CHAPTER 2 ~ KEY THEMES: A REVIEW OF THE LITERATURE “The smaller the income gap between city and suburb, the greater the economic progress for the whole metropolitan community.” David Rusk The suburbanization of jobs and people, the maturation of older suburban areas, the development of new suburban areas, and the decline of many urban areas have led to a debate over the relative importance of the city — and of overall city vitality — to the regional economy. This chapter summarizes recent academic and popular literature and research central to this issue. The integration of the global marketplace has also had a profound impact on cities and suburbs. Recent research stresses that within the new global marketplace, the region — not an individual city, suburb, or county — is emerging as the basic economic unit. Workers are hired from a regional labor force, a regional transportation system moves people and materials, and a regional infrastructure keeps the roads, sewers, and pipelines intact. “Only regions” says Theodore Hershberg, professor of public policy and history at the University of Pennsylvania,20 “have the necessary scale and diversity to compete in the global marketplace. Only regions have the asset profile capable of projecting overall strength — in sharp contrast to the profiles of individual counties or cities that lack either key infrastructure or a sufficiently skilled labor force.” The U.S. economy is increasingly characterized as a system of metropolitan-centered regional economies that transcend municipal boundaries.i These metropolitan regions will increasingly compete with one another and with urban centers throughout the world. The growing importance of the economic health and competitiveness of the region as a whole has led to research on the nature of the relationship between cities and suburbs — addressing this fundamental question: What is the relationship between cities and suburbs, and is that relationship important to the economic and social viability of the region as a whole? The academic and popular literature on this question can be summarized under three main themes. Theme 1: Within regions, are cities and suburbs dependent, interdependent or unrelated? There is no question that the spatial form of the metropolitan area has evolved significantly over the last 40 years. The once standard pattern of a city consisting of a major downtown, surrounded by an inner ring of lower-income residents and an outer ring of more affluent suburban residents, no longer adequately describes most U.S. metropolitan areas. What were once bedroom suburbs have been replaced by a metropolitan area outside of the central city that is increasingly urbanized and, like the central city, is a place not only for residences but also for businesses and employment. Many people both live and work in suburbs and rarely visit the city; others commute to the city for work yet utilize the retail, business, consumer, and social services in the suburbs. This change has led some academics and journalists to argue that suburbs are increasingly independent of central cities.ii They assert that with innovations in transportation and telecommunications, the relationship between cities and suburbs is increasingly competitive, and many of the traditional functions now performed by central cities have moved to or will become available in the suburbs. Other authors insist that some central cities, because of their location, size, and infrastructure, will continue to be key financial, communication, and transportation nodes well into the twenty-first century.12, 51 It is agreed, however, that parts of cities, particularly older industrial areas, may not be competitive in the global economy. For example, when new technology is applied to goods production and handling industries, newer, larger, and differently designed buildings are required, as is a floor plan suitable for fiber-optic wiring. Many older urban industrial facilities cannot easily accommodate these new uses, which may lead industries to locate in suburban areas where larger sites and cheaper land are available. Several academics have sought to better define the relationship between cities and suburbs using correlation studies:iii • A Win-Win relationship would exist if the prosperity of cities and suburbs is positively correlated — as when a corporate headquarters in the city leads to job growth in the suburbs. • A Win-Lose or Zero Sum relationship would exist if the prosperity of one is tied to the decline to the other (a negative correlation) — as when a factory moves from the city to a suburb, taking the jobs and tax base with it. • An independent relationship would exist if there is no correlation. The prosperity of one has no relationship to the prosperity or decline of the other — as when a thriving suburban business creates new jobs without an impact on other localities. The framing of these studies is clear: a demonstration of positive correlation lends support to the notion that policies which aid urban areas would also aid overall regional prosperity, and therefore are in the economic interest of suburbanites. Simply put, suburbanites should care about the economic well-being of the cities for reasons of pragmatic self-interest. A number of studies found evidence of a positive correlation between cities and suburbs — indicating a win-win or interdependent relationship. Strong positive correlations were found between central cities and suburbs when changing population, employment, and income data was examined. Generally,the findings can be summarized as follows: Income • Where suburban incomes are increasing, city incomes are also increasing, and the converse is also true. • In the high-growth metropolitan areas studied, no suburban area experienced income growth without corresponding growth in the central city, and the converse is also true. • Growth in city income is related to greater suburban residential appreciation, and also to suburban population growth. Employment • Growth in city employment is related to growth in suburban employment, and the converse is also true. Population • Metropolitan areas with relatively stable populations in their urban cores tend to have relatively high population gains in their suburbs. Researchers stress, however, that positive correlation does not imply or prove causation. For example, related prosperity or decline between a city and its suburbs might have an external cause such as overall economic growth in the western U.S. during a given time period. Second, even if causality is proven, there are questions regarding the direction of the causality. For example, does inequality between cities and suburbs cause slow growth in a region, or does slow growth in a region cause greater inequality between its suburbs and central cities?57 Nevertheless, most authors agree that while the relationship between cities and suburbs is changing, a mutual, interactive, and interdependent relationship exists. The economic fates and fortunes of cities and suburbs are inexorably linked. Theme 2: Do economic disparities between cities and suburbs hurt the ability of the region to compete? Economic equality (or disparity) within a region also appears to impact overall regional economic performance. Research shows that economies do suffer when large differences exist between urban and suburban incomes — and as those differences diminish, regional growth increases. Specifically: • Metropolitan areas with smaller per capita income disparities between cities and suburbs tend to be more prosperous. High employment growth tends not to occur in areas where there are high income disparities. As income disparities increase, employment growth rates decline.36 • Metropolitan areas with growing suburbs tend to have smaller income disparities between cities and suburbs than do slow-growing regions.53 Disparities between cities and suburbs also appear to hurt the ability of suburban areas to attract businesses, as outsiders’ perceptions of the region are influenced by conditions prevailing in the urban core. The literature cites as examples the image problems in Detroit, and in Los Angeles after the 1992 riots, which resulted in ripple effects outside the affected city. Several authors believe that neglecting the growing division of urban and suburban areas into “stark extremes of income, race, crime or safety”47 will hurt a region’s ability to be competitive in the global marketplace. Neal Peirce, author of Citistates, relates how “trouble in the cities isn’t cost-free. Fail to address inner-city social problems now and the bill — in higher welfare costs, failed schools, packed prisons — will come back to haunt everyone in higher taxes.” Increased taxes will reduce the private capital available for desired investments, including business development, and the public capital available for infrastructure and other improvements. Many authors note that the alleviation of destructive social and racial tensions (which are exacerbated by city-suburban disparities) is essential to establishing a region’s special niche in the world economy, because disparities weaken a region’s relative competitiveness. It has also been noted that the widening inequalities between cities and suburbs will not only hurt regional growth but also undermine social cohesion and stability. Anthony Downs12 distilled the arguments about why suburbs should care about the fate of cities as follows: • "creeping blight" - in many areas, symptoms of urban decline spread outward from the cities to the inner-ring suburbs and eventually to newer suburbs; • the majority of U.S. population growth will occur among people most at risk (minority and poor) and disproportionately located in the cities, eventually creating a drag on the regional economy; • many suburbanites depend on cities for their jobs; and • the region is the basic unit in the global economy - success demands healthy cities and suburbs. Theme 3: Does the city have a unique role in the economic life of the region? A main theory underlying the city/suburban interdependence hypothesis is that cities have unique economies and specialized functions that benefit the entire region. The compact development of the city provides greater opportunities for agglomeration economies which are the benefits that accrue from having many businesses in close proximity. The basic principle behind agglomeration economies is that concentration makes doing business more efficient for firms by providing access to specialized business services and by reducing the costs of face-to-face communicating. For example, corporate headquarters in cities attract business services, and as they grow, they attract and support additional related business services such as law firms and advertising agencies. High density also facilitates the rapid exchange of information through face-to-face contacts that are especially important in innovative and rapidly changing fields. In many cases, face-to-face communication is irreplaceable: financial and management firms, medical centers, educational institutions, and government, for example, continue to find face-to-face communication valuable. Because of the value they place on face-to-face communication, proximity to the other businesses and institutions they interact with is an important element of their location decisions. There are two counter-arguments regarding the importance of agglomeration economies: 1. Technology is eliminating the need for face-to-face interaction, and 2. While face-to-face interactions are important, suburbs are developing their own concentrations of employment and economies of agglomeration that match or exceed those of the city. In response, there is little scholarly evidence to support the argument that technology is replacing the need for face-to-face communication. Technology does not appear to reduce the need for face-to-face communication, or make location unimportant. Rather, technology appears to facilitate a sorting-out process in which certain routine functions such as back-office work can be decentralized to the suburbs, while the highly skilled or specialized activities, such as corporate headquarters, remain in the cities. Also, there are still many operations — from law to accounting, from advertising to business consulting — that require the face-to-face interaction of cities. There is, however, considerable evidence indicating that suburbs are increasingly creating their own central business districts, which are assuming the traditional functions of downtowns, and are consequently developing their own agglomeration economies. The important question becomes: What are the unique agglomeration economies or other features provided by cities that are not provided in the suburbs, and how can they be supported? Unique Contribution of Cities to the Regional Economy Location Scholars assert that central cities remain the most effective locations for specialized industries (such as high-fashion retail, major medical centers, and specialized wholesale suppliers) which serve thin but widely-spread markets. These businesses need the combination of a location accessible to the entire metropolitan area and the area’s large market to thrive.27, 12 Cities also contain nodes or central switching facilities in technological networks such as sewage purification systems, electrical power grids, and telephone networks. In many cases, these nodes were originally located in central cities, and the networks grew up around them. In addition, an entire network may have been constructed to converge in the central city as with major highway and transit systems.12 Housing and Public Services Cities provide housing and related public services for low-wage workers employed in the suburbs. They also make a significant contribution to the regional housing supply, providing a broad range of housing types and affordability levels.12 Amenities Central cities may provide unique amenities or features (such as historic sites, waterfronts, cultural facilities, sports arenas, and period architecture) that are valued not only by their residents but by nonresidents as well.27 Diversity In 1961, author Jane Jacobs emphasized that in addition to density, diversity is critical to the success of a city. Arguably, this is even more important in today’s global economy. Research has shown, for example, that manufacturing companies located in diverse urban settings tend to adopt the innovation of computer-programmable automation more rapidly than companies located in other homogeneous areas.19 The findings suggest that one of the reasons why cities are important to regional economies is that their diversity encourages innovation and helps regions reinvent themselves in the face of global economic change. Also, the diversity of languages and cultures found in cities is a crucial element in distinguishing and developing the competitive advantage of the inner city in a global economy. Summary For the last fifteen years, academics and popular authors have been trying to answer the question: What is the relationship between cities and suburbs, and is that relationship important to the economic and social viability of the region as a whole? The literature examined in this review can be summarized as follows: With the globalization of the marketplace, the region, rather than the city or county, has become the basic, competitive economic unit. Although the relationship between cities and suburbs is changing, income, population, and employment data demonstrate that cities and suburbs are highly interdependent. While there is some disagreement as to the scope of the city-suburb relationship, there is general agreement that within the regional economy, cities play a critical role because of their central location, developed infrastructure, business density, and higher diversity. Present regional trends show that despite the interdependence of cities and suburbs, there is increasing isolation of cities and suburbs by class, ethnicity, and race. Research suggests that ignoring growing socioeconomic disparities will hurt a region’s ability to compete in the global marketplace. Furthermore, it is likely that failure to address inner-city problems will result in higher overall taxes, a decreased availability of capital for business development, and an undermining of social cohesion and stability. Chapter 7 expands upon these conclusions and identifies policy strategies.