The post-Covid future of cities is in our hands

The post-Covid future of cities is in our hands

We have all rightly been obsessing with the immediate effects of the pandemic and the short-term prospects for economic recovery. But the consequences of this year’s enormous disruption of the world’s richest economies will play themselves out over decades, perhaps centuries. We can only begin to guess at the contours of how the world will be reshaped.

One particular feature of our social and economic lives, however, is already ripe for speculation: the role of the city. The great fear (at least for those who love urban energy) is that the pandemic spells a permanent decline in the fortune of megacities. Indeed, if the FT’s House & Home weekend supplement is anything to judge trends by, preferences are already shifting: apparently Londoners are dreaming of the suburbs.

There is no shortage of reasons for pessimism. I have noticed at least three distinct ones. First, owing to the density that in normal times makes them such hives of creativity, cities seem particularly vulnerable to infectious disease pandemics. 

Second, the things that make city living attractive — restaurants, theatres, museums and nightclubs — suffer disproportionately from the social distancing we must expect to persist at least intermittently. Even without government-imposed social distancing, the public may be less willing than before to cramp together for entertainment. If big cities have prospered because big city lifestyles attract the most productive workers for the modern economy — the thesis associated with urbanist Richard Florida — what is left when those lifestyles atrophy?

In an interview with my colleague Simon Kuper, Florida himself takes a balanced view. The young will continue to flock to the big cities, but “middle-aged people with children who have already acquired their networks, spouses and friends” are more likely to take the opportunity offered by remote online working. He expects “carnage in the office sector”.

This leads to the third factor: the step change in how our service economies function after the enforced shift to working from home. This may itself tilt the playing field against cities. The reason the biggest cities have pulled ahead of small-town and rural hinterlands for four decades is that their match of scale and density, which makes for a high frequency of face-to-face interactions, is particularly well-suited for the knowledge and communication-intensive jobs and intangible capital that leads value creation in today’s richest economies. But, in an instant, all these jobs have been taken almost entirely online — not without teething problems, but still remarkably smoothly. There is a plausible future in which the demonstrated possibility of knowledge industries without offices completely undermines the relative economic advantage of cities.

Of these three reasons, only the third strikes me as persuasive. As we have seen, coronavirus may have spread first in the metropolises but other areas can be just as affected. And rather than the best jobs going where great lives can be lived, it seems more plausible that great lifestyles prosper where the best jobs are. As long as the centre of economic value creation continues to be high-knowledge services (and what else should it be), great food, culture and entertainment will follow the knowledge industries whose workers disproportionately consume them. 

The third perspective, therefore, is the most important one. But we should not take it for granted that the profound social changes caused by Covid-19 will in the end disadvantage the big cities compared with smaller towns and the countryside. The New York Times’s David Leonhardt has tried to gaze into a crystal ball, and suggests three main economic losers in the post-pandemic US: local newspapers, department stores (but not the most fashionable ones in or near the megacities) and colleges. But all of these are part of what makes towns attractive. Big cities could be left the winners.

In the end, the prospects for cities could go either way, depending on policies. Many big cities themselves are working hard to become more attractive after the pandemic, for example by orienting planning policy to the concept of the 15-minute city, where residents’ professional and social needs can all be met within reach of a 15-minute car-free travel.

Conversely, national policy could be directed towards increasing the appeal of placing good jobs in towns and rural areas. Guillermo Tolosa, an economist with the IMF, writes to me that the “widespread adoption of online work (would be) an incredibly powerful instrument to mitigate” geographic inequality (which for the past 40 years has favoured big cities). “Government should not just hope the pandemic will help to make permanent advances in this direction, it should be proactive and intervene to ensure this historic opportunity will not be wasted.” This may include not just investments in connective infrastructure, but “tweaking labor legislation to induce firms to allow long-term employees to work remotely (or even force firms to allow them to do so if they wish). Relocation of senior workers can generate employment directly related to their activity (hire locally a junior officer), and unrelated (services that high-paid workers bring).”

There is an irony. If policy successfully manages to make smaller places attractive for the high-paid knowledge jobs that today drive economic value creation, it will make them more similar — in demography and lifestyle, values and social outlook — to the big cities. Daniel Finkelstein captures this wonderfully in a recent Times column: “In order to match the success and power of metropolitan areas, non-metropolitan places need to become more . . . metropolitan.” In the end, the cities win either way.

Coronanomics readables

• Sarah O’Connor’s latest column argues that governments should aim not just to get people back to work but to get them back to better jobs, by toughening the demands they make on how employers treat workers. I made the same argument in a Zoom panel debate on a new briefing about worker insecurity by the Joseph Rowntree Foundation.

• An IMF blog post explains why you should not expect an economic boost from the recent fall in some emerging market currencies. As the dramatic chart below shows, much more of their trade is invoiced in dollars than their trade with the US would indicate. This “dominant currency” phenomenon undoes the conventional prediction that currency weakening creates growth stimulus.

• After a marathon summit, European leaders agreed on a recovery fund and the EU’s next seven-year budget. My FT column this week explains that the most profound effects will be felt not in the fiscal transfers themselves but in how the deal permanently changes the political economy of EU economic policymaking.