The world should gradually move towards
a paradigm of global economic progress as opposed to merely national economic
progress. Not only would this view be more economically efficient, it would
also enable fostering of common human interest rather than national interests.
One of the major blocks of such a paradigm shift would be the rise of modern
city-states such as London, New York, Hong Kong and Singapore. Already 80% of
all innovation happens in major cities worldwide and this number is set to grow
to 95% by 2030. As the centres of innovation, these cities should divest
themselves of national encumbrances and truly become international cities for
international citizens contributing to global progress.
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| The future of humanity - megacities |
Cities rather than nations are now
driving humanity forwards. Cities are discovering new ways of doing things,
adopting new strategies, creating innovation, and fundamentally generating
growth for the world. Yet city-states aren’t a new phenomenon; we all know of
cities such as Athens, Sparta, Babylon, Rome, Samarkand, and Venice that played
central roles historically. Moreover these city-states have been governed for
their citizens rather than the wider regions within which they are situated.
Modern equivalents include Hong Kong and Singapore, which evidence the clout
that places like London, Paris and New York could wield if they were able to
combine the benefits of a city-state with their historical benefits. As an
illustration, the top 25 cities worldwide hold 51% of the world’s wealth and
the five largest cities in India and China hold 50% of their country’s wealth. These
city-states should be self-governed and allowed to pursue their own economic
interests without jealous government interference, which will eventually cause
spill-over of economic prosperity into other regions. It is also often cities
that can institute policies benefiting humanity as a whole better than national
governments – climate change is one example where cities such as London and New
York introduced congestion taxes and where the C40 network of major cities have
taken action against climate change. Even multinational businesses are
differentiating their strategies by megacities rather than nationally as
companies can perceive more commonalities between Beijing, New Delhi and
Frankfurt than they can between Frankfurt and Heidelberg. Indeed, Singapore was
hardly urbanized and had a reputation for slums when it was given independence
at the end of the second world war, yet its ability to focus solely on city and
urbanisation policy was transformational for the city-state which now boasts
the world’s highest GDP per capita at US$57.500 measured by purchasing power
parity, with Norway, the USA, Hong Kong and Switzerland following them. By
2050, the world’s wealthy citizens will be dominated by Asian city-states:
Singapore (US$137,710), Hong Kong (US$116,639), and Taiwan (US$114,093). This
should serve as a warning to potential city-states within the C40 as to the
kind of growth they can attain if they gain their independence.
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| Potential City-States? |
The economies of many of the world’s top
40 cities are already divorced from that of their neighbouring countries. In
fact, their main investment flows are derived from other major cities so that
the most important place to London is New York and Hong Kong and for New York
the most important are London and Tokyo. For a global citizen, they will move
between these major cities; for those coming from neighbouring countries to
these major cities it can feel like a completely different world. Despite an
ostensible economic recession, London’s economy grew by 12.5% between 2007 and
2011, which was twice as fast as the rest of the United Kingdom. In London
also, gross value added per capita was 70% higher than the national average. Furthermore,
London’s property valuations rose 15% or £140 billion just since 2007. In fact,
London’s real estate is worth more than all the property in the rest of the
United Kingdom added together. Additionally, EU policy would be divergent –
London would have revelled in joining the Eurozone where the Euro would have
consolidated London as the number one global financial centre. The benefits of
independence do not just flow one way; many nations would be better off without
their major cities as so much of a country’s economic, political and cultural
policy is distorted with too much concentrated in one place. For instance,
without London, the United Kingdom would have an economy less reliant on
financial services and more focused on manufacturing as well as an economy with
a lower unemployment rate than in London – this can all make a difference to
economic policy.
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| London - Perhaps the World's Foremost City-state? |
There is also a difference in the
business culture between London and the UK, which requires their own respective
policies. Whilst an immigration cap may be good for the UK, it is stifling on
innovation, competitiveness and creativity for London. London’s openness to
foreign ownership of its companies and skilled foreign labour had made its
competitive advantage its ease of getting things done, yet the imposition of UK-beneficial
immigration policies, bank levies and bonus caps is damaging London’s
competitive advantage. Even more damaging has been the UK government’s
intervention into what was previously regarded as sacrosanct – the rule of law
whose tradition can be traced to 18th century A.V. Dicey – the government
hounds perfectly legal tax avoidance schemes, naming and shaming companies such
as Apple and Starbucks. These policies interfere with London’s competitive
advantage and push more international business to other major cities that are more
accommodating. Accordingly, Singapore has been rated this year as the easiest
place in the world for small and medium-sized enterprises to do business, and
the third easiest place for multinational companies, by a World Bank report
that rated factors such as complexity of procedures to start a business,
enforcing contracts, registering property, and rule of law. In the same report
Hong Kong came second and the USA came fourth with the UK not in the top ten. Additionally,
Singapore ranked second behind Switzerland in the World Economic Forum’s 2012
Global Competitiveness Index, which compared nearly 150 economies across
criteria including infrastructure, education, innovation and efficiency.
Clearly London, as a city-state could top many of these rankings with its
world-class universities (3 out of the top 5 universities in the UK) and
infrastructure (5 major international airports and world-class underground tube
system) as well as historical benefits such as the rule of law, political
stability, the home of liberalism and sitting between the timezones of Tokyo
and New York that, if leveraged without UK government interference, could be
more productive for humanity’s progress as a whole. And unlike many other major
cities, London’s non-domicile tax rules allow the wealthy to come to London and
be taxed on only what they bring into the city. What partly contributes to
city-states such as Singapore and Hong Kong’s dominance and success is that
they are so open to international skilled workers with one-third of Singapore’s
labour force derived from foreigners – one of the highest proportions in the
world with the exception of places like Dubai and Doha.
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| Hong Kong - A Model to Replicate? |
In terms of public services and taxes
city-states are more efficient in their use of these funds. This should certainly
be something that piques the attention of city-state dwellers. The average
Londoner earns £37,000 per year, 53% more than average UK earnings. The Office
for National Statistics measured that the average Londoner contributes 70% more
(£16,000 each more a year) to the UK’s tax income than people in the rest of
the UK. Actually the taxes paid by Londoners compares to 45% of London’s GDP
and public spending in London is just 35% of London’s GDP – you can imagine
where the difference is sent. 20% of UK GDP is made in London and yet London
has 10% of the UK’s population. Such a situation where too much of a city’s GDP
is transferred via the tax system to other parts of the country is bad for both
sides. The city pays too much tax which is not allocated efficiently for those
citizen’s benefit, and those in receipt of the cash become too dependent on it.
Hong Kong has experienced a 40% increase in GDP per capita over the last 10
years and this with the incentivizing feature of a 15% flat tax rate. Imagine
London and New York with these tax rates and an efficient allocation of this
money in the form of government spending. The money that was transferred out of
London to other parts of the UK (if we consider each area should have the same
government spending as taxes raised), £18 billion last year, could fund over
150 hospitals of the size and complexity of Great Ormond Street, 2,000 new
well-equipped schools across London with top teachers and the newest textbooks,
or 6 new cross-rail projects – all just in one year. Thinking about that it is
a totally unacceptable situation for one of the world’s most vibrant economic
and social centers not to be independently managed and governed.
The socio-economics of cities also
differs from their countries. In Europe population growth is slowing with
people having less children. But major cities like London diverge from this
pattern with population growth increasing and the city becoming more youthful.
Middle-aged and poor are leaving London and this is what is arguably
controlling income equality in major cities. Those that can contribute with
their education and/or useful skills can make a living in these centers of
world innovation, while those who cannot leave for smaller cities. Even
graduates who flow to these major cities from around the world require greater
resolve and qualifications to make a living, as it arguably should be in major
cities where those all over the world desire to be in. Many large cities have a
large share of younger age groups with 20% of London consisting of ages 25-35. Additionally,
a recent survey revealed that there are now more ethnicities other than white
ethnic British in London – surely this is a telltale sign of the evolution of
an international city-state which should be governed by itself.
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The Global Travelator for the new
Entrepreneurial/Professional
Economic Class |
In fact, for the goal of human progress
as a whole, these global cities which are already developing an international
monoculture – better for global innovation and togetherness – should be given
their independence. They have already lost much of their specific national
cultural identity as they amalgamate cultures, religious beliefs, ideas, food
and people from all over the world. These major cities compete with each other
in the extent of their international monoculture in order to attract the
smartest and richest global citizens as well as the multinational enterprises
that bring investments and jobs to these cities. An unselfish relinquishment of
major cities by their current sovereign masters would raise living standards
for billions; they must examine this now as it is evident that inequalities
between London and other
English cities will only increase. London, Chongqing
and Buenos Aires will have more in common with each other and this commonality
will just become greater. These major cities are all attractive to a group of
entrepreneurial and highly-skilled professionals that are this world’s elite
migrants on a global travelator which moves them from major city to major city,
contributing to global economic progress. They have an ambivalent attitude
towards the country outside their host city and are truly global citizens. The
rise of this kind of thinking will only increase with globalisation and is
inevitable. The sooner the world begins to think of humanity’s common good, the
better it is for the world’s progress as well as living standards worldwide.
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