Shiftdisturbers Episode #8 - Urbanization in Southeast Asia.

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Transcript of the podcast:

The most interesting point of our work is how uneven development and urbanization is in Southeast Asia. It’s a place certainly to keep an eye on. I think it’s an intriguing case study of urbanization in our time.

IG: Welcome to Shiftdisturbers, the MPI podcast where we highlight the people, research and ideas that change the way that we think about the world. I’m your host Ian Gormely, writer and content producer here at the Martin Prosperity Institute at the University of Toronto’s Rotman School of Management. 

I know it’s been awhile but rest assured we’ll be back posting more regularly in the weeks to come including conversations with Roger Martin and MPI Fellows Jonathan Haidt and Lauren Jones.

But to kick things off we wanted to chat with MPI’s Director of Cities, Richard Florida about his team’s most recent report, the Rise of the Urban Creative Class in Southeast Asia which looks at the massive wave of urbanization currently sweeping Southeast Asia, and the ripple effects that transformation could have on the region’s middle and creative classes.

Analyzing urbanization in Cambodia, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, as well as their major cities, Richard was struck by the relatively uneven levels of development happening in the region. But there’s also concern about its future. The economic developments that lead to the rise of the advanced nations in North American, Europe, and parts of Asia, was propelled by urbanization. But globalization has torn apart local linkages between the hinterlands and urban centers. And now some nations in the region are threatened by the specter of urbanization without growth.

As Richard explains, Southeast Asia is an intriguing case study of urbanization in our time.

[00:01:50]

RF: I think the most interesting point of our work is how uneven development in urbanization is in Southeast Asia. There is a place like Singapore which literally is at the veritable heights of urbanization. It’s as urbanized…I mean it’s a city state so it’s as urbanized as any place in the world. It has a level of per capita economic output that is extraordinarily high. It has a level of per capita economic output that is marginally higher than Canada or the United States, and among one of the highest in the world. It has nearly half of its workforce being members of the creative class at 47 per cent. Canada’s is about 40 per cent, the United states is about a third, so it is quite high. It has all sorts of indicators. Every indicator that we looked at puts it among the richest, most affluent, most innovative, most developed places in the world.

And then you have places like Malaysia and the Philippines, which have about 20 per cent of their workforce in the creative class. And then, Thailand and Vietnam that have about 10 per cent of their workforce in the creative class, and Indonesia and Cambodia which are quite a bit less than that.

So what we talked about a lot in this report is these four tiers of economic development; Singapore at the top, Malaysia and the Philippines with economic output which would put them in the middle of what the world bank considers nations. Thailand and Vietnam, which is quite a bit less, and then Indonesia and Cambodia back in the lowest tier. Singapore has per capita output of over $50,000 dollars per person. Cambodia has per capita outcome of about $870 dollars a person. If Singapore is almost entirely urbanized less than 2 per cent of Cambodia’s population is urbanized. And if Singapore is 50 per cent creative class, Cambodia is five or six per cent, roughly speaking, creative class. So in a sense you have the global north and the global south; a wide variety of the world’s economic conditions in one region.

IG: As mentioned before, Richard and his team not only looked at urbanization and economic development at the national level, but also within these nations major cities, including Phnom Penh, Jakarta, Kuala Lumpur, Manilla, Bangkok and Ho Chi Minh City, which revealed the heavy economic lifting each of these urban centres do for their respective nations.

RF: Singapore is 100 per cent urbanized. Malaysia is three quarters urbanized. Indonesia and Thailand are about 50 per cent urbanized, and the Philippines 44 per cent urbanized. And Cambodia is just 20 per cent urbanized. Of course they’re expected to get more urban over time.

So we looked at the major cities but we go from a mega city like Manila with 13 million people, Jakarta with 10 million people, Bangkok with nine, Ho Chi Minh City with seven million and Kuala Lumpur with about seven million people, Singapore with five point six million people, and Phenom pen with one point seven million people. They are expected to grow quite a bit.

[00:05:15]

But Singapore as I mentioned had quite a high level of economic output. Kuala Lumpur was actually next in line with about $28,000 dollars in economic development a person, which is higher than Shanghai or Beijing, which is quite considerable. Kuala Lumpur is quite a developed place already. Bangkok is next with about $20,000 a person, Manila at about $14,000 a person, Jakarta at about $10,000, and then Ho Chi Minh City about $8,600 dollars a person.

We calculated what we called the urban productivity ratios. So we wanted to look at how productive a city is, a metropolitan area is in comparison to its country. So we calculated a ratio; the economic output per person for that city or metropolitan area compared to the rest of the country minus that city or metropolitan area.

So in the west most metropolitan areas are roughly the same level of productivity of their country. New York is about one and half times more productive than the United States. And the Silicon Valley, which is a very high urban productivity ratio for an advanced country is about one point eight. And of course Singapore is the same because it’s a city state, so the value is one. In Kuala Lumpur and Jakarta they are about three times more productive, the ratio is three. Compare that to Beijing or Shanghai which is about four and half times. Ho Chi Minh City is five point six times more productive than its country, and Manilla is about six times more productive than the Philippines. So in other words these places are really, really, really very productive compared to their nations. And it think that’s what really gives me great hope in looking at this.

These cities are quite a bit more productive than their larger nations. When the ratio in an advanced country is one to one and a half, that’s maybe up to 50 per cent as productive as the nation. In these countries, it’s three, three and a half, five or six times. The productivity and then the income and the wages, the standard of living in these cities is amplified as quite a bit greater than their surrounding countries.

IG: Despite the seemingly positive findings, globalization has decoupled local supply chains leading to a phenomenon called urbanization without growth, where people flood into cities but are unable to find the better jobs and wages that would lift them out of poverty and into the middle class.

[00:07:55]

RF: Now, the jury is out. Will urbanization ultimately lead to a full blown middle class in Cambodia, in Malaysia, in Vietnam? The jury’s out. One can’t know that in advance, the way it has in the United States the way it has in Western Europe. But the signs seem to suggest that whatever hope those countries have in developing into better economies and having a bigger middle class, would lie in those cities. And those cities right now, their level of urbanization is relatively in line with their level of economic output. So it suggests as they grow, there at least is a good fighting chance that as they urbanize they will develop further, and they will develop the middle class.

The troubling phenomenon though is that what we’ve seen over the past couple of decades in the emerging economies, especially in some of the poorest places in the world; parts of Africa and parts of Asia, parts of the Middle East, is what people are calling urbanization without growth. And what’s worrying about that is if urbanization went alongside growth and growth of the middle class in the advanced countries, what we’re seeing is high levels of urbanization as people flood the cities in some of these places, and that’s not necessarily leading to better jobs, more economic development. It’s just leading to bigger slums.

And the reason for that is in the past as a place urbanized it drove agriculture and its hinterland. But now with globalization places can import their food, even their rice. As places developed in the past cities like New York or Toronto or London, you could go on, they developed not only industries locally but industries in their hinterlands, and in related areas that could supply the urban centre. Increasingly with globalization those industries are now global. And so places in the developing world are being supplied by the same factories in China, or wherever, that are suppling us in the United States. And furthermore, a good deal of urbanization in the developing countries is happening simply because the countryside is so poor, and also because there’s not only famine but there’s civil conflict, wars, unrest, terrorism, and people feel more secure in city.

So one of the things globalization has done is really tore apart many of the local linkages, local industries, local farms, local agriculture that used to contribute to this more cumulative pattern of development which seems to be breaking down. Even as Southeast Asia develops and its cities develop, that phenomenon comes into play. I think the world is becoming more specialized. So places like China and parts of Vietnam, parts of Mexico, are developing large manufacturing bases and those manufacturing industries are no longer nearly as spread out or as locally integrated as they were.

So no, what economic geographers would call the spatial division of labour has become more varied and more differentiated. The world has become spikier.as economic activity has become more globalized and more specialized. There are only certain places that are developing these robust manufacturing clusters. So that hampers the development, or at least changes the nature of development in these places.

[00:11:14]

IG: But Richard remains hopeful that while the region’s development will remain uneven, its economically productive cities will be able to steer it towards a brighter future, though one potentially quite different than what we’ve seen in other parts of the world.

RF: It’s a place, certainly to keep an eye on. Maybe it’s the place we will see as time goes on, if we look back in 10 or 20 years, whether urbanization still carries with it growth for a large of number of people, or whether it means as a region develops you just gets these spikes of activity, like Singapore and perhaps one or two others that reached the apex of global power. But others don’t develop.

I think it’s an intriguing case study of urbanization in our time. And the question is does Southeast Asia end up with a relatively even level of urbanization and economic development like Europe, or like the United States or Canada, or does it really stay a very varied and very uneven and unequal region. And I don’t have a…our research suggests that…to me our research suggests it’s more likely to stay uneven and to have these pikes and peaks of activity, and alongside large valleys of economic underdevelopment. That that is more likely; looking at the data it is more likely that Southeast Asia stays a case study in uneven development than it grows and looks like what we have seen in Canada, the United States, and the advanced countries of Europe.

IG: Now we turn to MPI community manger Sarah Soderoff to find out what she and some of our coworkers are currently reading.

SS: I’m Sarah Soderoff, the Community Manager for MPI and I’m joined here with our good friend Philippa French who’s from the Institute for Competitiveness and Prosperity. And though it’s just the second version of the segment I’m going to switch things up and recommend an article this time rather than a book in an attempt to kind of cleanse my palate from all the news that’s been going on in the world, I’ve been trying to find more lighthearted things to read.

And I recently read two really good articles; one is a New York Magazine piece on Anthony Bourdain. They also had him on their podcast last week. And he’s just talking about…so Anthony Bourdain is the famous chef, the light kind of celebrity chef now, and he’s actually tried to become a writer and then pitched a show on how he could travel around the world and get paid for it, which is basically mentoring. 

[00:13:49]

And now he’s just the most famous chef and, kind of like a curator of different countries’ cuisine. And so they did a long form piece on how that came to be, and then how he also has become the go-to for travel food writing. So I thought that was really interesting and gave me like a 30-minute reprieve from the news while I was reading you. What about you, what are you reading?

PF: The last few months I’ve been trying to read books from more of a diverse group of authors than I previously was. Reading a lot of feminist books, and then I realized they were white feminists so I thought I’d read some feminists of colour books.

And it turns out they’re way better than what I’ve previously read. It’s just more interesting, just more perspectives that I never thought of before. And I found I just got a lot more from the books because I’m learning about different… completely, when you’re hearing things from just a completely different perspective and voice, you learn a lot more.

So right now I’m reading Swing Time by Zadie Smith. It’s taken me awhile to get through it. But I’m about halfway. It’s, like two months overdue on my library account. So I’m sorry to anyone who is waiting for that.

SS: There’s a long list for that. I know because I tried to get on it.

PF: [Laughs] And I’m also reading this book length poem about race and the imagination that delves into America’s history on the ongoing racial injustice. It’s called Citizen by Claudia Rankine. And it’s actually the book Johari read in silent protest at a Trump rally in Ohio back in the primaries. No, sorry, Iowa. So yeah, it’s really good. You should read it. Yeah.

SS: Do you tend to try and get something heavy and something light as kind of an offshoot for while you’re reading, or do you just kind of delve into one thing, finish it and then move on to the next.

PF: I’ve been reading a lot of heavy books, really heavy; enjoying it though.

SS: I’ve actually going away on vacation, and so I’ve been trying to download as many books to my e-Reader as possible for when I am away.

PF: Are you looking for location-specific?

SS: I once tweeted this and it was my most responded to tweet ever. I was in Argentina and I tweeted that I want books about travelling in South America and I got so many great responses. And ever since then I’ve tried to tailor what I’m reading to where I am.

 [00:16:06]

And so, I don’t know if anyone has any Japan-specific book recommendations but I wold love some. Because we’ll try and do this every episode if people have suggestions of things that they want us to read or, kind of things like even if they want us to look at it and review and comment on, we would love to do that. And we’ll try and bring guests on and have other people’s perspectives on stuff they’re reading to get a little bit of a diverse view.

IG: Thanks for that Sarah and Philippa.

That does it for us. Big thanks to Richard Florida. His new book, The New Urban Crisis, How Our Cities are Increasing Inequality, Deepening Segregation and Failing the Middle Class-and What We Can Do About It is out April 11th.

Thank you for listening to Shiftdisturbers. This episode was written and produced by myself, Ian Gormely. If you want to know more about the goings on around the Martin Prosperity Institute head over to Martinprosperity.org or follow us on twitter at MartinProsperiT. Note the lack of a ‘y’ at the end there.

 And to make sure you never miss an episode of Shiftdisturbers click the subscribe button, and If you like what you hear please take a minute to leave us a review. Once again, I’m Ian Gormely and thanks for listening.

[17.53 minutes]

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This podcast was produced by the Martin Prosperity Institute at the Rotman School in 2018.