Our cities and towns are the engines driving economic growth and account for almost 80 percent of the world’s GDP. But if cities are engines of growth, then they are also significantly affected by a recession – when previously high growth becomes negative growth over consistent time periods.
How cities, including citizens, governments, and businesses adapt or collapse has come into sharp focus in the last few years, as riots, drastic spending cuts and policy changes unravel and play out in the streets of cities across the world.
Citizens are often directly affected through changes in the way they live. A salary cut or freeze could be combined with higher tax rates and higher public transport fares and as a result citizens have little to no money to maintain their previous lifestyle and need to make changes. On the positive side, private vehicles may become unaffordable or citizens may find it more cost effective to car pool, or switch to public transport, an indication that high consumer spending or growth is not necessarily linked to a more sustainable way of living.
In other ways, free and accessible spaces, activities and amenities made available in a city become more important, and are in higher demand. The range of services and potentially the quality of services provided by the local government could be limited, depending on the spending cuts and re-prioritization of funding.
“Collapsed tax revenues, unemployment, disinvestment, disruption to municipal services, and the climate of uncertainty have challenged local leaders like no other previous crises, and cities need to take action to address the dramatic fiscal deterioration in their public finances beyond short-term measures and recovery plans” says Jean-Jacques Dethier, the Manager of the Research Services unit in the Development Economics Vice Presidency, at the World Bank, writing about cities in the aftermath of great recession.
For local governments, a recession can offer the opportunity for introspection. Or at least it should. With increased strain placed on public spending due to, for example, lowered expectations of of tax revenues or reductions in allocations from the state and changes in policy, urban governments quickly learn to do more with less. Cities which previously benefited from a good credit rating to raise external financing may now struggle to do so with a lower rating.
But as with most challenges, a recession offers the opportunity for adaptation and innovation. It can become the catalyst to reshape policies around the infrastructure of transportation, housing, and other public goods ensuring that they lock into more financially sustainable paths. A previous #CityTalk on the economics of sustainable cities discussed the economic benefits of embracing sustainability.
And what do our cities become if businesses fail, and leave for greener pastures? The implications of the flight of business and ideas in a recession can be devastating. As an example, our streets; the product of people, businesses, spaces and interaction, may lose their vibrancy if fewer consumers are there to shop and if fewer businesses survive, with fewer workers moving in and around them.
Incomplete building projects including stadia, housing, and public transport investments can quickly become a common sight in cities previously known for their massive and iconic public and private infrastructure projects. The failure of businesses can therefore lower the overall level of confidence in a city and can quickly become intertwined in the brand of a struggling city.
It is clear (although less clear exactly how), that the impacts of a recession are not nearly surface level or exclusively economic, but reach deep down into the complex systems that are our cities and towns, often having a lasting impact.
Join This Big City and Future Cape Town on February 21st at 1PM EST/6PM GMT/7PM CET/8PM SAST for our next #citytalk tweetchat. We’ll be exploring and trying to unpack life in Recession cities, for all who experience them.
Photo: rachaelvoorhees
