Detroit, once America’s fifth-largest city, has filed for bankruptcy. At its hight in 1950, the city was home to more than 1.5 million. Today, it has shrunk to 700,000 residents. Detroit’s failure lies in its inability to adapt to conditions that are helping make modern cities successful. Even while the automotive industry became decentralized, supporting pockets of success abroad, Detroit relied singularly on cars as an economic lifeline. “Instead, innovation is increasingly based on mixing and matching knowledge from different specializations.” Cities can achieve innovation by encouraging random interactions between people with different knowledge and skills.
What’s the Big Idea?
China should learn the lesson of Detroit while it attempts to spur economic growth by creating new urban centers, and maintaining old ones which relied on singular industrial sectors. “Meanwhile, the post-industrial attractions of cities like Shanghai and Beijing will attract the more talented and better-educated children of today’s industrial workers. … The boom in the successful cities, therefore, will hollow out human capital from less attractive industrial hubs, which will then fall into a vicious cycle of decay and falling productivity.” Rather than build cookie-cutter cities, China should upgrade its existing ones.