Are we experiencing the Third Revolution?

This article is published in collaboration with The Conversation. Publication does not imply endorsement of views by the World Economic Forum.

This year and this day – the United Nations’ World Cities Day – we should remember that the city is back. Across the globe there is an urban resurgence. In fact, it is of such major and global significance that I have described it as a Third Revolution, after the invention of cities around 5,000 years ago and the second linked to the Industrial Revolution.

In the US, cities that were losing population for decades are now experiencing an influx of people, and inner-city areas, long the black holes of capitalism, are now sites of major investments. Worldwide, cities are being revitalized. In Shanghai, for example, a former industrial site is being transformed into an artist precinct.

A select range of big cities are witnessing new influxes of people, quite literally transforming the urban experience and reversing the great suburban shift that occurred from 1950 to 1990.

The population of New York City declined steadily from 1950, bottomed out in 1980 and has now bounced back. London saw a steady population decline from 1951 until 1991. Now growth is beginning to surge past 1951 figures. A similar trend is apparent in Paris and Berlin.

But this revival is uneven and it comes with a cost.

Industrial cities such as Baltimore or Detroit, unable to replace the defunct industrial and manufacturing jobs, continue to lose population and fail to attract investment. And housing affordability in the most desirable cities is a worrisome trend that threatens to exacerbate social inequalities.

Hub for knowledge workers

What is behind this major urban transformation? We can identify a number of factors.

Household size is declining and there are more single-person and non-child households. In 1970 in the US, 40.3% of households were married couples with children and only 16.2% were single-person households. In 2012, the percentage of married couples had declined to 19.6% and single person households to 19.6%.

For an increasing number of people, the central city rather than the suburbs is a more attractive proposition with more job opportunities, a larger dating pool and more amenities. Almost half of all households in Atlanta and Washington, DC are single person.

Because we are now expected to do more in less time, time itself becomes more highly valued, adding to cities’ allure. The city is being turned inside out as the poor are displaced to the suburbs to spend more of their time commuting while the wealthier can devote more of their time to work and leisure such as visiting the gym.

There are also declining crime rates that have made cities palpably safer places to live – a trend felt around the world.

The most dynamic part of the economy, with more job opportunities and higher wage rates, is in the cultural creative economy of finance, advertising and all those sectors that require symbolic analysts – that is, “knowledge workers” with critical thinking skills.

Data and narrative have replaced metal and manufacturing. This cognitive capitalism has a heavy urban bias as it requires the close proximity of talented and creative people. There are strong economies of agglomeration because an increase of knowledge, creativity and innovation is generated by people living and working closely together.

There are also supply-side factors as well; the possibility of urban transformation from low-value to high-value land use provides opportunities for great profit from real estate development. This process, often lubricated, promoted and partnered with governments, attracts capital and investment from around the world. The frenzy of development, most of it speculative, can and does lead to short-term and even longer-term property slumps and housing bubbles. Even in places such as Dubai, awash in oil money, property slumps are a threat.

Priced-out populations

The British sociologist Ruth Glass first coined the term gentrification in 1964. It has now expanded to include not only the replacement of poorer people by the wealthier but the urban transformation of entire neighborhoods.

It is now used so often that it is now more a slogan than an analytic construct, but its common usage highlights the pervasive nature of urban change. It occurs, in different forms and manifestations, in cities around the world, from Paris to Seoul to Hanoi.

But this urban transformation comes with negative effects. The most obvious is the displacement of the poor from central cities, the suburbanization of poverty and the creation of cities divided by class and income as the rich take over the central city and the poor and middle-income are displaced to the suburbs.

Indeed, poor and middle-income people – once the mainstay of cities – are being priced out. This lack of affordable housing is causing social frictions. In Berlin, a flood of young adults from across Europe are attracted by the low cost of living in a vibrant city, yet the supply of accommodation is hampered by huge construction costs and lengthy planning process. Median rent has risen by 50% since 2009 and there are protests about soaring apartment rents and an increasing gentrification. Since 2010, the city has been adding between 40,000 and 50,000 people every year, while new housing units have been increasing only between 5,000 and 7,000 units each year. In Mumbai, India, with expensive real estate market costing as much as US$1,500 a square foot, there is no land available for shelter for the 60,000 people living in the streets.

In other cities, the less powerful are marginalized as house prices and rents climb beyond the reach of all but the wealthiest. In London, for example, the concentration of the very wealthy has pulled up prices throughout the central city region, forcing the middle-income to commute longer distances.

Humane cities

What can be done? Possible public policy responses include rent control, setting aside a certain proportion of new development for social housing and using public land to build more affordable housings.

This is not only an issue of social justice but also one of urban competitiveness. If workers have to commute long distances, then overall productivity is decreased. Vibrant cities with affordable housing are also more likely to be magnets for talented workers.

We should be building cities that are productive, competitive, sustainable, livable and fair. On World Cities Day, we should commit to building a more humane city.

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Author: John Rennie Short is an expert on urban issues, environmental concerns, globalization, political geography and the history of cartography.

Image: Cars and trains move on Taksin bridge over Chao Phraya river in central Bangkok, March 2013. REUTERS.