Why cities die?

Declining cities get trapped in a vortex of self fulfilling prophecies. Investments and jobs fall, resulting in a drop in incomes and spending, thereby generating a negative feedback of income and economic decline. This turns away the more well off and attracts the poorer, and so on, thereby triggering off another negative feedback loop of social degeneration. How do these cities get out of this poverty trap? What is the role of Government in such situations?

A similar logic applies to the Old Town areas of many of our cities. Having failed to keep pace with the requirements of the modern economy, these areas start declining. This in turn sets off a vicious cycle of falling land and rental values (relative to the other areas), thereby attracting the poorer residents. Slowly these areas develop slum like characteristics, and degenerate into oblivion. Crime and violence follows soon, and the downward spiral gathers pace.

Old Town streets and roads are typically narrower and are marked by perpetual traffic congestion. The absence or poor enforcement of zoning and building regulations in those times have resulted in buildings packed cheek-by-jowl with a riotous manifestation of mixed residential and commercial usages. Most of these buildings are old, located on small land holdings and with little or no open space. Given the stringent setbacks and parking requirements, there is limited possibility of reconstruction in such small landholdings without consolidation.

Further, the old and declining areas attract hawkers and street vendors for two reasons. First, their cheaper products have a bigger and more willing market in these areas. Second, they find cheaper accomodation in such areas. Given the poor public transport and the large commuting times, the attraction of a work place closer to their homes is invaluable. The presence of hawkers and street vendors in turn attracts more of them and the cycle builds up, converting areas into hawker markets. Hawkers invariably end up occupying road margins and vital junction spaces, thereby further reducing the road carriageway and exacerbating the traffic problems.

For historical and other reasons, old town areas are also the trading centers of a City. These locations are characterized by wholesale shops and large godowns. This in turn generates employment for headload workers, laborers, and push cart and other transport vehicle drivers. Given the availability of cheaper accommodation and the need to live close to their workplaces due to their odd working hours (Given the restrictions on entry of heavy vehicles to the City during daytime, most trading logistics have to be operated in the night), these people end up residing in the Old Town area itself.

Some element of demographic dynamics is also at work in promoting the decline of these areas. A disproportionately high share of households in the older areas of many Indian cities consist of joint families living in these old houses. Those joint families whose members have moved away, divides the accommodation into small portions and leases it out, so as to maximize their rental incomes. That the major demand is from the poorer migrant working families helps. Such social cultures encourage the development of large numbers of small scale economic activities, that invariably get located on the street margins. For example, the large number of families in each house and the lack of space, means that street side food vendors are patronized.

Harvard Professor, Edward Glaeser has chronicled the dramatic decline of the City of Buffalo from its pre-war era pomp, as one of the leading cities of US. In Can Buffalo ever come back?, he claims that cities fall into poverty because of relocation of industry and drop in labor demand, and declining areas becoming magnets for poor people attracted by cheaper housing. "The influx of the poor reinforces a city’s downward spiral, since it drives up public expenditures while doing little to expand the local tax base."

Prof Glaeser also argues that many old cities managed to stave off their decline through investments in the promotion of human capital. He writes,
"The cities that bounced back did so thanks to smart entrepreneurs, who figured out new ways for their cities to thrive. The share of the population possessing college degrees in the 1970s is the best predictor of which northeastern and midwestern cities have done well since then."

Vijayawada as a whole and different areas within the City have many learnings from Prof Glaeser's study. Being a major center for trading and other services, Vijayawada attracts a substantial number of migrant population. Over the years, the City's development has driven a very distinct wedge between the newer Patamata and Governorpeta areas and the Old Town area. While the former has propsered and is fast accquiring all the trappings of modernity and prosperity, the latter has been on a slow decline, which threatens to fall into an uncontrolled downward spiral. (or it may be waiting for the appropriate downward tipping point!) Apart from other socio-economic and political factors, massive Government investments in civic infrastructure has contributed in no small measure to the development of the newer areas. It has provided them with atleast the basic facilities required to attract migrants and the newer residents of the City.

Government policies may have unwittingly exacerbated the divide by relocating numerous slums and encroachments from these areas to the Old Town and Ajith Singh Nagar areas, which have in turn become more slummified. This may have occurred due to the scarcity of vacant Government lands in the newer areas and the availability of such lands in the Ajit Singh Nagar side. Further, given the much higher land values in the newer areas, utilizing these areas for resettling slums will have very high opportunity costs. This divide has been so internalized and subliminally institutionalized that all encroachment relocations today are invariably to these areas. There are only a couple of slums in the newer areas of the City and these too have been provided with all the basic civic infrastructure.

Good quality basic civic serices like water supply, sewerage, sanitation, and transport are today one of the primary pre-requisites for attracting residents. The best indicator of this trend is seen by the increasing differential in rents between areas with such facilities and those deficient in them. Wide roads and good transport facilities play a crucial role in enhancing the economic utility of any area. The newer areas of Vijayawada have benefitted enormously from road widenings, which have set in motion a chain of regeneration and renewal activities in the economy.

Prof Glaeser also brings out numerous examples of failures of massive Government investments in infrastructure in these failing cities, and drives home the ineffectiveness of such responses alone in stemming migration and the attendant decline. It is something similar to good money thrown in after bad money!

Policy makers have an interesting dilemma here. Investments in infrastructure are necessary and are the basic pre-requisite for giving these declining cities and areas, atleast the slightest chance of a revival. Choking off that opportunity would be the surest way of ringing thier death knell. But it is also true that many investments, especially in transport infrastructure end up being white elephants or being disproportionate to the need and requirements. Many modern infrastructure investments require a critical mass of consumer base who can afford to pay for its use. But declining and poorer areas of a City cannot muster this critical mass, thereby necessitating Government support. In any case investments in mega infrastructure projects require more rigorous due diligence and cost-benefit analysis and most importantly, substantial private sector participation for its sustainability and success.

But merely developing good civic infrastructure will only help attract those newer migrants to Vijayawada to such areas, but will not by itself contribute towards attracting migrants to the City. Similarly, massive investments in human physical capital will by itself not be able to stave off a decline. Both are necessary pre-requisites, they are not by themselves sufficient. While basic civic infrastructure is necessary to sustain a regeneration or redevelopment of the City or area, development of human physical capital is the major ingredient in incubating a regeneration.

As we have seen, a number of social, demographic and economic forces are in operation in declining areas of any City. Any effort in reviving these areas will have to account for these forces. There cannot be simple tailor made solutions. Road widenings can be useful in triggering off some of these activities and redeveloping these areas. Government policies making it mandatory to bring down very old buildings, coupled with policies incentivizing consolidation of holdings can promote redevelopment in these areas.

Government intervention is necessary to catalyse private investment in both physical infrastructure and human capital. Very often policy makers tend to get carried away by the mega infrastructure projects, and make masssive investments in one or two projects in the belief that it can regenerate old and declining cities. But as the Glaeser study shows, the world is littered with similar mega investments which have failed to achieve the objective. Further, in the absence of investments in human capital to develop local entrepreneurial skills, no amount of investments in physical infrastructure can prevent the decline of cities.