Question

Urban Growth

1. Source of Economic Growth: Explain why you feel that Increases in Human Capital is important to the overall economic health of an urban area in Chicago?

2. Public Policy: Explain why you feel public policy is important to the overall economic health of an urban area in Chicago. And how its policy has attracted location decisions of companies.

Answer 1

Global cities in developed economies have many attributes that contribute to their success, but human capital will be the most critical element for economic growth going forward. Civic leaders in global cities, specifically government officials and business executives, should prioritize developing and attracting skilled human capital to achieve continued economic growth. The importance of human capital to global cities is not a new concept. In fact, the need for human capital is widely accepted and discussed in any report on global cities. However, this paper argues that human capital should be at the top of the agenda, with other civic policies deliberately supporting the creation of human capital. The prioritization of human capital for existing global cities in developed economies requires a new approach as we rapidly shift to a knowledge economy where these cities are less focused on the production of physical goods and increasingly produce the ideas and information that shape the world. Global cities in developed economies must focus on enhancing human capital to achieve continued economic growth in the knowledge economy. These cities are well-positioned to thrive as the global economy shifts to a model where ideas and information are most important and the highest value. Global cities in developed economies are different from their emerging market counterparts. They are less focused on the actual production of physical goods and instead place greater emphasis on their most important asset: their talented workforce. While human capital has always been important, changes in the global economy mean that people are by far the most critical ingredient for economic growth in the future. For that reason, any strategy for economic growth must focus on human capital. Specifically, all civic decisions must be driven by the priority of developing and attracting skilled human capital. Strong human capital in turn spurs economic growth, which is critical because it allows a global city to maintain its position in the world. A vibrant economy supports all other aspects of a global city by growing the tax base and supporting institutions. Well-paid workers support other businesses and institutions as consumers, which leads to more jobs. Global cities are key participants in the global economy. Current global cities in developed economies face challenges to economic growth. It is imperative that these cities be able to grow over an extended period of time, even if their home countries face economic headwinds because of demographics and slowing productivity. The only way to do this is by developing and attracting global talent.

Human Capital and Economic Growth

Global cities in developed economies have benefited disproportionately from globalization and technological advances that have occurred since the collapse of communism. Undoubtedly, there have been challenges, particularly around income inequality, but global metropolitan regions in developed economies have thrived and are well positioned as we continue to transition to a knowledge economy and increasingly urban world.

However, given that the era of global cities is a relatively recent phenomenon and is rapidly evolving, even developed cities need to be mindful of their growth strategies going forward. Saskia Sassen, a Columbia University sociologist and leading theorist of global cities, defines global cities as the strategic sites that manage and guide the global economy:

? as highly concentrated command points in the organization of the world economy

? as key locations of finance and specialized service firms, which have replaced manufacturing   as the leading economic sectors

? as sites of production, including innovation, in these leading sectors

? as markets for the products and innovations produced

The free flow of goods, capital, information, and people are what define and link global cities, which act as hubs in the global economy. Of these elements, people are the most important and will only increase in importance. There are many rankings and lists (see figure 1) of global cities. When one looks at these lists, it is clear that a large share of identified global cities are in developed economies. These global cities are different than their developing economy counterparts because their economies are less focused on the production of physical goods and more dependent on rofessional services. They have already begun to recognize that it is the workforce that drives new ideas, creates new businesses, and elevates a city to global status. Therefore, global cities in developed economies will have different growth strategies and different priorities than their developing economy counterparts. For example, fast growing cities in developing economies must prioritize building out basic infrastructure to accommodate rapidly growing populations. This is very different from upgrading existing physical and technological infrastructure, which cities in developed economies will need to do to attract people.

While global cities in developed economies are each unique, they all share a common goal: to sustain economic growth while transitioning to a knowledge economy. Many have existing attributes already to support this position, but nonetheless, these cities need to be mindful of the levers they pull in order to drive equitable and sustainable economic growth. Specifically, cities must prioritize developing and attracting top talent by using all policy levers available.