. In Pittsburgh, economic revival has been boosted by a culture of innovation, helped
by organisations such as the Pittsburgh Life Sciences Greenhouse, which is partly funded by the
Commonwealth of Pennsylvania and the state’s department of community and economic development.
Some believe that the challenge of generating economic activity should be looked at more
broadly—and that means bringing artists and designers into the process. In Chattanooga, Tennessee,
a non-profit organisation called CreateHere organises business planning workshops and initiates
joint projects—such as the creation of a park in Detroit—that bring together individuals and groups
from diverse sectors of the city, including artists, designers, architects, engineers and general
contractors.
Josh McManus, founder of CreateHere, says that few cities have yet to make the connection between
creativity and economic development. “In more cosmopolitan cities, there’s sometimes a recognition
of creativity as impacting quality of life,” he says. “But to draw a link between sustainable economic
development and creativity is very rare.”

Charter Cities in developing economies Stanford Center for International Development and
the Stanford Institute for Economic Policy Research,
and the Henry Kaufman Visiting Professor at NYU’s
Poor governance and corruption are often cited Stern School of Business
as barriers to growth in developing countries, Professor Romer and his team have developed
which are also home to some of the world’s several Charter Cities scenarios. In one, Australia
fastest-growing cities. But, as any policy expert and Indonesia join forces to create a new regional
or development specialist will tell you, retrofitting manufacturing hub. Another suggests that Canada
for good governance is extremely difficult to do. could develop a Hong Kong in Cuba, by modifying
Corruption is hard to weed out once it is embedded the existing treaty between Cuba and the US to
in urban institutions, business models and cultures. shift control to Canada. A Canadian administrator
One new concept in urban planning—called would establish and enforce legal protection and
Charter Cities—explores ways in which good institutional stability for the territory.
governance and freedom from corruption may “Once you’ve appointed this strong executive,
be built into new cities from the very start, by it could look a lot like Hong Kong,” says Professor
outsourcing their development. The idea behind Romer. “In Hong Kong civil service and regulatory
Charter Cities is that by building special reform traditions were brought in to some extent along
zones, using unoccupied pieces of land and with expatriates, but to a large extent they were
establishing charters to govern them, governments developed by training people from the region.”
could quickly adopt new systems of rules that might Strong governance would attract foreign
be very different from those that exist in the rest of investors and residents to the city, while suburbs
the country. would emerge on the Cuban side of the city
“Just as developing countries have learned that boundary. As in the case of Hong Kong, the territory
they can import technology, countries could leverage would eventually be returned to Cuban control, with
systems of governance that are working,” says a special administrative treaty shaping how the city
Paul Romer, an economist and senior fellow at the would be governed.


Liveanomics

However, he argues, it is something to which cities should devote more attention. “Stimulating
enough raw creativity in a community serves as the precursor to innovation,” he says. “This
innovation, when nurtured, turns into a much more sustainable form of economic development.”
City branding: Messaging for the metropolis
In the same way that companies need to advertise their products and services, civic leaders, planners
and strategists need to be touting their cities’ strengths constantly in order to attract companies
to invest in their economies. A city’s image also helps it to build and retain the vibrant, creative
populations from which companies hire their employees.
“You need to do
In marketing themselves, some cities have it easy. Historic buildings and architectural monuments,
something new
seats of government and ancient academic centres guarantee many cities a place at the top of the
and stand out in
metropolitan league tables.
a way that makes
These big city brands exert a powerful pull—for example, despite their threats to desert London
you different—and
in favour of better tax breaks in Switzerland, few bankers or hedge funds have actually done so.
that’s a very
Meanwhile, 73% of respondents to our survey believe that their city’s image helps it attract important
difficult thing
industries. For others, a strong dose of creativity is needed to establish the brand recognition that will
to get cities to
help their cities compete socially, economically and culturally.
understand.”
Even big-brand cities face outdated views about what they represent. “If you ask someone in Tokyo
Carol Coletta, CEOs for Cities
or Moscow who’s not visited London what they know about London, in Tokyo, you’ll get Sherlock
Holmes and in Moscow, you’ll get Charles Dickens and fog,” says Wally Olins, chairman of Saffron
Brand Consultants. “The levels of misunderstanding are vast for almost any city.”
To correct this, or build up a new image, cities need to be ready to spend money. Toronto, in Canada,
invested US$m in its Toronto Branding Project, launched in 2005. Part of the funding went on brand
development and marketing, and consumer research was undertaken to identify what differentiated
Toronto from other cities.
“Starchitects”–celebrity architects—can also help to put cities on the map. Since the Guggenheim
Bilbao Museum opened its doors in 1997, Frank Gehry’s iconic design for the building has propelled
to international stardom the once little-known Spanish industrial city in which it is located. If Bilbao
is anything to go by, then, the lesson for civic authorities seems to be that one way of creating
distinction in an undistinguished city is to build it. But some cities struggle to find or develop their
identities, and instead try to mimic the characteristics of others. “The tendency is to study the best
practices and copy what’s safe because it’s been proven elsewhere,” says Ms Coletta. “But you need to
do something new and stand out in a way that makes you different—and that’s a very difficult thing to
get cities to understand.”
Ms Coletta cites the much-emulated Millennium Park in Chicago. “You can pull it off the first time,
but once you have the fifth version and people claim it’s their answer to Millennium Park, no one gets
excited any more. Then you’re an also-ran.”
The trick for cities is to recognise what they cannot be and to identify and emphasise their
differentiating characteristics. “Cities have to go though a painful process,” says Mr Clark. “It’s about
accepting constraints moving beyond rhetoric into reality.”


Liveanomics

The new economy?
Portland, Oregon, is one city that has gone through that process. The city conducted an analysis
of both its local industrial strengths and of the industries likely to show most growth nationally or
globally. It identified four industries—advanced manufacturing, clean technology and sustainability,
digital development and open source software, and active wear—and is now focusing on those. “We’re
not the size of the Seattle area and we don’t have the profile or the economic heft of San Francisco,”
says Portland’s mayor, Sam Adams, “so we have to be more clever and agile.”
Policymakers are learning that industrial strength is only one path towards developing a strong
brand. For Copenhagen, green city solutions are seen as a way to compete. The city’s goal is to become
carbon neutral by 2025, and plans to develop an international laboratory for foreign investment in the
field of clean technology. “Every city should find its core strength and invite business and universities
into partnerships to develop that core strength,” says its mayor, Mr Jensen.
Mr Adams agrees. “Any city worth its salt will tell you that the welcome mat is open for business,” he
says. “But when you’re making additional investments to keep what you have, to grow and to recruit
others to come to your city, you have to work from strengths.”
Mr Carter, of Centre for Cities, warns policymakers against too much bullishness. “Our research has
shown that UK policymakers probably need to be a little bit more pragmatic in some of their business
growth aspirations,” he says. “For example, almost 70% of England’s cities have identified the creative

Infosys in Bangalore life so far in terms of arts and culture,” he says. “The
city is not doing as much as it should in that respect.”
However, for the company, influencing the
In Bangalore’s extraordinary transition from a dusty development of the city means striking a careful
town to a thriving IT hub that is home to more than balance between stepping up and holding back. “We
600,000 IT executives, Infosys has played a leading don’t want to be seen as having a disproportionate
role. The IT services company has developed a large share of the city’s attention,” says Mr Mohandas Pai.
campus at Electronics City—based on Microsoft’s “The city has to articulate how it’s going to grow and
in Seattle—that is one of India’s largest industrial then invite stakeholders to participate.”
parks, and representatives from the company sit on At the same time, he believes that before this can
many city and state committees. happen, Bangalore needs stronger governance and
However, T.V. Mohandas Pai, a member of leadership. “The challenge in Bangalore is that we
the board at Infosys, believes that the urban don’t have a permanent city administration or an
policymakers should be playing a greater role in executive mayor,” he says. “We have to get the legal
attracting other businesses to the city. “We want structures in place.”
the city to market Bangalore and improve its While this may be a source of frustration for
image so that more and more companies in similar Infosys, the phenomenon is not an unusual one.
industries will come and settle here, which creates Ultimately, many city administrations still require
an ecosystem,” he says. “This ecosystem generates the approval of state and national governments
vibrancy and innovation.” before they can act. Mr Mohandas Pai believes this
He adds that developing the softer side of city needs to change. “Unless you fix the governance
liveability has also yet to receive sufficient attention. model, dramatic improvement cannot take place,”
“The focus in Bangalore has not been on quality of he says.


Liveanomics

industries sector as a strength that’s worth supporting. The problem with that is, when you look at the
statistics, a lot of these places just don’t have that big a concentration of creative industry workers.
The desire to have creative industries, life sciences or an advanced manufacturing sector is totally
understandable, but it needs to be grounded in a realistic assessment of a city’s position.”

Shrinking cities a less dramatic scale, and took earlier action to try
to manage urban shrinkage in its cities—the inner
cores of cities like Magdeburg and Halle had been
Many cities seem to work under an unofficial mantra neglected for decades, in favour of new town suburbs.
of “bigger is better”. But that’s not the case in the Now politicians and planners have embarked on
Sachsen-Anhalt region of eastern Germany, where the “re-urbanisation” of inner cities, with tower blocks
motto of an urban regeneration scheme, International knocked down to create “green corridors” linking
Building Exhibition (IBA), is “Less Is Future”. hubs of collective activity, including small businesses,
Sachsen-Anhalt’s population has fallen by 17% artistic communities and conference facilities. In the
since Germany’s reunification, and continues to surrounding country reindustrialisation is encouraged
fall. Today it is around 2.m; Karl-Heinz Daehre, through incentives such as solar and wind energy
the region’s minister for regional development and projects. The region plans to be wholly weaned off
transport, predicts that it will fall to 1.5m by 2060 if fossil fuels by 2060.
policies remain unchanged. Eastern Germany has benefited from €1.5trn
By 2050, 70% of the world’s population is expected (US$1.9trn) in financial transfers from the federal
to be urban. But while most cities are growing, one in government and EU since reunification in 1990 and
every four cities is shrinking, according to Professor unemployment is now, finally, below 10%. But this
Philipp Oswalt, head of both the IBA and the Bauhaus money is now running out—it is even becoming
Foundation in Dessau. But embracing shrinkage, the too costly to demolish housing—and it has not
IBA argues, can be a stimulus for re-inventing cities stopped shrinkage. This has led to scepticism about
that are smaller, and promoting their quality of life. longer-term prospects for some of these shrinking
Professor Oswalt took the notion of shrinking cities European cities. “Some of these cities will be
as a potentially positive phenomenon to Detroit, abandoned completely, utterly devastated,” says
Michigan, whose population has fallen from 1.85m in Regina Sonnabend, an urban planner at the Bauhaus
1950 to just 790,000 today. In the autumn of 2010, Foundation.
Detroit’s mayor, Dave Bing embarked upon a series of But in the US, whose population is expected to
heated town hall meetings to present his controversial grow by 10m by 2050, the outlook is more positive.
plan to demolish 10,000 of the city’s empty homes by Terry Schwarz, director of Cleveland Urban Design
the end of 2013, and to revitalise the urban core by Collaborative at Kent State University, says that
“greening” it. Cleveland, where she lives, has seen its population
With a budget deficit of more than US$300m, Mr more than halve over the last 60 years. Now, she says,
Bing has closed more than 60 schools and cannot it is on the verge of a transformation unlike anything
pay enough fire-fighters to combat blazing houses. she has seen in her 20-year career.
Unemployment is officially around 28% and one in “We have to find a way to accommodate this
three lives below the poverty line. There is no hospital rapid growth while reducing our national carbon
for the uninsured in downtown Detroit (although footprint,” she says. “I think the gradual repopulation
there are three casinos). of post-industrial cities in the US must be part of
Sachsen-Anhalt faced similar problems, albeit on this equation.”


Liveanomics

Key points
n As budgets shrink, civic leaders are looking for new ways to partner with the private sector to maintain
and improve liveability.
n The private sector is also playing a larger role in helping cities become greener.
n Business plays an increasingly important role in raising cities’ profile.

Part III: Business helps build city liveability

A s well as generating wealth and employment, businesses play a central part in developing a city’s
quality of life—by investing in the built environment, by funding cultural venues and events and
by engaging in other forms of corporate philanthropy.
As city governments struggle with tightening budgets, civic leaders are looking for ways to
leverage private sector investment so that they can deliver the infrastructure and amenities that their
cities need. In the UK, for example, city leaders are looking at the idea of schemes called local asset-
backed vehicles, by which local government combines its land assets with private sector investment in
order to help fund regeneration projects. In this way, they hope to continue to be able to invest in the
built environment, despite a sharp contraction in public capital investment. “City leaders are looking
for new ways of getting infrastructure projects funded in partnership with the private sector,” says
Andrew Carter. “Without that, they’re going to suffer from a period of very low investment in their
built environments”.
For companies, philanthropy is only partly altruistic. “There’s self-interest in a larger context,
which is that as a business you are more successful if the community is successful,” says Stanley Litow,
head of corporate citizenship and corporate affairs at IBM, and president of the IBM International
Foundation. “A city that’s absorbed with a transportation crisis or public safety crisis is unstable, and
that has an impact on all the operations in that city including business.”
In Atlanta, the Atlanta BeltLine—a US$2.8bn redevelopment project that will create a network
of public parks, trails and transit systems along a historic railway corridor—has received financial
support from companies such as Cox Enterprises, an Atlanta media group, and Kaiser Permanente,
a healthcare group. “Those corporations are looking at the Atlanta BeltLine as a way of keeping
Atlanta competitive,” says an urban designer and senior associate at Perkins+Will, Ryan Gravel, who
developed the idea for the BeltLine project.
But delivering city liveability is not only about delivering infrastructure. For example, companies
have long played a role in supporting the recreational side of their cities. And there are business
benefits—corporate sponsorship of the arts, recreational amenities, sports and entertainment can
provide attractive branding opportunities.
Moreover, corporate leaders know that the presence of these amenities can help make their cities


Liveanomics

more attractive to the workforces they need to employ. Respondents to our survey make the same
connection—85% agree that the cultural and social attributes of cities are as important to business
as good infrastructure. Many companies make the link between availability of cultural amenities and
availability of talented workers; Deutsche Bank, for example, is a major sponsor of the arts in London,
even though it is headquartered in Frankfurt. “[The bank] could have focused on Frankfurt,” says
Colin Tweedy, chief executive of Arts Business, a UK-based organisation that connects companies
to cultural organisations. “But their employees love being in London because it’s hip and stylish and
that’s why they sponsor major exhibitions there.”
Big corporate sponsorship deals can help civic authorities to provide more of what makes a city
appealing, underwriting programmes that municipal governments would find hard to fund. In the past,
this has brought cities everything from libraries and art galleries to concert halls and sports stadiums,
as dominant companies have sought to boost their prestige in the city in which they are headquartered.
“We cannot reach However, the relationship between businesses and the cities in which they operate is changing.
this goal alone. We No longer is there necessarily a strong correlation between corporate philanthropy and company
need public and headquarters, as the Deutsche Bank sponsorship approach demonstrates. As companies become more
private partners global, their philanthropic efforts are becoming less closely associated with individual cities. Waves
interested in of corporate consolidation have seen smaller businesses with strong local allegiances snapped up by
developing green multinationals with a global agenda.
city solutions.” Companies still tend to have close relationship with their local educational institutions. Even
Copenhagen’s mayor Frank here, however initiatives can take a broader, more regional approach. In Latin America and the
Jensen on the city’s aim to
become carbon neutral Caribbean, for example, companies such as Nokia, Alcatel-Lucent and Microsoft support Entra
21, a regional program providing disadvantaged young people with employment training. While
residents in metropolitan areas across the region benefit, the programme makes no explicit links
with specific cities.
In some cases, corporate largesse is distributed far beyond a company’s home base. “New business
leaders in sectors such as IT have a different ethos in terms of their philanthropic responsibilities,”
says ICIC’s Ms Lynch. “There’s still a great sense of responsibility but [Microsoft founder Bill] Gates, for
example is looking at global disease rather than putting up cultural monuments in cities.”
Of course, the role of business in the success of cities goes beyond philanthropy or sponsorship.
Through their profit-making activities, companies deliver services such as electricity supplies and
communications technologies. In our survey, 65% of respondents see the private sector as best placed
to deliver energy while 93% look to business for the most efficient telecommunications delivery and
5% see waste management as best handled by companies.
Increasingly, however, companies are also playing a role in fostering another element of an
appealing city—its greenness. While in our survey, 22% of respondents believe that their city’s leaders
should make reducing environmental impact a priority, local governments realise they need the
technical know-how of the private sector to help them do so. In Copenhagen, the mayor is working to
involve the private sector in the city’s mission to become carbon neutral. “We cannot reach this goal
alone,” says the city’s mayor, Mr Jensen. “We need public and private partners that are interested in
developing green city solutions.”


Liveanomics

Meanwhile, businesses and industry associations can act as ambassadors for their city, helping
bring in new enterprises. Almost one-third of respondents to our survey feel that this should be a
priority for civic leaders, but Greg Clark believes that the message is more effective when it comes from
the private sector. “Businesses can talk to the rest of the world about why it’s good to do business in
their city,” he says. “That’s much more powerful than the city government talking about it.”

Banking on bikes (US$39m) in Barclays Cycle Hire and Barclays Cycle
Superhighways, new cycle lanes into central London
from outer London.
Since July 2010, certain corners of London have For Barclays, the branding rewards from funding
become home to a new form of public transport— these schemes are clear—the distinctively-coloured
bicycles for hire. Along with the Transport for machines catch the eye as they make their way
London roundel logo in the bikes’ livery is the bright through London or sit in ranks on street corners.
blue logo of Barclays, the bank that has sponsored However, the investment will bring the company
the scheme. So while the scheme is getting more other benefits too, including bolstering the bank’s
Londoners to use a new form of public transport, it environmental credentials.
is also an example of how corporate philanthropy is “Branding is one benefit of our sponsorship,”
penetrating further into the services that contribute says Deanna Oppenheimer, chief executive of UK
to city liveability. retail banking and Western Europe, and vice-chair of
Users sign up for membership, pay a membership global retail banking at Barclays. “But it is also about
fee and can then pick up and deposit the bikes at making a positive contribution to society in London.
docking stations around the city; journeys of less The schemes have clear benefits of partnering
than 30 minutes are free of charge. Visitors can also Barclays with a sustainable and environmentally
buy casual access. Since the scheme was launched, friendly mode of transport.”
more than 2m journeys have been made on the bikes, Ms Oppenheimer also points to another, longer-
while some 100,000 or more members have signed term benefit for the bank of being involved in this
up to use the service. kind of scheme. “More cyclists on London’s roads will
Barclays made a successful bid to sponsor the help to create a friendly, attractive city with more
scheme via an open tender process that was run pleasant shared spaces,” she says. “This is vital if
by Transport for London. As part of its five-year London is to continue to attract bright, talented
sponsorship, the bank is investing up to £25m people to live and work in the city.”


Liveanomics

Conclusion

O ur survey of urban professionals shows that a city’s liveability plays an important role in making
it a more attractive place for workers and businesses. But when they are exploring ways to boost
economic growth in their cities, policymakers’ first priority must be to find ways in which to stimulate
job growth, primarily by making sure that the basics of infrastructure are in the right place. Of course,
liveability has a role in attracting skilled workers to a city. But this should not be overplayed, especially
in the face of longer-term forces of change across economies. Ultimately, policymakers have limited
power to counteract these trends, whether it is by improving liveability, business support or skills.
The point this makes is that above all, urban policymakers need to be flexible and realistic in the
strategies they adopt to promote business growth in different areas. After all, the route to growth
remains far from clear, particularly in times of economic volatility. Improving a city’s liveability is an
important goal regardless of its impact on economic growth, but its value as an economic development
strategy seems likely to vary from place to place, and depends greatly on the circumstances prevailing
in each location. Policymakers should pay heed to this reality when formulating their plans. And they
should question the wisdom of advice that offers them a quick fix to deep-rooted problems.


Appendix Liveanomics
Survey results Urban liveability and economic growth

Appendix: Survey results

Where are you personally located?
(Top 20 locations; % respondents)

United States of America
25
United Kingdom
10
India
10
Canada
5
Australia
4
Singapore
4
Hong Kong
3
Germany
3
China
2
Brazil
2
Mexico
2
Switzerland
2
Italy
2
Spain
2
Malaysia
1
Sweden
1
Japan
1
Belgium
1
Denmark
1
Netherlands
1



What were your main motivations in coming to your city? Select up to three.
(% respondents)

To seek better work opportunities
39
I was born here/it has always been my home
29
I was posted here by my employer
24
To be closer to family/friends
21
To go to school or university, or to be near to better schools or universities
15
For culture/nightlife
14
For greater personal freedom
11
For existing relationship/To find new relationship
9
For safety/security considerations
8
For healthcare considerations
3
Other
8

How long have you lived in this city, and for how much longer do you believe you will live there?
(% respondents) Have lived Plan to live

Less than one year
4
4
1-2 years
6
6
2-5 years
15
15
5-10 years
21
14
10-20 years
20
15
More than 20 years
34
27
Don’t know
19

Based on recent trends, how do you expect your city will perform in the following categories?
Select one in each row
(% respondents)
Well Moderately Poorly Don't know/not applicable
Economic (business/employment opportunities)
51 39 91
Social (safety, culture, housing, community relations)
37 49 14 1
Infrastructure (roads/transport, utilities)
26 47 26 1
Environmental (air/water quality)
26 47 26 1



How would you rate the overall relative quality of life in your city, thinking broadly about factors such as the local standard of
living, natural environment and work opportunities?
(% respondents) As a place to live As a place to work

Excellent
34
30
Above average
36
43
Average
20
19
Below average
9
7
Poor
1
1

If you had a choice, in which environment would you prefer to live at the following stages of your life?
Select one in each row.
(% respondents)
Inner city urban Suburban/city outskirts Rural Smaller town/village
Student
70 20 10 1
First job
81 16 3
Career development
73 24 3
Family/raising children
18 53 24 4
Retirement
19 24 42 15

In your view, which factors are most important to you in making a city an attractive place in which to live and work?
Select up to three.
(% respondents)

58
47
Safety and security
44
34
28
23
20
17
17
6



What would be the primary things you would improve/change in your city to make life less stressful and/or improve the
quality of life there?
(% respondents)

59
35
30
Safety and security
27
23
20
16
15
15
10
Other
6

What do you think will be the most critical pressures on your city in the next 3 to 5 years? Select up to three.
(% respondents)

Pressure on public services, eg healthcare, schools
57
Migration into the city
38
Economic uncertainty
37
Pollution levels
31
Crime and safety
30
Shortage of jobs
25
Migration away from the city
10
Availability of clean water
10
Labour/social unrest
7
Political instability
7
Availability of clean energy
7



What do you feel are the primary benefits for your company or organisation in being located in your city? Select up to three.
(% respondents)

Access to talent/labour
63
City has a high profile nationally/internationally, and a good reputation
54
Transport links to other key cities/markets
37
Cost of talent/labour
21
Affordability/cost of living
21
Good local governance/political stability
20
Safe and secure environment
18
Beneficial tax/regulatory regime
12
Good healthcare
8
Access to raw materials
2
Other
10

What do you think should be the main priorities for your city's mayor/leadership in order to make your city more competitive
for business? Select up to three.
(% respondents)

Improving public transport/roads
61
Improving schooling/education
33
Encouraging multinational companies to set up business
32
Improving safety and security
29
Raising the city's profile and improving its reputation
27
Reducing corruption
25
Reducing environmental impact
22
Supporting local businesses ahead of multinationals
15
Improving healthcare facilities and access to care
12
Attracting major sporting/cultural events
11
Other
7


Urban liveability and economic growth: Jobs, housing, and infrastructure

Urban liveability and economic growth: Jobs, housing, and infrastructure

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