Big Cities and Growth

'Jakarta by Night' Panorama

Professor Christopher Findlay, University of Adelaide

Indonesian cities appear to have excellent opportunities to contribute to growth and development, given their scale and the comfort of their communities with the social media.  But success depends on complementary investment and policy decisions by governments on infrastructure, education and entrepreneurship.  The same forces which make cities a success can drive political change if expectations are not met.

Indonesia has many big cities.  Jakarta with nearly 19 million population (including the outlying areas) is a huge city, flanked in the rankings by Los Angeles and Manila.   About 8 other cities are over 1 million.

Recent research stresses that cities are productive and can generate higher incomes.  Some of this work is laid out in September 2011 issue of the Scientific American (see here). For example, Bettencourt and West (see  here) report that:

  • Doubling city size regularly increases wages and patents per capita by 15% (over a wide range of city sizes)
  • ‘If 8 million people all live in one city, their economic output will typically be about 15 percent greater than if the same eight million lived in two cities of half the size’
  • ‘A city of 8 million needs 15 percent less of the same infrastructure than do two cities of four million each’

Scale also means fewer emissions.

Bigger cities can be ‘greener’ than smaller ones, although this depends on building the right infrastructure (to resolve traffic congestion for instance).  They can be healthier as well but that too depends on whether the basic infrastructure is in place.  New Yorkers apparently have a long life expectancy than other Americans.

Bettencourt and West say their results apply in cities in countries at different stages of development, so this is not just a rich country phenomenon.  But they do say that there is variation around these average indicators.  Some cities have done even better as they have grown, and others have not.

The secret lies in cycles of innovation and increases in wealth which have a couple of drivers.  Partly the cycles will be the result of endogenous innovation, driven by rising rents in larger cities which encourage action to become more productive.  But also there is selection process, since those who remain in the city are the highly productive firms that can pay the rents.

This story about the benefits of urban development seems to be resilient to the growth of social media.

Some had argued the alternative, namely, that proximity would no longer be important, and that cities would be less important.  It now looks like social media is a complementary force.   It accelerates the spread of ideas, making it easier for people to get together and share information.

If this complementarity factor is right, then Jakarta is an interesting position.   The Economist has reported that ‘Indonesia is now the world’s second-largest market for Facebook and the third-largest for Twitter.’  The article says

Indonesian culture seems particularly receptive to online socialising. People love publicity, don’t fret much about privacy and gleefully follow trends. “Everything is about friends and location,

says Andy Zain, the founder of MobileMonday Indonesia, a networking forum.

It noted, pointedly, the different strategies of the big firms.  Facebook for instance in what looks like a mistake ‘doesn’t even have an office in Indonesia, yet it has grown like crazy, to 30 million users.’    But Yahoo! has bought Koprol, a social network.   One of the services it offers isMeet new people:  Find out who else are in the mall or in your neighborhood. Say hi, have conversations and plan a meetup!’

This nice example of the way that the social media complements the urbanisation process by facilitating face to face contact.  MobileMonday offers something similar for people in the mobile industry.

The Economist also points that of 230 million or so Indonesians, fewer than 20% are connected to the internet (although about two thirds of the population have a mobile phone and this is expected to reach 100% in a few years time). Capturing the benefit of social media and being on par with other cities also means getting infrastructure and access conditions right so that it can operate widely.

Edward Glaeser points to another success factor:

Education leads successful urban development (not the other way around).

He argues that ‘skills not structures are the best antidote against urban failure’.  His concern is the risk of investment in structures like transport systems, and he refers to the Detroit People Mover which ‘glides over desolate streets’ (see here).

Glaeser also refers to entrepreneurship, which has been the focus of a big program in Indonesia this year (see The Global Entrepreneurship Program Indonesia (GEPI)).  Indicators like the share of employment in start-ups and average firm size correlate he says appear to lead successful urban development.

Finally, the combination of urban scale and social media can add up to powerful political forces.  The new media adds to the power of coordination of people in urban areas, which is a critical part of the virtuous cycle of urban development.  But as events in the Middle East have shown, Governments which don’t deliver can be subject to large and well organised demonstrations of political opposition.

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Filed under Economic development, Education, Energy, Indonesia, Infrastructure, Investment, Review of article, Social media

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