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The Wealth and Poverty of CitiesWhy Nations Matter$

Mario Polèse

Print publication date: 2019

Print ISBN-13: 9780190053710

Published to Oxford Scholarship Online: October 2019

DOI: 10.1093/oso/9780190053710.001.0001

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Shaping Cities and the Social Relationships Within Them

Shaping Cities and the Social Relationships Within Them

Cars, Boundaries, and the Provision of People Services

Chapter:
(p.77) 3 Shaping Cities and the Social Relationships Within Them
Source:
The Wealth and Poverty of Cities
Author(s):

Mario Polèse

Publisher:
Oxford University Press
DOI:10.1093/oso/9780190053710.003.0004

Abstract and Keywords

Some cities are more compact, and others are more sprawled; some are more segregated by class or race, and others are more socially cohesive. The outcomes are always in part shaped by national policies. This chapter first explores the drivers of urban form and of social and economic relations in cities, beginning with public policies toward transit, car use, and the consumption of land. Then it turns to the role of downtowns in shaping cities. The greatest challenge remains the promotion of social cohesion and social peace in large, diverse urban regions, notably in ethnically and racially divided societies. Instituting appropriate models of metropolitan governance, ensuring the equitable provision of people services (such as education and health), and curbing exclusionary practices (NIMBYs) are core issues, which societies have approached differently. The success of Vienna, ranked the world’s most livable city, has its roots in a unique model of metropolitan governance and housing provision but one that is difficult to transpose to other national settings.

Keywords:   central business district (CBD), downtowns, social cohesion, urban form, segregation, NIMBYs, metropolitan governance, Los Angeles, Red Vienna, public transit

In the previous chapter, we examined the institutions that allowed cities to become places where wealth could be created. We discovered that those institutions are very demanding and are at the root of the underperformance of all too many developing cities. We have said little so far about the shape of cities (urban form and urban structure, the technical terms used by economic geographers) or the conditions that allow (or do not allow) city dwellers to live together in reasonable peace and harmony. Here we return to the developed world.

National Governments Shape Cities

American cities are as a rule less dense and more sprawled than comparable cities elsewhere. That outcome is no accident, but rather the result of a particular mix of institutions and policies. It is to be expected that cities in older developed nations will be more compact, with correspondingly well-developed public transit systems. Cities like Paris and Vienna began to grow well before the advent of the automobile. Vienna attained its current population size before the first cars appeared. Its narrow inner-city streets and pedestrian squares are the outcome of a city where walking and horse carriages were the principal means of locomotion. History also explains why East Coast American cities like New York and Boston and other earlier settled cities are denser with stronger centers than cities that developed later. Los Angeles and Houston are examples of cities built around the car.

However, late settlement cannot alone explain the difference. American cities are also, on average, more car-dependent than Australian and Canadian cities. Sydney and Melbourne, like Canada’s three largest (p.78) metropolitan areas (Vancouver, Toronto, and Montreal) all have well-developed transit systems with strong downtowns—which begs the question: why do American urbanites consume on average more land and use proportionally less public transit? Are Americans inherently more in love with cars than other people; is love of the automobile a peculiarly American trait, so to speak? My experience living in France is that the average Frenchman is no less attached to his car than the average American, and perhaps even more so. For an answer, we need to look elsewhere.

Killing Public Transit: Step 1

The answer most economists give is simple: the “incentive system” in the United States encourages people to drive and to consume urban land. This is shorthand for the myriad rules and price mechanisms that incite people to do one thing rather than another. Let’s start with the consumption of urban land. U.S. tax law allows new homeowners to deduct the interest on their mortgage. The home mortgage interest deduction1 has been in place for several decades and is probably impossible to repeal, understandably popular with homeowners. Besides depriving the U.S. Treasury of a pretty penny (estimates put the annual revenue foregone in the hundreds of billions), the deduction constitutes an explicit subsidy to the middle and upper class, who are more likely to be homeowners. More to the point, the deduction is an incentive to purchase bigger houses and to consume correspondingly more land. By the same token, the deduction favors suburban expansion over central city consolidation. In a word, Americans are being subsidized to consume more space.2

Let us now turn to the incentives to use a car to commute to work. In June 1956, President Dwight D. Eisenhower signed the Federal-Aid Highway Act, creating the Interstate Highway System. The federal government shouldered about 90 percent of the capital costs of new highways. That in itself is not particularly noteworthy. Other nations have nationally funded highway systems. The system launched by President Eisenhower, however, differs from that in other nations in three respects. First, it provided no equivalent funding for public transit, precisely at the moment in time (the 1950s and 1960s) when mass transit was coming under threat. Unlike the United States, most European nations invested predominantly in rail and urban (p.79) transit in the years following World War II, in part to repair the damages of war.

Second, federal highways were to be free—there would be no tolls—the highways were appropriately called freeways in California. Tolls have since been introduced in some parts of the system, but American highways remain largely toll free, notably for highways within urban areas.

Which brings me to a third (and major) attribute that sets the American system apart: Highways became major modes (sometimes the dominant mode) of intra-urban transport, crisscrossing city centers and becoming the favored mode of transport for commutes between home and place of work. Limited-access divided highways rarely penetrate the city center in European cities.3 It is impossible to cross or to enter central Vienna without using city streets. A Viennese suburbanite cannot use a highway to go downtown. Divided highways are essentially seen as a means of travel between cities—say between Paris and Lyon, not within cities. Paris, like many European cities, has its outer-ring artery (la périphérique) that allows drivers to circumvent the city proper, but the driver cannot continue into the city without descending into its winding streets and boulevards.

I do not know what motivated American urban planners to adopt a philosophy of intra-urban rather than inter-urban highway construction, the former all too often becoming unsightly elevated eyesores cutting across old neighborhoods. Some blame must go to the powerful automobile lobby (the big three: General Motors, Ford, and Chrysler), which had come to dominate the American industrial landscape. The automobile industry was at the heart of America’s postwar industrial revival. Anything that encouraged consumer demand for automobiles was good for the economy. Canada was not immune to similar pressures; several intra-urban highways were built in Canadian cities, notably the Gardiner Expressway in Toronto and l’Autoroute métropolitaine in Montreal, the latter part of the federally funded Trans-Canada highway system. However, these were exceptions rather than the rule. Vancouver never allowed a highway to penetrate its central core, reflecting Vancouver’s environmental consciousness long before the environment became a fashionable issue. No Canadian city, and certainly no European city, comes close to reproducing the cobweb of divided highways that crisscross urban areas like Dallas, Houston, and Los Angeles, where they remain the dominant mode for high-speed intrametropolitan travel.

The incentives to use one’s car to commute do not end there. Gas (petrol) prices at the pump vary across nations, the basic reason for the (p.80) difference being not the cost of extraction or production, but rather taxes. Precise price differences differ across jurisdictions (states, cities, etc.) and fluctuate over time, but average gas prices in American cities are as a rule about half those in Western Europe, and sometimes even lower, and are generally 10 to 20 percent below the price in Canada. In some European nations, taxes account for 75 percent of the pump price, about a third in Canada, but below 20 percent in most U.S. jurisdictions. In short, low gas taxes and largely “free” federally funded intra-urban highways, taken together, constitute a powerful incentive to use one’s car over other modes. The emphasis here is on use, not ownership; Canadians, Australians, and Europeans are all as prone to own cars as Americans; they just use them less to commute.

I am not against cars. Our family car allows my family freedom of movement that would be impossible otherwise, and I am certainly not about to give up my car. However, I commute to work using public transit. Even in Montreal, however, the majority of workers commute by car, except those who work in the central business district (CBD). Montreal is not all that different from many other cities. The principal reason, besides the absence of satisfactory alternatives (especially in the more outlying suburbs), is that drivers in Montreal are not paying the “true” price (to society) of their choice. Roads, boulevards, and streets are “free,” as in almost all cities. Street pricing and tolls are the exception not only because of technical limitations (this will be less and less true in the future), but also because road-pricing is a hard sell, naturally unpopular with urban electorates. Elementary economics tells us that when something is free, it risks being overconsumed. This is no less true for highways, roads, and streets, which is the principal reason traffic congestion remains a worldwide problem. In almost all nations, the use of cars is subsidized (underpriced), the bill paid by society as a whole.

Killing Public Transit—Step 2

The United States stands out in the size of the subsidy, a massive transfer to urban American drivers. Putting aside the environmental consequences of higher CO2 emissions, the most consequential long-term effect of underpricing car use following World War II was the (p.81) destruction of public transit—almost total in some places—which brings me to the subject of modal split: the competition between transport modes—bus, subway, car, bicycle, walking, and so on. The use of one mode necessarily excludes the use of others; one cannot both drive to work and take the bus. Perhaps early urban planners in cities like Los Angeles and Dallas did not fully comprehend this principle: by building freeways, keeping fuel prices low, as well as other incentives for car use (i.e., free or cheap parking spaces), they were directly undermining transit services. Until the mid-20th century, transit services—streetcars, trolleybuses, rail, and buses—were highly profitable undertakings, often owned by private companies. In 1930, Los Angeles’s big bus conglomerate carried some twenty-nine million riders a year.4 Demand was assured since the majority of the population did not (as yet) own a car and were captive clienteles. the most profitable routes highly coveted by transport providers (bus and tram line owners). The allocation of routes by municipal authorities was often an object of political horse-trading and a potential source of graft. Regrettably, this is still the case in most cities of the developing world where car use remains beyond the means of the majority. The most lucrative bus and mini-bus routes in Puebla, for example, remain highly sought-after political prizes.

With the arrival of the automobile, almost everywhere, public transit ridership and profitability plummeted as car ownership grew. Every new driver was a fare lost. The switch to car use set in motion a self-reinforcing cycle of falling revenues and falling demand for travel by bus, streetcar, or other transit modes. Transport companies either went under or simply ceased to operate. Every city has its story to tell, but the sequence of events was fairly similar everywhere. Where the stories differ is in the reaction of public authorities. As streetcar, rail, and bus companies increasingly fell into the red, operators lobbied governments for funding. Unable to operate without public subsidies, the once private companies were, almost everywhere, eventually taken over by local government. Montreal municipalized tram and trolley bus services in 1951, tearing up tram lines. Toronto did not make the same mistake; it was one of the few North American cities to keep its streetcars, which are still in use today. In the United States, several cities (e.g., New York, Boston, and San Francisco) municipalized public transit systems. The New York Transit Authority began operating subways and bus lines in 1953.5 Once a largely private industry that paid taxes, transit now (p.82) became a public service, a burden that absorbed tax dollars. Maintaining a public transit system had now become a political choice, requiring public support, as it remains to this day.

In the face of rapidly falling ridership and growing demands on the public purse, public transit was left to decline to the point of no return in many American cities. Here we come to a second infernal circle that is difficult to reverse once set in motion. Cities that grew around the car necessarily produced less dense patterns of urban development, making it more difficult to maintain transit services unless they were highly subsidized, leading in turn to further reduced services and further decline in ridership, and so on until transit services basically collapsed. This outcome was not necessarily universally bemoaned. In many places, urban planners at times saw the car as the “modern” solution to urban mobility. Highways were the future. The construction of wide car-friendly boulevards and urban highways began in Los Angles before the Federal Highway Act of 1956. In the decades that followed, the battle between the car and transit was (and has remained) an uneven one, with the former highly subsided (but largely hidden) and the latter needing up-front public funding to survive.

The extended sprawl of many American cities and corresponding lack of transit services was, in short, not accidental. The principal actors at the time were undoubtedly not fully aware of the long-term consequences of their choices. The first to suffer would be the poor and minority populations who could not afford a car, an inducement to concentrate in inner-city neighborhoods. Nor could policymakers have necessarily foreseen the devastating impact of car dependency on the health of downtowns.

Resuscitating Public Transit?

As the negative consequences of disappearing public transit became increasingly apparent, with mayors calling for federal intervention, the plight of public transit slowly began to improve. Starting in the 1970s, some twenty years after passage of the Federal Highway Act, Congress began to make federal funds available for public transit based on various cost-sharing formulas with state and local authorities.6 Almost every American metropolitan area has sought to revamp its transit system with the aid of federal funds. However, in all too many places the damage was done; sprawl (p.83) and hollowed-out downtowns had become too far advanced to be reversed. Once ridership falls below a certain threshold, revival becomes nearly impossible. Use of public transit is also in part a matter of habit, which is difficult to revive once lost. Buffalo is representative of what occurred in many places. A light rail system was inaugurated in 1985 (Metro Rail) at the cost of some half a billion dollars largely federally funded, with the main line running from downtown to suburban Amherst. The rail cars are admirably modern and clean, but ridership has not followed, even declining in recent years.7 There is little evidence that Metro Rail has been instrumental in resuscitating the downtown or reviving the regional economy.

The American taxpayer is in the end paying twice for the uneven battle between transit and car: first, by subsidizing car use and second, by paying to repair the damage done. Had earlier policies been less one-sided, the American taxpayer would be paying less today to restore public transit.

Again, I do not wish to leave my reader with the wrong impression. I am not against suburbs. Suburbanization is the inevitable outcome of rising incomes and urban growth. Young families understandably aspire to a home with more than one bedroom and ideally a yard where their children can play. Family-oriented housing is of course more difficult to provide in a center-city setting. As the experience of other nations demonstrates, however, suburbanization need not automatically mean the death of public transit, although suburbanites will often use their car to commute to work. The difference is in relative proportions. Transit shares in Canada’s three large metropolitan areas have historically been in the order of 20 to 25 percent, compared to shares below 5 percent in Dallas, Cleveland, and Atlanta.8 Transit and private vehicles will always be in competition. The challenge is not allowing the second to completely undermine the first.

But does urban form really matter? Do more or less dense, more or less transit-oriented urban forms affect a city’s ability to generate wealth? On the one hand, there is no hard scientific evidence of a causal relationship between urban form and income per capita or other indicators of wealth. On the other hand, San Francisco, Boston, and New York, three relatively compact urban areas by U.S. standards with strong downtowns and good transit systems, systematically register at the top on various measures of income and wealth.9 This brings me to the role of strong centers not only in creating wealth but also in shaping urban environments that are reasonably socially cohesive.

(p.84) Why Downtowns Matter

Rare are the successful cities that have lost their downtowns, although they may have gone through difficult periods as did Manhattan in the 1960s. Downtowns have always mattered. They matter even more in modern economies driven by the production and exchange of information. A recent Federal Reserve Bank of Cleveland study for U.S. metropolitan areas found a strong positive relationship between central (near-CBD) population density growth and metropolitan per capita income growth.10 Chicago’s central neighborhoods in and around the Loop have grown faster in recent years than the metropolitan area as a whole. Information-rich activities are naturally drawn to dense central neighborhoods that are conducive to face-to-face meetings, which t, as we have seen, are at the heart of New York’s revival.

The role of downtowns and central neighborhoods is as much symbolic and affective as economic. For most people, the monuments, architecture, and look of downtown come to embody their city: Times Square and Fifth Avenue in New York; the Eiffel Tower and the banks of the Seine in Paris; Calle Florida and Teatro Colón in Buenos Aires. Like a canary in a coal mine, the health of downtown is a barometer of the city’s health. In Chapter 1, I pointed to the decline of Calle Florida, which has now been largely abandoned by its middle class, as the sad symbol of Buenos Aires’s decline. Then Mayor Rudy Giuliani of New York knew what he was doing when he chose to clean up Times Square in the 1990s, a cleanup that became the visible symbol of the city’s rebirth. Most New Yorkers today are justifiably proud of their city, very different from their perception not so long ago. One of the first things Charles de Gaulle did upon becoming president in 1959 was to order the sandblasting of the thousands upon thousands of buildings of central Paris that had become covered in a gray-like grime, the result of decades of neglect. This was a colossal and costly undertaking; but it gave Parisians renewed pride in their city.

New York also taught us that strong centers make good business sense. Strong centralities produce economic rents (which can be taxed), as any mayor knows; which is why mayors around the world fight so hard to protect their downtowns. Centralities are always human-made. Buffalo’s downtown, we shall discover in Chapter 4, lost its centrality and the location rent that went with it, and as a result, the whole region is paying (p.85) a high price. Downtown office rents per square foot are on average 50 to 100 percent higher in Manhattan than in suburban locations. In Buffalo, by contrast, rental prices downtown are no higher than un suburban Amherst,11 a good approximation of the location rent foregone. Higher real estate values mean higher revenues for local governments.12 The restoration of New York City’s fiscal health, following its self-inflicted fiscal crisis, would not have been possible had it not had a strong central fiscal base to fall back on. New York is able to keep Manhattan reasonably safe and clean because the center generates the revenues allowing it to do so.

The object of this book, need I remind the reader, is the urban region, the city with all its component parts. The whole body needs to be healthy for the city to work. The word suburb, by its very meaning, says that the urb in question is part of a greater whole. The suburbs of New York, Montreal, or Paris would not, and could not, exist if the initial central city had not first emerged and grown. The economic value of a healthy center extends to the whole urban region, as does its social value. In regions with revenue-sharing mechanisms, the fruits of centrality will be shared across the urban region, a pillar that is unfortunately lacking (or weak) in many American cities. When a center fails, as it did in Buffalo, the suburbs will bear the costs as much as the center, not only in rents and jobs foregone, but also in higher unit infrastructure costs, notably for transit, making it difficult, if not impossible, to maintain bus, rail, etc. services unless highly subsidized. Cost-efficient transit systems and strong downtowns are two sides of the same coin. The employment densities of Manhattan or downtown Montreal are impossible to achieve without transit, if only because of the impossibility of packing so many cars into a small area. Montreal’s downtown generates three hundred thousand jobs in an 18 square kilometer area. Bringing in three hundred thousand commuters every day by car is logistically not viable—that is, unless downtown is transformed into a giant parking lot, which of course defeats the very purpose of a dense center.

The ideal scenario—every central city mayor’s dream—is a virtuous circle in which a dense center allows the city to maintain a high quality (nonsubsidized or almost) transit system, which in turn serves to further strengthen downtown. Cities like Vienna and London are not far from this ideal, but for many others, as we have seen, the circle goes in the opposite (p.86) direction: deteriorating public transit followed by a collapsing downtown. Once both have collapsed, the road back is not easy.

A Strong Center Is More than a CBD

Up to now, I have implicitly conflated central business districts (CBDs) and central neighborhoods when speaking of downtowns. The two are not the same thing, however. Greenwich Village in Manhattan or The Annex in Toronto are central, but they are not in what is commonly understood to be the CBD, which is typified by soaring office towers, luxury hotels, and businesspeople racing to and from meetings. Few people actually live in CBDs; most of them empty out after working hours. Every metropolis, at least in advanced economies, will have its CBD or financial district. New York has Wall Street; Toronto Bay Street, and London the City. In some U.S. metropolitan areas, this is all that is left of downtown, a cluster of office towers that grow dark after 6 PM.

What distinguishes a true downtown, beyond the strict limits of the CBD, is people—people on the street; it is the destination for residents and visitors alike for entertainment, shopping, and just plain people-watching. In New York as in London, the hearts of the city’s shopping and entertainment—respectively, Fifth Avenue and Times Square and Oxford Street and Piccadilly—are located at some distance from the financial district. Toronto is no exception, with Bay Street near the Lake (Lake Ontario) and Midtown with its shops, cafés, and theaters further north. Further out, the visitor will find what I call “central neighborhoods,” which are often gentrified or in the process of becoming so. These neighborhoods are not typically major employment nodes as such. It is the proximity of jobs in and around the CBD that makes these neighborhoods (architectural attributes aside) attractive to diverse educated populations. Universities and other institutions of higher learning bring students. Corporate activities bring business travelers. One of the best indicators of a dynamic center is the location of the best hotels and the best restaurants. Restaurants, like theaters, hotels, and bars, mean people on the street at night, which is the first rule (with lighting) of keeping sidewalks safe. The emergence of lively central neighborhoods is ultimately dependent on the accessibility, within reasonable distance, of a diversity of employment possibilities that only a complete downtown (CBD and more) brings.

(p.87) Jane Jacobs’s Revenge: The Resurgence of Central Neighborhoods

Some sixty years ago, well before the famous urbanist decided to delve into economics, Jane Jacobs published The Death and Life of Great American Cities.13 Like so many urban planners since, Jacobs bemoaned the irreparable damage inflicted on city life by divided highways ripping through old neighborhoods, destroying housing, to be replaced by soulless high-rise apartment buildings. Add in the race factor and white flight and all the ingredients for decline were in place. In the 1960s, Jacobs rightly feared for the systematic destruction of many great American cities, above all central cities; this was not very different from my own reading at the time. Jane Jacobs, a staunch urban activist, became famous, among other causes, for her fight (which she won) against a planned Lower Manhattan Expressway, eventually leading to her arrest in 1968 during a particularly rowdy demonstration. A year later, she moved to Toronto to The Annex, which was not unlike her home neighborhood (Greenwich Village14)—it was walkable, with attractive three-story townhouses, shops, cafés, and a socially diverse population. Jane Jacobs and I thus have at least two things in common. Both of us at the time were not optimistic about the future of American cities, and both of us moved to Canada in the same year.

Jane Jacobs was right, of course, regarding the need for people-friendly neighborhoods where people can exchange, meet, and socialize, which is at the very heart of what makes a city tick. There is no need to return to a technical discussion of agglomeration economies, the economic gains from the spatial concentration of peoples and firms. For these gains to be realized, cities—Jacobs correctly warned—need to be properly designed and planned. Undoubtedly influenced by her personal experience in Greenwich Village and The Annex, she was also right in observing that only cities can provide such diverse environments. Where she was mistaken, we now know, was in assuming that lively, diverse neighborhoods would naturally give rise to productive innovations in the absence of other conditions; which, like so many, Jacobs took for granted and can thus be forgiven for ignoring.

That said, I shall now posthumously allow Jane Jacobs to take her revenge, but only partially. In most mature economies, the locus of “productive” innovation, notably in the information technology (IT) sector, has been shifting from suburban research campuses to the city, giving new life (p.88) to many old central neighborhoods, a renaissance that surely would have pleased Jacobs.

The Rise of Techno Neighborhoods

The digital economy has given new life to numerous central neighborhoods, Manhattan’s Silicon Alley, which we met in Chapter 1, an arch example. This gives rise to the question of why this is happening now and why in some neighborhoods and not in others.

Let us thus return to Manhattan’s Silicon Alley, the name given to this jumble of neighborhoods nestled between Midtown and Wall Street.15 With its old buildings and chaotic streets, and firms often lodged in refurbished warehouses or factories, Silicon Alley presents a very different picture from Silicon Valley, a suburban sprawl of techno campuses and office parks, home to IT megastars such as Google and Apple. Facebook recently inaugurated its ultramodern new campus, which is almost a city in itself, in Menlo Park in the Valley. An equivalent campus is difficult to imagine in Manhattan, if only because of space requirements. Visibly, New York’s Silicon Alley is a very different beast from San Francisco Bay’s Silicon Valley.

Suburban office parks and high-tech campuses will not go the way of the dinosaur. Firms and research institutions for which space is essential—think of large laboratories—will continue to seek out suburban locations. However, they are no longer the sole focus of the New Economy. Silicon Alley is not the only example of a central neighborhood turning into an IT hub. London has Shoreditch, an old working-class neighborhood just north of the City (financial district) with the equally predictable moniker of Silicon Roundabout. In Boston, the South Boston waterfront area, a short walk from the financial district, is now emerging (following a multibillon clean-up) as a high-tech hub. In Canada, central neighborhoods such as Montreal’s Le Plateau, north of downtown, and Toronto’s Junction Triangle, northwest of the CBD, have witnessed a literal explosion of New Economy firms in recent years.16

To understand what is happening, we need to go back to the massive employment shift out of manufacturing into high-order services, which benefited established CBDs in cities like New York, Toronto, and London, but also devastated many blue-collar working-class neighborhoods, laying the groundwork for what came to be known as gentrification (i.e. (p.89) young professionals displacing working-class populations). Gentrification remained relatively circumscribed in most places until the 1990s since CBD employment growth was rarely sufficient to offset the loss in blue-collar jobs and populations. Most large metropolitan areas saw their central populations decline during these decades of combined deindustrialization and suburbanization. Manhattan lost half a million residents between 1950 and 1990, a quarter of its population; central Montreal lost more than a third of its population between 1966 and 199; and inner London lost over a million residents between 1961 and 1991, a third of its population.17 In all three cities, central neighborhoods started to grow again in the 1990s, attracting jobs and residents. Inner London has seen its population grow by some one million since the mid-1990s, entirely recuperating its former losses.

What happened? First, demographics and tastes changed. The suburban dream has not disappeared, nor should we expect it to. But its lure is no longer what it once was. Why? The first reason is simple demographics: childbearing households, the primary buyers of new homes in the suburbs, are less prevalent. Single-person and childless households account for an increasing share of the population in all developed nations. Automobile ownership has reached its limits and is now stabilized. Although suburbs will continue to grow in many places, the great era of suburban expansion now lies behind us in the developed world. The American urbanist, Alan Ehrenhalt, evokes what he calls “The Great Inversion.”18 Perhaps, in fifty years urban scholars, looking back, will refer to the past era of urban flight as a temporary deviation from the normal evolution of cities.

Edward Glaeser nicely documents the change in preferences of Americans for urban living.19 Before 1990, the statistical relationship between city size and real wages (accounting for living costs) was systematically positive, as one would expect, but it turned negative afterward. For workers to accept lower real wages in big cities, they must now be receiving something in return, that “something” being the myriad amenities central big-city living offers: restaurants; museums; concerts; learning institutions; and so on. Part of the explanation undoubtedly lies in rising levels of education and increased foreign travel, with attendant consequences for tastes and preferences. For U.S. metro areas, the share of college-educated twenty-four to thirty-five-year-olds living within three miles of the CBD increased at double the rate between 2000 and 2009 as for the cohort as a whole.20 For (p.90) Canadian cities, our own research found that New Economy workers are more likely to live close to the CBD than are comparable cohorts.21

How the Internet Fuels the Demand for Face-to-Face Meetings and the Laptop Makes Central City Work Easier.

The second big change is technology which has given us the Internet, smart phones, laptops, e-mail, and yet-to-be-invented digital technologies. One of the many ironies of the digital era is that electronic communication increases the need to meet. It happened a century ago with the telephone and is happening again. E-communication creates new needs for meetings and gatherings. I invite the reader to count the number of people whom he or she communicates with electronically on a regular basis and has not also met. Probably not many. E-communication and face-to-face meetings are complements, not substitutes. It is no accident that the demand for business air-travel, conferences, symposia, and trade shows of every imaginable nature exploded with the Internet. E-communication multiplies the need to meet. This is nowhere truer than in the effervescent entrepreneurial milieu of the New Economy.

Let us therefore take a closer look at the kind of city neighborhood in which this new breed of start-ups is evolving. These are generally neighborhoods that have completed the transition from warehousing and manufacturing to residential and (nonmanufacturing) commercial uses. Unlike former noisy, malodorous manufacturing and warehousing facilities, not to mention trucks constantly coming and going, the digital economy allows for the cohabitation of workspaces and residences, facilitating mixed-use zoning. The glue here is the circular relationship between lifestyle choices and firm location, the symbiosis further buttressed by a growing trend toward condominium construction in cities like New York and Montreal: condos (apartments) occupy upper floors, while lower floors are left for workspaces and the ground floor for retailing, facilitating the emergence of mixed-use neighborhoods so prized by Jane Jacobs.

In Montreal, one of the most dynamic digital start-up scenes is centered on St. Lawrence Boulevard north of downtown, an old immigrant neighborhood that still has the flavor of its East European and Jewish past (p.91) with its delis and ethnic eateries, also formerly the heart of Montreal’s apparel industry. Today, like Manhattan’s alphabet soup of neighborhoods, it is crammed with cafés, artsy boutiques, and, more to the point, computer gaming software developers and other IT start-ups. Why specifically here? A manager of one of the larger computer gaming firms, housed in a recycled clothing factory, put it this way: “The kids we hire here work at all hours. They want to be able to go across the street for a coffee or sandwich at midnight, flake out in a bar at noon. They don’t want to commute too far. Many bike to work.” The reference to hours of the day is revealing. Firms like these want to be in twenty-four hour neighborhoods, not single-function districts that empty-out after 5 PM.

Technology also plays out at another level. The progressive miniaturization of computer devices, the laptop and IPhone visible examples, plus high-speed Internet and parallel technologies that facilitate information access and processing (cloud services, mobile hardware, social media, etc.) have meant that the space and financial needs for starting up a business are falling. New Economy firms are starting to resemble financial and other high-order services, able to generate high-income streams with little floor space, enabling them to afford the high rental costs typical of central locations. Often, all that is required are a few PCs, determination, and willing financial backers, the last-named further strengthening the pull of neighborhoods within easy reach of financial districts. It is easier to meet a rich banker or eager venture capitalist in Lower Manhattan than in the New Jersey suburbs. In coworking spaces, which are often located in café-like environments, all the budding entrepreneur needs is a laptop and a good idea, further reducing the need for floor space.

A parallel change is the growing focus on content: the entertainment (music, games, shows, etc.) information (news, newspapers, broadcasts) content accessible via digital devices, producing a growing symbiosis with the entertainment, publishing, and broadcasting industries, the traditional foundations of downtown economies. The American sociologist Michael Indergaard has coined the term digitalization of culture to characterize the growing interdependence between the arts and technology.22 The birth of Manhattan’s Silicon Alley between Midtown and Downtown, conveniently tucked between the center of the entrainment industry to the north and the financial district to the south, was, again, no accident . Add in abandoned factories and warehousing and packaging facilities, together with an excellent transit system and falling crime rates, and all the ingredients were in (p.92) place, once the digital economy took off, for the resurgence of Manhattan’s central neighborhoods.

As the final exhibit, I now return to Silicon Valley, which may seem self-contradictory, but it is not. The Bay Area techno scene is also undergoing a geographical shift, challenging the Valley on its home turf. A growing number of IT firms have chosen to open up shop in San Francisco proper in neighborhoods such as SoMa23 and The Mission, both of which are within walking distance of the financial district. Twitter, Uber, and Airbnb, to take three examples, have chosen to locate their new production facilities in central San Francisco. Valley workers also increasingly want to live in central neighborhoods, which has given rise to a singular class of commuters epitomized by so-called Google Buses, the popular name given to the fleets of buses hired by Silicon Valley companies such as Google to shuttle their employees between their place of work in the Valley and place of residence in (generally) trendy, but also increasingly expensive, San Francisco neighborhoods.24

The growing taste of Valley workers for city living, which has driven up prices, has of course not been universally welcomed by local residents. San Francisco was already one of the most expensive housing markets on the planet, reflecting the flip side of the increasing pull of central neighborhoods. High housing prices are a two-edged sword: indicators of economic rents but also potential engines of social exclusion. Today who can afford to live in central Manhattan? We shall return to questions of housing affordability and social cohesion later in this chapter. For the moment, let us simply remember that the rise of the digital economy, while behind the renaissance of many central neighborhoods, also has a darker side. IT facilitates the concentration of high-paid, knowledge-rich jobs both within and across cities.25 This is good news for the winners but less so for those left behind. Before digging deeper into the social challenges facing modern urban economies, however, let us take a brief journey to Los Angeles.

Yes, Los Angeles Has a (Strong) Center; But It’s Just Different

After reading the foregoing discussion, the reader, especially if he or she is an American, may rightly ask: what about cities like Houston, Phoenix, and (p.93) Los Angeles (henceforth L.A.) which have notoriously weak transit systems and endless suburbs and yet are economically successful by any measure? Does this not contradict what I have just stated regarding the importance of strong central neighborhoods? It is a valid question.

As a partial answer, I will recount another city story, this time about Los Angeles, which is arguably the poster child of a sprawled car-dependent metropolis. Yet, I like L.A. I spent a sabbatical year in L.A. with my family in the 1980s and returned frequently afterward to visit my Aunt Silvia (whom we first met in the New York story), onetime actress, now deceased. Silvia’s apartment, which became somewhat of a second home for me, was appropriately located in the Hollywood Hills.

Let me start with public transit. Undeniably, public transit in L.A. is a far cry from New York’s. Yet, this result was not foreordained. I remember an old classmate of mine from Penn in Urban Planning who had since become a transportation planner for the city of Los Angeles, saying: “Mario, if we had known then how things would turn out, we would have done things differently.” Los Angeles is another example of how earlier decisions to focus almost exclusively on urban highways, including the tearing up of existing rail and streetcar lines, produced a low-density pattern of settlement that made it almost impossible, several decades later, to build and manage a cost-effective mass transit system. L.A. has since heroically attempted to turn back the clock, with predictably limited success.

With a first line opening in 1990, the newly created Los Angeles County Metropolitan Transport Authority (Metro, for short) embarked on an ambitious program of subway construction.26 Los Angeles now has a well-developed subway system with six lines, the largest network in the United States after New York and Chicago. Unfortunately, however, ridership has not followed. A simple comparison with New York drives home L.A.’s dilemma. Recent estimates27 put Metro’s daily ridership at around three hundred and sixty thousand for a metro area population of some fourteen million, compared to five million for New York’s subway system for a population of some twenty million. Thus, New Yorkers were on average ten times more likely to use the subway than Angelinos.28 Part of the difference can be explained by the limited geographic coverage of L.A.’s system, a corollary of the region’s sprawled development, with many areas still not serviced. However, L.A.’s entrenched car culture, the result of decades of car dependence, is also part of the answer.

(p.94) Let me use an anecdote to illustrate the strange relationship between Angelinos and their subway, which they seem to consciously choose to ignore. The family was again visiting with my (now bedridden) aunt in Hollywood. After so many stays in L.A., we had completely assimilated the Angelino ethos. We did everything by car. It never occurred to us to use the subway, although (as we would discover) a metro station—Hollywood and Vine—was within easy walking distance. One day, the family car was unavailable, but my older daughter and I needed to go downtown. We bravely trudged down the hill in search of this mysterious metro station. I asked a saleslady for directions in the first available shop, only to be met with a blank stare as if I had asked her for directions to the moon. I had no better luck in the next shop. In neither case was the individual remotely aware that a subway existed, even though a station was just a few blocks way. We eventually found the Hollywood and Vine station. To this day, this little incident, impossible to imagine in New York, remains with me. No self-respecting New Yorker ignores where the nearest subway station is. Navigating the subway system is a matter of pride, the sign of a true New Yorker. I could only conclude that L.A. and New York indeed represent two very different urban cultures.

A Center Created by and for the Car

Angelenos remain wedded to their cars. Yet, contrary to popular opinion, L.A. has a strong center that Angelenos well understand, even if they do not necessarily identify it as such. This is proof, if need be, of the need for successful urban regions to create centralities, places that facilitate face-to-face contacts and personal relationships, even where they do not adhere to the traditional model of transit-supported centers.

So let us now get into our car and visit L.A.’s “center”: an elongated downtown stretching west from the CBD (the formal downtown and financial center) along a 15-mile east–west axis to Santa Monica on the Pacific, about a thirty-minute drive (traffic conditions allowing) or five hours on foot if one were inclined to do so, which of course no sane Angeleno would. Almost everything that matters—the best shops, financial institutions, major consultancies, café and night life—lies along this axis. Nestled south of the Hollywood Hills (with its famous sign) and the Santa Monica Mountains, Wilshire Boulevard is its informal main street, which if one (p.95) were indeed inclined to walk would be the obvious choice. Within L.A.s urban sprawl, this elongated downtown is actually quite compact and, as economic theory would predict, generates higher land values; office rents are on average twice as high as in the rest of Greater L.A.29

Like any self-respecting downtown, L.A.’s is an assemblage of neighborhoods. Leaving the CBD proper with its office towers, going west, the visitor would first encounter Koreatown, your typical inner-city ethnic neighborhood and then enter Miracle Mile and Museum Row on Wilshire. A slight detour north would take the visitor to the heart of Hollywood, which needs no introduction. Like Times Square, the City has made a major effort to clean up Hollywood; but it still has some way go if it ever wishes to equal its East Coast rival. Then, moving west again to West Hollywood, the visitor would discover L.A.’s own gay neighborhood and just to the south Farmers Market and The Grove with its upscale food stores and cafés. Still moving west, the visitor would enter Beverly Hills, which also needs little introduction, and Rodeo Drive, L.A’s (even glitzier) answer to New York’s Madison and Fifth Avenues. Further west still, the traveler would come to Westwood, home to UCLA,30 my sabbatical alma mater, with its students and cafés. Finally, driving down Wilshire, the mighty Pacific would open up to the visitor: Santa Monica with its oceanside promenade, pier, and active café scene and night life. Predictably, the geography of L.A.’s New Economy start-ups closely follows its elongated downtown, culminating in Santa Monica and Venice Beach, both of which have high concentrations of IT firms.31

The Pacific may be the end of the road, but it is much more than that. The Pacific Ocean is not only the western anchor of L.A.’s elongated downtown, but also a vital ingredient in the region’s social glue and self-image. L.A. would not be L.A. without the beach and all that that entails in terms of lifestyle and social interaction. Like New York’s Central Park, the 2-mile stretch between the Santa Monica Pier, with its fun rides and food stalls, and Venice Beach to the south, with its boardwalk, sidewalk cafés, and people-watching crowd, performs an essential symbolic and socializing function. This is where Angelenos of all classes and races can mingle and do. A Sunday afternoon on Venice Beach is as animated, as lively, and certainly as cosmopolitan as a Sunday in the downtown of any great European city.

I cannot leave L.A. without a word about its darker side. L.A. is a highly segregated metropolis, both socially and ethnically. The elongated downtown I have just described is largely white, middle and upper class, with (p.96) mostly single-family homes and obligatory manicured lawns; thanks to Mexican gardeners. L.A.’s sprawl means that millions of Angelenos, many Hispanic or black, have no choice but to own a car, but cars are not necessarily within the means of all. Many are thus forced to rely on the city’s woefully inadequate transit system with correspondingly long commutes.

The lesson from Los Angeles is simple, but it also carries a warning: “central” places where people can mix and gather are a necessary condition for success in today’s information-based economy. But they alone are not sufficient to ensure social cohesion. People of all races and classes must feel that they belong to their city. It is to this subject that we now turn.

Why Social Cohesion Matters and Why It Is So Difficult to Achieve

Social cohesion is a difficult concept to define, but we all intuitively understand what lies behind the term.32 We know what it is not: indicators such as income inequality, residential segregation (by race, class, or ethnicity), and crime spontaneously come to mind. We would expect politically fragmented and highly segregated cities with sharp income differences to be less socially cohesive. The evidence largely bears this out. Crime rates, a powerful indicator of social cohesion (or rather the lack thereof), are positively correlated both with higher levels of income inequality and of racial segregation for U.S. metropolitan areas.33 Terms such as civility and trust also come to mind: lack of trust is often a major factor holding back Third World cities, Port au Prince a particularly brutal example. Unsurprisingly, Port au Prince is a highly segregated city, with its tiny rich elite holed up in the separate municipality of Petionville up the mountain in the cooler, less polluted hills.

The evidence for a positive relationship between social cohesion and wealth, though necessarily indirect, is not lacking. For U.S. metropolitan areas, Edward Glaeser observes that people living in places with more unequal income distributions and higher crime rates are less likely to declare they are happy.34 As we have seen, insecurity implies a cost. Evidence, again for the United States, suggests that more unequal and more segregated urban areas not only have higher crime rates, but also exhibit lower income growth.35 The mechanisms by which social and racial segregation hamper overall income growth are not fully understood, but we again intuitively (p.97) understand that the presence of ghettos where outsiders fear to tread—but also insulated homogenous rich neighborhoods—are unlikely to produce environments conducive to collaborative behavior, personal improvement, and what I have called productive innovation.

While we know that a minimum of social cohesion, trust, and civility is necessary for the creation of wealth, we do not know what that minimum is. The threshold may be lower than we think. Wealth and crime are not incompatible. Despite equivalent or higher per capita incomes, American cities have higher crime rates on average than Canadian, Australian, and Western European cities. It is partly for this reason that U.S. cities do not as a rule do well on quality-of-life rankings. While the causal link between quality of life and wealth creation is often indirect and difficult to quantify, the relationship in the opposite direction is unambiguous. Ensuring a decent quality of life (at least for the majority) is impossible without wealth and the goods and services it buys, especially public health, decent housing, and education. All the cities that top Mercer’s quality of living rankings are also wealthy places: Vienna, Zurich, Vancouver, Munich36). As American cities bear witness, however, wealth is not a sufficient condition for social cohesion.

The evidence for the United States suggests that larger urban areas, though generally wealthier, are also on average more unequal and more segregated than smaller places.37 My own research shows similar results for Canada.38 Part of the explanation is the concentration of the very rich in the largest urban areas. However, a fundamental obstacle to building socially cohesive cities, especially racially and culturally diverse societies, is human nature itself.

Birds of a Feather—The Natural Desire to Flock Together (and to Exclude)

The propensity of human beings to prefer their own kind is entirely natural. In cities with peoples of multiple origins, individuals and families will naturally seek out neighborhoods where they feel at home, if only for practical reasons: to be close to houses of worship, schools, stores, and to other services catering to their special needs. Among the first things my Viennese parents did upon arrival in New York was to find German-speaking butchers, bakeries, and grocery stores where my mother (who (p.98) loved to cook) could find all the familiar ingredients for Wiener Schnitzel and Malakoff Torte. Fortunately, Manhattan’s German neighborhood was not far, just across Central Park, but it has since disappeared as German-speakers melted into the American mainstream.39

The propensity of likeminded people to flock together is by no means all bad. However, it is the bad side that makes the news. One need not cite extreme cases such as the institutionalized segregation of Catholics and Protestants in Belfast or the ethnic cleansing of Sarajevo to be reminded that different creeds and races find it difficult to cohabit peacefully. De facto segregation is a reality in almost all cities with racially mixed populations, and not just in the United States. The propensity of people to flock together by class is no less real. Every city has its richer and poorer neighborhoods. The propensity to segregate is universal, and thus also the propensity to exclude.

How Wealth Facilitates Segregation

One of the many ironies of modern economic development is that greater wealth has increased the potential for spatial segregation. Before the advent of trams in the 19th century and other transport modes that greatly increased our ability to move within the city, notably the car, the most common mode was walking (only the rich could afford horses). In the course of my stays in Puebla, I undertook a study of the city’s social geography to discover to my surprise that segregation by class was lower there than in Canadian cities. Many neighborhoods were visibly mixed, although Puebla did have very rich and very poor neighborhoods, the latter often consisting of informal settlements. The greater spatial social mix had four explanations: (1) domestics, still a common feature of life in Puebla, often lived next to (and sometimes in) the employer’s home; (2) the absence of a fully developed mortgage market meant that families often kept their home even after their social status had improved; (3) Puebla’s Spanish- and Arab-inspired architecture with its high walls and interior courtyards meant that a resident’s social status was not easily evident from the outside, with rich and poor often lived side by side. The decisive factor (4), however, was the relative absence of mobility, especially for the less fortunate. Few owned a car, a powerful incentive to live close to employers.

(p.99) Puebla and other Latin American cities, following in the footsteps of richer cities, are becoming more segregated as incomes rise, housing markets become more fluid, and urban transport improves. The role of the car is double. Not only does the private automobile give its owners greater flexibility to choose (and to create) neighborhoods, but it also becomes an expression of social status and a means of maintaining social distance. I do not wish to caricature, but the private car essentially allows white elites (or those who think of themselves as white) to isolate themselves from the unwashed masses. If the lucky owners can in addition use divided highways (elevated is even better) to move around the city, they can live in the city without ever having to see a poor neighborhood. The reader will by now have guessed the analogy with many Western, especially American, cities: our friendly white-collar worker driving in from his or her manicured suburb to his or her reserved underground center-city parking space without ever having traversed a “bad” neighborhood.

The car as an expression of social superiority is on the decline in rich nations as car ownership becomes universal, but it is still very much alive in many developing nations. A visible expression, all too common in Latin American cities, is the attitude of drivers toward pedestrians, who are unworthy of consideration since they are walking. Only rarely have I seen drivers voluntarily stop for pedestrians. Public transit, by the same token, is for lesser folk. No self-respecting executive or otherwise socially powerful individual would contemplate riding a collectivo or mini-bus—a taxi perhaps, but public transport, never.

The most powerful manifestation of social segregation, which is difficult to imagine without the car, is the growth of gated communities, a form of secession by the rich from the rest of society. The decline of downtown Buenos Aires is the predictable complement of the flight of its elites into often self-contained suburban communities. The province of Buenos Aires tax office identifies some four hundred gated communities around the capital, containing ninety thousand homes. Most manage their own utilities and security with CCTV and guards patrolling at all hours. Some are small towns in their own right: Nordelta, a secure mega-complex on the capital’s northern edge, is home to more than seventeen thousand residents, who have their own schools, hospitals, and hotels.40

Buenos Aires is by no means an isolated case. The first thing a Poblano colleague did after purchasing a car was to move to a gated community (La Calera) on the southern outskirts of Puebla, which like its Porteño sister (p.100) had its own utilities and guarded entrance. I couldn’t really begrudge my colleague, for La Calera obviously provided much better surroundings for raising his children: landscaped grounds, fully equipped playgrounds, and, above all, an environment in which it was safe to walk and move around. Had I stayed in Puebla, perhaps I, too, would have moved there. Yet, as for all such self-contained communities, this meant not only the formal exclusion of “others,” but also the withdrawal from the wider community of resources in the form of taxes paid and concomitant expenditures on public services.

Don’t Let the Good People Secede

The core challenge of any political model (and there are many) of regional governance conducive to social cohesion is the shared financing (or not) of public services. The challenge, stated more crudely, is preventing the “good people”—the better-off or privileged group41—from seceding from the rest of society, be they wealthier lighter-skinned Haitians seceding to Petionville up the hill or wealthy white Buffalonians (see the next chapter) seceding to Amherst in the northern suburbs. How can society ensure that all share in the financing of public services? And which services? Here we come to the essential distinction between what I call “people” services and urban services.

The Distinction Between People Services and Urban Services

The problem is not municipal fragmentation as such. Almost all major metropolitan areas around the world are politically fragmented, not only in the United States. The fundamental issue is the jurisdictional level at which people services (investments in people) are financed, as distinct from land and building-oriented services (urban services, for short). It is the former—education, daycare, health, and other social services (to which public transit could also be added in many cases) that allow individuals to better themselves, to rise out of poverty, and to advance. Erasing or reducing inequalities across neighborhoods or municipalities becomes problematic where people services are financed via local taxes and consequently tied to (p.101) the wealth of the local area, be it called a borough, township, municipality or something else.

In many of the cities visited in this book (e.g., Vienna, which we visited in Chapter 1 and Montreal, which we shall meet in Chapter 6), people services are centrally financed via, respectively, the Austrian state and the province of Quebec, with costs borne by all taxpayers. The neighborhood or municipality in which one grows up is not necessarily a determining factor of one’s life chances. American cities, at least the majority of them, are different: the financing of most people services is a local responsibility. The main point of contention often centers on primary and secondary education, which, when locally financed, not only produces quality differences across space, but can further exacerbate inequality by triggering population movements, with wealthier inhabitants fleeing to better serviced areas, thereby creating a vicious cycle.

Ironically, one of the principal obstacles to regional revenue sharing is that urban regions that would gain most are also the least likely to have it. Political opposition will be strongest where people services are financed through local taxes and where, correspondingly, social divides are the deepest and thus where so much is at stake, creating a political catch 22. The decentralized financing of people services is arguably the Achilles heel of the American urban model (at least, the majority model). Why would the mayor of a suburban municipality freely consent to reduce his town’s school funding for the sake of regional harmony or freely use local tax revenues to finance transit systems that primarily benefit central city riders? He or she wouldn’t—that is, unless forced to do so by senior government. U.S. senior governments (states) are generally reluctant to intervene. Regional revenue-sharing arrangements are extremely rare with Portland, Oregon, and Minneapolis-St. Paul, Minnesota, among the rare exceptions.

Is Social Cohesion Possible without Coercion?

The apparent difficulty of the different-colored tribes of our species to live together in peace or of the better-off (whether individuals or communities) sharing their riches unless forced to do so raises a simple but central question: is social cohesion possible without coercion from above? The evidence suggests that the answer is “no.” As we shall discover as we move to other city stories, senior governments almost everywhere have stepped (p.102) in, to various degrees, to limit the freedom of individuals to choose (and to exclude) neighbors. The fundamental question is the degree of coercion and, correspondingly, the willingness of society to accept limits on freedom to ensure social harmony. Here, nations vary greatly. The Netherlands is among the more coercive with an openly directive housing policy that redirects newcomers to chosen locations. This policy is explicitly aimed at producing ethnically diverse neighborhoods, which goes some way in explaining the relative absence of ethnic ghettos in Dutch cities.42

Singapore provides a radical example of central government coercion to ensure ethnic harmony. The island city-state counts three major ethnic groups: ethnic Chinese (the majority), Malays, and East Indians; the first have historically higher incomes, and the second are traditionally at the bottom of the social ladder. Upon independence in 1965, Singapore introduced an explicit policy aimed at preventing residential segregation by race. Publicly built or subsidized housing became the dominant form of habitat and still is. Apartments are administratively assigned to prevent members of the same ethnic groups from living in the same building block, even to the point of not allowing an ethnic Chinese couple, say, to rent or sell their flat to fellow Chinese. By all accounts,43 Singapore’s strategy has worked, forging a shared sense of Singapore nationhood. This is no small achievement in a region with a history of interethnic strife between Malays and ethnic Chinese where not so long ago native Indonesians (Malays) massacred several thousand ethnic Chinese in a moment of nativist frenzy.44 Singapore has been equally forceful in imposing public transit with a combination of road tolls and punitive taxes on the purchase of private vehicles, making cars unaffordable by all but the very rich.

The dilemma is real. Is coercion the necessary price to pay for social peace in ethnically diverse societies? Freedom is a core value of civilized society, including the freedom to choose one’s neighborhood and to protect it, which brings us to what has come to be known as NIMBYs45: actions by residents to block projects they see as detrimental to their neighborhood, be it via protests, referendums, or other means. NIMBYs have become a major force blocking mixed residential development, not least in American cities. Richard Florida, in his recent book, the Urban Crisis,46 is not incorrect in pointing to NIMBYism as among the chief culprits driving the social divides in American cities. The New York Times quotes Diane Yentel, president and chief executive of the National Low Income Housing Coalition47: “One of the biggest obstacles that has always existed and that remains in building (p.103) affordable housing in higher-income, higher-opportunity neighborhoods is local opposition.”

Data for the largest U.S. cities over the last fifteen years show that low-income housing projects using federal tax credits are disproportionately built in majority nonwhite communities. The government is de facto helping to maintain racial divides, despite federal law requiring government agencies to promote integration.48 Why? The reason is that it is simply easier (and cheaper) to build social housing in poor minority population neighborhoods. The New York Times cites a federally funded public housing project to be built in an affluent majority-white neighborhood of Houston, but which was eventually abandoned after a particularly rowdy town hall meeting. Residents expressed fears, valid or not, of school overcrowding and falling property values. One resident cited was admirably (but also depressingly) honest, fearing “unwelcome residents who, due to poverty and lack of education, will bring the threat of crime, drugs and prostitution to the neighborhood.”49 It is easy to condemn such fears; the challenge is overcoming them.

It is difficult to see how such opposition can be overcome without placing constraints on the rights of citizens. A bipartisan bill was introduced in the U.S. Senate in early 2017 that would prohibit community residents from vetoing federally funded projects.50 A similar bill (SB 827) was introduced in the California Senate in January 2018 that would have reduced local control of land zoning near public transit stations; the bill did not pass. The concerns raised by NIMBYs are not limited to the United States. The Quebec National Assembly recently passed a law abrogating the right of neighborhood residents in Montreal and Quebec City to trigger binding referendums on proposed zoning changes and building projects. Community groups predictably see this as an attack on democracy, while mayors defend the law as necessary for maintaining efficient housing markets and preventing NIMBYs.

NIMBYs come in many flavors, but they are almost always defended as a means of protecting the neighborhood from incursions that would alter its “character” and implicitly bring down housing values. Should not citizens have the right to protect their environment and their investments? Unfortunately, the evidence suggests that citizens, given the power to decide, will more often than not oppose (rather than support) new construction and new populations coming to their neighborhood.51 It is important, however, that one not conflate the two classes of motivations behind NIMBYs, (p.104) although the two may overlap, especially where race comes into play. NIMBYs motivated by the desire to keep certain types of people out of one’s neighborhood are one thing; NIMBYs motivated by the desire to prevent new construction are another. It is the former that was our focus here. We shall cover the latter in Chapter 7 when we address housing prices.

Center/Suburb Divides and the Quest for the “Right” Model of Metropolitan Governance

Finding the right regional governance model remains an ongoing challenge to which no society has as yet found the ideal solution. The importance of formal regional governance structures should not be overstated. It is not a critical factor where people services are centrally and/or regionally financed as they generally are in Europe and Canada. Many region wide services can be effectively delivered via special-purpose agencies without necessarily requiring a formal regional governance structure. Transit is the prime example where costs are shared in varying proportions between riders, local government, and senior government. In the United States, federal grants for public transit are conditional on the region first creating a Metropolitan Planning Organization (MPO), with a governing board drawn from local authorities and typically also including nongovernment actors. This is an unfortunately all too rare example of the federal government stepping in to promote regionalism.52 At the time of writing, it was far from certain whether the Trump administration would continue the grants.

Total consolidation under a single regional government as in Vienna (see below) is rarely the solution and in any case is not feasible in most cases, if only because metropolitan areas are continually expanding. The challenge is inventing and reinventing models of metropolitan governance appropriate to local context. The range of institutional arrangements is almost infinite.53 Portland’s model is different from that of Minneapolis-St. Paul, just as Montreal’s is different from that of Toronto. Whatever the formula adopted, the ultimate test is the prevention of social and/or ethnic divides that undermine the ability of people to live together.

Often, the principal challenge, as we shall see in Paris and many U.S. cities, is the social and political divide between the central city and surrounding jurisdictions. The evidence suggests that urban regions where the central city is undisputedly the dominant player are less prone (p.105) to center–suburb tensions. New York City had the good fortune, we saw, of annexing its outer boroughs early-on during the urbanization process. A recent study for German cities points to a positive relationship between central-city fiscal health and its regional weight, in essence reducing downward tax competition.54

Cooperation between center and suburb is almost impossible to achieve where the municipal border between the central city and suburb is also an “us/them” divide, turning the boundary de facto into a form of institutionalized segregation. Paris, as we shall see, comes close, though it has nothing like the stark black/white boundaries that separate many American central cities from their surrounding suburbs. Detroit is a particularly harsh example.55 There is nothing subtle about these boundaries, both social and institutional, as visible to the passerby as an international border. Here secession has triumphed, the good people leaving little behind in the way of taxes or anything else for that matter.

The full measure of the public policies discussed so far, whether with respect to city/suburb divides, the provision of people services, public transit, or the health of downtowns, will become clear in the next chapter when we visit Buffalo. There we shall compare its story to that of Toronto. But before that, let us return to Vienna

Vienna’s Livability—A Confluence of Chance and Political Will

Vienna, let us recall, is ranked at the top on both the Economist Livability and the Mercer Quality of Living indexes. As we shall discover, Vienna’s admirable performance is in large part the accidental outcome of its past decline and the social upheavals it triggered, another of history’s many ironies. As such, Vienna’s undisputed achievement is difficult to replicate and, by the same token, potentially fragile as the conditions that made it possible fade into the past.

An (Accidentally) Preplanned Metropolis

Vienna is unique among the world’s great cities in that regional governance is not an issue. There is no central city–suburb divide (at least not yet), nor is (p.106) there a need to invent institutions to promote regional cooperation. Vienna is not a fragmented metropolis divided into competing jurisdictions. The city of Vienna is largely coterminous with the urbanized region, its two million inhabitants contained within essentially the same borders as a century ago. Berlin finds itself in a similar fortunate position, for similar historical reasons. The only other possible comparison is Singapore, which is an independent city-state, a single jurisdiction.

Vienna has the added advantage of being a Land within the Austrian federation with the full powers of a federated state, with the double status of City and Land. It’s as if the New York metropolitan area with its twenty million inhabitants were a separate state within the United States, with borders drawn a hundred years ago that shrewdly foresaw the metropolis’s future growth.

How did this come about? The story begins in the years before World War I when Vienna was still the rapidly exploding capital of the Austro-Hungarian Empire. Planners foresaw a glorious future for the imperial capital and with laudable foresight planned infrastructures for a metropolis twice its size, including its vaunted tramway network, a model metropolis for the 20th century. The growth of Vienna, we know, came to an abrupt end as the Empire collapsed after World War I. Vienna, however, remained essentially intact, both politically and territorially.56 Those who would be called upon to govern Vienna in the future would inherit a city with considerable powers and whose territory matched its demographic reality.

This unified structure facilitated the application of policies that were conducive to social equality—that is, were a city administration inclined to do so. This is where the story takes a dramatic turn which would transform Vienna into a unique social laboratory. Vienna was far from an equal society. In addition to the material suffering brought by the war and defeat, Vienna was a socially divided city, with poor working-class outer districts pitted against the richer center and leafier western districts, a divide that would ignite a political revolution.

Red Vienna: Planned Cohesion

On May 14, 1919, six months after the end of the war, the Viennese elected an openly Socialist administration, marking the beginning of what would come to be known as Red Vienna (Rot Wien). It would last until 1933. Red (p.107) Vienna was to be a great social experiment, a beacon for social reform movements around the world, and the model for a more just and equal society. City Hall recruited the best talents of the day: urban planners, social thinkers, and architects. The new Vienna, city leaders proclaimed, would bring education, health, and generally better living conditions to the hitherto disenfranchised working classes. The centerpiece of Red Vienna was a massive public housing program, which went well beyond the provision of housing. This was an experiment in social engineering. Red Vienna’s program was exceptional in its sheer size; some 382 housing estates were built between 1923 and 1933, comprising sixty-four thousand housing units, new homes for two hundred thousand families. Housing estates were deliberately dispersed across the city, and occupants were chosen to promote social mix, although, unsurprisingly, poorer districts tended to be favored, the Socialist Party’s political base.

Among the revolutionary features of Red Vienna’s social housing program was the architectural quality of the housing estates. These were not the assembly-line high-rises of the Paris banlieue. Each housing estate was a signature project overseen by a well-known architect. Most still stand today, many of them now classified as protected heritage buildings. Karl-Marx-Hof, the most famous project in the (former) working-class district of Heiligenstadt, is now a tourist attraction, designed by the well-known urban planner Karl Ehn. It was completed in 1930 with 1382 housing units. Karl-Marx-Hof became a symbol of working-class resistance, stormed by right-wing militias during Austria’s brief 1934 civil war as the nation began its slow slide into the abyss.

The objective was not simply to house but to uplift the working classes. Each housing estate incorporated kindergartens, dental clinics, baths, maternity centers, schools, and so on, as well as the mandatory playing grounds and green spaces. The city administration also financed an extensive network of so-called workers libraries and public swimming pools, the latter also often becoming architectural icons. All this was financed by a mix of special municipal taxes named Breitner Taxes in honor of the city councilor who introduced them: taxes were placed on luxury items such as large homes and villas, horse racing, upscale bars and bordellos, champagne, and other “superfluous” expenditures. The taxes were understandably not overly popular among the upper classes. All that came to an end in the 1930s as the First Austrian Republic fell victim first to an authoritarian-clerical regime and then to National Socialism.

(p.108) Jumping over those dark years, let us come back to the Vienna of today. Although the Socialist idealism of the 1920s is now history (gone are the dreams of fashioning a “new man”), Red Vienna’s housing legacy has survived and is now part of Vienna’s DNA. All national governments since have continued to support Vienna’s unique approach to housing. “Public” housing is in effect a misnomer in the Viennese case; publicly supported housing accounts for close to two-thirds of the housing stock, including a uniquely Viennese institution, Gemeinnütziger Bauvereinigungen (Limited-Profit Housing Associations or LPHAs), also a legacy of the prewar period.

Austria’s approach to housing has the additional non-negligible effect of keeping housing prices low, a major element in Vienna’s continued high ranking on livability. Private builders must compete with the large publicly subsidized construction sector, keeping costs down in the nonsubsidized segments of the housing market.57 The crux of the Austrian system is the direct funding of builders, including LPHAs in the form of construction assistance grants, thus subsidizing supply, the opposite of subsidies that target demand (households).

Vienna’s history, in short, produced a very different attitude toward housing from that found elsewhere, with housing viewed not as a consumption good or an investment, but as a public service like transit or sanitation. More to the point, the presence of “public” housing in almost all segments of the market except the most exclusive, as well as the general quality of construction, has meant that no social stigma is attached to living in “public” housing. Such housing is a normal choice for all but the very rich. Vienna’s activist housing policy with immigrant populations directed to geographically dispersed housing is explicitly aimed at promoting social mix.58 The end result is a metropolitan area that is largely devoid of sharp residential divides—at least, nothing approaching the ghettos of urban America. Homelessness is almost unknown, which goes some way in explaining why Vienna continues to rank high in quality-of-life rankings.

Is Vienna’s Success Sustainable?

The integrated regional governance of Vienna was only possible because the city had ceased to grow. Had Vienna continued grow, it would soon have found a large proportion of its population beyond its borders in suburban (p.109) municipalities. It also is difficult to imagine that Vienna’s ambitious public housing program could have kept up with demand under conditions of rapid growth.

Other aspects of Vienna’s success are historically grounded and as such are difficult to replicate. The trauma left by the turbulent interwar period and World War II, which prompted the strong desire not to repeat the errors of the past, gave birth to a political culture of consensus, the so-called Social Partnership (Sozialpartnerschaft) in which the various bodies representing capital (i.e., Chambers of Commerce), labor (unions), and the state systematically consult and negotiate on major issues. Vienna’s imperial legacy also helped. The imperial crown left the city with an impressive network of parks and protected forests, which are now accessible to all classes of society. Vienna’s vaunted quality of life, one might say, is in part the outcome of the accidental meeting of two opposites: royal privilege and Socialist egalitarianism.

Vienna’s “cohesiveness” was (and still is to some extent) the product of a fairly homogeneous society with shared social norms, which again is an outcome of its past slow growth and relative isolation. The Iron Curtain helped keep “others” out. But no longer: Vienna’s immigrant population has grown rapidly in recent years, the natural outcome of its success. Neighborhoods with high proportions of non-native Austrians, often Turks and migrants from former Yugoslavia, have emerged in the city’s western inner suburbs, the historical heartland of working-class Red Vienna. These nascent ethnic clusters bear little resemblance (at least, not yet) to urban ghettos but nonetheless bear witness to the difficulty of maintaining the right balance between freedom (the right “to flock together”) and spatial equality under conditions of high growth and ethnic diversity.

Austria is not immune to the political winds sweeping much of the Western world. In the October 2017 legislative elections, the right-wing anti-immigration Freedom Party (Freiheitliche Partei Österreichs: FPÖ), long politically ostracized, garnered 26 percent of the national vote, entering the government for the first time. The Freedom Party’s electoral base, like Trump’s Republican base, is concentrated in rural areas and small towns, although its share of the Viennese vote (21 percent) was also non-negligible. Herein lies another warning. The very success of cities like Vienna in welcoming “others” can trigger a backlash, both inside and outside the city.59 In the end, cities are at the mercy of national electorates. (p.110)

Notes:

(2.) The tax reform bill passed by Congress in 2017 reduced the value of the Mortgage Interest Tax Deduction. The main change is the maximum value of mortgage debt for which interest can be deducted, lowered from one million to 750,000 dollars.

(3.) Paris was a notable exception for a time, with a submerged highway along the banks of the Seine leading into the inner city. It has since been closed, replaced in some parts by a walkable embankment.

(6.) Actually, the first pro-transit legislation was passed in 1964 (the Urban Mass Transportation Act), but this called for a fifty–fifty sharing of capital costs, beyond the means of many local authorities.

(8.) Exact comparisons of modal shares are difficult to come by, in part due to definitional problems. Data sometimes refer to cities (municipalities) and sometimes to urban regions, without necessarily being clearly stated. The reader may wish to consult the following sites: http://www.uitp.org/MCD; http://www.epomm.eu/tems/cities.phtml; https://en.wikipedia.org/wiki/Modal_share#Cities_with_over_1.2C000.2C000_inhabitants

(9.) I shall not give any figures because results differ for median and average income (or using GDP per capita). The point is this: the Boston and San Francisco urban areas are systematically among the top on different measures of wealth.

(10.) Fee and Hartley (2012). The study was for the years 1980–2010.

(11.) Cushman & Wakefield publishes yearly data on local office markets around the world. The data cited here are for 2016 (http://www.cushmanwakefield.ca). The CBD/Suburb ratios are similar in Los Angeles and Montreal.

(12.) This statement applies to local governments that draw a significant share of their revenues from property taxes, which is the case in most of North America.

(14.) Jane Jacobs’s hometown was actually Scranton, Pennsylvania. Jacobs moved to Greenwich Village in 1935 at the age of nineteen.

(15.) For more on Manhattan’s Silicon Alley, see Indergaard (2003, 2009) and Wortham (2010).

(16.) For references on London’s Silicon Roundabout and New Economy districts in Canada and elsewhere, see Biddulph (2012), Duvivier and Polèse (2018), Foord (2013), Hutton (2004), and Wainright (2012). Hutton (2016) provides an excellent overview of the rise of New Economy districts in several cities.

(17.) Inner London = former London County, the historical core. Central Montreal = the Borough of Ville-Marie.

(23.) SoMa, abbreviation for South of Market Street, recalling Manhattan’s alphabet soup of neighborhoods. For references on San Francisco’s challenge to Silicon Valley, see also Cortright (2016) and Weinberg (2015).

(24.) On Google Buses, see De Konnick (2014), Nieva (2014), and Opillard (2015).

(25.) That falling communication costs facilitate spatial concentration is a basic axiom of urban economics.

(26.) Construction costs were estimated in the 1990s at $250 per mile, for a total cost close to $5 billion, about double in today’s dollars.

(28.) Other sources put the ratio even higher. Measuring subway ridership is not an exact science because properly counting transfers is a major problem. Wikipedia puts New York’s subway ridership, calculated on an annual basis, at thirty-five times that of Los Angeles. https://en.wikipedia.org/wiki/List_of_metro_systems#List

(30.) University of California at Los Angeles.

(32.) Elsewhere, my colleague Richard Stren and I coined the term social sustainability, which essentially captures the same notion (Polèse and Stren 2000).

(36.) Mercer’s Quality of Living Index is not without its failings, as are all such ranking exercises, but it is among the most rigorous, comprising thirty-nine indicators, including crime statistics: https://en.wikipedia.org/wiki/Mercer_Quality_of_Living_Survey

(38.) Thus, the Quebec City urban region (population seven hundred fifty thousand) has a more equal income distribution across households than the Toronto urban region (population: six million).

(39.) The heart of the German neighborhood, also known as Yorkville, was East 86th Street called (Der Deutsche Broadway: The German Broadway), replete with German-language movie theaters, book shops, and restaurants.

(40.) Source: Economist (2013).

(41.) In authoritarian regimes, one could add the politically privileged, party members, and other friends of the regime.

(43.) For my comments on Singapore, I am grateful to Professor Sarah Moser, Geography Department, McGill University, a recognized authority on the history of interethnic relations in the island state.

(44.) The bloodiest massacres occurred in 1965–1966 on the island of Java. Estimates put the total deaths between half a million and a million. Later, in May 1998, anti-ethnic Chinese riots broke out in several Indonesian cities.

(45.) Not In My Backyard.

(48.) Ibid.

(49.) Ibid.

(50.) I do not know what finally happened to the proposed legislation.

(51.) Einstein et al. (2018). The authors analyze planning and zoning board meetings in the Boston area, finding that participants, more often than not, tended to oppose new construction.

(53.) See Kantor et al. (2012) for a description of the regional governance structures of New York, London, Paris, and Tokyo.

(55.) The recently published interactive Opportunity Atlas allows the reader to visualize the social divides for America’s major metropolitan areas: https://opportunityatlas.org

(56.) Vienna underwent various boundary changes after World War I, notably during the Nazi period (1938–1945), but the boundaries that define Vienna are not very different today from those of a century ago.

(57.) For an in-depth description of the Austrian system of housing finance, see Amman and Mundt (2017). For housing prices, see Wolf (2013).

(58.) For a detailed analysis of Vienna’s policy on immigration, see Eurofound (2009).

(59.) I do not wish to resurrect old ghosts, but it is sobering to recall that it was “mongrel” pre-World War I Vienna, a city where true Germans were forced to live with Slavs, Magyars, Jews, and other lesser peoples, that so shocked a youth from the provincial town of Braunau, setting him on his course to found a political movement dedicated to cleansing Vienna of its mongrel elements. In this, we sadly know, that the young Hitler would be successful.