Hail the rise of the mega-city. Surrounded by millions, we work better and are more prosperous

Even cities that have lagged behind are now putting in infrastructure

Projected 9.6 million rise in the population would mean an increase bigger than the current 8.3 million population of London (Getty Images)

If you think that the gap between London and the rest of the country sometimes seems larger than the gap between North and South, and even – dare I say it – between England and Scotland, it looks as though it is likely to get larger still. For London is part of a global trend towards mega-cities, and according to a new study by Oxford Economics on global cities, is set to add another 1.5 million people by 2030, taking its total population to 10.1 million.

The trend is universal, as evident in the emerging world as in the developed. Indeed it is more evident in the emerging world, though in another 15 years or so that distinction will have become yet more blurred than it is today. The fastest growth of population inevitably will be in Africa and the Indian sub-continent, but the fastest growth in economic activity will come in cities in China, which are, so to speak, getting richer faster than anywhere else.

So while the Tokyo region will in 2030 remain the largest economic entity, with a GDP of $2.4 trillion, it will no longer be the world’s largest urban agglomeration: its 36.3 million people will be pipped by the 37 million in Jakarta. Aside from Tokyo, the only urban region in the developed world with more than 20 million will be New York/Newark/Jersey City. Meanwhile, there will be four cities in China with more than 20 million inhabitants, the largest being not Beijing or Shanghai but Chongqing.

In the Indian sub-continent Dhaka is projected to pass both Delhi and Mumbai in size, while in Africa, Lagos remains the giant, reaching 25 million. In Latin America both Mexico City and Sao Paulo will be above 20 million, whereas in Europe the London region passes Paris to become the largest, at 16.7 million.

If, however, you look at economics, ranking cities as “island states”, the pecking order goes Tokyo, New York, Los Angeles, London, Shanghai, Paris. So in another 15 years or so, wealth will remain in the developed world, but that wealth will be rapidly shifting towards the emerging one.

This prospect raises a string of questions. There are the parochial ones for us. How do we fit another 1.5 million people into London and continue to maintain or improve the quality of life for all? How do we make sure the wealth that is being generated is pushed outwards, not just to the commuter belt but to the country more widely? And perhaps most difficult: how do we stop people in London thinking of it as an island state? The argument there is partly a moral one – Londoners are part of the wider community and depend on it – but there is also the hard-nosed practical one that such an attitude is likely to undermine the prosperity that the city generates.

The questions for the world are, of course, much more important than the questions for us. To many people the idea of a world dominated by mega-cities is an alarming one. In Europe we have the example of a successful country, Germany, where there is no single dominant city. But that is a function of German history over the past century, not one that anyone would want to emulate. In any case, this is not really a European issue. What really matters is not that London or Paris is too dominant. Surely what matters is how Jakarta, Dhaka or Lagos will evolve to give the best possible life for the people who live there.

Here I think it is possible to be quite hopeful. If you have wealth and organisation you can fix it. And mega-cities develop mega-wealth. There is a model in the Tokyo region, where a huge agglomeration works remarkably well. It is clean, safe and prosperous – the safest large city on earth. It is also, for all the debate about Japan’s lost decade, an economic powerhouse. It generates the wealth to pay for the infrastructure that any giant city needs.

That is surely a pointer for the emerging world: they need to put in the infrastructure. Gradually that is happening, even in cities that have up to now lagged behind. For example, getting around Delhi used to be a nightmare but the Metro is developing into an extensive modern network.

There is one further point that troubles many people, which is the environmental cost of mega-cities. They are crowded and messy; they eat up large amounts of agricultural land; and they put pressure on their hinterland to service their needs.

All that is undeniable, for the costs are visible and obvious, and people who don’t like cities will not change their view. But from an economic perspective they are better both at generating wealth and fulfilling people’s needs than the countryside or suburbia. Obviously density cuts the cost of public services. Why does Scotland have to have higher public spending than the rest of the UK? Because density is lower. Less obviously density also increases people’s efficiency. When someone in China or India moves to a city his or her output rises by at least 30 per cent. It also reduces family size, or at least is associated with that. Seen this way, urbanisation is doubly welcome – which is a bit of a relief, as if the Oxford Economics projections are right, we will get a lot more of it.

Our money’s not going quite where we thought

Anyone pondering on economic policy after the general election next year should read a new paper from the Office for Budget Responsibility, which highlights the way in which spending has shifted, and is projected to carry on shifting in the future. The core point is that spending is moving away from public services and investment, and towards welfare and debt interest.

The starting point is the way public finances became unbalanced from 2003 through to 2008. The government estimated each year that it was running a structural deficit of 2 to 2.5 per cent of GDP, but this would come down over time. Not only did it not come down but it now appears with hindsight that the deficit was larger than estimated at the time.

“In the run-up to the crisis,” the OBR reports, the Government “consistently ran deficits that were larger than forecast, and larger than in most other developed economies”.

Looking ahead, the projection is that we will balance the books in 2018-19, leading to the first surplus for 18 years. At that stage both receipts and spending would be about 38 per cent of GDP, roughly the same level as in the early 2000s.

So why is this return to what might be called “early Gordon Brown” seen by many as vicious cuts in spending? The explanation is the shift in priorities, in particular the really big cuts in day-to-day spending on services.

We notice those, whereas to most people money spent on welfare is less visible and money spent on debt interest invisible – but this is not an easy one to explain to voters.

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