Over five millennia, urban centers have been drivers of civilization and progress, and have adapted in ways that have changed their form and function but assured their survival. Today, they are about to undergo another critical transition that will determine their relative position in the decades ahead.
Cites began as small settlements that became bigger and denser, before becoming less dense again. Walking was replaced by a transit-based culture, which was replaced in its turn by an auto-dependent culture, which is now set to be usurped by a new pattern of life based on digital commuting. Cities must now adjust to a new paradigm in the high-income West, and also in the developing world where the vast majority of the world’s largest megacities are located. In countries like India and China, the flow of people to cities appears to have slowed as urban life loses some of its appeal. What were once thought of as places of opportunity are now more often linked to deteriorating health conditions and shorter life spans.
In this emerging new reality, urban centers must find their niche. People’s choice of location is more fluid than ever before, and the home has become a primary business location. People will come to the city, not out of economic necessity nor government fiat, but because that is where they choose to settle.
The transactional city
The new urban paradigm represents the third major urban transformation in the past century. In 1900, cities were primarily centers of manufacturing and trade in physical goods. But by the 1960s, places like New York, Chicago, San Francisco, and Tokyo jettisoned the factory-centered economy and evolved into what Jean Gottmann called the “transactional city.” This was dominated by elite business services operating out of high-rise towers—the “commanding heights” of the world economy, beneath which all others were relegated to subordinate roles.
This shift was hugely disruptive. New York, which had a million manufacturing jobs in 1950, now has less than 100,000. Los Angeles has seen industrial employment drop from over a million in 1990 to fewer than 500,000 now. Much of the old urban population moved as industrial and white-collar jobs headed to the periphery. Indeed, despite all the talk of “back to the city,” suburbs account for about 90 percent of all US metropolitan growth since 2010, a net gain of two million domestic migrants, while the urban core counties lost 2.7 million.
This is not just an American phenomenon. Since 1921, Paris’s city center has lost over 700,000 residents, while the suburbs have gained nearly eight million, according to data from the French census bureau INSEE and the United Nations. After peaking at 4.5 million residents in 1901, inner London lost 2.03 million people over the next 90 years while outer London added 2.2 million.From 1990 to 2020, the central city of Seoul lost a million residents while the suburbs (Gyeonggi and Incheon) added 8.5 million. Cities in developing countries, notes NYU’s Solly Angel, have also followed this dispersive pattern.
The limits of the luxury city
Whether in Mumbai or Manhattan, the transactional city became increasingly rarified as costs rose and the urban focus shifted to the upper classes. In 2003, the New York City Mayor at the time, Michael Bloomberg, openly described his city as “a luxury product,” built around wealthy elites, serviced by subordinate workers from the fringes. Cities like New York, London, and Paris continue to attract the ultra-rich who purchase properties, even if they live there only intermittently.
Overall, these cities tend to have some of the worst inequality of any location, an urban model very different to the Jane Jacobs conception of a city that does not “lure the middle class” but creates one. Indeed, as the transactional city reached its apogee, the opportunity horizon for working- and middle-class families dimmed.In 1970, half of the city of Chicago was middle income; today, according to a 2019 University of Illinois study, that number is down to 16 percent. Meanwhile, the percentage of poor people has risen from 42 to 62 percent.
San Francisco, the urban center that gained most from the technological revolution, epitomizes the final stages of the transactional city. It is now the country’s costliest city and anchors a region with the smallest middle class among the 52 Metropolitan Statistical Areas with over a million people. Inequality grew most rapidly there over the last decade, reports the Brookings Institution, as techies moved into tough urban areas like the Tenderloin. A city of enormous wealth has become bifurcated, plagued by mass homelessness and petty crime, while the middle-class family heads toward extinction. San Francisco has lost 31,000 home-owning families in the last decade, a trend that accelerated during the pandemic.
The employment structure is increasingly split between elite professions and low-end support jobs. In New York City alone, there are 200,000 domestic service workers with a median pay barely above $20,000. That leaves most of them dependent on government subsidies for rent, food, and medical care. Philadelphia’s central core, for example, rebounded between 2000 and 2014, but for every district that gained in income, two suffered income declines.Since 2000, the “number of people living in extremely poor neighborhoods has doubled,” notes one study; neighborhoods of concentrated poverty are still disproportionately located in the densest urban places. Many large cities also became more racially segregated, with New York being the most separated.
The pandemic reshapes the urban paradigm
Dense centers—what historian William McNeill described as the “confluence of the civilized disease pools”—suffer worst during pandemics, as did ancient Rome and the great cities of the Renaissance, the Islamic Caliphate, and China. So, dense urban centers generally suffered the worst COVID-19 fatality rates. In the developing world, cities like Rio, Karachi, and Manila were particularly hard-hit.
Lingering fear of infection has launched what Zillow Inc. calls a “great re-shuffling”—the acceleration of an existing trend towards the suburbs and smaller cities.According to Pew, a preference for larger homes in less dense areas grew from 53 to 60 percent between 2019 and 2021. And according to the American Enterprise Institute, the percentage of Americans who say they want to live in cities dropped to 13 percent in just two years, down more than half from the 29 percent reported by Gallup in 2018. In 2020, exurbs enjoyed a 37 percent growth in migration and price increases twice the national average, according to a Wall Street Journal analysis.
But the most important result of the pandemic was the shift to home-based work, a huge blow to the “transactional city.” This does not appear to be a temporary phenomenon. Stanford economist Nicholas Bloom suggests that even after the pandemic, “the share of working days spent at home is expected to increase fourfold from pre-COVID levels, from 5 percent to 20 percent.” A recent analysis of 21 global business districts found that this is a global phenomenon; surveys of real estate professionals in 2022 found that most clients were reducing space by 20 to 30 percent compared to the year before.
Similar patterns can be found in Australia, New Zealand, as well as in Mumbai, London, Paris, Sydney, Hong Kong, and Tokyo. Even Calgary, North America’s biggest post-war new business district, has seen its property values drop by two-thirds. In an October 2020 essay for the Wall Street Journal, Nicholas Christakis reported that:
The shift to working from home will also linger. Some companies have already eliminated in-office work, and others will follow. N. Chandrasekaran, the CEO of India’s Tata conglomerate, forecasts that most of the 450,000 employees of Tata Consulting Services, one of the world’s largest management consulting companies, will continue to work from home after the pandemic. “The digital disruption is so significant that most of us cannot imagine the degree,” Mr. Chandrasekaran said. “The pandemic has accelerated digital trends that will stick after it has gone.”
The social collapse
Every shift in urban function comes with social costs. In the era of the industrial revolution, millions of people left the farms and headed to the cities for work, leading people to London or Liverpool, Paris, Berlin, Tokyo, Seoul, Singapore, or Beijing. Conditions in these cities were—and often still are—unsanitary, and death rates were higher than in the countryside. Yet whether these were Italian peasants coming to Rome or the rural refugees heading to Manchester portrayed in Friedrich Engels’s Condition of the Working Class in England, people traveled not for a change of lifestyle but to escape even more crushing poverty in the countryside.
Crime has always been a part of the urban story, but in many ways, today’s wave is more terrifying and more random. Even the worst gangsters of the 1930s—like Murder Inc. in my mother’s Brooklyn slum—generally left “civilians” alone. Today’s crime, on the other hand, reflects what one Chicago resident described as “sociopathic idiocy.”In some great urban centers—San Francisco, Los Angeles, Seattle, Portland, New York—the social order has broken down, and these cities have become centers for homelessness, open drug markets, and petty crime. In many cases, crime has made people more reluctant to ride on public transport such as the New York subways, once a major asset to traditional cities.
Similar evidence of disorder can be found in major European cities. Arguably the biggest force undermining urbanity are the effects of inequality, racial tension, and rising crime in cities across the United States and around the world, including Paris. London has a crime rate “rising five times faster than [the] rest of England.” The world’s highest crime rates are overwhelmingly in large cities such as Caracas, Pretoria, Johannesburg, and Durban, the last three of which are all in South Africa.
Redefining urbanism: the “city of bits”
Cities have survived at least five millennia by changing their form and function. Today, cities must adjust to a broad “networked” urbanity, or the “city of bits” first proposed by the futurist William Mitchell in 1999. In the emergence of an “electronically augmented environment,” Mitchell foresaw that talent, money, and power would have the ability to shift to whatever locale attracted them. In this scenario, cities could become giant playgrounds, post-graduate schools for the affluent, and tourist meccas. They would now be, as H.G. Wells foresaw, primarily “a place of concourse and rendezvous”—culture, entertainment, and diversion. This new kind of city might still lure some of the youngest workers but generally for short periods.
If cities want to be more than entertainment centers, they need to make radical changes. In the “city of bits” era, urban areas must be able to compete with other geographies for residents and businesses. The conveniences of urban living—like broadband, arts, ethnic culture, and entertainment—are becoming available across more locales, even in largely rural areas. Future urbanites will have to be persuaded that urban centers offer these amenities not only in greater depth but under secure conditions. Under such conditions, claims that “superstar” cities will come back as before are simply exercises in denial. Attempts to force government workers back to the offices, as attempted in London, have encountered strong opposition from both employees and top managers. The key is not forcing people into cities but making them more attractive to people as they enter adulthood and enter family formation years.
Currently, large cities are increasingly childless. The number of babies born in Manhattan this decade has dropped nearly 15 percent; already home to a majority of single households, the nation’s premier urban center could see its infant population cut in half in 30 years. To be sure, young and talented people will continue to flock to big cities, but once they hit the family formation period in their 30s, they are still likely to depart for the suburbs.
Demographer Wendell Cox estimates that the percentage of households with children between the ages of five and 17 was nearly three times higher in suburbs or exurbs than in or near the urban core. Urban school districts are imploding as the number of young people growing up in core cities has declined.San Francisco, for example, is home to more dogs than children under 19, while Seattle boasts more households with cats than two-legged offspring.
To retain some demographic vitality—particularly given the decline in migration to urban cores—problems with crime and sanitation need to be addressed, as does the paucity of affordable family-friendly housing. This new city will be less about high-rise glamour and more about attractive neighborhoods. The artists, musicians, artisans, writers, and tech professionals do not need cubicles in a tower; they need neighborhoods that sustain them and their families. To survive and thrive in the “city of bits” era, urban areas will have to compete for residents and businesses—not out of economic necessity but as a choice. Critically, cities must be places chosen by the current crop of grassroots startups that has arisen since the pandemic, and for research-intensive work in such fields as medicine.
“A great city,” noted Aristotle, “is not confounded with a populous one.” Successful future cities need to focus on quality of life and on grand visions of urban supremacism. Land use will have to change, with a shift away from massive retail and office projects and a greater emphasis on housing. In places like central London, developers are looking to turn office and retail space into apartments, while New York and Los Angeles are looking at these conversions as a way to create more affordable residences.
Successful future cities can only compete by providing a more dynamic, vital alternative to the periphery or small towns. In the “city of bits” era, success depends on tapping the skills and entrepreneurial penchants of its denizens. Cities need to grow, not by becoming greater or more grandiose, but by offering a better, safer, and more exciting urban experience—a more people-friendly metropolis.