04 Sep Urbanization: The Big Picture
By Anjum Altaf
Anyone wanting to understand urbanization needs to get past two major misunderstandings.
First, urbanization is not about individual cities – neither solving their problems nor enhancing their potential for growth. The end result of urbanization is indeed an increase in the population of cities but the term itself refers to the movement of people from rural to urban locations.
But which urban locations do (or should) people move to? That is a more important question. What are the choices that exist and what determines the attractiveness of one location over another? Should public policy attempt to influence the spatial distribution of population by altering the attractiveness of different types of locations?
Second, the pattern of urbanization is not predetermined. People move primarily to seek work and therefore any change in the distribution of employment opportunities should alter the pattern of migration. Different industrial or economic policies should lead to different patterns of urbanization.
For example, an export-oriented industrial policy favors coastal locations; one based on high-end services might best be centered in big cities; labor-intensive manufacturing for the domestic market is suited to medium-sized cities; a big agro-industrial push strengthens the role of small towns.
It should be obvious that urbanization cannot be divorced from a discussion of industrial policy. But what exactly is our industrial policy and what role does it envisage for the various categories of urban locations – the big, medium, and small-sized cities and towns? Never having considered this explicitly, we have unplanned urbanization with suboptimal results – the big cities are overwhelmed with the influx of people and the majority of medium and small-sized cities are stagnant.
Eighty percent of Pakistan’s population lived in rural areas in 1950 when the economy was dominated by agriculture. Industrialization began to draw people into cities primarily because urban wages exceeded rural wages and better access to services added to the attraction.
The structural transformation of an economy – the transition from agriculture to industry – is accompanied by urbanization because most industry is located in cities. South Korea and Pakistan shared the same level of urbanization in 1950 but the structural transformation in the former is complete – in 2010, 80 percent of its population was urban.
The structural transformation in Pakistan and India has remained stunted by contrast – by 2010, only about 40 percent of their populations were urban according to official statistics, the consequences reflected in their much lower living standards compared to South Korea.
The stunted transformation in the subcontinent is both a source of opportunity and a cause of concern: the former, because the majority of the population is yet to migrate and therefore their choice of locations can be influenced by intelligent policy interventions; the latter, because there is little serious thinking on industrial policy that will influence people’s choices over locations.
The concern is compounded by the fact that arrested industrialization does not forestall urbanization. There might be no positive incentive to migrate but if rural poverty deepens desperate people would be pushed into cities. Such a poverty push has swelled a number of megacities in Africa. A similar push drives the export of labor from many regions in South Asia skipping domestic locations and moving directly to employment-generating cities abroad.
Poverty-driven urbanization is a consequence of weak industrialization. Employment shifts directly from agriculture to low-level services in informal sectors. The results are visible in slums in the big cities.
Healthy urbanization is not possible without industrialization whose policy parameters impact the choice of locations. This connection is ignored in the subcontinent. When challenged, policymakers are likely to argue that economics ought to be left to the free market which would best determine the locations of jobs and people would move accordingly.
This is contrary to experience. God did not create markets, human beings did. Almost all major markets in the subcontinent are outcomes of public sector investments (railways, canals, roads, villages) made by the British for objectives that are hardly relevant today. Opening up the Pakistan-India border or linking Kashgar to Gwadar would strengthen some markets and create others where none existed before. Each would affect the choice of destinations for rural migrants.
This raises a policy question: Where should jobs be located to yield an urbanization pattern that makes people better off? The question assumes that policy makers have a free hand in choosing locations and types of jobs. Unfortunately, that is not the case –one cannot, for example, relocate an impoverished farmer and expect him or her to adapt seamlessly to modern industry in a mega-city.
The reason is simple. Pakistan and India have not invested adequately in the health, education and skills of their rural citizens. Weak social and labor policies have severely limited the ambit of industrial and urbanization alternatives. Abstract theory might suggest that mega-cities are the most efficient engines of economic growth but with the existing endowment of human capital one might just end up with a transfer of rural poverty to urban locations.
The more realistic question is to ask what kinds of urbanization patterns are compatible with existing socioeconomic conditions. Should an informed policy favor rural industrialization? Should there be a phase of skill enhancement through agro-industrial development in small towns? Should medium-sized cities serve as intermediaries in a staged urban-industrial strategy?
These longer-term perspectives may appear suboptimal from the viewpoint of abstract growth theory but economists tend to forget that life is real and not abstract – one can only assume away reality at great cost to human beings.
The key takeaway is the following: Cities are not going to drive growth; rather, different types of growth will energize different types of cities – provided there has been adequate investment in human and physical capital.
Anjum Altaf is Dean of the School of Humanities and Social Sciences at the Lahore University of Management Sciences. This op-ed appeared in Dawn on September 3, 2013 and is reproduced here with permission of the author.