The Planet of Cities: Good governance pays dividends

I’d like to begin this month’s column by asking a question. How could it be that cities with broadly comparable attributes enjoy varying levels of success on the global stage?

Take two cities with apparently similar fundamentals: population size, geographic advantages and disadvantages, business climate and overarching national contexts. What could cause such seemingly evenly matched cities to enjoy varying fortunes in the global race for talent and investment? What are the hidden factors behind the hard facts that could explain the disparity?

It could be explained by the manner in which cities present themselves to the world. Some are simply better known and more celebrated than others. These cities – think London, Paris, New York – have successfully carved out a place for themselves in the popular imagination. They have, in effect, written their own legend. Of course, the legend is not based solely in fiction: these cities have been observed to be good at certain things, consistently over time. But often they have also invested in their reputation to the degree that, when they do tell their story, it is doubly believable. Any inspiring embellishments about what they are and what they offer are taken in good faith; they have earned the benefit of the doubt.

Another explanation might be that certain cities have been better able to harness a spirit of invention than others. By design or happenstance local people and businesses have done things differently, been successful, and achieved competitive advantages as a result. As inventive people tend to seek environments conducive to creativity, such cities’ track records of success often ensure that their success can perpetuate. We might look to Barcelona in the 1990’s for an example of how this virtuous circle can work. There, urban regeneration schemes linked to the 1992 Olympics used individual neighbourhoods, in all their quirky uniqueness, to narrate the city’s story. This emphasis on giving grassroots culture a voice set the place apart; to this day, it remains a premier destination for inspired young artists and designers. We witness a similar phenomenon today in Copenhagen. The Danish capital, having committed to becoming the world’s first carbon neutral metropolis, has become a magnet for the brightest minds in the field of sustainability.

A third explanation could be that some cities simply enjoy greater levels of self-confidence on the world stage. Bolder in their ambitions and appetite, sharper in their vision for the future, and exceptionally steadfast in the face of crisis and adversity, these places punch above their weight. They talk-the-talk and walk-the-walk.

In a nutshell, we might label these three factors communication, innovation and motivation. While distinct, they are not unrelated. When you boil them down, all three are, in fact, the product of good leadership and strong governance. The report Readiness, Resilience and Responsibility: City Governance and Real Estate in a Post-COVID World, released by JLL and The Business of Cities, investigates this issue in nuanced detail.

The authors lay out seven “habits” of good governance. These are:

• Political consensus and continuity – the gift, in these increasingly polarised times, of maintaining, even strengthening, civic consensus
• Metropolitan management – the ability to manage growth evenly and at ‘whole city’ level
• Fiscal capacity – or the capacity to attract public investment in priority projects such as infrastructure, housing and liveability
• Instruments to optimise land and infrastructure – speed and flexibility in the use of land and real estate
• Vision and appetite for the future – a thirst for success, especially apparent in times of crisis and setback
• Commercial readiness and agility – including a transparent regulatory environment
• Brand and story – the willingness to build and trade upon a global reputation

The report also differentiates between a city’s “hard” powers – i.e. the freedom to legislate and raise finance – and “soft” powers, which might be better described as instincts or persuasions. Those that are strong on both fronts are described as “conductors”. They are an elite band, small in number and outsized in influence. Then there are those that are weak in both – “contingents” in the parlance of the report. In between are the “can-doers” (weak hard powers, strong soft powers) and the “commanders” (strong hard powers, weak soft). One ought not assume that any of the four leadership types are necessarily better or worse than the others; there are advantages and drawbacks to each. The key is to understand where those advantages lie and maximise them; each city must play to its own strengths, not those of its competitive neighbours.

What is interesting for me is how they do this. The report focuses mainly on what all of this means for real estate investors, and I highly recommend that you seek it out. But there are wider questions to be asked, not least regarding how cities might be emboldened or enfeebled by the experience of COVID-19.

It is no exaggeration to say that the world desperately needs cities to re-find their feet as quickly as possible. They are the places into which we have funnelled our hopes and aspirations – not to mention significant levels of investment – as the world has urbanised. Experience tells us that similar fundamentals do not guarantee similar outcomes, and this is as true in the field of pandemic recovery as any other. While it is still too soon to sort the winners from the losers, we can be sure that winners and losers will, over time, emerge. The good governance dividend is very real. We will see it redeemed as the aftereffects of the pandemic reconfigure the map of strategically influential cities.