The Future of the Metropolis: Berlin London Paris New York. Economic Aspects [Reprint 2019 ed.] 9783110854237, 9783110104981

Table of contents :
Preface
Contents
Introduction
Part I. The Historical Perspective
1. Historical Dimensions of the Modern Metropolitan Problem
2. The New York Metropolis in Transformation: History and Prospect. A Study in Historical Particularity
3. Long-Term Trends and Problems of Metropolitan Paris
4. Railroads, Manufacturing and Services as Decisive Factors in Shaping the Metropolis, Berlin 1850-1920
5. National Capitals, World Cities and the New Division of Labour
Part II. Changes in the Spatial Structure of Economic Activity During the Last Decades and the Metropolis: Facts and Explanatory Theories
Chapter 1: General Trends
6. The Development of the European Urban System, 1971-1981
7. The Changing Spatial Structure of Economic Activity and Metropolitan Decline in the United Kingdom
8. Berlin and the Spatial Division of Labour within the FRG
9. Economic Transformation, Minorities, and Urban Demographic-Employment Mismatch in the U.S. and West Germany
Chapter 2: Economic Development in Selected Metropolitan Areas
10. Restructuring and Locational Change in London's Electronics Industries
11. Does Paris Subsidize the Rest of France?
12. Decline of Industrial Employment in Berlin - Causes and Consequences
Part III. Economic Policy and the Metropolis
Chapter 1: Policies for Urban Economic Development in Advanced Industrial Countries
13. Overview: National Government Responses to Structural Changes in Urban Economies
14. Policies to Stimulate Urban Economic Activity in the United States - The Case of Detroit
15. The Growth of the Paris Region, Town Planning and the National Policy of Locational Control (1920-1984)
16. Economic Development Policy in London
17. Policies for Urban Economic Development in the Federal Republic of Germany
18. Evaluation of Recent Policy Innovations in Berlin (West)
Chapter 2: Economic Transformation and Political Change in Metropolitan Areas
19. The Advanced Industrial Metropolis: A New Type of World City
20. Big City Politics - New Patterns and Orientations at the Local Level of the Welfare State
Chapter 3: Development Options and Constraints for the Economic Future of Berlin (West)
21. Metropolitan Development to and Beyond 2000 - Some Hypotheses applied to the City of Berlin
22. Alternative Development Paths for the Economy of Berlin (West) - Reflections on Different Scenarios
About the Contributors

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The Future of the Metropolis Ewers • Goddard • Matzerath (Eds.)

The Future of the Metropolis Berlin • London • Paris • New York Economic Aspects Editors Hans-Jürgen Ewers, John B. Goddard. and Horst Matzerath

W DE G Walter de Gruyter • Berlin • New York 1986

Editors Professor Dr. Hans Jürgen Ewers Institut für Volkswirtschaftslehre (insbesondere Ordnungs- und Strukturpolitik) Technische Univ. Berlin Professor Dr. John B. Goddard Director of the Centre for Urban and Regional Development Studies at the University of Newcastle upon Tyne (U.K.) Priv.-Doz. Dr. Horst Matzerath Wissenschaftlicher Berater des Historischen Archivs der Stadt Köln, Priv.-Doz. Universität GSH Duisburg (Private Lecturer at the Universität-GSH Duisburg and Scientific Advisor to the Historical Archives of the City of Cologne)

CIP-Kurztitelaufnahme

der Deutschen

Bibliothek

The future of the metropolis : Berlin, London, Paris, New York ; economic aspects / ed. Hans-Jürgen Ewers . . . - Berlin ; New York : de Gruyter, 1986. ISBN 3-11-010498-9 N E : Ewers, Hans-Jürgen [Hrsg.]

Library of Congress Cataloging in Publication Data The Future of the metropolis. Bibliography: p. 1. Metropolitan areas-Congresses. 2. Urban economics-Congresses. 3. Urban policy-Congresses. I. Ewers, Hans-Jurgen. II. Goddard, John E,1943III. Matzrath, Horst. HT330.F87 1986 307.7'6 86-29068 ISBN 0-89925-096-3 (U.S.) Copyright © 1986 by Walter de Gruyter & Co., Berlin 30. All rights reserved, including those of translation into foreign languages. No part of this book may be reproduced in any form - by photoprint, microfilm or any other means nor transmitted nor translated into a machine language without written permission from the publisher. - Typesetting: Wyvern Typesetting Limited, Bristol, England. - Printing: Gerike GmbH, Berlin. - Binding: Dieter Mikolai, Berlin. - Cover design: Lothar Hildebrand, Berlin. Printed in Germany.

Preface This volume presents the papers of an international conference on "The Future of the Metropolis - Economic Aspects", held-at the Technical University Berlin in October 1984, to a larger audience. The conference was part of a more comprehensive project on "The Future of the Metropolis: Paris - London - New York - Berlin", initiated and carried through by the Technical University Berlin and the Senator for Building and Housing Berlin (West) as a contribution to the International Building Exhibition Berlin, whose first part ("reporting stage") took place in 1984. The second part of the International Building Exhibition will follow in 1987, together with the celebration of the 750 year anniversary of the city Berlin. Both events, the International Building Exhibition and the 750 year anniversary, are occasion enough to rethink the role of the metropolises in general and of Berlin (West) in particular. Berlin (West), more than other western metropolises, has experienced a period of sharp decline after the Second World War, both with respect to population as well as to employment, in particular manufacturing employment. Besides the special political role which Berlin (West) had to play in the past 40 years and will have to play for the foreseeable future, the question of the general future function of the metropolises and the meaning of this function for Berlin (West) arises. The leading idea behind the project on "The Future of the Metropolis" was to develop future options for Berlin (West) by comparison to other metropolises, as far as one can learn from examples which never fulfill the "other things being equal" condition. Although, for matter of practicability, the choice of concrete examples for the project was restricted to London, New York and Paris, the discussion extensively refers to the general trends which can be observed in other metropolises of similar size and importance. Thus, the papers of the conference on the economic aspects of the general theme which are presented here reach far beyond the four case-studies London, New York, Paris and Berlin. Their economic history, present economic problems and political options are discussed, along with a careful description of ongoing general trends which are exemplified by the above mentioned cases. Therefore the book can serve as a compendium of ongoing economic trends and policy options for industrial metropolises to a broad community of economic historians, economic geographers, regional planners, city planners and local authorities engaged in policies to revitalize the economic base of their cities.

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Preface

I am greatly obliged to many people and institutions who helped me in getting the conference running and the papers being published. John Goddard, University of Newcastle upon Tyne, and Horst Matzerath, Historisches Archiv der Stadt Köln, served as critical consultants for the programme, chairmen for two of the sessions and co-editors of this volume. Karl Schwarz, Administrative Director of the Technical University Berlin, was the ingeneous spiritus rector of the whole project and at the same time the trouble-shooter for many of the breakdowns which happen during such an enterprise, included the almost unavoidable extensions of the budget. Rolf Stein, beside his research work, took the burden of the organizational work which had to be done for the preparation of a conference as well as much of the editors burden. Judy Libra was very helpful in editing the translations of several manuscripts. The Senator for Building and Housing in Berlin, Klaus Franke, together with the Vice-President of the Technical University Berlin, Klaus Schumann, and the former Undersecretary of the Senator for Economics and Transport, now Senator for Finance, Günter Rexrodt, served as hosts to the conference. The budget was provided by the Senator for Building and Housing and the Technical University Berlin. Berlin, March 1986

Hans-Jürgen

Ewers

Contents Introduction Part I. The Historical Perspective 1. Historical Dimensions of the Modern Metropolitan Problem Anthony Sutcliffe 2. The New York Metropolis in Transformation: History and Prospect. A Study in Historical Particularity Eric E. Lampará 2.1. Introduction 2.2. The Contribution of Nieuw Amsterdam, 1609-1664: Survival 2.3. New York City in the British Empire: Provincial Metropolis and Entrepôt 2.4. Ascendant Metropolis, 1790-1836. New York: Hinge of Union 2.5. The Empire City: Growing Up (and Down) With the Country, 1837-1897 2.6. Greater New York City, 1898-1948: Hanging In 2.7. New York, 1948-1977: While the City Slept 2.8. New York-Manhatten, 1977-1984: City of Hype and Hope 2.9. Postscript 3. Long-Term Trends and Problems of Metropolitan Paris Marcel Roncayolo 4. Railroads, Manufacturing and Services as Decisive Factors in Shaping the Metropolis, Berlin 1850-1920 Ingrid Thienel-Saage 4.1. Introduction 4.2. The Development of the Railroad Network 4.3. The Location of Technologically Advanced Sectors of Manufacturing 4.4. The Role of High Level Services 4.5. Conclusions 5. National Capitals, World Cities and the New Division of Labour Peter Hall

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13

27 27 29 33 40 53 65 72 81 94 111

117 117 117 124 130 133

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Part IL Changes in the Spatial Structure of Economic Activity During the Last Decades and the Metropolis: Facts and Explanatory Theories Chapter 1: General Trends 6. The Development of the European Urban System, 1971-1981 Paul Cheshire and Dennis Hay 6.1. Introduction: Stages of Urban Development 6.2. Developments in the EEC Since 1975 6.3. Berlin in the Context of Urban Change 6.4. Urban Development: Problem Versus Non-Problem 6.5. Case Study Comparisons: Cultural Capital Cities Compared to Industrial Agglomerations 6.6. Conclusions 7. The Changing Spatial Structure of Economic Activity and Metropolitan Decline in the United Kingdom David Keeble 7.1. Introduction 7.2. Metropolitan Industrial Decline 7.3. The Urban-Rural Population Shift 7.4. Theories of the Urban-Rural Manufacturing Shift 7.5. New Firms and High Technology Industry 8. Berlin and the Spatial Division of Labour within the Federal Republic of Germany Franz-Josef Bade 8.1. Introduction 8.2. Long-Term Trends in Structural Changes 8.3 Regional Differences in the Functional Economic Structure 8.4. The Role of Berlin 9. Economic Transformation, Minorities, and Urban DemographicEmployment Mismatch in the U.S. and West Germany John D. Kasarda and Jiirgen Friedrichs 9.1. Introduction 9.2. The Problem: Immigrant Workers, Jobs, and Public Policy 9.3. Urban Transformation, Unemployment, and Welfare 9.4. Mismatch: Theoretical and Policy Issues Chapter 2: Economic Development in Selected Metropolitan Areas 10. Restructuring and Locational Change in London's Electronics Industries Roger Leigh, David North, and Lynn Steinberg 10.1 Introduction: London's Deindustrialisation

149 149 149 151 154 157 162 166

171 171 172 179 182 187

201 201 203 207 213

221 221 222 225 242 251

251 251

Contents 10.2. The Electronics Sector: Scope and Definitions 10.3 The Origins and Structure of the Electronics Industries in London 10.4. Employment Decline and Occupational Change 1971-1983 10.5 The Processes of Adjustment in the London Electronics Industries 10.6. Some Policy Considerations 11. Does Paris Subsidize the Rest of France Remy Prud'homme 11.1. Introduction 11.2. Budget Induced Transfers 11.3. Social Security Induced Transfers 11.4. Public Prices Induced Transfers 11.5. Conclusion 12. Decline of Industrial Employment in Berlin - Causes and Consequences Hans-Jürgen Ewers and Rolf Stein 12.1. The Problem 12.2. General Development Trends of the Manufacturing Sector and Their Impact on Berlin 12.3. Spatial Development Trends and Their Impact on Berlin 12.4. Future Structural Change in Berlin 12.5. Perspectives of Future Industrial Policy in Berlin

ix 253 255 259 266 279 285 285 287 290 292 294

297 297 297 301 303 306

Part III. Economic Policy and the Metropolis Chapter 1: Policies for Urban Economic Development in Advanced Industrial Countries 13. Overview: National Government Responses to Structural Changes in Urban Economies Joanne Fox Przeworski 13.1. Introduction 13.2. Rationale for Urban Economic Development and National Government Policies 13.3 Nature of National Government Responses 13.4. Conclusions 14. Policies to Stimulate Urban Economic Activity in the United States - The Case of Detroit Harold Wolman 14.1. Introduction 14.2. Economic Decline in Detroit

313 313 313 314 316 325

327 327 327

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14.3. National Policies 14.4. State and Local Policies 14.5. Conclusion 15. The Growth of the Paris Region, Town Planning and the National Policy of Locational Control (1920-1984) Pierre Merlin 15.1. Introduction 15.2. The Origins of the Policy to Restrict the Growth of Paris 15.3. The Policy of Decentralization and the P. A. D. O. G. 15.4. The Response of the Paris Region 15.5. Administrative Decentralization and Centres of Industrial Conversion 16. Economic Development Policy in London William Lever 16.1. Introduction 16.2. The Changing Structure of London's Economy 16.3. Economic Policy in London 16.4. The Neo-Keynesian Approach 16.5. The Urban Programme, 1978 16.6. Premises and Property 16.7. Urban Development Grant 16.8. A Case Study of Local Authority Assistance: Southwark 16.9. Market-Based Approaches 16.10. The Socialist Approach 16.11. Conclusions: The Future 17. Policies for Urban Economic Development in the Federal Republic of Germany Manfred Konukiewitz 17.1. LookingBack: Policies for Urban Growth 17.2. Responses to Urban Economic Decline 17.3. Regional Impacts of Sectoral Policies 17.4. The Role of the Länder 18. Evaluation of Recent Policy Innovations in Berlin (West) Manfred Kern 18.1. Introduction 18.2. The New Structural Policy of the Berlin Senate 18.3. Main Features of the Berlin Promotion Law 18.4. Preliminary Evaluation of the Amended Berlin Promotion Law 18.5. The Berlin Innovation Policy 18.6. Preliminary Evaluation of the Berlin Innovation Policy

330 332 333

337 337 337 338 342 346 349 349 350 354 355 355 361 362 363 364 366 367

371 371 372 375 379 381 381 382 382 384 384 386

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Chapter 2: Economic Tranformation and Political Change in Metropolitan Areas

391

19. The Advanced Industrial Metropolis: A New Type of World City Richard V. Knight 19.1. Introduction 19.2. The Role of Cities in Advanced Industrial Societies 19.3. Knowledge Resources and Economic Development 19.4. Industrial Regions and the Global Challenge 19.5. City Development in the Context of the Global Economy 19.6. Conclusion

391 391 395 413 421 428 434

20. Big City Politics - New Patterns and Orientations at the Local Level of the Welfare State Adalbert Evers and Hellmut Wollmann 20.1. Introductory Remarks 20.2. Challenges for Redefining the Welfare State and Repercussions on Local Government 20.3. Mapping the yet Uncertain Future of a "New Municipal Interventionism" Chapter 3: Development Options and Constraints for the Economic Future of Berlin (West)

437 437 438 455

463

21. Metropolitan Development to and Beyond 2000 - Some Hypotheses applied to the City of Berlin 463 Rainer Mackensen 21.1. Metropolitan Decline 463 21.2. The Abel-Study 464 21.3. Ranges of Prospect 464 21.4. Hypotheses of Long Range Urban Change 465 21.5. Perspectives for the City of Berlin 466 22. Alternative Development Paths for the Economy of Berlin (West) - Reflections on Different Scenarios Hartmut E. A rras 22.1. A City at the Turning Point? 22.2. Where can the Development Lead? Something About Forecasts and Scenarios 22.3. Scenarios for Berlin-Basic Structures 22.4. Which Divergencies Will Ensue ? The Authors

471 471 472 473 476 479

Introduction I. Since the 1970s most of the large metropolises of the western industrialized world have come to share some of the dilemmas with which Berlin - due to political reasons - was confronted 25 years earlier. Most are facing, to some degree, a flight of capital and population, a serious decline of employment in manufacturing, in the bulk transshipment of goods and the tax base as well as a dramatic increase of social problems due to a proportionally greater number of less advantaged individuals (unemployed, immigrants, unskilled, less educated, older people). Although periods of recession in a city's economy are nothing new, there seemed to exist an irreversible "growth" impulse in the development of the large metropolis in the past which now might be broken. Opposed to earlier, occasional set-backs and slowdowns in their development, many of the metropolises in the western industrialized countries have experienced a still continuing process of relative shrinkage which in many instances amounts to absolute decline. Is the present situation, the "crisis of the metropolises", indeed a break in a long established trend, is it the transitory stage to a new function, or is it the expression of the onset of an irreversible future decline? And what should be done politically to tackle the obvious problems of most of the metropolises? Which are the proper points of departure for revitalization strategies and how can they be effectively set up in an overall situation of economic recession? There is no straightforward answer to these questions to be found in the collection of essays in this volume, although some general, partly optimistic views of the ongoing development might be articulated as preliminary conclusion from the contributions presented here by historians, economists, geographers and political scientists: - There are enough indications to view the observable decline of the metropolis as the spatial consequence of a continuing, stepwise transformation of an industrial society into an information society. The driving force of this process is the technical progress which first created the base for the mass production of manufactured goods and then contributed more and more to the liberation from hard physical work in manufacturing. The metropolises have been and are still the trendsetters in this process of setting up and cutting back physical production in manufacturing. They established themselves as centres of physical production during the second half of the last century, and the more dynamic of them are now on the way to establish themselves as centres of technical-organizational knowledge, information produc-

2

Introduction

tion and distribution as well as communication and through this to become trendsetters of the future development of the worldwide industrial system. - Therefore, what happens presently in the large cities of the industrialized countries, is not simply a process of shrinkage, but of functional structural change of the traditional manufacturing centres towards the exercise of management and communication functions. The process of shrinkage in the metropolises and cities of similar size, as quantitative analyses show, is mainly restricted to the shop-floor activities of the manufacturing sector. - It seems to be important to realize, that the process of functional change of the metropolis presently runs comparatively slowly. This is due to the overall low level of economic activity, in particular of investment, because of the ongoing worldwide depression. If one accepts the notion of a fifty- to sixty-year cycle of worldwide economic activity, it is likely that the really rapid transformation of the metropolis will come in the later 1990s and the early 2000s, when the world economy revives on the basis of the basic innovations which now can be observed for example in the fields of micro-electronics, new materials and bio-technologies. - The friction caused by the functional change most affects those cities which in particular profited from the upswing of physical production in industrial manufacturing during the 19th century. These cities bear the greatest inheritance of an outworn capital stock with respect to housing facilities, infrastructure and physical capital. The rejuvenation, conversion and the partial abolition of obsolete structures in these cities is a necessary precondition for the exercise of the new role which is being forced upon the old industrial metropolises by the worldwide dynamics of the industrial system. - There seem to be three types of activities which might form the growth base of the advanced industrial metropolis: In industrial manufacturing it will be the complex production activities which - even under a system of advanced telecommunication are dependent on face-to-face contacts, either to customers or to specialized research and development activities. This applies to complex investment goods as well as to diversified consumption goods for the higher income segment of the demand. In the service sector it will be in particular production oriented services in which the metropolises are likely to specialize; especially activities which are complimentary to new technologies, like software production, leasing, market research, construction and planning, advertising and consulting. Such activities have an intensive demand for information and therefore will be dependent on the urban milieu. The third kind of activities which form the growth base of the future metropolis are advanced household oriented services, particularly those which facilitate the exchange of people, ideas or information such as communications, travel, publishing, films performing and visual arts, entertainment and international events. - The most important property of the presently dynamic urban regions which facilitates their growth is their attractiveness for those upwardly mobile middle-

Introduction

3

classes who are able to mobilize the human capital necessary to perform the nonroutine functions of the industrial system, namely the highly skilled workers, technicians, administrators and information mediators. These classes prefer the advantages of the urban milieu, but do not accept the traditional disadvantages of industrialized cities with respect to housing and environmental conditions as well as to traffic congestion. - On the other hand, the " o l d " industrial cities run into a growing qualitative imbalance between demand and supply of working places. These cities have been growing as places where unskilled migrants from farm to city could always hope to find appropriate entry-level employment. And still today, they attract many unskilled immigrants. But the pool of entry-level working places is shrinking as well as the pool of traditional, low-qualified clerical and manual jobs. Although, as in the past, the metropolitan economy will create plenty of low-skilled jobs particularly in the household oriented service sector, it is likely that these jobs will increasingly be filled by new immigrants who accept the moderate working conditions as well as the low income of these jobs, but not by the existing unemployed whose job expectations are different. - In relation to this situation, explicit urban economic development policies are poorly developed. Government responses are only now emerging, unfortunately most frequently in an ad hoc crisis management manner. What is needed, is not only a new instrumental approach, but also a new division of labour between central and local government responsibilities. - Instrumentally, the traditional ways of stimulating economic activities in depressed regions by mainly subsidizing capital investment have been questioned in particular for two reasons: First, one is no longer convinced of the effectiveness of a mobility oriented approach for regional policies because under conditions of economic stagnation the potential of mobile investment is too small to be an effective point of departure for the revitalization of distressed cities. Concentration on the indigenous potential and stimulation of its development seems to be more promising. Second: Investment incentives normally favour traditional production activities and therefore lead to undesired structural side effects rather than the necessary functional change in the large cities. On the other hand, the new emerging " u r b a n " industries, as characterized above, rely more on an adequate "industrial milieu" (i.e. availability of information, highly qualified labour, research and development facilities) than on simple cost advantages. Therefore, policies to stimulate the endogenous potential of urban areas, must concentrate on the creation of the required "industrial milieu". - Institutionally the effective management of change requires extended activities on the local level in particular in the large cities. On the one hand, these cities have to fulfill the seed-bed function for the new emerging high-tech industries. On the other hand, they have to resolve the bulk of the above mentioned frictional problems

4

Introduction

which accompany the transition of an industrial society into an informational society and the change in values and life styles, whose impact is felt in the large cities first. This means that local governments can no longer view economic development solely from the narrow perspective of increasing technological competitiveness and productivity, but have to include ecological, social and cultural concerns at the same time. In addition it is necessary to find adequate ways of dealing with new forms of pauperism and new ways of social integration and participation. Therefore a "new municipal interventionism" has to be created and financially supported by the central governments to effectively deal with this historically unprecedented set of urban problems. In the following sections, the articles in this volume are briefly described. The rough outline of the volume unfolds the problem on three different levels. It starts with a historical approach, continues with an economic analysis of the present situation and ends in an attempt to evaluate existing urban policies and characterize the proper starting points for new revitalization strategies. The three parts of the volume contain comprehensive comparative surveys as well as specific contributions for each of the four metropolises chosen as examples for this book: Berlin, London, New York, Paris. II. The historically oriented articles in the first part of this volume contribute - in different manners - to the basic question of how the presently perceived "crises" of the metropolises can be interpreted, either by the analysis of single examples (Lampard: New York, Roncayolo: Paris, Thienel-Saage: Berlin) or by a comprehensive comparison of leading metropolises ( S u t c l i f f e and Hall). Although similarities in the development of these metropolises can be revealed, the selection of examples leaves no doubt, that these cities had a different rise at a different point of time, due to differences in geographical location as well as in their political and economic background. Therefore even the rise and the past development of metropolises can only in a very limited way be explained by a uniform framework. The example of Berlin (Thienel-Saage) between the take-off of the main industrialization wave around 1850 and the Great Berlin Act (1920) shows the factors which underlay the rise of the Prussian and later the German capital to an industrial metropolis: central location in the emerging network of traffic connections, in particular of the railway system, settlement of technologically innovative sectors of manufacturing production, concentration of higher public and private administrative and service functions, facilitated mainly by the property of being the capital and by a high supply of qualified labour. In contrast to Berlin, Paris as the capital of a centralized national state had always been the dominant city within its national city system. Roncayolo in his article characterizes the relation between economic development and the influence of central planning activities from the early 19th century up to the present. Already a

Introduction

5

centre of trade and finance at the beginning of the 19th century, Paris concentrated further economic, cultural and political function within its area. Large scale industry and, accordingly, the population of workers grew extensively after 1890, particularly in the suburbs. A tendency of deindustrialization beginning in the 1950s is illustrated by the pushing of shop-floor activities to the periphery or even further beyond the Paris area, and by the further concentration of higher service functions like management, research and development, planning and marketing within the city centre. These tendencies have even been strengthened by the economic crisis of the 80s which mainly affected the physical production activities. The rise and decline of the metropolis over a long period of time is represented by the case of New York, which is analysed in detail by Lampará. Although Lampará's essay is of greater length than the other contributions it was included in this volume because it perfectly demonstrates the future character of the metropolis, namely: a place, where management functions for a worldwide industrial system are performed. Since its foundation 1625/26 as Nieuw Amsterdam the city has changed its economic and social character half-a-dozen times: colonial foundation; provincial metropolis and commercial centre in the British Empire; rise to metropolis and banking-centre after independence; centre for trade and finance as well as largest industrial city of the USA in the second half of the 19th century; extension of its functions as capital market, trade centre and industrial location during the first half of this century; decline of industry, trade and of navigation after the Second World War; recovery of the New York economy since about 1977. During this development New York has increasingly broken away from its role in a regional and national framework and has acquired special functions within the international industrial system, in particular with respect to finance and trade. This development made New York the world capital of trade and therefore brought it closer back to its origins as a trade post. Sutcliffe sets the development of London, Paris, New York and Berlin into a comprehensive framework of the rise of the metropolis, which - in addition to its original coordinating function in the service sector - accumulated productive activities as well as political functions for the rising national states. He locates the turning point around 1900, where tendencies to decentralize became stronger and the growing problems of late capitalism enforced attempts to plan and to control further development. The failure of the planning approach and the economic crisis acompanied by a flight of capital and population out of the large cities as well as by growing social problems created the view of a crisis of the metropolis around 1970. For Sutcliffe the present situation of the metropolis is a transitory stage, although aggravated by a cyclical recession at the end of a long wave of economic development. He foresees a changed shape of the metropolis: less agglomerated, more centre of reproduction than of production, better preconditions for government, advanced production oriented services, culture, education and leisure activities.

6

Introduction

Therefore the modern metropolis would exercise a similar function as the metropolis in the pre-industrial society and come back to its origins in a certain way. Hall delineates two basic stages in the development process of the metropolis: an economic transformation around 1890-1914 which made the metropolis a real industrial city and the second, around 100 years later, which introduced the process of deindustrialization. Like Sutcliffe, Hall's understanding of the development process refers to the notion of long waves in economic development, triggered by bunches of innovations. While the innovations which initiated the long waves in the past have been directed mainly at production, today's innovations concern mainly information. The metropolises will, according also to Hall, continue to be a centre of innovation, but their sphere of influence will be enlarged both with respect to their immediate hinterlands and to the international scale of their activities. Beside this difference with the past Hall points out an astonishing similarity between the early rise of Victorian London or Wilhelmine Berlin on the one hand and Silicon Valley or Britain's M4 Corridor on the other hand: Their growth owed a great deal to state encouragement in the form of scientific and technological innovation, plus the stimulus of military contracts. Thus, the forces that drove the metropolis in the past and drive it today may not be very different - all that has changed is the geographical spread of the activities concerned. III. The second part of the volume contains contributions that analyse the development of cities and city systems in the last decades from a specific economic point of view. In the first chapter the presently emerging trends of changing population and employment distributions are presented and theoretical approaches for their explanations are discussed, probable future trends are then revealed. In Cheshire and Hay's paper the evolution of the European urban system is analysed by an extension of existing theories on urban development stages and comparisons of population change mode between different nations and different types of cities. These classifications are then linked to economic and social influences on urban change. It is shown that Berlin's demographic and industrial development is not as exceptional as commonly assumed, especially if it is compared to other "northern capital cities". Keeble's contribution starts with the finding that manufacturing decline in the urbanized European regions, measured in terms of employment change rates, is negatively correlated with increasing urbanization levels. He reviews current theories that seek to explain these processes contrasting them with changes in industrial activities and population change observed in particular in the metropolitan regions of the United Kingdom. Even in the sector of "high technology industries" the highest growth rates do not occur within the boundaries of the big industrial agglomerations but in adjacent areas which are highly intertwined with the central areas and also in distant locations with favourable environmental conditions. Nevertheless he judges development conditions of the old metropolitan areas with

Introduction

7

"cautious optimism" because they will continue to be centres of quaternary activities. The traditional sectoral method of describing structural economic change is enlarged in Bade's presentation by an analysis based on different types of activities performed in a sector or region. The changes in the resulting functional division of labour indicate that increases of employment in production-oriented services have occurred in growing and declining industries and that inspite of the decline of manufacturing employment in urbanized regions, the interregional differences between central and peripheral areas in the distribution of functions have not changed significantly. The structural deficiencies of the Berlin economy as compared to the central areas of the Federal Republic of Germany become obvious in Bade's functional approach. Kasarda and Friedrichs concentrate on the question of why inner city unemployment rates tend to be higher than national averages and extremely high rates occur among inner city ethnic and racial minorities. Their thesis is that the divergence between job demand and job opportunities is widening because of the functional transformation of inner cities; public policies have not been able to reduce this "mismatch" but rather have worsened prospects for the necessary adjustment processes. They draw their conclusions from a comparison of data on North American and West German cities and claim that future problems of German cities will be in many aspects similar to problems experienced earlier in the American cities. The contributions referring to specific cities in the second chapter begin with an analysis of London's electronic industry by Leigh, North, and Steinberg. The main factor determining the poor performance of this nationally growing sector in London was its unfavourable position in the restructuring process caused principally by merger activities and rationalization. Furthermore, extension of the job base in the electronic sector by new firm foundation and foreign investment took place mainly outside of the London region. Nevertheless, the authors argue that London has advantages because of its great pool of highly qualified and diversified labour and because certain firms will continue to profit from the localization economies in London. The proposals for various interventions as elements of a local sectoral policy in London derived from their analysis take into account the partially diverging aims of national policies for the electronic sector and local social objectives. The aspect of public finance in metropolitan development is introduced in the contribution of Prud'Homme. He questions the "exploitation" thesis and examines different types of transfer mechanisms between metropolitan Paris and the rest of France, thereby enlarging our knowledge of the cost-benefit relationships between a capital city and the rest of the nation. The impact of regional price and cost structure for goods and services provided by the public sector, representing one transfer mechanism, is difficult to assess as Prud'Homme shows. But he presents some evidence which indicates that Paris by budgetary and social security induced transactions subsidizes rather than exploits the rest of the country.

8

Introduction

The chapter is concluded by an examination of West Berlin's economic, in particular industrial, development and prospects by Ewers and Stein. Having demonstrated how the structural changes in the world economic situation during the seventies and the downswing phase of a long run development cycle influenced the performance of West German industry, they discuss the regional impact and in particular effects on the city of Berlin. Although industrial decline and industrial restructuring will continue, economic policy for the secondary sector in Berlin is of crucial importance because the growth of the tertiary sector is heavily dependant on industrial development. For a successful economic revitalization different measures of economic policy are proposed, combined with policies for upgrading housing standards and with environmental improvements. IV. In chapter one of the third part contributions on the urban economic policies of western industrialized nations are collected. An overview of the O E C D countries' reactions to urban decline is given by Fox Przeworski. She suggests that inspite of the widespread negative effects which structural economic transformations caused for many urban areas, no systematic approaches to design and evaluate corresponding policies have so far been developed by national governments. Presently, responses to urban problems are generally uncoordinated and more a byproduct of other macroeconomic and sectoral policies. A first example of this situation is provided by policies in the United States reviewed by Wolman, who focuses on the case of Detroit. He shows the comparably small impact of the federal grant system on the city's evolution notwithstanding the spatial implications of federal import policies on automobiles and the drawbacks of the overvalued dollar. A limited range of stimulation policies have been introduced by the city government in recent years pursuing the goals of job creation and tax base expansion. Wolman sees the main objectives of the public sector on the local level in facilitating structural economic change and mitigating its social consequences. French experience of controlling the development of economic activities in metropolitan Paris is summarized by Merlin. He shows how early measures to slow the growth of industrial and later also of service activities failed until declining population growth gained an influence in the late sixties. The "schema directeur" which was later introduced for the Paris Region was amended several times but only after trends had already changed. In the last years a policy of administrative decentralization and industrial conversion of certain regions has been implemented responding to the continued high centralization of budgetary and administrative power and to the economic crisis. However, it seems questionable whether these measures will in fact reduce the dominant position of the Paris region. Lever describes and evaluates in detail policies for urban economic revitalization in Great Britain, in particular for London. He differentiates measures according to a classification in market-based, neo-Keynesian and socialist approaches and addresses the outcome of national programmes aimed at urban regeneration, as well as the

Introduction

9

coordination problems between national and local policies. Although many of these measures were aimed at job creation it is probable that their main effects have to be seen in social rather than economic terms, chiefly in alleviating negative consequences of high unemployment rates in the inner areas. Konukiewitz reviews urban policies in the Federal Republic of Germany beginning with programmes of the sixties, when because of rapid economic growth substantial shifts of inner city land use occurred. After economic decline became visible in the late seventies in metropolitan areas largely dependant on coal and steel industries and in coastal cities, several federal and state programmes were launched to avoid severe distress in lagging cities. He concludes that on the federal level no comprehensive policy for urban economic development exists. Beside the fact that economic distress of urban areas is a relatively recent phenomenon, the lack of a comprehensive policy approach for urban development is explained by electoral arithmetics of government and by organizational bureaucratic inflexibilities of the decision framework for spatially targeted policies in the Federal Republic of Germany. On the other hand sectoral and other federal policies partly favour urban areas and a variety of measures to foster economic growth were taken on the state and local level. Kern gives a description and preliminary evaluation of local policy measures implemented recently in Berlin (West). The basic feature of this policy is a modernization of the industrial structure of the city by an amendment of the Berlin Promotion Law and an innovation policy. The author discusses the instruments of this policy of structural adaptation in detail and argues that an imitation of policies applied successfully in the American context is feasible in Berlin too and the only way of achieving growth in the long run. In the following second chapter general development options and constraints for economic futures of old metropolitan areas are discussed. Knight develops in his article a conceptual framework for the fundamental changes that characterize present urban development throughout the western world. The transformation of old industrial cities from centres of physical production to centres of information processing is viewed in the context of changing conditions of the world economy. The primary function of what he labels an "advanced industrial metropolis" will be to produce and distribute knowledge and to govern technology. New ways of economic thinking are required if future development of these knowledge capitals is to be understood and guided, because methods of wealth creation are changing. Evers and Wollmann discuss the restrictions which are placed on strategies for economic revitalization by a number of socio-political problems which also confront the large cities. They refer to new forms of pauperism and "social death", to the necessity of new forms of cooperation between the providers of social services and their clients, instead of further professionalization and monetarization of such services, to the needs of finding new modes of participation and of bargaining to

10

Introduction

integrate the interests of marginal groups as well as to the necessity of taking into account the increasing diversity of life-styles, orientations and cultures in order to provide the setting for more cultural pluralism and tolerance. They argue the need for a "new municipal interventionism" as an integrated strategy to tackle the present problems of large cities. In the third chapter of the policy section more concrete development options and constraints for the economic future of Berlin (West) are discussed, a part of which can be transferred to other cities too. Social change that will influence the future development of urban areas is summarized in MackenserCs contribution. He refers to a study of long term developments in social and economic life of the Federal Republic of Germany carried out by a group of research institutes. He presents the main hypotheses as far as urban development is concerned and applies these hypotheses to the specific situation of Berlin. Thus important characteristics determining the future evolution of the city can be discovered and advantageous and disadvantageous features can be contrasted. Mackensen concludes that Berlin will continue to be a centre of social innovation. The results of two scenarios developed for the further discussion of the political, economic, social and environmental future of Berlin are presented by Arras. By enrolling these two contrasting scenarios Arras shows that different strategies in the use and combination of high and low technologies will yield different social outcomes. He points out that a one sided support of high-technologies will cause numerous social conflicts. Hans-Jurgen Ewers John Goddard Horst Matzerath

Part I. The Historical Perspective

1. Historical Dimensions of the Modern Metropolitan Problem Anthony

Sutcliffe

In 1910, a great allgemeine Städtebau-Ausstellung was held in Berlin (Hegemann, 1911, 1913). It was largely the brainchild of the German urbanist, Werner Hegemann, whose approach to, and understanding of, urban problems was rooted in a methodology of systematic comparison across space and time. Berlin was presented as the epitome of a world-wide metropolitan problem which the new science of urban planning was struggling to resolve. Hegemann (1911: 7) wrote: "Berlin wird augenblicklich ein internationales Sturmzentrum in dem Kampfe um die segensreiche Gestaltung der durchaus neuen Welt, auf der wir seit dem Wirksamwerden der neuzeitlichen Technik in Industrie und Verkehr leben."

Hegemann (1930) was no admirer of the economic and political conjuncture which had shaped Berlin, as he was to demonstrate later in a classic piece of historical polemic, Das steinerne Berlin, published a few years before his death. However, his concept of the future of Berlin and the other great metropolises was an optimistic one, because he could assume a continuing process of dynamic urban development. The Berlin building exhibition of 1984 has much in common with the Berlin town planning exhibition of 1910. Hegemann drew on the experience of a larger number of great cities, but London, Paris and New York were outstanding among his selection. However, one crucial difference separates the two events. In 1984, we are preoccupied not by the problem of metropolitan growth and its resulting congestion, but by metropolitan decline and the resulting degradation and desertion of large parts of our inner cities (e.g. Lawless, 1981; Hall, 1981). The preoccupation springs principally from the experience of London and New York among the world's great metropolises. Paris is not yet in decline. Elsewhere, growth continues. Tokyo and Moscow continue to expand, while in the Third World a new generation of giant metropolises is coming to the fore (Roberts, 1978: 5). At the end of the century, it is confidently predicted, the largest city in the world will be Mexico City, with thirtyone million people (Barney, 1982: 242). Meanwhile, London's population will have

The Future of the Metropolis © 1986 Walter de Gruyter & Co. • Berlin • New York

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sunk, on present projections, to less than six millions. Even in the United States, the decline of New York is balanced by the expansion of the great "sunbelt cities", with Los Angeles, Dallas, Atlanta and Houston at their head (Abbott, 1981). We are confused by these conflicting indications, but they have produced at least one coherent result - that in 1984 the metropolis stands towards the top of the world's agenda of urban problems. Indeed, in the very month of October, 1984 the regional council of the Ile-de-France is hosting a conference in Paris under the simple title, "Metropolis 84". Equally symptomatic of the current climate is the conference held by the International New Towns Association in Rotterdam, also in October 1984. Its theme, "Strategies for Urban Revival", will involve a heavy emphasis on the present and future of the metropolises. Ironically, this concern with decline has made Berlin a metropolitan exemplar of our day just as much as growth brought it to the fore around 1910. Before 1914, any discussion in Berlin of the comparative problems of the great metropolises would have included extensive reference to Vienna, and that was indeed the case at the Städtebau-Ausstellung in 1910. However, defeat in the First World War led to the dismemberment of the Austro-Hungarian Empire and the reduction of Vienna to the awkwardly located capital of a small territorial state. Since 1918 Vienna has irrevocably lost its role as a world city. Since the "Stunde null" of 1945 Berlin in its turn has had to adapt to a reduced status, complicated by its extraordinary political division not so much between two territorial states as between two contrasting worlds, capitalist and socialist. For a while, its experience thus diverged radically from that of the world's other great metropolises. The most striking contrast was with New York. Thanks to industrialisation, political rationalisation, and the creation of an integrated world economy in the nineteenth century, Berlin and New York were able to rise from relative obscurity in 1800 as medium-sized cities to the status of world metropolis, on a par with the established metropolises of London and Paris, by 1900. New York went on to inspire the most comprehensive and persuasive organising concept to be produced by urban geography since the last war - Jean Gottmann's "Megalopolis". Gottmann (1961) identified the north-eastern seaboard of the U.S.A., the urbanised region stretching from Washington, via New York, to Boston, as the world's fullest expression of the twentieth-century trend towards urban déconcentration. In essence, Gottmann's "Megalopolis" was a reformulation and extension of the hinterland concept which had been developed principally by German geographers in the late nineteenth and early twentieth centuries, notably in the work of Walter Christaller. But Berlin, after 1945, had no hinterland. No longer, therefore, could it hope to inspire organising concepts of general applicability. There were many lessons to be learned in post-war Berlin, but they would be applicable to Berlin alone. In this year of a new Berlin building exhibition, 1984, we are no longer so sure that Berlin's experience is unique. At a time of world economic depression which recalls

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the early 1930s, continuing urban deconcentration is being accompanied by major technological changes in the organisation of production. So far, the main expression of these changes has been a sharp decline in employment in manufacturing. A similar reduction in the tertiary sector may be on its way, in step with advances in computer technology. It seems doubtful that this increasing surplus of labour can be absorbed into new productive activities, even if the world economy revives. Consequently, the changes that are taking place in production today are bound to have implications for the organisation of reproduction tomorrow. We may develop a life more centred on the home, with men, women and children increasingly sharing what were once ageand sex-specific roles. A more informal, localised economy may emerge, blurring the distinction between reproduction and production (Bell, 1973). Whether or not this new existence will come into being remains a subject of intense debate (e.g. Hall, 1977). But if it does, it will almost certainly be located in the suburbs and the small and medium-sized towns which surround our great cities. Meanwhile, the central cities will need to acquire a new role. Perhaps Berlin's experience can suggest what that new role might be. Since the 1970s most of the other great metropolises of the western industrialised world have come to share some of Berlin's dilemmas. All are facing, in some degree, a flight of capital and population, a serious decline of employment in manufacturing and the bulk transhipment of goods, and an accumulation of social problems among the poorer elements of the remaining population. All are turning towards knowledge and amenity as their ultimate resources. Thus Berlin in 1984 has the opportunity to teach as well as to learn. However, to perform this exemplary function, Berlin's distinctive experience has to be set in the context of the long-run development of world urbanisation. Historians are accustomed to divide the evolution of human society into a series of stages. Depending on their ideological and empirical perspectives, they would situate our western world of today in an "industrialised", "modern", or "capitalist" stage. The transition to that stage would have taken place, either more or less rapidly according to the individual historian or school of historians, between the fifteenth and the nineteenth centuries. 1 The metropolis, for its part, was already in existence before this transition. Indeed, the phenomenon of the metropolis can be traced back, in terms of both function and of ideology, to the Ancient world (Sutcliffe, 1984). In its original Greek sense, "metropolis" meant a "mother city", the original urban centre from which other cities had been founded as colonies (Forstall and Jones, 1970). In the context of a low level of productivity, political factors were crucial to the rise of outstanding cities such as Thebes, Babylon, and Athens. Most were the seats of great empires and when these empires fell, so did their metropolises decline. Western Europe knew only one of these great empires, that of Rome, and when the Roman imperial system gave way to feudalism between the fifth and the ninth centuries of our era, the metropolis disappeared. Economic development within feudal Europe from the tenth century produced a dispersed

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system of towns engaged predominantly in trading and manufacturing. Large cities did not begin to emerge once more until the twelfth century, when unified kingdoms such as France and city states such as Florence and Venice began to favour a concentration of political and economic functions in a small number of important urban centres. By the fourteenth century, Paris had become the largest city in western Europe with a population of over two hundred thousand people. Depopulation in late medieval Europe then decimated the large cities and it was not until the sixteenth century, when renewed population growth was combined with economic expansion outside Europe, that progress towards the emergence of giant cities was renewed. Antwerp, Amsterdam and London now came successively to the fore, confirming what the growth of the big Italian trading cities had suggested earlier - that the new, mercantile economy of western Europe was generating a new primary raison d'être for giant cities, that of coordinator of a widespread network of exchange. 2 Amsterdam reached its apogee in the seventeenth century almost exclusively on the strength of its economic role, for its government functions were very limited. However, London's sustained growth from the sixteenth century was based on a combination of economic and political functions which allowed it to surpass even Paris in size to become by far the largest city in the western world by the close of the eighteenth century, with a population of nearly a million people. By this time, London was no longer functioning merely as the capital city and dominant economic centre of an important trading nation. Since about 1760, England's unique conjuncture had allowed it to generate and sustain a series of productivity increases in manufacturing which were without precedent in human history (Mathias, 1983). London's manufacturing industries did not participate significantly in this process of technological advance, which was located principally in the cotton textile regions of the North and the iron-producing areas of the Midlands. However, as the national centre of government and finance, with the country's largest port, London maintained and even enhanced its coordinating role. Some of the big industrial cities, such as Manchester and Birmingham, grew faster than London during the nineteenth century, but the factor of seven by which London's population expanded was sufficient to maintain its status as England's "primate city". On the eve of the First World War, the London agglomeration housed over seven million people - roughly seven times more than the largest provincial conurbation, centred on Liverpool. Meanwhile, London's share of the population of England and Wales had risen from about one-tenth at the beginning of the nineteenth century to one-fifth at the end (Sutcliffe, 1983). Industrialisation's transformation of England into a heavily urbanised nation dominated more strongly than ever by London set the pattern for the rest of the world. By the end of the nineteenth century, industrialisation had transformed most of the Continent and spread outside Europe, principally to North America (Pollard, 1981).

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Thus, just as industrialisation initially accelerated the growth of London, so it came during the nineteenth century to reinforce the already very considerable growth of Paris, and to raise up Berlin and New York to world metropolitan status. At the same time, it gave them a greater predominance within their national territories. A growing proportion of the national population came to live in the metropolises, and an enhanced political and cultural influence radiated from them. In Germany and the United States, federal systems of government discouraged complete domination by the metropolis, particularly in the case of New York which was not even the capital of New York State, let alone of the Union. In France, on the other hand, so great was the dominance perceived to be that serious provincial jealousy of, and hostility to, the capital accumulated during the nineteenth century. These new metropolises of the industrial era had many of the functional characteristics of London. However, two important differences should be noted. Firstly, Paris and Berlin, which started to grow rapidly only in the mid-nineteenth century, when they became railway centres, acquired manufacturing sectors which were much larger than London's in relative terms. In particular, they developed important engineering and chemical industries. Secondly, all three of Paris, Berlin and New York developed residential densities which were twice or more as high as those of London. Whereas in London the majority of the population lived in single-family houses, in the other three cities the apartment was the norm. Thus London was noted, even in the nineteenth century, as a sprawling metropolis, "a province covered with houses", in the memorable phrase of an official report of 1854 (Young and Garside, 1982:1-10). As we shall see, the London paradigm of the metropolis of small houses would become very influential in the formulation of policies to control and order large urban areas which culminated in the twentieth-century theory and practice of urban planning. How did the metropolis of this new, industrial era differ from its pre-industrial predecessor? The main change was one of scale. The metropolis remained an economic coordinator through its tertiary sector functions, but the activities which it coordinated were now vastly more productive than before, and so generated a massive and sustained increase in aggregate metropolitan income. Moreover, because the main productivity gains in the eighteenth and nineteenth centuries were made in the primary and secondary sectors of production, the tertiary sector had to recruit additional labour. Both these factors generated a rise in the population of the metropolises. Further reinforcement was provided by the generalisation of the nation state in the industrialising world of the nineteenth century, a factor which made a big contribution to the rise of Berlin as Germany came to be united under Prussian leadership. Central government, meanwhile, tended to grow in scope to control the complexities of industrial society. In addition, manufacturing tended to expand in the metropolises, responding to the presence of a large local market, external economies of scale, and improved communications with both the national

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hinterland and other parts of the world. Finally, these great cities, growing rapidly in population in an era of rising incomes and improving communications, took on enhanced socio-cultural functions. All, for instance, became even more important centres of book publishing than they had been in pre-industrial times. The number of newspapers, journals and magazines published in them increased, and in the case of newspapers there was a shift towards daily publication. Thanks to the railways and telegraph from mid-century, news and publications were more widely and quickly distributed from the metropolis. Fashions of dress and behaviour spread more readily and the metropolis normally pioneered every urban innovation in leisure. Even the housing forms of the metropolis tended to be diffused to the provinces, as for instance in the spread of the Parisian apartment house of the Second Empire to other large cities in France. Thus the metropolis became an increasingly important participant in the process of reproduction as well as of production. This allembracing influence was reflected in England in the increasingly common reference to London simply as "the Metropolis" - for it had no rivals. However, industrialisation did more than bring national territories increasingly under the sway of the metropolis. It also brought the metropolises themselves into closer association in an international system of mutual respect, rivalry and emulation (Sutcliffe, 1981:163-201). London and Paris established a particularly close relationship of mutual influence. Berlin and New York tended to be recipients of influences from London and Paris during the nineteenth century, but from the 1920s they would become sources of influence in their own right. This sense of a common interest among the great world metropolises played an important part in their formulation of policies to tackle the major problems which metropolitan growth generated under conditions of industrialisation. The discussion so far has emphasised the functional character of the growth of the great metropolises of the industrial era. However, as urban agglomerations several times larger than any previously known, they generated serious problems of congestion. This congestion became acute from mid-century when steam railways and steamships poured people and goods into the metropolises, stimulating a new burst of growth in their populations, but failing to make a significant contribution to movement within the metropolitan areas. Building technology and street transport proved unable during the nineteenth century to make a radical breakaway from preindustrial practice. The expansion of manufacturing within the metropolis accentuated the congestion and contributed to a further decline in the quality of the environment through pollution. Manufacturing also pushed up the proportion of manual workers in the metropolis to levels in excess of those common in preindustrial times. In consequence, the metropolis became, even more than in the past, a place in which great extremes of personal affluence and poverty existed side by side. This juxtaposition had serious implications for the maintenance of public order and political stability in the metropolis. Paris experienced these problems in an

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especially acute form during the first half of the nineteenth century, as noted by Louis Chevalier (1958) in a well-known study of that city, and they contributed to the elaboration in France of a distinctive solution which we have come to know as "haussmannisation". The partial reconstruction of Paris during the middle decades of the nineteenth century is too familiar to require detailed description here (Pinkney, 1958). In essence, it amounted to a modernisation of an existing metropolis using traditional building and transport technologies, and the result was a densification of the urban habitat with large capital sums invested in buildings and the urban infrastructure. Some peripheral growth occurred, and was indeed encouraged by the authorities, but it took a high-density form which largely reproduced the habitat of the inner areas. The ambitious reconstruction programme thus failed to resolve the congestion problem. However, it created an impressive environment which has remained an inspiration to urbanists ever since. London, with its lower densities, suffered less acutely from congestion. It declined to undertake a programme of street-building on the Parisian scale. Instead, informed opinion looked to the railways as a means of spreading the urban area and reducing congestion. However, the railways of London proved to be as disappointing as Haussmann's new streets in Paris. Steam traction proved inappropriate to shortdistance movements, and only the white-collar workers commuted to the suburbs in any numbers. Some workers made use of the cheap early-morning fares which the authorities encouraged the railway companies to offer, but until the end of the century the vast majority of journeys to work were made through the streets, most of them on foot. However, the increasing suburbanisation of a middle-class minority generated a low-density habitat which appeared to offer a radical alternative to that of Paris. Thus London and Paris constituted the two dominant paradigms of nineteenth-century metropolitan urbanisation, in a situation of growing tension between the developing technology of manufacturing production and the more slowly changing technology by which the urban environment was created. That tension, however, would be resolved at the end of the nineteenth century. In the 1890s and the early 1900s, the internal transport systems of the metropolis were transformed by the electrification of the tramways and the introduction of motor vehicles on the streets driven by the internal combustion engine. At last urban areas could spread outwards at lower densities. In 1898 and 1902 Ebenezer Howard published his concept of the replacement of London by a decentralised network of "garden cities" (Howard, 1902). H. G. Wells (1902) envisaged a London area which would extend up to seventy miles from the centre, sustained by railway commuting. Patrick Geddes and Paul Meuriot (1897: 452-3) were fascinated by the possibility that electricity could permit a decentralisation of manufacturing from the large cities. 3 In the short term, most of the decentralisation which now occurred was of residence, but much large-scale manufacturing moved out to the periphery, or set up

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there from scratch, as in Berlin. This spreading of the metropolis was welcomed by the representatives of a new force in urban development, urban planning. Indeed, planning was partly generated by the spreading process itself. The improved means of transport were in large measure provided, or supervised, by public enterprise, which had been developing in the large cities in the later nineteenth century to mitigate the problems caused by the growth of congestion. Through planning, public authority could hope to avoid the growth of external diseconomies in the peripheral areas which would now be constructed. In this way the transport revolution brought about a revolution in urban policy, and the Berlin Städtebau-Ausstellung of 1910 was a symbol of this change. Thus the years around 1900 are the turning-point in the history of the metropolis of the industrial era. 4 Market forces, conditioned by an accelerating rate of technological change, would from now on deconcentrate the dense metropolis which nineteenth-century laissez-faire had built up, but public intervention would become inextricably embroiled in that déconcentration. Because an increasing proportion of investment in the infrastructure of the metropolis was public investment, and because the ideology of planning became so persuasive, the illusion built up that the large urban areas were indeed evolving under public control. That illusion was complete by the 1950s and 1960s, when the planning of decentralisation began at last to be complemented by the planned reconstruction of the inner districts of the metropolises. However, in the following decade it would become apparent that public policy remained incapable of controlling market forces, and an awareness began to grow up, expressed by such as Harvey and Castells, that planning was merely an expression of the needs of late capitalism. The resulting disillusionment with planning has created the climate in which, today, we face the future of the metropolis. That it should take until the 1970s for the limitations of urban planning to be recognised was due largely to the turbulence of economic and political conditions in the twentieth century. The optimism which had sustained Hegemann was severely shaken by two World Wars and an intervening period of slow economic growth. The great pioneer planners of the early twentieth century rode on the great surge of investment which generated massive urban growth between the 1890s and the First World War. The 1920s and 1930s, however, had more in common with the Great Depression of the 1870s and 1880s, when urban growth had flagged and, in the absence of technological innovations, congestion had accumulated. Despite the high hopes of the planners before 1914, peripheral expansion in the inter-war years was ineffectively ordered, and the environmental disaster of the Paris lotissements in the 1920s produced a reaction among architects and planners in favour of concentration. This reaction was once again derived from a metropolitan paradigm, with Le Corbusier seeking to create in vertical building the social vitality of Paris (Sutcliffe, 1977), and New York's accumulation of skyscrapers suggesting a high-technology

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city of the future (Warner, 1983) to replace the spreading, arcadian urban environment of which the English planner, Raymond Unwin, had now become the leading prophet. However, planners in general felt a sense of frustration between the wars, as suburbanisation left behind it a decaying, though still overcrowded, inner city. Le Corbusier's ideas, complemented by those of other modernist architects such as Gropius and Mies van der Rohe, seemed to combine economic efficiency with the maintenance of a high quality of urban life, and even the decentralising planners were prepared to countenance them as a means of ordering the reconstruction of the inner city. Thus planning orthodoxy, having initially adopted the ideal of decentralisation and déconcentration, developed a more comprehensive view of the city in which the creation of a better environment would proceed simultaneously on the periphery and in the inner districts. Planning theory had thus reached a superficially impressive level of balance and maturity when the Second World War interrupted the normal processes of urban development. The war led to a new period of dominance for British concepts of urban planning, represented principally by Sir Patrick Abercrombie. In his great wartime and post-war plans for London and other British cities and regions, Abercrombie anticipated a period of great stability within the centrally planned economic system which the war had brought into being. With hopes high that the world economy would also be stabilised on the basis of the international trading and financial agreements made in the mid-1940s, it seemed possible to plan, in Britain and elsewhere, a rationally distributed urban system, in which the advantages of concentration would be minimally offset by congestion. London's spatial growth was to be halted by a green belt of agricultural land, with excess population decanted to a ring of new towns outside the green belt. The size of the outflow would be inflated by a redevelopment of the inner districts of London at lower densities. The key to the success of the strategy was the direction of new employment to the more depressed parts of the country, under powers established by the Distribution of Industry Act, 1945. In Paris a similar strategy of decentralisation was adopted, though without the green belt. Unfortunately, economic and demographic fluctuations undermined the redistributionist strategy. World economic stability and national demand management on Keynesian lines produced conditions so favourable to economic activity that economic growth rose in the 1950s and 1960s to levels far in excess of what could have been predicted at the end of the war. Birth rates, too, resumed an upward trend in the 1950s and 1960s. It was at this point that the planning strategies applied to London and to Paris diverged. London was envisaged as the centre of an urbanised south-eastern region of England, with population growth accommodated up to seventy miles away from it in enlarged "new towns". The green belt remained in being, as did the objective of reducing London's population to around seven millions after redevelopment was complete. In Paris, however, a number of peripheral "new

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towns" were planned in the early 1960s to permit a massive growth of population within the agglomeration. This big change in French urban policy was a product of the very successful modernisation programme which generated a big flow of previously rural people into urban areas in the 1950s and 1960s. Inevitably, a high proportion of this movement focused on the Paris area and serious efforts to divert it elsewhere in France would have slowed the rate of economic growth. The regime of President Charles De Gaulle was in any case eager to justify a big programme of public investment in Paris, which had been starved of funds since the early twentieth century. As during the Second Empire, the commitment of public funds and the big growth in demand stimulated private investment, and the inertia of the resulting boom was so strong that Paris has not yet faced the symptoms of absolute decline which have caused such concern in London. It was after about 1970 that the idea of a decline of the metropolis became common currency. 5 An important source of this concern was New York, which had been developing as the centre of a dispersed urban region without the benefit of the centralised planning imposed on the European metropolises since the Second World War. Like London, New York had been shedding population since the 1950s but from the early 1970s the welcome reduction in densities in the most overcrowded areas turned into a process of total abandonment. The notorious ruins of the South Bronx, the product of fires deliberately started by the owners of unlettable private rental housing, suggested the possibility of a decline syndrome which could spread to other areas of the inner city. For the first time in the history of the metropolis since the depopulation of the later Middle Ages (if we except the artificial case of Berlin after 1945), land in the inner districts of a large city was unable to attract a productive use. On the contrary, so disfunctional were some of the activities carried on in these declining districts, such as crime and drug abuse, that they drove productive uses out of the area altogether, in the "blow-out" phenomenon identified by David Harvey. This creation of derelict land in the inner areas of a large metropolis was paralleled in London by the dereliction of the docklands, which were made redundant by containerisation, using port facilities further downstream. In the London case, public authority tried harder than in New York to find new uses for the land, through the activities of the Docklands Development Corporation, but by the early 1980s it had become clear that Britain had an over-supply of urban land in the manufacturing and transhipment districts of its cities. The collapse of manual employment in Liverpool and Manchester, as well as London, produced a spreading dereliction which was superficially identical to the desertion of the manufacturing districts of industrial cities in the "rustbelt" of the north-eastern United States (Hall, 1978). As we survey the growing degradation of the inner districts of London and New York, or, in Paris, the deterioration of the peripheral grands ensembles of the 1950s and 1960s, it is important that we recollect that we are in the midst of a world depression in which investment is at a low level. As historians review the develop-

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ment of the metropolis since the beginnings of industrialisation, they are likely to detect a fifty-year cycle of the world economy in which twenty-five year periods of rapid growth and optimism are followed by twenty-five years of slow growth and pessimism. Consequently it is likely that the really rapid transformation of the metropolis will come in the later 1990s and the early 2000s, when the world economy revives on the basis, if we follow Schumpeter (1934), of a new cluster of innovations. Previous upswings, beginning around 1850,1900, and 1950, have all been associated with communications improvements which have extended human exploitation of land. Any upswing occurring around the year 2000 is almost certain to spread the metropolis even further (Gordon, 1982). Indeed, this change is already being anticipated in the American Sunbelt. Meanwhile, the dereliction of our inner cities should not depress us unduly. What we are seeing is a flight of population and capital from the congested areas of our cities generated by the late nineteenth century, and from environments created more recently, on Corbusian lines, but in imitation of that earlier congestion. The logic of improving communications, now that, since 1900, they have created growing quantities of urban land, is that congestion will gradually be reduced. Planning should not seek to resist the desertion of the inner city for, as we have seen, it has never been in control of urban evolution and in a world depression it has no chance of establishing that control. Certainly, the desertion has been accelerated by the sudden collapse of the older, labour intensive manufactures and transhipment industries, which were concentrated in the crowded districts of the late-nineteenth-century city with the pullulating workforce which staffed them. Their demise, however, is no more a cause for regret in the long term than the abandonment of an older housing stock which no longer offers desirable accommodation for the mass of the metropolitan population. Certainly, there will be transitional problems of social deprivation, crime and environmental deterioration. But in the long term a reduced, less densely constructed city will be able to function more effectively as the centre of reproduction, rather than of production, that the metropolis is likely to become in the early twenty-first century. Much more accessible than in the past to its hinterland, and indeed to the whole world, its densities reduced to levels similar to those of the suburbs, the metropolis will offer a favourable environment for the pursuit of government, high-level business services, culture, learning and leisure which will provide its main role (Florence, 1955). Jean Gottmann (1967: 142), some fifteen years ago, detected the trend: "Our whole technological progress is aimed at liberating us from the hard, compelling work of production itself, so that we can indulge in something else, which is basically administration, communication, art, research and also leisure."

In 1984 the prediction has become reality. The metropolis is taking on a new role, not substantially different from its role in the pre-industrial era, before it accumulated a large manufacturing sector. And that role, of course, will have been pioneered by Berlin.

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Notes 1 The literature on this transition is voluminous, but for a recent treatment see Rostow (1975). 2 See the recent surveys of the history of the early modern world by Fernand Braudel, most notably Braudel (1984). 3 For more realistic views, see Adna F. Weber (1899: 158). 4 The decentralising metropolis of the twentieth century is discussed in Kingsley Davis (1955). 5 See Berry (1976), Beaujeu-Garnier (1980). For a recent review of the debate on "counterurbanisation" and "disurbanisation", see Gordon (1982). 6 This view coincides with that of Brian Berry (1976).

References Abbott, C. (1981) The New Urban America: Growth and Politics in Sunbelt Cities. University of North Carolina Press, Chapel Hill. Barney, G. O. et al. (1982) The Global 2000 Report to the President, Vol. 2: The Technical Report. Penguin, Harmondsworth. Beaujeu-Garnier, J. (1980) Géographie urbaine. Armand Colin, Paris. Bell, D. (1973) The Coming of Post-Industrial Society: A Venture in Social Forecasting. Basic Books, New York. Berry, B. J. L. (1976) The Counter-Urbanization Process: Urban America Since 1970, in Berry, B. J. L. (Ed.) Urbanization and Counter-Urbanization. Sage, Beverly Hills. Braudel, F. (1984) Civilization and Capitalism, 15th-18th Century, Vol. 3: The Perspective of the World. Collins, London. Chevalier, L. (1958) Classes laborieuses et classes dangereuses à Paris pendant la première moitié du XIXe siècle. Pion, Paris. Davis, K. (1955) The Origin and Growth of Urbanization in the World, The American Journal of Sociology 60, pp. 429-37. Florence, P. S. (1955) Economic Efficiency in the Metropolis, in Fisher, R. M. (Ed.) The Metropolis in Modern Life, pp. 110-18. Doubleday, Garden City, New York. Forstall, R. L. and V. Jones (1970) Selected Demographic, Economic and Governmental Aspects of the Contemporary Metropolis, in Miles, S. R. (Ed.) Metropolitan Problems, pp. 5-70. Methuen, Toronto. Gordon, P. (1982) Déconcentration Without a "Clean Break", in Kawashima, T. and P. Korcelli (Eds.) Human Settlement Systems: Spatial Trends and Patterns, pp. 193-202. International Institute for Applied Systems Analysis, Laxenburg. Gottmann, J. (1961) Megalopolis: The Urbanized Northeastern Seaboard of the United States. MIT Press, Cambridge, Mass. (1967) The Skyscraper and the Sprawl, in Gottmann, J. and R. A. Harper (Eds.) Metropolis on the Move: Geographers Look at Urban Sprawl, pp. 125-50. John Wiley and Sons, New York. Hall, P. (Ed.) (1977) Europe 2000. Duckworth, London.

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(1978) The Future of the Metropolitan Region, in Clarke, J. I. and J. Pelletier (Eds.) Régions géographiques etrégions d'aménagements, pp. 217-21. Editions L'Hermès, Lyon. (Ed.) (1981) The Inner City in Context. Heinemann, London. Hegemann, W. (1911,1913) Der Städtebau nach den Ergebnissen der allgemeinen StädtebauAusstellung in Berlin . . . 2 Vols. Verlag Ernst Wasmuth, Berlin. (1963) Das steinerne Berlin: Geschichte der größten Mietskasernenstadt der Welt. Ullstein, Berlin. (First published 1930 by Jakob Hegner, Lugano.) Howard, E. (1902) Garden Cities of Tomorrow. S. Sonnenschein and Co., London. Lawless, P. (1981) Britain's Inner Cities: Problems and Policies. Harper and Row, London. Mathias, P. (1983) The First Industrial Nation: An Economic History of Britain, 1700-1914. Methuen, London. Meuriot, P. (1897) Des agglomérations urbaines dans l'Europe contemporaine. Belin Frères, Paris. Pollard, S. (1981) Peaceful Conquest: The Industrialization of Europe, 1760-1970. Oxford University Press, Oxford. Pinkney, D. H. (1958) Napoleon III and the Rebuilding of Paris. Princeton University Press, Princeton. Roberts, B. (1978) Cities of Peasants: The Political Economy of Urbanization in the Third World. Edward Arnold, London. Rostow, W. W. (1975) How it all Began: Origins of the Modern Economy. Methuen, London. Schumpeter, J. A. (1934) The Theory of Economic Development: An Inquiry Into Profits, Capital, Credit, Interest and the Business Cycle. Harvard University Press, Cambridge, Mass. Sutcliffe, A. (1977) A Vision of Utopia: Optimistic Foundations of Le Corbusier's Doctrine d'Urbanisme, in Waiden, R. (Ed.) The Open Hand: Essays on Le Corbusier, pp. 216-43. MIT Press, Cambridge, Mass. (1981) Towards the Planned City : Germany, Britain, the United States, and France, 17801914. Basil Blackwell, Oxford. (1983) In Search of the Urban Variable: Britain in the Later Nineteenth Century, in Fräser, D. and A. Sutcliffe (Eds.) The Pursuit of Urban History, pp. 238-40. Edward Arnold, London. (1984) Introduction: Urbanization, Planning, and the Giant City, in Sutcliffe, A. (Ed.) Metropolis 1890-1940, pp. 1-18. Mansell, London. Young, K. and P. L. Garside (1982) Metropolitan London: Politics and Urban Change 18371981. Edward Arnold, London. Warner, S. B. (1983) The Management of Multiple Urban Images, in Fräser, D. and A. Sutcliffe (Eds.) The Pursuit of Urban History, pp. 383-94. Edward Arnold, London. Weber, A. F. (1899) The Growth of Cities in the Nineteenth Century: A Study in Statistics. Macmillan, New York. Wells, H. G. (1902) Anticipations of the Reaction of Mechanical and Scientific Progress Upon Human Life and Thought. Chapman and Hall, London.

2. The New York Metropolis in Transformation: History and Prospect. A Study in Historical Particularity Eric E.

Lampard

2.1. Introduction The population of New York City is in decline. Since 1950 the trend line of the city's population growth rate has been downward from a peak of c. 7.9 million residents at midcentury. Notwithstanding a brief resurgence in the late 1960s, net numbers fell again through the 1970s to less than 7.1 millions by 1980. In 1984 resident population reached an estimated 6.9 millions (the level of 1930), despite renewed economic vitality after 1977, substantial recuperation from the city government's fiscal crisis of 1975, and a strong cyclical recovery since the last quarter of 1982. Periods of growth and recession in a city's economy are, of course, nothing new. Moreover, in the three hundred and sixty years since its planting as Nieuw Amsterdam in 1625-26, New York City has undergone half-a-dozen social and economic transformations and the painful experience of recent decades may signal merely that a further structural metamorphosis is underway. But, whereas in the past, each successive business cycle or long-run structural development deposited an ever greater net concentration of population and work force in the New York City area of its day, the current alteration has involved a substantial and, to date, persistent net decline in numbers of city residents, a notable shift in the character (and residential distribution) of its work force, and a falling off in average income per household relative to certain other large United States cities. Signs of recovery in the city amidst continuing evidences of decline provide no clear or unambiguous indicators of the direction of change. Nevertheless, where we have been dealing historically with a net accretion of population and productive activities, and with a seemingly irreversible "growth" impulse punctuated to be sure by occasional set-backs and slowdowns, we may now be witnessing not so much a pause as the cumulative shrinkage of New York City's residents and resources.

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A further question arises whether this decrement is simply another round of decentralization within a more extended form of "metropolitan area" or part of a manifestly novel tendency involving net déconcentration and eventual dispersal of city residents and jobs into a "polycentric urban field": a process which in varying degree has characterized a growing number of urbanized areas - including New York - over the past quarter century. If the latter, then not only does the city core retain a diminishing share of metropolitan population, with some leveling of residential and work densities, but the core eventually registers absolute net loss of inhabitants, while its polynucleated central business district selectively devolves its more standardized functions and products into an increasingly multi-centered, comparatively lower density, urbanized region. Moreover, insofar as the "face to face" communications cost factor is only critical for the most uncertain and unstandardized transactions, there is an attendant loss of "centrality" in the ecological organization of the whole. No agglomeration, even one as large in area and population as New York City, is an island sufficient unto itself. Its chances for growth and prosperity are always tied into the fortunes of wider regional, national, or transnational systems in which it interacts. Residents of cities, nevertheless, are not all merely passive respondents to changes originating in their larger social environments. Individually and, in a sense, collectively citizens may participate intentionally and actively in such changes according to their own perceptions, capacities, and access to means. At times New Yorkers have served as a locomotive imparting some of their momentum to a much wider world. Personal characteristics aside, however, the degree in which a city's residents might originate their own roles or undertake private ventures would largely depend on how they are situated within the relevant systems at any time. Merchants and artisans in New York City-Manhattan c. 1700 were obviously operating within a very different socio-economic setting from their successors in Greater New York City c. 1900, and at either date their situations would have diverged markedly from those of their counterparts, say, in Albany or Boston. Finally, in as much as alternating sequences of faster and slower population concentration and economic growth were motivated almost entirely by actions of private businesses and households (except in wartime), must public policies now supplement or supplant profit-motivated behavior as they have variously done since the 1930s and 40s in order to maintain growth in, and of, large cities? Or, as bornagain market enthusiasts aver, must private sector initiative be "unleashed" from the trammels of government interference and regulation so that resurgent "market forces" may again be permitted to solve the "problems" of large agglomerations, such as New York, if necessary by dissolving them altogether this time around? Regardless of ideological predilections, however, one may wonder whether the exceptional size and functional ascendancy of New York City within the evolving system of U.S. cities create(d) special obstacles or, alternatively, noteworthy

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advantages with respect to "problem solving" not experienced by other declining centers at home or abroad? Although much can be learned from a comparison of New York City's tribulations with those of other great metropoleis - London, Paris, Chicago, or Berlin - little can be done about their respective difficulties without first considering their distinctive histories and disparate situations.

2.2. The Contribution of Nieuw Amsterdam, 1609-1664: Survival New York City had its origins in the efforts of Dutch merchants to capitalize "the fur trade" following Henry Hudson's voyage to North America in 1609. Some 240 kilometers up a great river which eventually bore his name, Hudson made contact with the powerful Iroquois people - "the Five Nations" - whose lands stretched westward from the Mohawk Valley. Although the English captain had found neither the eastward nor westward passage to the Orient sought by his sponsors, the Vereenigde Oost-Indische Compagnie, Hudson nevertheless saw the opportunity for an immense traffic in furs. Such exchanges of peltries for trinkets were inaugurated over the next few years by the ventures of several voorcompagnieën but the Dutch presence in North America was more firmly established in 1614 when the States General of the United Provinces granted a three-year monopoly of the fur trade to a Nieuw Nederlandtsche Compagnie (NNC). The new company hoped to eliminate "wasteful" competition among Dutch interests in both the purchase and sale of furs. The principal trading post of the NNC was located not on the island in the great harbor which the Dutch called Manhates (Manhattan) but far up Hudson's river named Mauritius after Prince Maurice of Nassau - on the edge of the Iroquois country. A stockade, Fort Nassau, was built by company servants on an island within the present-day limits of Albany, N.Y. Rivalry among mercantile chambers and towns in the United Provinces prevented renewal of the company's charter in 1617, although good relations had been established with the Iroquois and NNC prospects seemed good. Fitful trading continued but no new penetrations of the area were attempted until the Truce of Trêves with the Spanish Habsburgs expired in June, 1621 when the States General proceeded to charter a new West-Indische Compagnie for a term of 24 years. Given the precarious state of Netherland's independence from Habsburg rule, the West-Indische Compagnie (WIC) was more than just another business venture. It was granted a trading monopoly with the entire east coast of the Americas together with the Atlantic coast of Africa (slave trade). Its octroy also bestowed authority to regulate and "protect" the contraband trade with Spanish-Portuguese held territories (privateering). Finally, the WIC received permission to plant settlements

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overseas in addition to the trading bases of earlier years. The company was expected to make a profit for investors and at the same time plow back part of its earnings into the independence struggle. Meanwhile, the States General entered into financial and military commitments to the enterprise and expected to share in its revenues. 1 Thus, the WIC was to operate on an altogether different scale from the NNC and, although one of its first corporate acts was to create a province of Nieuw Nederland in 1623, the focus of its expectations was on the Caribbean and the Spanish Main rather than the fur trade of its North American domain (which was already under competition from New France). Dutch vessels used the great harbor but not before May, 1624 did the first settlers, coloniers, sent over by the company reach Manhattan Island. They comprised some 30 families, mostly Protestant Walloon refugees from the Spanish Netherlands. Once again the main body pushed up the Hudson (North) River to construct a new base, Fort Oranje, around which was to be laid out a provisioning village, Beverswyck (Albany). For all the natural "advantages" of its harbor, Manhattan remained but a cluster of huts with a small defensive retreat located on Nut (Governor's) Island where the East River (an arm of the sea) runs into the Upper Bay. Bases were also established on the South (Delaware) River almost opposite its confluence with the Schuylkill River - the future site of Philadelphia - and an attempt may have been made to thrust a Dutch presence as far east as the mouth of the Connecticut River on Long Island Sound. Yet by the close of 1625, after three more ships had arrived with company servants (farmers and craftsmen) and more free coloniers, there were no more than 200 Christian souls in all Nieuw Nederland. The Dutch invasion was more firmly consolidated in May, 1626 when the ruling Amsterdam chamber appointed a "Director-General" and Council to manage the WIC's province. More settlers disembarked with the first Director-General, Peter Minuit, who promptly "purchased" Manhattan Island from some local "Indians" f o r / 6 0 in merchandise and trinkets (equivalent to about seven or eight beaver pelts.) Minuit began the construction of Fort Amsterdam (laid out in 1625) on the southern tip of the island and concentrated the bulk of the company's servants there, leaving only about 15 or so traders at Fort Oranje, and virtually abandoning the fort on the Delaware except for seasonal visits. When Manhattan became the seat of WIC military and commercial administration, it contained about 30 wooden structures covered with bark, a countinghouse built of stone and thatched with reeds, foundations of the fort, and some land cleared for company farms or bouwerijen. A horseoperated mill was also being built "over which shall be constructed a spacious room sufficient to accommodate a large congregation and then a tower where the bell brought from Porto Rico will be hung." By 1628 the same chronicler could report a population of some 270 who "remained as yet outside the fort, in no fear, as the natives live peaceably with them." 2 But as the bell from Porto Rico indicates, the

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eyes of many newcomers were also directed more upon the Caribbean than on cargoes of furs coming down Hudson's river. Nieuw Nederland was a side show. Dutch interests had been developing on IberoAmerican turf for two decades or more before Hudson's voyage. The real opportunities for the WIC lay along the Guiana coast and beyond - from the Orinoco as far south as Bahia. Indeed, losses incurred in fruitless assaults on that area during 1624— 25 absorbed much of the profit made in the West African "Guinea trade", leaving Amsterdam with little capital or manpower to invest in Nieuw Nederland between 1625 and 1628. Only in 1627 did the Rotterdam Captain Piet Heyn begin to recoup company losses with raids on Portuguese ships at Bahia culminating in his capture of the Spanish silver fleet in 1628. This triumph enabled the WIC to pay off its debts, distribute a substantial, c. 75 per cent, dividend to shareholders, and left it with sufficient resources for investment in the capture of Recife and Olinda early in 1630 and the defeat of an Iberian relief fleet in the following year. As early as 1627-28 the WIC had meanwhile been considering "seigneurial" land grants and commercial privileges (including ten year tax exemptions) to a handful of favored private venturers who were major company stockholders. These patroons sought to plant estates on the Guiana coast or adjacent islands with a view to trading with the natives and producing sugar or minerals for export via WIC ships and marketing services. Much the same expectations motivated the company's "Charter of Privileges and Exemptions" granted to Nieuw Nederland in 1629 where the meager population remained dependent on the company for food and other supplies despite the division of labor time made possible by concentrating the Europeans at Fort Amsterdam. Already in 1626 the shortage of land workers had led the WIC to import 11 "seasoned" Africans - New York's first immigrants, albeit involuntary ones - and two years later the company predikant complained to a fellow cleric in old Amsterdam about the food shortages, the need for another dozen or so farmers with animals "and laborers in proportion". 3 Hence the hopes raised by the vryheden of 1629 which sought to establish patroonships or leen goederen, each with a minimum of 50 tenant cultivators, along the Hudson (North) and Delaware (South) Rivers. The charter also allowed "free holdings" of improved land (except on Manhattan Island) to be brought into production and maintained by small cultivators at their own expense. Export crops were not anticipated from the patroons or freeholders but their produce might ease the company's supply burden (heavy into the early 1630s) and allow some provisioning of ships, while their presence would furnish additional means for Nieuw Nederland's defense. The WIC retained its monopoly of the fur trade. Meat, grain, and dairy products were subsequently brought across the East River from Long Island or down the Hudson. Traffic with English sea captains and merchants, however, indicated that Fort Amsterdam was still augmenting supplies of foodstuffs and tobacco from places as far off as Massachusetts Bay and the

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Chesapeake. Yet the company guarded its fur trade against poachers and smugglers and controlled all shipping and imports (to which end it prohibited textile manufactures.) Likewise in 1633 the WIC granted its officers "the staple right" which obliged non-company vessels to offer their cargoes for sale or pay duty on them. Nevertheless, despite these measures, another five years lapsed without the fur trade or settlement registering any notable increase. The capture of Spanish-held islands in the southernmost Antilles, the campaign of Graaf John Maurice which brought half the capitanias of Brazil into Dutch hands after 1636, as well as the seizure of Portuguese slave barracoons on the Guinea Coast of Africa, absorbed company energies and reinforced its commitment to building a tropical empire and to cutting its losses in Nieuw Nederland. By 1638 the WIC was opening up its entire province to "lawful" traders of "friendly nations" - subject only to ad valorem duties and a requirement that all goods be carried in company ships. Land was also made more readily available to proven cultivators on a headright basis. The patroonship grants were cut back on both major rivers - only Rensselaerswyck had really worked out - while town lots were now offered for sale on Manhattan itself. It was possible that Nieuw Nederland might become a source of victuals and timber for the tropical empire even though such goods could not compete in European markets with Baltic grain or Scandinavian timber on account of transport costs. In 1640 the WIC finally abandoned its restrictions on manufactures and intending settlers now paid only board (not passage) on company ships and the ten year exemption from tithes was again brought into effect. 4 Within a few years of the amended charter of 1639 some exports were going to bolster the Dutch in Pernambuco and to Cura§oa, as well as private and company furs to Amsterdam, but the growth of population remained disappointingly slow. In 1643, when local Indians finally struck back - the "terrorists" of their day - against the overbearing Director-General and the private expropriators, there were still fewer than 500 residents in Manhattan and no more than another thousand elsewhere including recent arrivals from New England. Death and destruction around the port were so widespread in 1643—44 that many ships departed from the great harbor without return cargoes - which led the directors to consider ceding their province back to the States General "if they receive profit from it." Meanwhile, for all the multiplicity of sects and diversity of tongues in and around Fort Amsterdam - so gratifying to late 20th-century pluralists - it is evident that few Netherlanders wanted to settle there and that most foreigners were not so much colonists as rootless sojourners with their hopes set on the fur trade or privateering. The WIC held on to Nieuw Nederland but no longer maintained its traders there after 1644.5 The almost uniformly English and Puritan Massachusetts Bay Company stronghold of Boston scarcely four years younger than Fort Amsterdam - had nearly three times as many residents as the Dutch company's village.

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Indian troubles persisted on the mainland for another two years and intermittently thereafter. The Treaty of Münster in 1648 put a formal end to profitable privateering, and in 1652-54 the Portuguese, now also free from the Spanish Crown, succeeded in driving the Dutch off the mainland of Brazil, finally exchanging a cash indemnity and commercial privileges in return for the abandonment of the WIC's territorial claims in 1662. With the outbreak of the first Anglo-Dutch War in 1652 the vision of tropical empire faded and to the extent Nieuw Nederland's port was serving as an entrepot for Chesapeake tobacco, New England products, and as a base for re-exporting E u r o p e a n goods to other English plantations in defiance of Cromwell's Navigation Act, the company's domain was now regarded as more than a trespass on territories claimed by English Crown and Commonwealth since the Bristol Merchant Fellowship sponsored Cabot's voyage in 1497. The embattled W I C meanwhile was repeatedly the subject of complaints to the States General by covetous newcomers regarding its unresponsive management. In 1653 its political monopoly was finally broken when the gemeente of "the Fort and City of Nieuw A m s t e r d a m " received a charter of municipal self-government with the company still bearing the costs of provincial defense. A highly restrictive franchise in 1657 allowed substantial citizens, with one or another degree of burgerrecht, to dispute the burgemeesters and other appointed town officers. 6 Nevertheless, the bulk of infrastructural outlays on streets, canals, wharves and de singel, a modest wall across the island some 250 m north of the unfinished fort, was still undertaken by the company not the city. The W I C also carried the financial burden of destroying the upstart plantation of New Sweden on the Delaware and of putting down Indian uprisings between 1655 and 1663. Even as the Dutch from Brazil were fostering the lucrative sugar culture on English and French-held islands in the West Indies, the burgemeesters and other Nieuw Amsterdam notables readily surrendered to an overwhelming force sent by James D u k e of York and Albany, the Lord High Admiral of England, to "reclaim" the province for his restored sovereign and grateful brother, Charles II. The abandoned Petrus Stuyvesant, most patriotic and despotic of the Directors-General, was left to surrender a defenceless city to Colonel Richard Nicolls on September 8, 1664.

2.3. New York City in the British Empire: Provincial Metropolis and Entrepot When the city renamed New York came under the proprietary rule of the D u k e of York, there were some 1200 to 1500 Europeans and Africans resident on Manhattan Island. The larger New York province had recently expanded its population to between six and 10 000 located principally in the lower Hudson Valley and on Long

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Island. There were about 300, for the most part wooden, buildings in the city in addition to 15 or 16 public structures, covering a built area of no more than 30 hectares. When a new City Hall was constructed at the corner of Broad and Wall Sts in 1697 to replace Willem Kieft's Stadt Huys (originally a 5-storey dockside tavern) population had risen threefold since 1664 to 4937, including 700 Negroes slave and "free". This number constituted 27 per cent of the provincial (non-tribal) population in 1698, the highest proportion in the history of New York province or state prior to the consolidation of greater "five borough" New York 200 years later. 7 During the century and more of English rule the population of New York City climbed to 21 863 by 1771 when it represented about 13 per cent of the province's population of 168 007. The city may have reached c. 26 000 at the outbreak of the War of Independence but the population growth of 4.6 per cent per year during the two decades before 1775 contrasted with an annual rate of less than 1.5 per cent over the century's first quarter. Clearly, access to the growing commerce of the English (after 1707, British) navigation system did not by itself release some mainspring that transmuted natural resources and harbor into "sustained economic growth". A brief acceleration in city numbers and buildings had occurred north of the wall in the 1680s when the proprietary governor granted the port a monopoly of bolting and exporting flour (rescinded in 1694) but the population growth rate between 1664 and 1698 averaged barely 1.0 per cent per annum. Boston's growth had been considerably faster and as the royal governor of New York, Benjamin Fletcher, had reported to the new Board of Trade in London in 1696: "Philadelphia in fourteen years time is become equal to the city of New York in trade and riches." Indeed, the new commonwealth of Pennsylvania had put on as many settlers in two decades as New York after eight. Shortly after the yellow fever outbreak in 1702 had killed off 570 New Yorkers, the city found itself slipping - despite its harbor and hinterland behind Penn's Quaker City situated over 100 miles up the Delaware River in the heart of "the best poor man's country." 8 New York City would not recover second rank again before the late 1750s after Boston had been relegated to third place and Philadelphia around midcentury had become No. 1. A surge of newcomers following the 1731 small pox outbreak first carried New York City's numbers over 10 000 in 1737 - two decades behind Boston. Not before the 1750s did the city experience rapid concentration, surpassing 20 000 residents by 1770, even as its share of the provincial population plummeted. Meanwhile Boston had maintained itself as the largest agglomeration and commercial entrepot in Anglo-America until c. 1750, a primacy held for a century since its mercantileshipping interests had forged a connection with the West Indies during "the sugar revolution" which had rendered populous English and French islands dependent on outside sources for food and materials. New York's modest fortunes, like those of more rapidly growing Philadelphia, were also bolstered by the Caribbean trade but unlike Boston, or another latecomer Charles Town in the Carolinas, the city on the

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Hudson had little direct trade with the English metropolis. Although Boston and New York had roughly the same proportions of outbound tonnage sailing to British (c. 19%) and West Indian ports (c. 50%), the New England entrepot had twice the number of departing ships with three times the tonnage burden of New York as late as 1715.9 From the late 17th century ships clearing New York harbor carried flour, biscuit, bread, barreled meats, and timber to the Caribbean and Atlantic islands (Bermudas and Bahamas) in return for sugar, dyewood, mahogany, slaves, ready cash (mostly Spanish coin), or bills of exchange drawn on London. Ships from New York also carried West India goods, local breadstuffs, and produce of adjacent colonies to Boston and New England, returning with fish, dairy products, rum, and imported English and European wares, some of which were re-exported to the islands as well as to the Chesapeake and Carolina coasts. As these entrepot functions developed in New York, flotillas of sloops, schooners, and other craft brought in more Connecticut products, and numerous yachts made round trips to the Delaware to augment the limited volume and variety of goods originating in New York province. It was this emerging entrepot role, role rather than mere export of hinterland farm products or furs that allowed both city and province to sustain comparable rates of population increase over the second quarter of the century. Compared with the fertile piedmont plateau extending 40 to 50 miles west and southwest of Philadelphia, New York's hinterland was narrow in area and endowment. East of the Connecticut River and south of the Shrewsbury River in East Jersey, New York ran into established competitors, although neither New Haven nor Perth Amboy constituted a threat. To the west of Albany, the Iroquois blocked penetration along the Mohawk, while further north through the Adirondack upland, the French and their Indian allies dominated access to the St. Lawrence and the interior Great Lakes. Even good agricultural land was confined to a sleeve of territory reaching up the Hudson valley and to parts of western Long Island. Thus for a province like New York which did not develop a major staple in European demand, such as sugar, tobacco, or rice, there was no prospect of rapid economic advance. Exports from the Chesapeake and Charles Town areas comprised 83 to 87 per cent of the official customs values of all exports from the mainland colonies to England from the late 1690s through the 1760s. In contrast, New York City was dependent not so much on natural resources of field or forest as on the human resourcefulness of its merchants, mariners, and artisans. By commerce and manufacture they added market value to the primary products of the hinterland and to the commodities of other places with which they trafficked. Value added by New York, in this sense, as by Boston and Philadelphia, was contingent on identifying and capitalizing market potentials outside the home province; a simple intercourse between town and country, or even outport and metropolis, did not suffice to build a center of more than tertiary importance in the colonial economy.

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It was the net earnings of New York merchants from sales of goods, shipping, and financial services in multilateral transactions that enabled the commercial community to cover more of its heavy adverse balance of trade with British and other creditors. The volume of outbound tonnage burden from New York to British ports doubled over the second quarter of the 18th century. Thereafter it usually exceeded the proportion, if not the volume, of Boston and Philadelphia tonnage bound for the U.K. Official values of goods imported directly from England to New York also increased but did not regularly surpass Boston's imports until the disruptions preceding the War of Independence. The problem of legal return cargoes to New York persisted inspite of higher levels of imports (than of exports) from (to) the English metropolis. Coal in ballast from Newcastle or Swansea was not a source of profit but did help moderate the price of firewood during bitter New York winters. (See Table 1.) During the century's third quarter, first Philadelphia, then New York surpassed Boston in resident population. Boston's numbers actually declined somewhat and its port seems to have lost some shipbuilding and trading activities to more competitive Yankee outports and to Newport, R.I. (the fifth largest port town in AngloAmerica.) Boston and New England suffered material losses and political disappointments during the wars against New France, while Philadelphia's and New York's earnings from entrepot functions were augmented by privateering, illicit trading, and strengthened ties to London during the final stages of Britain's "half century of conflict" with France. Philadelphia merchants exported breadstuffs and livestock to the islands, southern Europe, and even to Boston; they were well placed to benefit from the rising international price of wheat stemming from grain shortages in the markets of Lisbon, Cadiz, Barcelona, and Marseilles. Net earnings in these markets helped pay for imports from the mother country, some of which still came via Boston. Profits were also plowed back into Philadelphia shipping; the victualling, leather working, and shipbuilding crafts did very well. British government spending on the French and Indian War in campaigns from Fort Duquesne to Niagara redounded to the advantage of New York and Philadelphia resulting in (1) greater direct import flows, and (2) enlarged sales of imported goods to the interior. It is on the import side that Boston's waning primacy in dealings with the imperial metropolis becomes noteworthy. New York's English imports at official valuation exceeded Boston's in six of the years 1759 through 1770, while even Philadelphia's direct imports surpassed Boston's in three of those years. Boston's share of official export values to England, however, only fell below New York's in 1761 and 1762 and was more than twice the official value of Philadelphia's share except in years around 1760. In 1755, meanwhile, New York City had been designated "the general Magazine of Arms and Military Stores" as well as the principal point of concentration for British

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The numbers of persons employed in the Borsig company outnumbered those of any other engineering company. In the forties of the 19th century we find 1000 to 1100 workers and clerks working in the Borsig company compared to more than 2800 persons in total. Borsig always had a lack of qualified workers. In the following years the engineering industry had the highest growth-rates of all manufacturing, exceeding even those of the clothing industry (see Table 6 a - c ) . The electrical plants were not clustered in one specific area, but were located primarily in the northern suburbs Wedding, Reinickendorf, Martinickenfelde, Siemensstadt and in the southeastern suburban area. In the 19th century Siemens had opened several plants spread across the city. In the early 20th century Siemens concentrated the plants in a western outlying area on Spandau territory. The formation of industrial sites caused the functional and spatial division of production and dwelling. The separation of these two functions in the urban area became the most important factor in shaping the urban structure and the most important problem in later planning its further development. Industrial sites considerably contributed to inner city congestion, above all the formation of highdensity residential quarters next to industrial sites and tertiary services. The population, and above all the immigrants concentrated primarily in the southern and northern suburbs (see Table 7). In the northern districts the concentration of industry attracted workers housing areas clustered close to the factories; in the southern districts the numerous clothing workshops were mixed with working and living. Here the typical rental barracks (Mietskasernen) with small dwellings (more Table 6a: Development of the Metal Industry 1801-1871

Year

Number of Factories abs. Index

1801 1816 1831 1846 1849 1852 1855 1858 1861 1867 1871

1 119 727 947 1 744 1746 1 810 1 825 1 975 2 240 3 012 3 391

64 42 54 100 100 104 105 113 128 173 195

Number of Employed Persons abs. Index 4 099 1 896 2 943 7 913 6 811 7 890 8 554 9 194 11 665 18 984 26 273

52 24 37 100 86 100 108 116 147 240 332

Employed Persons total 41 391 32 020 25 944 78 093 78 572 87 152 91 476 109 252 114 489 127 789 182 772

In % of Employed Persons 9.9 5.9 11.3 10.1 8.6 9.0 9.3 8.4 10.2 14.9 14.3

Source: Bevölkerungs-, Gewerbe- und Wohnungs-Aufnahme vom 1. December 1875. . .,4. Abt., H. 3/4, p. 6-7.

130

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Table 6b: Development of the Mechanical Engineering Industry (Engineering, Toolmaking, Instruments) 1801-1871

Year

Number of Factories Index abs.

1801 1816 1831 1846 1849 1852 1855 1858 1861 1867 1871

266 251 268 553 630 607 640 701 813 1 029 1 133

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Number of Employed Persons abs. Index

4 2 3 4 8 9 14 20

517 470 470 601 591 360 136 535 338 557 595

11 10 10 100 56 73 90 186 203 316 448

Employed Persons total 41 32 25 78 78 87 91 109 114 127 182

391 020 944 093 572 152 476 252 489 789 772

In % of Employed Persons 1.2 1.4 1.8 5.9 3.3 3.9 4.5 7.8 8.1 11.3 11.2

Source: O. Wiedfeldt, Statistische Studien. . p. 255; Bevölkerungs-, Gewerbe- und Wohnungs-Aufnahme vom 1. December 1875 . . . , 4 . Abt., H. 3/4, p. 7.

Table 6c: Development of the Engineering Industry 1801-1871

Year

Number of Factories Index abs.

1801 1816 1831 1846 1849 1852 1855 1858 1861 1867 1871

8 14 3 33 29 30 42 61 67 104? 122?

24 42 9 100 88 91 127 185 203 315 370

Number of Employed Persons abs. Index 17 19 75 2 854 704 923 1 310 5 456 5 362 12 179? 17 178?

0 0 3 100 24 32 45 193 194 432 609

Employed Persons total 41 32 25 78 78 87 91 109 114 127 182

391 020 944 093 572 152 476 252 489 789 772

In % of Employed Persons 0.0 0.1 0.3 3.6 0.9 1.1 1.4 4.9 4.8 9.5 9.4

Source: O. Wiedfeldt, Statistische Studien. . ., p. 258; Bevölkerungs-, Gewerbe- und Wohnungs-Aufnahme vom 1. December 1875. . 4. Abt., H. 3/4, p. 7.

Decisive Factors in Shaping the Metropolis, Berlin 1850-20

131

than 50% had only one room that could be heated) at relatively low rents bordered the streets and tiny courtyards. The eastern districts and suburbs were built up later and slower, but the same way. The western districts and suburbs did not have the same mass invasion of population and building. Social segregation was remarkable, and resulted primarily from the price market for properties and rents, the quality of building and the existence of parks and recreation facilities like the Tiergarten. When companies moved to the outskirts and outlying areas, the industrial plants did not remain isolated settlements in the suburban fringe or in the outlying areas. They became the nucleus of crystallization for the following development of more plants, of dwellings (Mietskasernen or family homes). This way the city incorporated rural areas and small towns in a functionally differentiated urban structured metropolitan area.

4.4. The Role of High Level Services The expansion of the city was primarily caused by the expansion of booming industries, secondarily by tertiary services. The traditional government functions and services of the Prussian capital increased when the German Empire was founded, and Berlin became the political center of the Kaiserreich. The government board was extended in order to control the complex modern state. The number of embassies and other diplomatic institutions grew. Parties and associations of economic interest groups established their central offices. The location of private high-level services was closely related to the emergence of the imperial capital and the economic growth making Berlin the national center of finance and commerce: all great banking houses, insurance companies, national and international commercial agencies and large joint-stock-companies located their German main offices in Berlin in order to find contact, consulting and negotiating partners to make business more effective. Existing services attracted others. The tertiary sector recruited additional labor available by the constant influx of population. The government functions were located in the central part of the city: in Cölln, Friedrichstadt and partially Dorotheenstadt, spreading westwards along the Tiergarten. The new services were located in the same central quarters of the city, because their primary economic function was representation and being within easy reach for business partners was crucial. Therefore they did not hesitate to pay climbing rents and buy expensive properties. So the inner city began to transform into a central business district (Krause, 1958; Schott, 1912) with blocks and streets specializing in tertiary functions: government buildings on Wilhelmstraße, banking on Behrenstraße, retail shops and department stores on Leipziger Straße, wholesale

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151

study by van den Berg et al. (1982) although their analysis is in terms of continuous changes in rates of change in core and hinterland. These stages may be regarded as empirical regularities which theory may seek to explain rather than constituting a specific theory of urban change. The stages, however, do correspond not just to hypothetical but to actual states of the world. Thus stage 1A in Table 1 (which, perhaps significantly, represents stage 8 in the van den Berg et al. schema) might correspond to relative reurbanisation when there is significant movement into the core from the hinterland (and from elsewhere), perhaps of high income "gentrifiers", but still outward movement of poorer residents who lived at higher densities from the core and a net loss from the hinterland.

6.2. Developments in the EEC Since 1975 Hall and Hay having defined 438 urban systems in the countries of the E E C classified them to one of their original six stages for the periods 1950-60,1960-70 and 1970-75. The data used were mainly derived from the national censuses of population so these were "stylised" periods. If we examine these results not in terms of sequential shifts for individual F U R s but as frequency distributions this classification showed a tendency for a progressive shift of the distribution through time. In Figure 1 the percentage frequency of each stage for the FURs of the E E C 9 is shown for each of the three periods and for a final period, 1975-81. This perhaps demonstrates most clearly the successive rightward shift of the urban system of Europe as the modal stage of development moved from Relative Centralisation in 1950-60 (that is both cores and hinterlands growing but cores more rapidly) to Absolute Decentralisation in 1975-81. 2 Although, as Figures 2 to 5 show, individual countries similarly demonstrate this shift in the frequency distribution of stages of development of their FURs through time, there are significant and consistent national variations. In the first period Italy's urban system was at what Hall and Hay classify as the earliest stage of development, typical of a still forming system of urbanisation and significant rural-urban migration; thus in over 90 per cent of Italian FURs in this period the core was exhibiting growth and, in some 60 per cent, the hinterlands were declining. The UK had the most "mature" system with 50 per cent of its FURs in various stages of decentralisation. The Federal Republic of Germany was between these with a bi-modal distribution; a peak at the Centralisation during loss phase whilst the median lay in the Relative Centralisation stage with both cores and hinterland growing but the cores growing faster. These national variations within the overall pattern continued throughout the period

Paul Cheshire and Dennis Hay

152

LC

AC RC RD Type of P o p u l a t i o n

AD

LD

Shift

Figure 1: European Economic Community: Percentage Distribution of Functional Urban Regions to Stages of Development 1950-60, 1960-70, 1970-75, 1975-81.

1950 to 1981. In the last sub-period, the distribution in the UK had become bi-modal with 50 per cent of all FURs in the sixth stage but a small number in stage 1A; that is losing population from both core and hinterland but experiencing a greater rate of loss from the hinterland. There were no urban regions which as a whole were gaining but where the rate of gain was faster in the core. In Germany exactly the same proportion, half, of FURs were in the sixth stage but the distribution was no longer bi-modal; in Italy, still only 22 per cent of FURs were in stage 6. These very general patterns, however, result from a number of specific and component factors. Population change is the result of natural change and the difference between in- and out-migration. The fact that in Italy the modal "stage" between 1975 and 1981 was one where the functional urban region was, as a whole, growing, whereas in Germany and the UK it was one where the F U R population was declining, owes something to the positive natural increase in population in Italy compared to the low or even negative rates in Germany and the UK. Similarly core growth relative to hinterland growth may typify rural-urban migration and hinter-

The Development of the European Urban System, 1971-1981

LC

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RC RD of P o p u l a t i o n

AD

153

LD

Shift

Figure 2: Federal Republic of Germany: Percentage Distribution of Functional Urban Regions to Stages of Development, 1950-60, 1960-70, 1970-75, 1975-81.

land relative to core growth, suburbanisation as a result of differential migration. A further factor noticeable in advanced industrialised countries, in the years since about 1970, is a tendency for smaller cities to be gaining relative to larger. The analysis undertaken for the EEC 9 countries for 1975-81 suggests such a development is discernible in Europe as a whole. If all FURs having total populations exceeding 330 000 (of which there were 191 in the EEC 9 and 2 in Greece) are divided into two groups - a group of the largest where the population of the core exceeded 200 000 and of smaller urban regions where the core population was less than 200 000 - we observe that the modal stage for the largest urban regions is stage 5; the cores are declining. For the intermediate urban regions, however, the modal stage is 4, where both core and hinterland are growing (see Figures 6 and 7). This can equally be seen in the mean rates of growth of population for the two groups between 1975 and 1981. The population of the largest FURs in the EEC 9 had a mean rate of growth of +0.15 percent per annum (+0.18 percent if those in Greece are included); that for the intermediate FURs was +0.43 percent. The real difference, however, was in the

154

Paul Cheshire and Dennis Hay

Type of

Population

Shift

Figure 3: France: Percentage Distribution of Functional Urban Regions to Stages of Development 1950-60, 1960-70, 1970-75, 1975-81.

cores; the largest were declining at a mean rate of —0.59 percent per annum whilst the intermediate cores were declining at a mean rate of only —0.10 percent per annum. These differences between the largest and the intermediate FURs are also apparent within Germany as Figure 7 shows.

6.3. Berlin in the Context of Urban Change Within this evolving system, Berlin is, as is well known, an example of a major city losing population rapidly. Of the 193 major functional urban regions of Europe of more than 330 000, only Glasgow is losing population more rapidly (measured as an annualised rate of change). Besides Glasgow, Essen's rate of loss exceeded that of Berlin's in 1971-75 as did that for Charleroi, Liverpool and Doncaster in 1975-81. Taking the period as a whole, however, Berlin had the second largest loss.

The Development of the European Urban System, 1971-1981

LC

AC RC RD Type of Population

AD

155

LD

Shift

Figure 4: United Kingdom: Percentage Distribution of Functional Urban Regions to Stages of Development 1950-60, 1960-70, 1970-75, 1975-81.

Berlin has, of course, a unique position. It is the only major urban region which has no hinterland - only core. This immediately suggests a partial explanation. Berlin's rate of loss, if compared with other cores rather than complete urban regions, is not exceptional. The following urban cores exceeded Berlin's rate of loss in each of the two sub-periods. Listing them is helpful in providing some possible classification. The biggest single group is composed of cities which, within the definition of the O E C D (1983) are suffering from "urban decline"; that is the combination of population loss and severe economic, social and/or environmental problems. These, as other work (see Cheshire, Hay, and Carbonaro, 1984) has shown are concentrated in a belt of 19thand early 20th-century manufacturing cities stretching from Genova and Torino in north west Italy through the Saarland, the Ruhr, southern Belgium and northern and north eastern France to the British midlands and north and west to Glasgow and Belfast. Within this belt the most rapidly prospering parts are in previously less

156

Paul Cheshire and Dennis Hay

industrialised areas - southern and east central France, southern and central west Germany, north Belgium and southern England.

F U R Cores with Greater Rates of Population Loss than Berlin

1971-75 Essen Frankfurt Hannover Darmstadt Pforzheim Kobenhavn Valenciennes Udine Amsterdam Rotterdam Utrecht 's-Gravenhage Belfast Glasgow Liverpool London Manchester Nottingham Bournemouth Edinburgh

1975-81 Liège Gent Antwerpen Bruxelles Düsseldorf Schweinfurt Duisburg Kassel Kobenhavn Clermont-Ferrand Avignon Torino Bologna Bergamo Utrecht Sunderland Belfast Glasgow Portsmouth Chester

Liverpool London Preston Coventry Southampton Reading Newcastle Plymouth Cardiff Manchester Sheffield Brighton Birmingham Bristol

Amongst the cities, the cores of which are rapidly losing population, there is a strong representation of these cases of "urban decline": Essen, Duisburg, Valenciennes, Rotterdam, Torino, Sunderland, Glasgow, Belfast, Liverpool, Manchester or Sheffield. There is also, however, a representation of some of the currently most prosperous cities of Europe which are specialising in the tertiary sector: Frankfurt, Düsseldorf, Bruxelles, Bournemouth, Reading or Bologna. The probable explanation for the presence of this group is that, in cities such as these, the displacement of housing by offices and associated land uses (roads, parking, restaurants, etc.), rising incomes and an associated reduction in densities, are leading to population loss from the core; in each of the above cases the hinterland was growing outstandingly fast. There appears, however, to be at least one further category within the set of m a j o r F U R s with rapidly declining cores in population terms; that is northern capital cities: Kobenhavn, Amsterdam, Edinburgh and London. None of these cities are, or were, heavily specialised in older manufacturing sectors; all, in terms of the total urban

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Shift

Figure 5: Italy: Percentage Distribution of Functional Urban Regions to Stages of Development 1950-60, 1960-70, 1970-75, 1975-81.

region, are comparatively "healthy"; all have a comparatively strong service sector but all are rapidly losing population. The explanation is not clear - perhaps, as we speculate below, a combination of demographic structure making low natural population change even lower, cultural factors and a particularly extensive pattern of decentralisation. Within this group might be placed Berlin. A further discussion of these factors is continued below.

6.4. Urban Development: Problem Versus Non-Problem So far the discussion has been couched in terms of growth and decline of population. There is, however, certainly at least one further dimension of development in the urban system of Europe; that is the severity or comparative absence of urban problems. Both the studies previously referred to stress the extent to which their

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Type

of

Population

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Shift

Figure 6: Percentage Distribution of E E C 9: Largest and Intermediate F U R s by Stage of Development, 1975-81.

schema of stages of development can be used to anticipate urban problems. Thus van den Berg et al. (1982) write: "each stage is attended by a number of clearly distinguishable urban problems, for which the policy maker has to find a solution."

The implication is that the problems essentially of disequilibria in a dynamic system (the "problems" being the consequent adjustment costs) should not be regarded as exogenous; rather that there is both scope and rationale for intervention so that urban development may more closely approximate the socially optimal in the long term. Van den Berg et al. develop a typology of particular problems and policy responses which accompany each of the stages of urban development. Hall and Hay (1980) equally point to the significance for policy makers of the apparent empirical robustness of the stages of urban development. ". . .it does potentially provide a way of predicting future regional performance. Faced with it the policy maker may want to try and manipulate the process."

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Shift

Figure 7: Federal Republic of Germany: Largest and Intermediate F U R s by Stage of Development, 1975-81.

These conclusions may equally serve as warnings against policy becoming inflexibly entrenched in relieving the symptoms of problems that are diminishing or have ceased to exist. In countries such as the U K , where decentralisation has reached such a spatial extent that it might more reasonably be termed ex-urbanisation, it may be the case that the European Community's Less Favoured Areas policy might now be regarded as appropriate for an earlier stage of urban development. It might equally be argued that if a pattern of stages of development exists then such stages are "normal" and there is no reason why problems should necessarily occur at any particular stage. Urban health, in other words, is reasonably viewed as another dimension of development which is not necessarily associated with any particular pattern of core/hinterland population growth or decline. If one views problems as resulting primarily from the adjustment costs imposed by change, there are certain automatic mechanisms of spatial adjustment within the economy: these are residential mobility, worker mobility (between jobs which involves a potential for restructuring the spatial pattern of employment and may occur simultaneously and be

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migratory) and job mobility. As one of the authors has argued elsewhere (Cheshire, 1979) worker mobility not associated with residential re-location may be viewed as a form of continuous mobility in the space economy whereas migration which involves significant costs to the individual is a form of discontinuous mobility responding only to much more substantial differences in relative advantage. There is evidence, however, that all three forms of adjustment are impeded as the overall level of excess demand falls and as alternative opportunities deteriorate. Loss of population from both core and hinterland, whilst it may in general tend to be associated with problems, may reflect only spontaneous and voluntary re-location of residential patterns (ex-urbanisation) or the existence of attractive opportunities in some urban region to which migration costs are particularly low. Thus, while the particular manifestation of urban problems may vary with the stage of development, a city may be healthy or unhealthy at any stage. Elsewhere (Cheshire, Hay and Carbonaro, 1984), the present authors have set out a system used for classifying the largest cities in Europe according to the extent of their "problems" and by a measure of their rate of population change. Clearly this squeezes into only two dimensions a multidimensional problem and like all such exercises is open to objection. It nevertheless provides a means of making operational the O E C D (1983) definition of "urban decline" noted above and of considering population change independently of problems. It incidentally allows a test of the assertion in the same O E C D report that there is a positive association between the incidence of urban problems and of population loss: ". . . the degree to which the whole range of problems is exhibited, the scale on which this occurs, and their concentration in declining metropolitan areas, justifies a uniquely urban perspective."

The measure of population change employed for this exercise weighted the rate of change in the core by a factor of 0.65 percent compared to a weighted mean for all m a j o r European F U R s of 0.52 percent living in the core. Where the actual proportion exceeded 0.65 percent, however, that actual proportion was used as the weight. The lowest value of either of the subperiods was then used because of the association of the duration of loss and the current rate of loss. The problem index used a range of socioeconomic variables calculated for each F U R (or, in the case of G D P and change in G D P per capita, the index for Level 2 regions in which the F U R core was situated was used as a proxy). The value observed for each variable was then weighted to produce a single composite measure. The weights were estimated from the data by means of discriminant analysis; two "training sets" of problem and nonproblem cities were nominated without reference to the data base by experts in each country. The scores that resulted from this procedure are plotted against the population change measure in Figure 8. The results were extensively tested for sensitivity to training set composition and selection of variables and prove quite robust; sixteen cities appeared in the worst twenty cities in some 18 out of 20 different

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rankings. A stepwise procedure was used to exclude non significant variables and the three that were retained were all significant at the 2.5 percent level or better. It will readily be seen that, in all countries except Italy, a faster rate of population loss tends to be associated with more problems - although this relationship is not statistically significant in Germany (nor in the Netherlands) and the constant varies with the natural rate of change of population. The absence of such a significant relationship in Germany seems to be accounted for exclusively by the cases of Düsseldorf and Frankfurt for reasons already noted. In Italy there is a direct and statistically significant relationship between population growth and problems, however. This is consistent with the view that the Italian urban system is at an "earlier" stage of development; or could just result from differential rates of natural population growth in the north and the south and perhaps some reverse in the trend of migration to the north. Thus, as a first generalisation, the assertion of the O E C D (1983) quoted above, seems to have some modest validity although had data availability allowed the inclusion of Athens and Salonika it would probably have been further weakened. It can also be seen that the group of northern "capital" cities referred to earlier, lie close together not only in rates of population loss but also in terms of their problem score. Berlin, London and Kobenhavn are clustered very closely with Amsterdam apparently more healthy and Edinburgh less healthy. Since Berlin is the only city without a hinterland (in which two of the measured problem indicators - unemployment and net migration - tend to be "better"), it could be argued that in some sense not only is the rate of population loss overestimated for Berlin but the score overestimates its problems. If population change and problems had been measured only for F U R cores, Berlin might have been closer to Amsterdam than to London and Kobenhavn. A counter argument, however, can also be made. Berlin is the only city in the group which benefits from significant locational incentives. Without those incentives its measured problems would presumably be worse.

6.5. Case Study Comparisons: Cultural Capital Cities Compared to Industrial Agglomerations A series of case studies were undertaken as part of the wider project on which this paper draws. These case studies were selected primarily on the basis of the apparent extent of "problems". Two cities, however, Berlin and Kobenhavn, were included as examples of severe population loss without apparently severe problems. The sample was not large enough for extensive statistical analysis; it will be readily appreciated that collecting a wide range of economic, social and environmental data on consistently defined F U R cores and hinterlands is a major research task. This imposed limits on the number of case studies. There were also major problems of

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to make "peripherally" structured manufacturing activities survive, not to speak of the budgetary unfeasibility of such an attempt. This does not mean that one could neglect the manufacturing sector in a strategy of economic revival for Berlin and try to rely more or less completely on an expansion of the public and private service sector. The latter - taken alone - offers only limited options for an expansion of employment. Although the public service sector (non-profit organizations, Government) has contributed considerably to the employment balance of Berlin even in the youngest past (see Table 2a), a further expansion can scarcely be expected in view of the suffering public budgets. In the private service sector the development of the most strongly growing subsector (professional services, i.e. production-oriented tertiary activities) is largely dependent on the growth of manufacturing activities. The correlation between the employment change rate in total manufacturing and the growth rate in professional services 5 is highly significant. A simple regression analysis between the employment growth rates of the subsector of professional services P and employment change in manufacturing M for functional urban regions of the Federal Republic of Germany 6 (see Table 2b) using employment data for 1976-83 leads by an ordinary least square estimation to the equation: (1)

P = 41.07 + 1.67 M ( F = 33.9, f = 5.8)

with n = 10 and an adjusted R2 = 0.79. Similar results are obtained for the relation between the growth rates of employment in the service sector S as a whole and the employment change in manufacturing: (2)

S = 13.27 + 0.67 M (F = 41.0,/ = 6.4)

with n = 10 and an adjusted R2 = 0.82. Both equations are significant at the 0.001 level. The much higher constant factor in the first equation indicates a higher "autonomous" growth of professional services and the higher slope reflects a stronger dependance on changes of manufacturing employment. The results given here for the short period of 1976-83 are in line with long term trends of structural change in urban regions (see e.g. Norton, 1979: 108). They reveal why the strategically important professional services grew by a comparatively low rate in Berlin (see Table 2a and b). The second highest growth rate in the private service sector is reached by the personal services. But again this subsector is also indirectly dependent on the manufacturing sector for two reasons. First: In a period of great labour market instability the chance to get a workplace is the most important determinant of

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household mobility (see Zimmermann, 1984), which in turn is one of the determinants of the demand for personal services. Second: The manufacturing incomes are a significant part of the basic income of Berlin, from which the demand for personal services is derived. Therefore, the task must be to transform the existing manufacturing sector into an advanced urban industry. This is a strategy of innovation, an attempt to technologically upgrade the production programmes as well as the production processes of existing plants and to rejuvenate the industrial structure by technology-oriented new firm foundations. For Berlin to perform such a transformation requires the removal of two bottlenecks: the functional deficits (with special regard to the needs of small and medium-sized firms) and the lack of skilled workers. The first is obvious for reasons mentioned earlier. The second has already been stressed in the contribution of Kasarda and Friedrichs (in this volume; see also Kasarda, 1982) and is picked up in Knight's paper (in this volume; see also Knight, 1982). The existing bottleneck of skilled workers in Berlin is depicted in Table 3. Of particular interest is the middle class of skilled technicians, administrators, and information processors, which forms the most important point of departure in a rejuvenation strategy for any industrial city.

12.5. Perspectives of Future Industrial Policy in Berlin A comparison between the presently dynamic industrial cities in the south of West Germany and Berlin reveals the lack of future industrial and tertiary growth sectors in Berlin. The same holds true for the functional structure within the sectors. The share of dispositive activities such as R & D, software production, market research, public relations, planning and consulting is still comparatively small in Berlin. The structure of industrial production in Berlin is based too much on mass products for stagnating markets and should be more oriented towards products of high complexity. This adverse structure of industrial output has certainly been favoured by the former Berlin Promotion Law - at least until its revision in 1982 - and resulted in an insufficient adaptation to the changing market conditions. Nevertheless the city of Berlin has a number of advantages on which policies for future industrial development can be built: - A first and important factor is the large share of small and medium sized firms in Berlin. New studies on the growth of manufacturing enterprises show that the highest employment growth rates occur in the group of small single-plant firms (see Ewers, Fritsch and Kleine, 1984). Furthermore, small and medium sized firms are generally better adapted to an urban environment for example in respect to smaller capital-output ratios that lower space demand (see e.g. Falk, 1980). - A second positive factor is the large variety of public research institutions that are

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located in Berlin, especially in the field of future technologies (flexible automation systems, environmental-, energy-, communication-, and bio-technologies). This factor gains particular importance in a strategy of an innovation oriented regional policy that is directed towards small and medium firms, because the provision and effective use of public research is of crucial importance for this group of firms that do not have sufficient R & D capacities to solve innovative problems which arise in a discontinuous manner. Thirdly Berlin has, as compared to other industrial cities in the Federal Republic of Germany, the advantage of having already established a system of economic promotion. This is first simply an advantage because of the quantity of public resources that are directed to the promotion of the economy. Therefore, it is much easier in Berlin to obtain the budgetary means for a revitalization strategy than in other cities that suffer from industrial decline phenomena. But there is a qualitative component of the promotion argument too. Since the mid 70's the Senate of Berlin has started a series of special policy programmes to promote innovative activities of small and medium firms and structural change, a lot of these activities being applied for the first time in the Federal Republic of Germany. In the meantime, the promotion agencies in Berlin have gathered considerable experience in implementing all kinds of measures to stimulate innovation and technology oriented firm foundations. This includes measures like technology-, know-how, and personnel-transfer, as well as providing venture capital and consultative support for innovative firm foundations and initiating a technology park. No matter how single measures have to be evaluated, there is a comparative advantage of experience in promotional activities as compared to other West German urban areas, which can be used as an asset for a revitalization strategy. Although the economic policy in Berlin represents a promising approach to stimulate industrial activities in the economy, it remains questionable whether this policy will have effects strong enough to compensate for actual employment losses. Three further conditions might be decisive for the overall success of the strategy: - First it seems necessary to enlarge the number of firms included in the innovation promotion strategy. At present, the strategy is primarily restricted to early users of new technologies and high-tech firms. These firms account for a very small share of all working places and will do so at least in the middle run. Therefore, to gain observable results in the labour market, a regional strategy must include the bulk of existing small and medium sized firms. A group which does not belong in general to the high-tech sector or early adopters of new technologies, but which could gain in its growth potential by means of relatively small technical improvements and by product diversification. The desired new industrial structure will not emerge mainly through the foundation of completely new activities, but through small step changes in existing activities.

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- The second is the question whether it will be possible to significantly improve the quality of living and housing in Berlin, for this is an important factor in migration decisions of the above mentioned middle class of skilled workers, technicians and qualified employees in professional services. Especially in a city like Berlin which has a strong base of small and medium firms, this group is relevant for a revitalization strategy. - Closely interrelated is the third problem. It concerns the large group of low or unqualified persons whose employment perspectives are at present extremely unfavourable and will be even worse if the objective of economic policy is an advanced industrial city. Certainly consumer oriented services will offer a growing number of workplaces requiring low qualifications, but probably not enough to offset job losses in the traditional industrial sector of the city. The upgrading of qualifications is one possibility to deal with the problem but further new approaches will be needed to provide employment opportunities and prevent high social costs that might be caused by accumulating negative effects of industrial decline.

Notes 1 If not differently stated the name "Berlin" stands for "Berlin West" in this paper. 2 For a description of the promotion of economic activities in Berlin see the contribution of Kern in this volume. 3 See in particular van Duijn, 1983; Freeman, Clark and Soete 1982; Glismann, Rodemer and Wolter 1978, 1980; Kleinknecht, 1984; Mensch, 1979; Petzina and van Roon, 1981. 4 See Thwaites, Edwards and Gibbs 1982; Goddard et al., 1983; Ewers, 1984d. 5 Professional services include: Law firms, public accounting, architect and engineering offices, real estate agents, public relations, and exhibition services. 6 Nürnberg was excluded from this regression as an "outlier". It is an unrepresentative case especially because the largest German accounting firm which has centralized its activities in Nürnberg increased its workforce extensively in the period under discussion.

References Bade, F.-J. (1984a) Die funktionale Struktur der Wirtschaft und ihre räumliche Arbeitsteilung, Discussion Paper IIMIIP 84-27, Wissenschaftszentrum Berlin, Berlin. (1984b) Räumliche Anpassungsprozesse, Arbeitsteilung und unternehmerisches Standortverhalten, in Brugger, E. A. (Ed.) Regionale Innovationsprozesse und Innovationspolitik, pp. 119-45. Rüegger, Diessenhofen. Czada, P. (1969) Die Berliner Elektroindustrie in der Weimarer Zeit, Einzelveröffentlichungen der Historischen Kommission zu Berlin, Band 4. Colloqium Verlag, Berlin. Van Duijn, J. J. (1983) The Long Wave in Economic Life. George Allen & Unwin, London.

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Ernst, D. (1981) International Transfer of Technology, Technological Dependance and Underdevelopment: Key Issues, in Ernst, D. (Ed.) The New International Division of Labour, Technology and Underdevelopment, Consequences for the Third World, pp. 15-76. Campus, Frankfurt. Ewers, H.-J. (1984a) Berlin: Auf dem Wege zur Industriemetropole der Zukunft? in Schwarz, K. (Ed.) Die Zukunft der Metropolen: Paris, London, New York, Berlin, Bd. 1 Aufsätze, pp. 397^106. Reimer, Berlin. (1984b) Zukunftsträchtige industrielle Arbeitsplätze - Prioritäten aus Berliner Sicht, in Deutsches Institut für Wirtschaftsforschung (Ed.) DIW-Symposium, Strategien für mehr Arbeitsplätze in Berlin, pp. 60-73. Berlin Verlag, Berlin. (1984c) Kleine und mittlere Unternehmen als Ansatzpunkt einer beschäftigungsorientierten Strukturpolitik, in Ewers, H.-J., Schuster, H., Probleme der Ordnungs- und Strukturpolitik (Festschrift Seidenfus), pp. 88-111. Vandenhoeck & Ruprecht, Göttingen. (1984d) Räumliche Innovationsdisparitäten und räumliche Diffusion neuer Technologien, in Brugger, E. A. (Ed.) Regionale Innovationsprozesse und Innovationspolitik, pp. 97-118. Rüegger, Diessenhofen. Ewers, H.-J., M. Fritsch and J. Kleine (1984) Bildungs- und qualifikationsorientierte Strategien der Regionalförderung unter besonderer Berücksichtigung kleiner und mittlerer Unternehmen, Schriftenreihe 06 "Raumordung" des Bundesministers für Raumordnung, Bauwesen und Städtebau, Heft 06.053, Bonn. Falk, N. (1980) Finding a Place for Small Enterprise in the Inner City, in Evans, A. and D. Eversly (Eds.) The Inner City, Employment and Industry, pp. 367-88. Heinemann, London. Freeman, C., J. Clark and L. Soete (1982) Unemployment and Technical Innovation. Frances Pinter, London. Fröbel, F., J. Heinrichs and O. Kreye (1977) Die neue Internationale Arbeitsteilung. Rowohlt, Hamburg. (1986) Umbruch in der Weltwirtschaft. Rowohlt, Hamburg. Glismann, H. H., H. Rodemer and F. Wolter (1978) Zur Natur der Wachstumsschwäche in der Bundesrepublik Deutschland, Kieler Diskussionsbeiträge, Nr. 55. (1980) Lange Wellen wirtschaftlichen Wachstums. Replik und Weiterführung. Kieler Diskussionsbeiträge, Nr. 74 (reprinted in Petzina and van Roon, 1981). Goddard, J. B., et al. (1983) Technological Innovation in a Regional Context: Empirical Evidence and Policy Options, Discussion Paper Nr. 55, University of Newcastle upon Tyne, Center for Urban and Regional Development Studies. Hall, P. (1981) The Geography of the Fifth Kondratieff Cycle, New Society, March 26, pp. 535-7. Hoppen, H.-D. (1979) Industrieller Strukturwandel. Duncker and Humblot, Berlin. IHK Berlin (1984) Bericht 1983/84, Berlin 1984. Kasarda, J. D. (1982) New Urban Policies for New Urban Realities, in Hellstern, G.-M., F. Spreer and H. Wollmann (Eds.) Applied Urban Research, Arbeitspapiere, Seminare, Symposien, Heft 2, Bd. 1, pp. 5-14. Bundesforschungsanstalt für Landeskunde und Raumordnung, Bonn. Kleinknecht, A. (1984) Innovation Patterns in Crisis and Prosperity: Schumpeter's Long Cycle Reconsidered, Diss. Vrije Universiteit te Amsterdam. Knight, R. V. (1982) City Development in Advanced Industrial Societies, in Gappert, G. and

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R. V. Knight (Eds.) Cities in the21st Century, Urban Affairs Annual Reviews, Vol. 23, pp. 47-68. Sage Publications, Beverly Hills. Linge, G. J. R. and F. E. I. Hamilton (1981) International Industrial Systems, in Hamilton, F. E. I. and G. J. R. Linge (Eds.) Spatial Analysis, Industry and the Industrial Environment, Vol. II, International Industrial Systems, pp. 1-118. John Wiley, Chichester. Matzerath, H. (1984) Berlin, 1890-1940, in Sutcliffe, A. {F.d.) Metropolis 1890-1940, pp. 289318. Mansell, London. Mensch, G. (1979) Stalemate in Technology. Ballinger, Cambridge/Mass. (1981) Wirtschaftliche Perspektiven für Berlin, in Hillenbrand, J. (Ed.) Die Zukunft Berlins, pp. 139-221. Ullstein, Berlin. Müller, J. (1983) Sektorale Struktur und Entwicklung der industriellen Beschäftigung in den Regionen der Bundesrepublik Deutschland. Duncker and Humblot, Berlin. Norton, R. D. (1979) City Life-Cycles and American Urban Policy. Academic Press, New York. Peschel, K. (1983) Der strukturelle Wandel der Industrie in den Regionen der Bundesrepublik 1960 bis 1976, in Müller, J. H. (Ed.) Determinanten der räumlichen Entwicklung, pp. 125-72. Duncker & Humblot, Berlin. Petzina, D. and G. van Roon (Ed.) (1981) Konjunktur, Krise, Gesellschaft. Klett-Cotta, Stuttgart. Thwaites, A. T., A. Edwards and D. C. Gibbs (1982) Interregional Diffusion of Production Innovations in Great Britain, Newcastle upon Tyne, Center for Urban and Regional Development Studies. Zimmermann, H. (1984) Die Ballungsgebiete in Wohnortpräferenzen und Mobilitätsverhalten, in Deutsches Institut für Wirtschaftsforschung (Ed.) DlW-Symposion, Strategien für mehr Arbeitsplätze in Berlin, pp. 114-30. Berlin Verlag, Berlin.

Part III. Economic Policy and the Metropolis

Chapter 1: Policies for Urban Economic Development in Advanced Industrial Countries

13. Overview: National Government Responses to Structural Changes in Urban Economies 1 Joanne Fox

Przeworski

13.1. Introduction The recent changes in the international and national economies, the appearance of new technologies, and the shifts in patterns of demand force profound transformations upon many urban areas in industrialized countries. Cities are experiencing a process of economic restructuring, often accompanied by serious economic and social dislocations. Although the long-term consequences on the structure and economic vitality of cities cannot be predicted precisely, some of the combined effects are known in many urban areas: - obsolescent and inefficient manufacturing industries; - decline of manufacturing activity employment and growth of administrative and service jobs; - selective migration of population to small and medium-sized towns; - proportionally greater number of less advantaged individuals (unemployed, immigrants, unskilled, less educated, older people); and - declining tax base. Among O E C D governments there is widespread concern, notably focused on

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employment, over the differential effects of these changes on urban economies. This concern can be traced to a number of trends that have been particularly marked in the past decade: - the evidence that macro-economic policies and a general economic recovery alone will not be sufficient to cause the regeneration of some urban economies; - increasing doubts about the effectiveness of traditional regional policy, i.e., of general subsidies usually to industry, to control and distribute growth in designated areas; and - greater devolution of authority and autonomy to local government in some countries with the consequence, in practice, that local governments face a new responsibility for the local economy. Structural changes and demographic shifts not only pose problems for some urban areas but also can create opportunities to develop urban policies that both assist the process of adaptation and mitigate the effects of the associated dislocations. Rather than attempting to re-create the historic economic base, as with many urban policies in the past, policy-makers are exploring new ways to exploit opportunities that emerge from the dynamics of change. The scope of adaptation required - affecting industries, infrastructure, and institutional arrangements - are frequently beyond the reach of local or intermediary governments alone. National governments, however, can design policies that intentionally favor revitalization in urban areas. These urban economic development policies are intended to improve the quality of the urban environment as a necessary condition for leveraging self-sustaining investment and employment. They can be integrated or coordinated with other national policies, notably those directed towards industry and the labor market, and with local initiatives.

13.2. Rationale for Urban Economic Development and National Government Policies General agreement may be reached among O E C D countries that a necessary foundation for any successful urban revitalization program is macro-economic growth. Some governments do not pursue specific urban adjustment policies but instead rely on market mechanisms. The assumption is that the market is operating efficiently and that the national economic and social interest is best served when the government abstains from any discretionary intervention. Government intervention, in this view, distorts private decision-making, creating inefficiencies, and, therefore, should be kept to a minimum with at most a "safety net" of social welfare programs to cushion the impact of change on those most affected. Critics of this approach contend that nonintervention may not be compatible with

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national adjustment goals, that it assumes a perfect capital market and perfect labor mobility and ignores the spiral decline of local revenues that impinge on the range of potential responses of a particular urban area. T h e y argue that the rationale behind urban-directed programs is to enhance efficiency by removing some of the negative externalities synonymous with cities and restoring a m o r e competitive market. F r o m the point of v i e w of central governments, the rationale behind urban directed programs has been to correct market imperfections or to bring about a m o r e equitable distribution of economic benefits. T h e current national discussions about designing policies targeted explicitly towards urban economic development are motivated by a variety of reasons, notably centered on the continuing high unemployment in the cities. T h e r e is an assumption that the stimulation of urban economic activities could contribute to national economic adjustment - an assumption based on the belief that local constraints to national economic growth, especially those that are beyond the financial or administrative capacity of a municipality, are being ignored or poorly treated by national policies. By lowering the cost of d e v e l o p m e n t in a distressed area and reducing the risk of failure, urban economic d e v e l o p m e n t policies can better utilize the supply of resources in an area and as a result are likely to increase both aggregate employment and the gross national product. M o r e o v e r , urban areas are o f t e n considered important to be the appropriate focus f o r e f f o r t s to capitalize on changing technologies because of their high concentration of services, technical schools and research institutes, transportation networks, cultural amenities and their role as traditional centers of innovation and motors of economic growth. National intervention is also motivated by increasing concern about risks to the environment and productivity f r o m inter-urban competition to attract new businesses and mobile industry. Similarly, many processes of adjustment occur across the boundaries of any local area, f o r example, those affecting the labor market and education, and need to be treated by policies f r o m a national perspective. Finally, government policies may be called f o r in response to public preferences o v e r the distribution of resources and in order to strengthen democracy or maintain social peace. In the v i e w of many local governments, the need f o r short-term, as well as long-term, solutions makes national urban policy initiatives imperative.

Certain

positive

externalities and natural advantages of cities and towns, even in older industrial areas, provide a base upon which to build during the process of adaptation. First, the human capital and o f t e n considerable economic, social, cultural, and recreational investments are already in place. Secondly, the housing stock is available and o f t e n suitable f o r conversion. Thirdly, the strategic and central location facilitates personal interaction - an advantage well understood by the offices concerned with administration, planning and coordination that are urban-based. In the prevailing macroeconomic climate, h o w e v e r , many urban governments have neither sufficient authority nor adequate financial capacity to undertake the broad range of initiatives required to stimulate business investment and sustained employment creation.

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13.3. Nature of National Government Responses At present none of the O E C D countries has shaped a comprehensive development strategy directed towards urban areas. Moreover, the majority of countries do not have any policies directed specifically to urban economic development. Economic problems of larger cities are presumably tackled in many of these countries through macro-economic policies. In this view urban centers are an integral part of the national economy and their economic well-being is closely related to the national economic development. Hence, the benefits of overall national growth will be felt in urban areas through increased aggregate investment, growth in employment and income, and greater demand for commercial, financial and other services. The national government's role, therefore, is to provide conditions under which sustained growth can be achieved without undue inflation, heavy external indebtedness, and high rates of unemployment. These objectives are judged to be best met through national fiscal, monetary, and trade policies. This position assumes a "neutral" relationship between the national government and its cities with assistance at most for "essential projects" and with government intervention into local markets limited to the "safety net" of social welfare programs. Governments, such as the United States and the United Kingdom, supporting this view rely on market mechanisms and attempt to mitigate problems in particularly distressed areas through targeted programs - assistance for inner cities and community enhancement - that have placed varying emphasis on social or economic goals during different political administrations. Nonetheless, during the past four years, as it has become clear that high rates of unemployment will most likely persist and that benefits of an economic upswing will continue to fall unevenly on urban areas, government attention is increasingly directed toward urban agglomerations with a view to removing constraints on the local level to adjustment and employment creation. Most commonly, two broad types of policy are being used to respond to the problems and opportunities for urban regeneration: national sectoral policies directed at the labor market and firms or industrial sectors and national spatial policies targeted for specific urban areas and regions.

13.3.1. Reliance on Sectoral Policies Sectoral policies are targeted toward specified firms or industrial branches, the labor and housing markets and typically receive the lion's share of government resources for structural adjustment purposes. By definition they impinge on regions and cities in different ways, sometimes clashing with urban economic development objectives in a particular setting. Although the aggregate influence of a given sectoral policy on

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specific urban settings is not clearly known, it is well recognized that sectoral policies can have a strong influence, both positive and negative, on building activities, conditions for urban trades and industries as well as on urban living conditions and social services. A discussion of sectoral policies as they are or can be utilized for urban economic development is beyond the scope of this paper. It should be noted, nonetheless, that some concern with the consequences of sectoral policies is evidenced in those countries that solicit local assessments of the impact of national policies, as in New Zealand through the local and regional councils or through legislative requirements for impact analyses of new programs, as formerly in the USA. Furthermore, particularly during the past four years, there has been increased sensitivity to the place of urban economic needs within national priorities. In the Netherlands and Germany, for example, where urban policies have been subsumed under general planning policies and urban problems were thought to be tackled mainly through sectoral policies, the specific place of urban needs within the framework of national priorities is currently receiving political recognition. Although national sectoral policies may not be formulated with distressed urban economies in mind, they can be seized upon at the local level to tackle urban economic development problems. In the United States, for example, in 1981 federal resources for economic development were available from more than 50 programs operated by 19 different national departments or independent commissions. Currently, Dutch cities promoting business activities can steer firms to at least 30 types of central government subsidies and loan guarantees, while in the United Kingdom there are more than 350 such instruments. And in France, as part of the national modernization program, a battery of multi-sectoral investments will be applied to radically alter the iron and steel bases of 14 clusters of industrial communities that have been designated as "conversion poles". It is rare, however, to find integration at the national level of policies oriented towards the labor market or industries with urban policies. In the first place, industrial support is usually given directly to firms, with little or no involvement of municipal authorities intended. Secondly, in most European countries, labor market policies are generally implemented through local offices that are directly responsible to the central or regional governments and over which cities have limited influence. As it becomes clear that the unemployment problem continues to be resistant to solutions put forward and cannot be solved by macro-economic and sectoral policies or local initiatives alone, there is a growing discussion that comprehensive schemes are needed. For optimal effectiveness, it is thought that these should be designed cooperatively by agencies responsible for manpower programs and urban environments and implemented jointly on the municipal level.

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13.3.2. Modification of Traditional Regional Policy Nearly all O E C D countries have employed some form of policies, typically developed after World War II, as a means to cope wth differential regional growth and to encourage economic development in areas with fewer resources and higher unemployment and to discourage growth in heavily built-up areas. The principal policies have land-use and distributive goals with fiscal and location theories playing important roles in the design of appropriate instruments. Recent economic trends and changes in the circumstances of some urban areas, however, have altered the single focus of controlling growth and directing it to underdeveloped regions. Additionally, attraction of mobile investment is no longer regarded as an effective means to generate new employment. There is increasingly an emphasis on indigenous development. Thus, national governments are stimulated to look more closely at the reasons for the exodus of economic activity in urban areas and to examine what type of policy interventions are appropriate to retain and strengthen local businesses and stimulate new entrepreneurs. Some governments, for example, in Finland, Germany, New Zealand, Netherlands, Norway, Turkey and the United Kingdom, that until now have used regional development assistance policies as their only spatial policy are reassessing these programs in light of the changing economic circumstances. This reassessment usually focuses on the new problems prevailing in industrial cities or towns and on the objectives of equity versus efficiency. Modifications of regional development assistance programs tend to take two principal forms: (1) the inclusion of certain cities among the eligible areas and (2) the removal of impediments to industrial investment in urban centers. 13.3.2.1. Including Urban Areas A m o n g Eligibles The problem of what to do about deteriorating urban economies is generally raised under the rubric of regional policy since in most OECD countries this constitutes the traditional national response to "urban" needs. The principal modification has been the extension of some provisions of regional policy to urban areas which were not eligible for these benefits. 2 Hence, in Germany after 1981 the lagging economies of steel communities and after 1984 of northern coastal cities became the object of special fiscal programs under the regional policy incentive system - a major departure from the previously exclusive orientation towards rural and border areas. And under the aegis of regional policy, the Netherlands recently has begun an experimental program specifically to address constraints to economic investment in the four largest cities. "The Big Cities Bottlenecks Program", with its limited funding of approximately 5 percent of total annual regional assistance, is basically designed to stimulate one or a few infrastructural projects in each city that would

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complement programs under the much more heavily financed sectoral policies. Finland's regional development program, with an increase in funding in 1982, now embraces the weakest municipalities, although not the largest cities, in the developing regions. A commitment to encourage economically viable development in all regions stimulated a partial response in New Zealand: as of 1983 all urban areas are included within nonpriority regions, that is, they are eligible for planning, technical, and managerial assistance but not financial aid; at present only Dunedin of the four largest municipalities is able to receive regional aid. Similarly reflecting a change of attitude but not funding patterns is the 1981 Regional Planning Concept of Austria. Approaching urban economic adjustment needs through regional policy is only a partial response to the problem, and not only because of the rather meager resources usually allocated to regional programs. More importantly, cities and towns with serious adjustment problems do not always fit the core/periphery framework of regional policy. Many areas with serious structural problems lie close to the nation's center and fall outside the reach of assistance to periphery regions, for example, Halden, Norway; Birmingham, United Kingdom 3 ; Lille and Dunkirk, France; and Dortmund, Germany. Similarly, declining cities and towns may lie within prosperous areas and again be ineligible for aid, such as Landskrona, Sweden; Corby and Chatam, England; and Kiel, Germany. Without resolving this difficulty, government officials have tended to offer ad hoc responses. For example, Halden - an economy traditionally based on textiles, shoes, steel, and sawmills that collapsed simultaneously during the 60s - was declared to constitute an "unusual situation" by the Norwegian government and thus temporarily included within regional development assistance jurisdiction. In Sweden, the national government provided Landskrona, a city facing closure of its major source of employment, with a one-time grant as seed capital for a Development Fund. These resources enabled the formation of Landskrona Finans, a quasipublic organization that operated to convert land and support new enterprises in hiring some of the unemployed from the closed shipyards. 13.3.2.2. Removal of Barriers to Industrial Investment in Urban Centers Reassessment of regional policy is also proceeding on the grounds it does not meet the criterion of efficiency. Regional policy had primarily equity objectives: to prevent "unbalanced" growth and to distribute population and/or investment to less developed areas. If it was politically expedient to contend that such policies result in net growth, it was recognized, nevertheless, that the principal concern was that particular areas and their resident populations should not be penalized due to lack of resources. It is now argued that such basically redistributive policies, that aim to restrict growth in some metropolitan areas, actually decrease national efficiency and output. During the present period of slow economic growth this latter argument is

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particularly appealing, and more attention is being given to evaluate the trade-offs between policies with essentially equity or efficiency objectives. Controls on industrial location in urban areas and incentive programs to direct investment elsewhere have been modified in countries with highly disparate administrative systems. In Turkey, the legacy left three industrial estates in periphery regions with 50-99% vacancy rates. Moreover, the contribution to national productivity of industries in the less developed provinces amounted to less than 3% of the total in 1980, while Istanbul industries alone provided more than 55%. The government of the United Kingdom concluded that no net growth has resulted from the measures; Finland since 1981 has included firms in urban areas as eligible for industrial aid; and Norway has liberalized or cancelled its traditional containment policy concerning development certificates, even including Oslo firms among recipients for general incentives for industrial modernization. In the Netherlands, premiums to relocating firms in "growth poles" were abandoned because they were thought to be ineffective as incentives; and Japan concluded that its results were meager after 15 years experience with a strategy to disperse economic activity to 13 new industrial cities and 5 special areas. In 1983, responding to complaints from Tokyo and Osaka that forced relocations were detrimental to economic growth, the Japanese government lifted restrictions on new construction and expansion of small and medium-sized enterprises within the built-up areas of these two large metropolitan areas. To date, the needs of periphery regions and of distressed urban areas have not been addressed as distinct problems requiring separate responses. There is a current tendency to narrow the focus of regional policy, to target down for a convergence of local economic development and regional goals. Thus, governments are attempting to treat the problems by extending a policy that was designed to control and redistribute economic growth, not to restructure and modernize economies. The effectiveness of such an approach is limited by two important constraints. For one, as discussed above, there are bottlenecks to strengthening local economies that are outside the competence of regional programs as currently conceived, such as policies directed towards the labor market and property development. Secondly, in light of the resources involved in regional assistance, which are being reduced in many countries, the results are not likely to be substantial or sustainable.

13.3.3 Explicit Urban Economic Development Policies The formulation of explicit policies derives from the concern that the severe problems of economic adjustment in urban areas will aggravate unless they meet with direct attention from all levels of government. Instead of controlling and distributing growth, these policies are intended to promote location in, not away

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from, the cities by reducing the cost or risk of doing business in the area and by improving the social and commercial environment. Two countries - the United Kingdom and the United States - are unique among O E C D members in having explicit programs directed specifically towards strengthening economic activities in urban areas with distinct national agencies to administer them. It is paradoxical that these programs are found in countries that are leading advocates of free market mechanisms for the eventual solution of urban problems. The United Kingdom and the United States have been experiencing during the past twenty-five years severe urban economic decline, suburbanization, and changing composition of urban population. As a consequence, they were the first to shape policies oriented to physical, economic and social problems of inner cities. Subsequently, both countries have placed greater emphasis on stimulating in urban areas economic investments that, in principle, would not have occurred without public intervention in the form of grants, subsidies, land provision and abatement, job credits, or loan guarantees, etc. Among the plethora of programs developed in the late 1960s and early 1970s in the United States, the Urban Development Action Grant ( U D A G ) remains the sole instrument that explicitly addresses the problem of urban economic decline. The United Kingdom has consciously adopted this model in its Urban Development Grant. Complementing the U D A G program as potential tools for local economic development are Community Development Block Grants directed towards community and neighborhood improvement projects and Industrial Development Bonds. During the past five years, the United States has been severely reducing or eliminating programs that facilitated economic development in areas suffering severe unemployment. Favorites of urban areas, such as the Urban Development Action Grant and Community Development Block Grants, were proposed to be eliminated in the FY1986 budget along with the Urban Mass Transit Administration and the Small Business Administration, whose programs of subsidies, loan guarantees and assistance to development companies were used to enhance economic development efforts. In contrast, the British government has increased funding for its urban program and undertaken several other initiatives that are targeted towards attracting private investment and small business development in inner cities. These initiatives include the much discussed enterprise zones, now into their fifth year; urban development corporations, the Partnerships Programme, and the Urban Development Grant, implemented in 1983. In other O E C D countries that do not have such programs there is increasing focus on the economic dimension of traditional urban policies, primarily those directed towards planning and the physical environment. Some reorientation already has been seen as, for example, in the Dutch "Big Cities Bottleneck" program mentioned as a new focus within their regional schemes and in special assistance to businesses in

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14 cities that experience problems linked to accommodation needs or dislocation in the process of urban renewal, the "KSBS program". The economic potential inherent in traditional policies also has attracted attention in Germany, where general urban infrastructure support is seen as a means to assist lagging urban economies. The federal government has added an unemployment factor to the formula for the distribution of urban renewal and development assistance funds for which all localities are eligible. Leading urban economic development measures with traditional planning policies for land use, urban renewal and housing, both on the national and local levels, can be problematic. Local officials, in particular, contend that policies that were necessary to control and limit growth under previous circumstances have not necessarily been converted to present needs. The ordering of priorities and agenda of property-led policies, they would argue, are different. Physical planning primarily has a construction agenda and frequently addresses the perceived needs of larger firms and new industries. Some officials express concern for the economic development consequences of supporting "planners' ideals" such as a ring of industrial estates around a city or futuristic science parks designed by landscape architects just waiting for clients who have yet to be identified. It should be quickly added that many of the tools provided under urban policies, unique or innovative as they may be, are funded modestly in comparison to regional development programs and, almost symbolically, in relation to sectoral programs. Indeed, one of the most enticing features of the Urban Development Action Grants lies in the potential power to exploit small capital grants of the national government by leveraging larger investments of private companies. Successful economic development projects must necessarily draw upon private resources as well as multiple governmental programs.

13.3.4. Local Capacity-Building Policies In many O E C D countries, the distribution of powers among different government levels and traditions of strong local government place urban policy in general and urban economic development policies in particular among the responsibilities of the regional or local government. This is the case in Denmark, Finland, Norway, New Zealand, Portugal and Sweden; in federal systems, such as Austria, Australia, Canada, Germany and the United States, the regional governments play a formative role in designing appropriate policies. When urban economic development initiatives are undertaken, it is generally by enterprising local authorities acting as packagers who assemble programs from various national and regional agencies and combine them with local initiatives, effectively "coordinating from below". For the most part, however, any role of

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urban authorities in economic development is a relatively new and untested phenomenon in O E C D countries. City officials have tended to regard their possibilities for action as limited to providing adequate infrastructure, land and premises and insuring public services. For this reason, many national officials argue that a change of attitudes and approaches on the part of local policymakers is required to reduce their dependence on national ministries to solve problems and to undertake appropriate local actions to strengthen their economies and create new jobs. In turn urban authorities respond that legal and administrative structures, fiscal constraints, and the political relationship of the city to surrounding areas constrain independent initiatives and force a dependency on national ministries. Some national governments are modifying legal, fiscal or administrative structures and simplifying bureaucratic procedures with a view towards increasing flexibility, public participation and effectiveness of public policies. One of the objectives is to underpin responsibility with authority and place the locus of decision-making closer to implementation. Particularly popular during these years of fiscal constraint when government programs are being streamlined and rationalized, the devolution and decentralization of national government powers and agencies have resulted in new authority for local and regional governments, although not necessarily increased financial resources. France, Greece, Spain, Turkey and the Netherlands, for example, are in the process of decentralizing powers that formerly were the domain of a strong central government, a process that could thrust upon municipalities greater responsibilities for urban employment and economic problems. The Netherlands, after disappointing results during ten years of deconcentrating central powers, established a commission to examine how this policy could better address problems of urban renewal, development and employment. Its conclusions in May 1983 advised that cities due to inherent capacity levels were not equally able to assume expanded powers and that different approaches were required. Hence a decision was made to target one program specifically to the four biggest cities, although the controlling authority is located on the provincial level. In Japan outside experts suggest that the highly centralized, over-entangled bureaucracy impedes local action, despite the national government's discussions since the late 70s of the need to encourage an "era of local initiative". In other countries, mutual agreements among national, regional and local governments insure that economic and infrastructural needs of the urban area are specified and negotiations ensue concerning selective investments to be shared. By this means the Austrian government jointly with Vienna (70-30%) facilitated the location of a General Motors production plant in 1980 with the gain of 2500 jobs. 4 Earlier economic promotion agreements involved initiatives to take advantage of Vienna's "east-west" location to attract international organizations and construct the UN International Center and Austrian Conference Center. Even when such partnership

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arrangements are not exclusively reserved for cities, they can be directed toward facilitating structural adjustments in specific cities and towns, such as occurred in the Landskrona case which received funds from a development foundation. The recently enacted Plan Contracts under the French decentralization program of 1981 suggest that as industrial policy becomes regionally based, striking changes will occur in the reallocation of responsibilities among central and municipal governments. In federal countries, these negotiations are more likely to occur on the land or state level. For example, Ontario province introduced Community Economic Transformation Agreements in 1984 as a special measure to assist communities particularly dependent on mineral, forestry, and manufacturing industries that have become less competitive in world markets. The unique needs and potential of these severely depressed communities, such as Sudbury, will be assessed against the available economic development programs, and financing from provincial budgets will be tailored to individual circumstances. National policies to strengthen local capacity must be underwritten with fiscal capacity. This can be enhanced by supportive transfer grants from national to regional governments and/or the expansion of local taxation and financial powers. Most promising and flexible among the arrangements to encourage business activity and residential in-migration are general purpose or block grants from national to state and local governments. Another vehicle that offers flexibility in providing capital and technical assistance to urban areas are quasi-governmental organizations (quangos) that exercise considerable autonomy from the public sector but ultimately are accountable to it. Organized to operate on business principles and staffed with economic development professionals, these organizations are considered better able than public agencies to respond quickly to investment needs and remain insulated from politics. While their origin is often due to public initiative, widespread support is generated by capital contributions from the private sector, individuals, other development corporations as well as national, regional and local governments. The United States has had considerable experience with quangos, which are currently attracting widespread attention in other O E C D countries. Among the many examples are two in Massachusetts, the Commercial Area Revitalization District (CARD) program of the Industrial Finance Authority and the Community Economic Development Assistance Corporation (CEDAC), both organized in the late 70s. C E D A C , as the earlier established New York Jobs Authority (NYJDA) of 1961, provides low interest loans to local development corporations with priority to distressed areas. The sources of capital for these development corporations varies, from national funds such as for C A R D and C E D A C to initial state grants and subsequent public bond subscriptions as with NYJDA. Despite the popular attention to urban economic development and "the era of local initiatives", care must be taken to separate rhetoric from realistic expectations. Local efforts must be supported both by capacity-enhancing policies, technical

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assistance, and financial resources. The recent measures in the United Kingdom, for example, to cap local tax rates and to eliminate metropolitan councils are predicted to have serious consequences on capacity of local municipalities to undertake economic development. National policies and tools remain essential to successful revitalization efforts in many urban areas. And although national policies that lend themselves to these purposes often may be only a small part of national government activity, they can constitute a significant contribution to these local efforts. Striking examples of revitalization and adaptation projects, such as the Baltimore Inner Harbour project, attraction of General Motors to Vienna, the Imatra project coalescing adjustment efforts of six adjacent municipalities in Finland, could not have happened without intervention and resources from the national government.

13.4. Conclusions What becomes apparent from the cross-national overview is that explicitly urban economic development policies are very rare. We can point to a handful of specific programs, some of which are imitations of others. The special needs of urban areas continue to be treated within the context of other policies. The conjuncture of the structural transformations affecting cities is unprecedented in modern times. Hence, government responses are only now emerging, unfortunately most frequently in an ad hoc, crisis-management manner. Many are experimental in nature and have yet to be incorporated into national programs. Only a few countries have set clear objectives to guide policy responses to these new problems. Assessment of the results is complicated by the absence of clear expectations and, in some cases, inadequate procedures and information for policy evaluation. Moreover, evaluation is confounded by the difficulty in isolating and measuring the differential impact of macro-economic and sectoral policies on urban areas. Whether targeted policies are needed, which levels of government should be engaged in urban economic development, what types of policies and tools are most effective, and how we know this - these are questions that are only beginning to be discussed. The rationale for central government involvement in this area is not clearly drawn, and any public discussion is charged with political content. The argument that explicit urban economic development policies are unnecessary cannot arise from self-satisfaction that things are going so well. But not enough is known about the processes of change and the types of interventions that lead to successful adjustment and employment creation. The call for research, as recently raised by the Journal of the American Planning Association (Summer, 1984: 261) is "no academic subterfuge but an expression of frustration over the limited knowledge on which we base our planning".

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Yet what is clear is that something is needed. National governments do have impacts on urban areas through the enormous resources they command, purchasing power, regional and sectoral policies; in turn, the decay and dislocations of many urban economies also have affects on national growth and on prospects for necessary social and economic adjustments to structural changes. The arsenal of traditional policies has not been sufficient to prevent consequences which result in some urban areas being left on the margin - economically not able to profit from the recovery, new investment and job creation and socially burdened by the costs and tensions of maintaining disadvantaged populations who are less and less able to cope with the information and skills required in an age dominated by advanced technologies.

Notes 1 This paper draws upon the author's two years of experience as principal consultant to the Organisation of Economic Cooperation and Development project on Urban Economic Development. The paper benefited from comments from John Goddard, Mark de Jong, and Hal Wolman, who collaborated on this project. The author was particularly grateful for the opportunity to work with them and to collect information from discussions with government officials, meetings with case study teams, and national policy reports. Countries participating in the OECD project were Australia, Austria, Canada, Denmark, Germany, Greece, Finland, France, Japan, Netherlands, New Zealand, Norway, Portugal, Sweden, Turkey, United Kingdom, the United States, and Yugoslavia. A final project report will be available from the OECD by autumn 1986. The views expressed here are those of the author and should not be ascribed to the O E C D Secretariat or its Member countries. 2 The largest cities are excluded from regional development assistance measures in many countries including Sweden, Norway, Finland, and Japan; Portugal is in the process of revising its incentive system in ways that will likely exclude urban centers. 3 In early 1985 in apparent recognition of this limitation of its regional policy, the United Kingdom included Birmingham among areas eligible for regional development assistance. 4 The fact that this one activity created about the same number of jobs as through regional development assistance in designated areas was not lost on Vienna city officials.

14. Policies to Stimulate Urban Economic Activity in the United States The Case of Detroit Harold Wolman

14.1. Introduction The most striking feature of urban economies in the United States is their diversity. The economies of some urban areas are performing well, generating new employment above the national average and experiencing relatively low unemployment rates and rapid increases in per capita income. In other metropolitan areas, however, employment growth has been low and in some cases negative, unemployment rates are well above the national average and growth in per capita income has lagged behind the rest of the nation. This chapter focuses on the problems of these latter economies and policies to deal with them. It is well to recognize, however, that this focus perforce ignores the real diversity characterizing U.S. urban economies and thus tells only part of the story. The problem economies are concentrated among urban areas previously dominated by employment in those manufacturing sectors which have undergone decline within the national economy. Many, but not all, of these areas are older industrial concentrations located in the Northeast and Midwest parts of the country.

14.2. Economic Decline in Detroit In many ways the problems of the Detroit area, 1 while perhaps extreme, exemplify those of other areas experiencing economic distress. Detroit is a city dominated by durable goods manufacturing, particularly motor vehicles and intermediate products associated with motor vehicle production such as steel and fabricated metals. As a

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manufacturer of durable goods, the area's economy is exceedingly sensitive to economic cycles and in any effort to assess the area's economic condition it is important to attempt to separate out cyclical from structural change. Nonetheless the area's structural decline is readily apparent; from 1973-1979 (a period coinciding with the peak of two economic expansions), total employment in the nation as a whole increased by 17.0%, while the increase in the Detroit metropolitan area was only 7.8%. During the 1979-82 period (which essentially measures performance from an economic peak to a recessionary trough), U.S. employment fell by 0.3%, while Detroit area employment fell by 13.3%. Obviously, the 1979-82 performance includes both a cyclical and (given the subpar performance in the 1973-1979 period) a secular component. Overall Detroit area unemployment fell by 6.5% - a loss of 110000 jobs - between 1973-1982. Alterations in the national economic structure brought about by new technologies, changing tastes, and increasing competition from lower-wage developing nations have had a particularly severe impact on heavy manufacturing cities like Detroit. Betwen 1973-1982, manufacturing employment in the United States fell from 26% of total non-agricultural employment to 21%. This change in national structure translated into a loss of nearly 100 000 manufacturing jobs for the Detroit economy. (That is, had Detroit area manufacturing employment declined at the same rate as national manufacturing employment, the area would have suffered a loss of 100 000 manufacturing jobs). Equally importantly, however, many of these economies suffered losses in their competitive advantage relative to other areas in the United States, particularly in the South and Southwest. Between 1973-1982, the Detroit area lost a total of 190 000 manufacturing jobs of which only 100 000 could be attributed to national trends in the manufacturing sector; the remainder represent jobs lost to other areas in the United States due either to a particularly unfavourable mix within the manufacturing sector (e.g. motor vehicle employment fell by 27.5% nationally compared to a 6.5% fall nationally in the entire manufacturing sector) or to a decline in the attractiveness of the Detroit area as a place to do business. As a consequence of these trends, manufacturing employment fell from 37% of total employment in Detroit in 1973 to 27% of total employment in 1982, a much greater reduction than in the nation as a whole. The loss of competitive advantage is to some extent related to high wage structures built up over time by the heavily unionized labor forces in the larger urban areas of the Northeast and Midwest. Wage levels in the Detroit area for unskilled manufacturing jobs were 33% higher than the national average in 1982; they were 18% above the national average for skilled manufacturing jobs. The decline in manufacturing employment left Detroit area workers unprepared for the job requirements of many of the jobs in the growing service sector and particularly those in the advanced service sector. The Detroit area had in 1982 a lower than average percentage of skilled workers in its labor force and a higher than average percentage of unskilled

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workers. Its proportion of college graduates (13.3%) was about 20% below the national proportion (16.3%). As a consequence, Detroit did not share proportionately in job gains in the service sector. Service sector jobs increased by 33.1% nationally between 1973-1979 compared to only 24.8% in the Detroit area. The result of these trends has been a growing unemployment rate in the Detroit area relative to the nation. The Detroit area unemployment rate increased from 5.4% in 1973 to 7.8% in 1979 (2.4 percentage points) at the same time the U.S. rate was increasing from 4.8% to 5.8% (one percentage point). The ratio of the Detroit unemployment rate to the national rate thus increased from 1.12 to 1.34 during a time of national economic expansion. By 1982, in the depth of the recession the Detroit area unemployment rate stood at 15.9%, 1.67% times that of the U.S. rate. How much of the deterioration of the Detroit economy between 1979-1982 represents reversible cyclical change and how much irreversible structural change is not yet possible to determine, although the economic recovery has improved the area's economy substantially. The problems of U.S. urban economies usually have their most severe manifestations on the major central city of these areas. This occurs for a variety of reasons. The post World War II era has seen a massiv^jdemographic movement of the middle and upper income groups from central city to suburb. The central city is typically the repository of the lower-skilled, the poor and minority groups. The central city labor force is thus most at risk from declines in traditional manufacturing employment. In addition, the decline in the importance of manufacturing nationally and, in areas such as Detroit, the loss of competitive advantage, has been accompanied by a decentralization of manufacturing jobs within metropolitan areas. While in theory the metropolitan area economy represents the functioning labor market, in practice imperfections in the economy such as inadequate transportation and labor market information make it difficult for some central city residents to find employment in suburban locations. (This feature, however, is frequently overemphasized; nearly 35% of employed Detroit residents have jobs in suburban locations). As a result of these factors, the burdens of a poorly functioning urban economy are disproportionately borne by residents of the central city. In 1970, the city of Detroit's unemployment rate was 7.2%, 25% greater than that of the metropolitan areas as a whole. By 1980, it was 18.5%, 60% greater than that of the entire area. The median income of Detroit city residents also fell from 83% of the Detroit metropolitan area median income in 1970 to 69% in 1980. Finally, as a consequence of the institutional structure of U.S. metropolitan areas, the fiscal impact of poorly functioning urban economies is focused on central city jurisdictions. There is no general purpose metropolitan government in U.S. metropolitan areas; the central city and the various suburbs each collect their own taxes and provide most of their own services. The loss of economic activity from

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within city borders thus adversely affects central city governments by reducing property tax revenues, even if central city residents are able to find employment in suburban locations. The city of Detroit has faced severe fiscal problems since the late 1970's. These problems have been partly mitigated by the granting of permission by the state of legislation for the city to triple the tax on wages of employees who work in Detroit but live in surrounding suburbs. (In the United States, local fiscal structure is controlled by state legislation. Detroit is permitted to levy both a property tax and an income tax on its own residents as well as a wage tax on non-residents employed in the city).

14.3. National Policies The United States has had a weak tradition of spatial development programs. It has not had, for example, a regional policy in the tradition of most European countries. The Reagan administration has stated that the foundation of its urban policy is national economic growth. However, it recognizes that even with national economic growth, some cities will still be left with serious structural problems. For these cities, the Administration "has maintained (my underlining) aid programs focusing on declining cities' needs" and has proposed one new program - enterprise zones which has yet to be approved by Congress. At the present time the primary federal program fostering urban economic development is the Urban Development Action Grant ( U D A G ) . This program provides federal aid on a discretionary basis to distressed cities for projects designed to stimulate economic development and create permanent jobs. Eligible cities submit proposals for projects to the federal government. The proposals are supposed to involve both local government and private sector participation and the proposed projects are to result in private sector investment and permanent jobs which would not otherwise have occurred in the absence of a U D A G grant. The federal government funds those proposals with the greatest leverage (private investment to federal grant) and highest number of jobs produced for dollar of federal aid. Approximately half of the U D A G grants have been for commercial-retail development (frequently major downtown development projects such as hotel-convention center-tourism complexes) and one third for industrial development. The U D A G funds are used by the recipient cities primarily in the form of loans or interest subsidies for private investors, although they may also be used for land writedowns and infrastructure investment. The Community Development Block Grant (CDBG), by contrast, provides funds by formula to all cities over 50 000. While CDBG may be used for a broad range of community development purposes (housing rehabilitation, neighborhood improve-

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ment, etc.), it is increasingly being used by cities for economic development activities. Both the U D A G and the CDBG programs are administered by the U.S. Department of Housing and Urban Development. The U.S. Economic Development Administration (EDA) operates programs which provide infrastructure grants and loans to local governments and loans to businesses in eligible areas. These programs, in existence since the mid-1960's, have traditionally focused almost exclusively on rural areas (not regionally defined) and the amount of resources committed has always been a relatively small portion of the domestic program budget compared to the regional programs of European governments. During the Carter administration funding for these programs was encouraged and for the first time a substantial portion of the funds were targeted on the large distressed cities. However, the Reagan administration has advocated eliminating the Economic Development Administration and its programs; while it has not as yet been able to achieve this objective (due to congressional opposition), it has severely reduced the funding for these programs and reversed their growing focus on large urban areas. However, these direct economic development programs pale in importance before the indirect development subsidies provided through the federal tax system. Interest paid to state and lacal government bondholders is exempt from federal government taxation. As a consequence states and localities are able to issue bonds at interest rates two to three percentage points lower than those on taxable corporate bonds of similar maturity. Over the past decade subnational governments have, in effect, issued bonds, the proceeds of which they have then loaned to private firms for industrial development projects as well as for other purposes (mortgages, student loans, hospital construction). In so doing they pass along the two to three percentage point interest rate subsidy to these private entities (however, no single issue for industrial purposes can exceed $10 million). In 1985 state and local governments issued nearly $19 billion in these "small issue" industrial development bonds; the federal subsidy in the form of tax revenue foregone as a consequence of the tax exemption for interest payments was nearly $2 billion. Perhaps the most important federal policies affecting the Detroit area economy, however, have been neither the direct urban economic development programs nor the indirect tax subsidies. Instead, they have been 1) import quotas on Japanese automobiles which have served to protect the American automobile industry and thus artificially support Detroit employment and 2) high interest rates and overvaluation of the dollar which have worked in the opposite direction by increasing the price of American automobiles relative to imports. A variety of other national programs in specific sectors (e.g. employment, transportation and housing) may also have important impacts on large urban economies. In

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addition, general revenue sharing, a mildly equalizing general grant program, provides about 5% of local government revenue.

14.4. State and Local Policies Urban economic development policies at the state and local level reflect in large part the institutional structure of metropolitan areas. In the United States, with very rare exceptions (of which Detroit is not one), there are no general purpose governments at the metropolitan level. The city of Detroit, and the variety of suburban municipal jurisdictions surround it each has its own government, levying taxes on its citizens and providing services for them. The city of Detroit is the predominant jurisdiction in the area simply because it is the largest; not because it can effectuate policy for the entire area. The city's population is 26.8% of that of the entire SMSA and most of the area's jobs are also located outside of the central city. Nonetheless, given the weakness of U.S. metropolitan institutions and the predominant status of the central city, the most important public figure in devising economic development policy is usually the central city mayor. The mayor is likely to have two primary economic development objectives which are not always completely consistent. He is concerned both with the employment of central city residents (employment objective) and with the fiscal condition of his jurisdiction (tax base objective). The first objective does not necessarily require jobs be located inside the city's boundaries. Indeed, it is likely that the best chance for central city residents to gain employment is for new jobs to be created in the city's suburbs, which have proven to be more attractive areas for business location than deteriorating inner city areas (35% of the residents of the city of Detroit already work in suburban locations despite a quite rudimentary public transportation system.) However, job creation in the suburbs, even if it employs central city residents, will do little to enhance the city's tax base. Thus, the tax base objective inevitably appears more compelling and the preponderance of city economic development activity in the U.S. consists of the granting of tax concessions designed to attract economic activity within central city borders (despite a proliferation of studies indicating that such concessions have relatively little impact in business location decision). The city of Detroit several years ago pressured the state legislature to permit Detroit to grant such concessions. Instead, the state agreed to permit every locality to abate for a 12 year period 50% of the property tax for new manufacturing investment. The provision thus operates as a marginal incentive to attract firms to the state of Michigan and as a substantial windfall to these firms which would have located in Michigan anyhow. The city of Detroit nevertheless makes extensive use of this provision. Many cities have recently undertaken programs to attract new and/or retain existing

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economic activity through economic development campaigns. Typically these include marketing and promotion of the city as a good place to do business (particularly for high technology activity) or to visit (tourism) and efforts to act as a facilitator in assisting businesses to move to or remain in the city. Such facilitative efforts include creating computerized land and site inventories designed to match business requirements with available land and buildings, land assembly (including industrial parks), brokering packages of financial assistance among an individual firm, the various levels of government and financial institutions, and assisting firms in making their way through the maze of state and local regulations. The issuance by the state or city of industrial development bonds (incorporating the federal tax subsidy discussed earlier) is frequently used as the "glue" to assist private firms in obtaining low-cost financing of the locals in the area. The city of Detroit's strategy has been aimed at helping businesses assemble useable land (available at relatively low cost within the city), and at developing the city as a convention and tourist center, thus creating the kind of low-skill service and trade jobs that will provide employment opportunities for the city's low skilled unemployed. The primary deterrent to development of the city as a convention and tourist center (or to development of the area as a whole as a regional corporate headquarters as the Detroit Area Chamber of Commerce and SEMCOG, the metropolitan area advisory board, have urged) is its reputation as an unpleasant place to live. In response the Detroit mayor has announced that he wants to reverse this perception and turn Detroit into a "world-class" city. He has thus strongly supported downtown development including entertainment and cultural events as well as retail shopping, the construction, with federal aid (which has not been forthcoming) of a subway (Metro) system for the area, and improvement of business and neighbourhood services, particularly police protection. As the above discussion suggests, the options available for the Mayor of Detroit are quite constrained. Indeed, it is clear that in a metropolitan economy it is difficult if not impossible for a successful economic development effort to be lead by a central city mayor whose concern is likely to be confined to what occurs within the city borders. Even at the metropolitan level the ability to structure a development program which has a major impact in the face of strong national and regional trends is questionable. In this context, the decision of the Detroit Mayor to structure a community development oriented economic development program may reflect a rational choice in a constrained environment.

14.5. Conclusion The Detroit area's essential economic problem - about which the mayor of the central city can do very little - is that it is no longer competitive as a location for

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routine production processes. It could become competitive only if its relative wage levels declined precipitously. Such a strategy of "getting well by getting poor" is not an attractive prospect to Detroit area residents and is quite unlikely to be pursued. Instead, the Detroit area must adjust through a combination of labor force outmigration and through developing a competitive advantage in more complex manufacturing processes. Both of these are already occurring. The Detroit metropolitan area population declined slightly from 4 554 000 in 1970 to 4 488 000 in 1980. And Detroit's motor vehicle industry is making rapid technological advances in an effort to achieve greater productivity and to regain cost competitiveness with foreign imports. In so doing, the industry is rapidly substituting capital for labor. The effect of this restructuring of the motor vehicle industry on the Detroit area economy is still uncertain. In the short run, there will be fewer jobs in the automobile industry, but these will be higher paying. In the aggregate, however, income to area residents generated by the automobile industry and total area employment will fall. However, ¿/increased productivity makes the Detroit motor vehicle industry more competitive and output expands, more highly paid workers will gain jobs in the industry. Even if total employment in the industry does not reach previous levels total income paid in wages to area residents may increase. Such increases in income would be translated into additional jobs in the area through the multiplier effect on the local economy. In addition, an increase in motor vehicle production would generate additional jobs in the locally based motor vehicle supplier sector and the increased income from these jobs would also have a local multiplier effect on area employment. The net long-range effect on total area employment levels thus depends on the condition of the automobile industry and cannot now be discerned. What can be discerned, however, is that fewer people will have jobs directly in the automobile production process and that most of those who lose existing jobs will suffer either long term unemployment or reduced wage levels in the local service sector. The area economy as a whole may benefit, but at the same time there will be readily identifiable individuals who will be losers. The strains this adjustment process will impose on the local social and political systems will be considerable. At the local level, the major role of the public sector in helping facilitate economic adjustment may well be attempting to manage and at least mitigate the disruptive social consequences. This task may well require federal and state assistance. Federal policy, on the other hand, is likely to effect Detroit less through the application of specific urban economic development policies or provisions and more through the nature of federal foreign trade laws and quota arrangements, the impact of national economic policy on foreign exchange rates, and the extent to which the federal tax code encourages business investment.

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Note 1 Unless otherwise specified, the Detroit area refers to the Detroit SMS A - the effective metropolitan labor market area - rather than the administrative boundaries of the city of Detroit.

15. The Growth of the Paris Region, Town Planning and the National Policy of Locational Control (1920-1984)* Pierre Merlin

15.1. Introduction In France, the concept of regional town planning with regard to the agglomeration of Paris did not emerge until after the First World War, and it was not until shortly before the Second World War that it was first formulated as a regional urban planning scheme. Although very little emphasis was placed on a national strategy for the location of activities, there was clearly a certain amount of concern about reducing the burden caused by the agglomeration of Paris.

15.2. The Origins of the Policy to Restrict the Growth of Paris Under the " A n c i e n régime", the city of Paris had developed, enclosed by walls and surrounded by "faubourgs". T h e latter were the scene of activities which were relegated to sites outside the city or which profited from this external location, especially because it enabled them to avoid paying the city toll (a form of internal customs levied at the city boundaries). Although successive sovereigns tried to check the growth of these "faubourgs", the edicts they passed (there were 17 between 1549 and 1781) had little impact. Throughout the 19th century, the state only intervened to shape the townscape (Haussmann), but showed no interest in the "faubourgs", which, at the end of the century, were swamped by industrial suburbs. It was not until 1919 that a competition was held to find a scheme for the future planning and extension of Paris, but the programme did not impose any financial limits, and Jaussely's winning project was * Translated from French by Evelin Petzold.

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not put into practice. The laws of 1919 and 1924, with varying degrees of success, called for the establishment of schemes for the municipal districts ("communes"). Finally, the law of 1932 provided for the preparation of a town planning scheme for the Paris region covering an area of 35 kilometres in radius, to which these local schemes were to be subordinated. This was the first time the term "region" was defined other than as an administrative unit, but more importantly, this was the first time that the state expressed its intention to take the initiative in town planning for the region and to check the development of the Paris region. The instructions given by the government were malthusian in character: "Town planning for the Paris region requires more than ever before an overall plan, which should be limited to the present population, for if the population of Paris continues to grow, this will pose a considerable social danger and the situation could become irreversible." The P.A.R.P. (town planning scheme for the Paris region), also called the Prost scheme after its principal author, was published in 1934, but was not approved until 1939, too late to be employed to check the wave of erratic urbanization, which took place between the wars in the form of allotments and poor detached houses (Merlin, 1982). The Prost plan does not aim at defining the position of the Paris region in the development of the national economy, but follows to the letter the malthusian instructions received from the government. Apart from a network of super highways, its main feature is a classification of the 657 "communes" (municipal districts) into four categories. If the existing industrial estates are tolerated in the "communes" already completely urbanized (category A), the setting up of new industries is prohibited in the rural "communes" (category D), and almost impossible in the intermediate "communes" (categories B and C). In these "communes", in fact, the sectors which are not yet built up are designated as "non-affected zones" ("zones non affectées"), where only farm houses and residential property of very low density may be erected, or "exceptionally, and after consultation with the Senior Committee for Town Planning and General Organization of the Paris Region (Comité Supérieur d'Aménagement et d'Organisation Générale de la Région Parisienne), buildings and factories, if their design is in good taste".

15.3. The Policy of Decentralization and the P.A.D.O.G. The Prost plan was drawn up and approved too late to check the development of the allotments, as experience has shown. Similarly, before the Second World War, there was no precise strategy, let alone efficient regulations to curb the economic growth of the Paris region, which at that period was based on industry. On the contrary, Paris was a major focus of development, the obvious place to set up dynamic and innovative activities.

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Shortly after the war, when a new doctrine had been formulated and juridical and financial measures had been decided upon in many sectors (housing for example), there emerged the concern to formulate and apply a locational control policy for industrial activities (nobody foresaw at that time that the tertiary sector was to become the prime motor inducing urban growth), and, on a larger scale, a policy for regional development. Certain countries had preceded France for strategic reasons revealed by the Second World War, or because the limited size of their territory had compelled them to do so. The second reason carried the most weight in the case of the Netherlands, but was only of relatively minor importance compared to the first one in the case of Great Britain (Barlow report, 1940). It was military considerations, however, which prompted the U.S.S.R. to transfer its factories to the Ural mountains and Siberia during the war, and the United States, under an otherwise liberal system, to encourage industry to move outside the North East. France had its eyes opened by the publication of a book which had a considerable impact, even though its arguments were often summary or even questionable: "Paris et le désert français" (Paris and the French Desert) by Jean-Francois Gravier (1947). This publication lent French regional development policy its initial anti-Parisian stance before more positive definitions emerged in the course of time. The facts of the matter were simple: for historical reasons, Paris had become a giant agglomeration, ten times larger than the other big urban centres (Lyon, Marseille, Lille-Roubaix, Tourcoing) and it attracted a considerable number of workers from other regions (from towns rather than directly from the country), who were enticed by the size and diversity of the labour market and by the higher salaries, despite the disadvantages of urban concentration (higher rents, longer travelling times and higher transport costs, harmful effects on health, etc.). Quite apart from its function as a political, administrative and cultural centre, Paris was also, from the economic point of view, virtually the only centre of finance in the country (banks, insurance companies, head offices of the major companies), and it even provided the majority of jobs in certain sectors of industry, especially in the automobile industry (60%), the electronics, aeronautical, mechanical and pharmaceutical industries (60% each), and even in the polygraphy and cardboard industry (50%). Two thirds of company taxes were levied in Paris. Three quarters of research activities were concentrated there. The process of cumulation resulting from this concentration was self-perpetuating: one third of new industrial premises were established in the Paris region (one sixth of the population). This statement of facts quickly becomes a judgement, especially in the case of Gravier: neither the drawbacks, nor indeed the advantages of this concentration, because they do exist (Perroux, 1965), are analysed. The economies of scale, the external economies, the easy exchange of information are not taken into account. If this had been done, this would doubtless have led to concentration being tolerated, or even encouraged, in the case of new industries, which are the most fragile and

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most dependant on a free flow of information, whereas geographic redistribution would have been accelerated in the case of the remaining - and much more numerous - activities. At all events, a Department for Regional Development was set up in 1950 within the Ministry of Construction and given the task of formulating a more precise definition of national policy in this sector and of administering a National Fund for Regional Development (Fonds National d'Aménagement du Territoire - F.N.A.T.). Subsequently, this instrument of financial intervention was to be followed by others, such as an Interministerial Committee for Regional Development (Comité Interministériel d'Aménagement du T e r r i t o i r e - C . I . A . T . ) , set up in 1960 as a competent authority on questions of co-ordination, arbitration and incentives, and above all there was the Delegation of Regional Development and Regional Policy (Délegation á l'Aménagement du Territoire et á l'Action Régionale - D. A . T . A . R . ) , established in 1963. During this first phase of regional development policy the main objective of these bodies was to curb the growth of the Paris region and to organize the decentralization of activities located in Paris towards other regions (the "province"), or at least discourage their further development. The principal means to this effect was the introduction in 1955 of the "agrément" procedure (a form of locational control policy) for the establishment or extension of all industrial premises covering an area exceeding 500 square metres. In 1959 this "agrément" procedure was extended to the re-utilization of existing premises, but the threshold was raised to 1000 square metres in 1967, and to 1500 in 1972. This "agrément" is granted by the minister in charge of construction after consultation with an interministerial committee of decentralization, which bases its decision on the objective necessity for the activity in question being in the Paris region. This committee is also responsible for the decentralization of state enterprises and proposes measures to encourage industrial decentralization. In 1967 the "agrément" procedure was extended to apply to offices covering an area of 500 square metres or more (1000 since 1972). Moreover, those businesses which have been granted permission to set up in the Paris region are required to pay a tax, the so-called "redevance" (tax on floor space). On the other hand, subsidies were granted to businesses which pulled down their factory buildings or offices or made them available for housing (until 1972). Simultaneously, incentives were given for industrial location in the "province": in addition to information and advisory structures and infrastructures, designated industrial areas were created. But above all, government financial backing was provided in the form of subsidies covering part of the investment costs, the actual amount varying according to the degree of priority which the regional development scheme gives to the location chosen. These incentive measures were complemented by other forms of financial aid (subsidies for the transfer of businesses outside Paris,

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reduction of real estate prices, loans granted by the Fund of Economic and Social Development, subsidies for the training of staff, etc.) and fiscal measures. At that time, after various attempts to revise the Prost plan, the Department for the Planning of the Paris Region (Service de l'Aménagement de la Région Parisienne S.A.R.P.) worked out a new regional development scheme (1960). This rather unambitious document was, in fact, an interim scheme designed for ten years. It echoes both the malthusian vision of the Prost plan and the intention of controlling the impact of Paris: "Without robbing Paris of its vitality, a more satisfactory balance between the capital and the 'province' must be found." The scheme for the Planning and the General Organization of the Paris Region (Plan d'Aménagement et d'Organisation Générale de la région parisienne - P . A . D . O . G . ) emphasized "the care and protection of rural areas, the wooded slopes and green areas around the agglomeration". With regard to the setting up of activities, the P . A . D . O . G . scheme not only praises the policy of decentralization adopted in the national scheme, but suggests that "the activities in the secondary and tertiary sector, which must remain in the region (should be) transferred to the suburbs". But although the P . A . D . O . G . envisages a considerable number of activities moving out to the periphery of the agglomeration, it does not envisage any extension of the same, and it rejects the hypotheses which suggest that regional development should be centred on new towns (as in London) or on the accelerated growth of the small, secondary agglomerations in the periphery of Paris, because this might result in an increased impact of the region. On the other hand, it is suggested that major efforts to restructure the suburban areas should be made: apart from the creation of a network of infrastructures for transport, it is decided to create four restructuration centres in the suburban area: La Défense, Velizy-Villacoublay, La Courneuve-Le-Bourget and Créteil (or Fontenay-sous-Bois). The P . A . D . O . G . was criticized for its excessively malthusian approach: the locational control policy was matched, as far as spatial planning was concerned, by a "perimeter of urbanization" ("périmètre d'urbanisation") corresponding to the boundaries of the agglomeration at that time, beyond which building was not to be permitted. This proposal, which was hardly realistic at a time of rapid demographic growth (about 150000 persons per year), was very rarely adhered to, which led to a new, more ambitious scheme being drawn up: the "schéma directeur" of 1965, which will be discussed later on. As a matter of fact, certain suggestions made in the P . A . D . O . G . (above all, that of the restructuration centres in the suburbs) were excellent, but the P . A . D . O . G . suffered the handicap of arriving on the scene after the appearance of the large housing estates, just as the Prost plan had appeared after the erection of the inadequate allotments. During this first phase, between 1955 and 1971, 2745 cases of total or partial decentralization were registered, just over 160 per year (289 in 1961, the peak year). But two thirds of the businesses remained in the Paris basin, i.e. within a radius of 200 kilometres from Paris, usually in small or medium-sized towns. These 2745 cases

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resulted in the creation of 430 000 jobs outside the Paris region, but only a small number in the priority regions, at that time the West, the Southwest and the Massif Central. Their main impact was a marked, even spectacular slowing down of the increase in activities in the Paris region: the proportion of new industrial premises in the Paris region dropped from one third to only 8.6%. At the same time, however, the economic growth of the region centred around the development of the building trade and public works (24% of jobs in this sector were created in the Paris region) and, above all, in the tertiary sector (28% of jobs). This, indeed, is the weak spot of the decentralization policy, which, during this period, was primarily involved with the secondary sector, which only accounted for 13% of the jobs created. Nevertheless, regional development was also able to boast major success, for example the decentralization of the automobile industry, with its percentage in the Paris region being reduced from 67% to 45% in fifteen years; in the aeronautical industry, which, historically, has its origins in the Paris region and is now re-established in Toulouse, in the electronics industry, the pharmaceutical and pneumatics industry, etc. (Merlin, 1974).

15.4. The Response of the Paris Region Thanks to regional planning the Paris region was able, in the second half of the 1960s, to free itself from the straight jacket in which regional development policy, essentially anti-Parisian in its direction, and the P . A . D . O . G . had confined it. In 1961, a public institution was created, the District of the Paris Region (District de la région de Paris), comprising the three "départements" (administrative districts): Seine, Seine-et-Oise and Seine-et-Marne. It was entrusted with "the study of the problems involved in the planning and development of the whole or part of the region". It was headed by a very high-ranking government official, Paul Delouvrier, who had already held very responsible posts and who was known to enjoy the personal confidence of General de Gaulle. The P . A . D . O . G . was soon reviewed and P. Delouvrier instructed the recently established Institute for the Development and Urbanization of the Paris Region (Institut d'aménagement et d'urbanisme de la région de Paris - I . A . U . R . P . ) to prepare the future "schéma directeur" for the development and urbanization of the Paris region (schéma directeur d'aménagement et d'urbanisme de la région de Paris - S . D . A . U . R . R . ) , which was published in 1965 after having been "taken into consideration", but was not officially approved until 1976, after having been revised. The preparation of the S.D.A.U.R.P. took place in a climate which was quite different to that which had existed when the P . A . D . O . G . was drawn up. Since the end of the war national demographic growth had increased, owing to a sharp rise in

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the birth rate; there was rapid economic development and the President, together with his entourage, had created a mystique of growth and planning. In 1964, the National Commission of Regional Development itself predicted an increase in purchasing power of 250% in 25 years, as well as an increase in leisure time, in the number of automobiles and everyday mobility, while it was envisaged that the French population would attain a figure of 75 million in the year 2000 (General de Gaulle even spoke of 100 million). In this connection, the authors of the "schéma directeur" based their calculations on the population of the region reaching 14 million by the end of the century, which assumed that the influx of population towards the Paris region would somewhat abate, but nevertheless meant it would be necessary to accommodate another 5.5 million inhabitants. With regard to activities, the "schéma" anticipated that the increase in the number of jobs would follow or even encourage demographic growth. "To dismiss these predictions, to consider them excessive would mean considering excessive either the number of French people or their standard of living of tomorrow. It would mean rejecting both the reality of figure, as well as the hope for progress. In fact, neither France nor Paris have a choice any longer: they must assume the dimensions of the future". It is known that the drop in the birth rate, which occurred from 1965 on, and which no expert had anticipated, rendered these predictions obsolete. It was not until the revision of the "schéma directeur" in 1975 that this drop in the birth rate was to be partially taken into consideration and the figure for the envisaged population reduced to 12 million. With regard to the economic slump, which has occurred in the course of the past ten years, this was not taken into account until another revision project in 1980, which was never to be approved. The "schéma directeur", in its initial version of 1965 as well as in the version revised in 1975 and officially approved in 1976, accepts the principles of regional development and consequently the selective limitation of activities in the Paris region, but just by "paying lipservice", and reducing their significance by predicting rapid growth at the national level and growth on a much smaller scale at the regional level. With regard to regional planning the options chosen by the "schéma directeur" are determined by this anticipated growth. Major axes of development were chosen along the principal valleys (the Seine upstream and downstream from Paris, the Marne); new urban centres, intended to relieve congestion in Paris, were proposed, both in the existing suburbs (restructuration centres) and in the projected extensions (new towns) along the primary axes of development; extensive networks of roads (highways) and railways (Regional Express Network) were planned and largely realized in the course of the following two decades. The successive revisions of the "schéma directeur" have not only updated it from a technical point of view, but have also, with some delay, reflected the change of orientation imposed first by the demographic crisis and then by the economic crisis. As early as the late 1960s, a national debate, sparked off by the publication of the

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"schéma directeur", focussed on the question of the position of the Paris region on a national and international scale. The incentive role played by such a town planning strategy was sought by other densely urbanized regions, encouraged by the D . A . T . A . R . (Delegation of Regional Development and Regional Policy). One by one, the Basse Seine, Lorraine, the Northern region, Lyon-Saint-Etienne, NantesSaint-Nazaire, Marseille, etc. set up their own regional "schémas directeurs", all based on the hypotheses of rapid demographic growth and economic development. At the same time the anti-Parisian debate was fired by the freely acknowledged prospects of growth shown by the most important French region. Inversely, this iconoclastic aspect encouraged certain people to question the policy of decentralization for the first time. The Council for Economic and Social Affairs of the Paris region argued that: "it is not certain that decentralization will substantially curb the growth of Paris, but it threatens to break productive ties and to shatter a harmonious equilibrium." The drop in the birth rate, which began in 1965 and which all experts had at first believed to be a temporary phenomenon, made it necessary to adjust the projected demographic figures accordingly: the "schéma" of 1975-1976 still envisaged 12 million inhabitants by the end of the century, the 1980 project reduced this figure to 11 million. This radical decline corresponds to the superimposition of the effects of three successive changes: the fall in the birth rate, which began in 1965; the radical slowing down, around 1970, of the influx of migrants from other regions to Paris (this was due to the fact that the traditional areas of emigration were subject to a reduced demographic pressure); and finally, since 1975, as a result of the economic crisis, the almost complete drying up of the foreign immigrant labour force. The demographic growth of the Paris region thus slowly fell from approximately 150 000 to less than 50 000. The need for more space abated. House-building figures, which had exceeded 100 000 per year in the early 1970s, recently plummeted to below 50 000. The projects for new towns were revised downwards, in most cases to approximately half the size. These new towns, which were given priority status in the Vth Plan of 1965, were the object of one of the six "goal programmes" ("programmes finalisés") of the Vlth Plan; in the Vllth, drawn up in 1975, they are simply integrated into the priority programme "better living conditions in the city" ("mieux vivre en ville"), before disappearing altogether from the field of national priorities in the VHIth Plan drawn up in 1980. As far as the economic crisis is concerned, it resulted in much keener competition to attract new businesses. The déconcentration of numerous activities located in Paris or the inner suburbs to the periphery of the agglomeration and to the new towns had been accompanied by large-scale modernization of industry. The crisis was to make the enterprises immobile, thus slowing down this modernization process. At this time the de-industrialization of the Paris region begins to be mentioned, and more

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often than not it is deplored. The drop in the rate of economic growth has also slowed down the rising space requirement per inhabitant. The resources for realizing major infrastructures have become scarcer. Industrial sectors abandoned by industries which have decentralized or gone bankrupt are no longer utilized, which creates the problem of the "industrial fallows". However, the energy crisis has not had as much of an effect on urbanization as could have been expected. With regard to transport, it should have led to a limitation of the role of the car: the energy crisis has emphasized the need to give priority to public transport, as already stated by the politicians in charge of this sector in the early 1970s, but it has proved virtually impossible to put it into practice, because of the great influence of the road and automobile lobby within the Administration represented by the "corps" of engineers of the Civil Engineering Department ("ingénieurs des ponts et chaussées"). As far as housing is concerned, no measures have been taken to check the form of urbanization which tends to become predominant at the fringes of the big agglomerations: the "rurbanization", i.e. the construction of groups of detached houses at the outer edges of the traditional villages of the rural area surrounding the agglomeration. This entails high heating and transport costs (since these houses are far away from all infrastructures, services and the majority of shops) and necessitates the possession of two cars. This morose atmosphere caused the elected representatives in the Paris region to demand the creation of new activities and to question quite openly the decentralization of activities. Several specialists (Beaujeu-Garnier, 1974; the Albert Report; etc.) see the salvation of the capital in the strengthening of its role as a cosmopolitan city. Others, who agree with the former in some respects, desire a policy of quality for Paris, with regard to the protection of sites, monuments, and urban policy, and a veritable contract between Paris and the "province" concerning the decentralization of activities (Merlin, 1975); this should be selective according to the innovative character they represent. Such a policy might appear to be élitist and pro-Parisian, but it is surely in the interest of the "province" to allow Paris to remain a hot-bed of activities, which, by adopting a more general character, could spread some time later to the benefit of the French regions. However, for a long time this debate hardly had any concrete significance. It is true that the limit beyond which the utilization of new surface areas was subject to the "agrément" procedure, was raised in 1972; it is true that an adjustment of the "redevance" according to the location of new activities in the Paris region was adopted, favouring, in particular, the new towns. Finally, it must be admitted that the "agrément" procedure itself was employed to encourage the activities whose location in the Paris region is approved to set up in the new towns. But the Paris region, where unemployment used to be virtually unknown, today finds itself in almost the same difficult situation as the majority of the other regions. The persistence of the economic crisis and the prospects of administrative decentralization were to make the question appear in a new light at the beginning of the 1980s.

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15.5. Administrative Decentralization and Centres of Industrial Conversion In 1982 and the following years, a fundamental structural reform took place: administrative decentralization. For well-known historical reasons, France has been a highly centralized state for centuries. The excessive division into municipal districts, the "communes" (36 000 "communes") further reduced the local authorities' possibility to act. The only intermediate level is the administrative district, the "département", created during the French Revolution barely two centuries ago and which neither corresponds to a geographic unit nor to any historical reality like the former provinces. The region, which more or less corresponds to the former provinces, is a regrouping of "départements", which had only the status of a public administrative institution. The first aim of the reform of decentralization was to give the region the character of a territorial collectivity with the same legal status as the "département" and the "commune". The President of the Regional Council, until then appointed in indirect elections, is now in charge of the regional executive, i.e. he administers services, which, before the reform, were placed under the official authority of the prefect, the government's representative. The prefect, who now bears the title of Regional Commissioner of the Republic, only retains his authority as government representative in the region. At the level of the "départements", the same transfer of authority is taking place in favour of the President of the General Council, while the prefect assumes the title of Commissioner of the Republic. At the regional level, the last stage of the reform will be the election, probably in 1986, of the regional council by universal suffrage. The transfer of authority from the government to the regions, the "départements" and the "communes" is accompanied by the transfer of corresponding funds. The government intended this reform to bring the decision-making process closer to the people, and to transform the administration of society by spreading responsibility more widely at all levels, and by setting free initiative, which would seem indispensable at a time of economic and social crisis. From the economic point of view, the laws of 1982 and 1983 allow the regional and departmental Commissioners of the Republic to devote themselves more to economic development and action and to assist companies, elected representatives, and employers and trade unions. The extent of the economic crisis, the collapse of certain sectors of industries (iron and steel industry, coal mining, shipyards, etc.), the considerable weakening of others (automobile industry) have resulted in a massive loss of jobs in certain traditionally industrialized areas. Consequently, the government has defined 14 centres of industrial conversion, on which its main action will be concentrated. These centres designated in March 1984 are as follows: - the ports of Calais and Dunkerque;

The Growth of the Paris Region - the mining basin of Nord-Pas-de-Calais, including the agglomeration Valenciennes; - the Sambre valley; - the Meuse valley; - the mining basin of Southern Lorrain (west of Nancy); - the Caen basin; - the Chalon/Saône-Le-Creusot-Montceau-les-mines area; - the Montluçon basin; - the Roanne basin; - the southern basin of the "département" of the Loire (Saint-Etienne); - the Decazeville basin; - the Albi-Carmaux basin; - the ironworking complex of Fos/mer; - the sector of the shipyards of La Ciotat and La Seyne.

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Frankly speaking, the first measures, taken when these centres of industrial conversion were created, are still on a limited scale. They involve an increase in the funds available to the Commissioners of the Republic (small specialized teams with special tasks), an easing and speeding up of the procedures for obtaining public aid, a déconcentration, to the same end, of financial aid to companies, social measures accompanying industrial re-organization, and finally the setting up of programmes for redevelopment, the most positive section of the new policy, but also the most difficult to put into practice. After only a few months, it is too early to pass judgement on its efficiency. The priority given to the reconversion of declining industrial regions could further limit the chances of development of the Paris region. Under pressure from the elected representatives in this region, the government had, in fact, already taken measures to alleviate the restrictions imposed on companies wanting to establish themselves or expand there. For it was clear that in times of economic crisis, refusing small companies the opportunity to get established or to expand in the Paris region meant depriving France of new jobs. The law of December 3,1982, abolished the "redevance" (special tax) for industrial premises newly established or extended in the Paris region, but at the same time increased the level of the tax applying to tertiary activities or offices. Similarly, the decree of April 3, 1984, stipulated 1500 square metres as a new threshold for offices destined for research purposes, as had already been the case for industrial premises since 1972. These slight modifications in the existing legislation do not reflect a change in policy but a slight increase in flexibility. As the synchronization of these measures with the promotion of the centres of industrial conversion shows, this is an attempt to reconcile the acknowledgement of increasing concern of the elected representatires

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of the Paris region with the absolute priority which is accorded to the centres of industrial conversion, but which is not easy to put into practice. France, however, cannot confine itself to a simple touching-up of a policy defined a generation ago, and will have to carry out legal and financial reforms which are as farreaching as the administrative decentralization was from a political and administrative point of view.

References Beaujeu-Garnier, J. (1974) Place, vocation et avenir de Paris et de sa région. La documentation française, Paris. D . A . T . A . R . (1983a) Aides au développement regional. D . A . T . A . R . , Paris. (1983b) Rapport annuel. D . A . T . A . R . , Paris. Gravier, J.-F. (1947) Paris et le désert français. Le Portulan, Paris. Merlin, P. (1974) Aménagement du territoire et location des activités en France, in Tijdschrift voor economische en sociale Geografie, pp. 368-80. (1975) Paris et sa région, l'avenir de dix millions de français, in La NEF, Numéro special, no. 56, mars et mai. (1982) L'aménagement de la région parisienne et les villes nouvelles. La Documentation française, Paris. Perroux, F. (1965) Les techniques quantitatives de la planification. P . U . F . , Paris.

16. Economic Development Policy in London William

Lever

16.1. Introduction Intervention in local and regional economies in Great Britain was until recently the responsibility of central government. Until perhaps ten years ago, almost all the efforts to redistribute spatially the location of economic activity were directed through the Department of Industry's regional policy. This was based upon the identification of areas which required assistance to foster economic development and employment because of their relatively high unemployment rates. A three-tier structure of assistance was developed focusing upon grant assistance to capital expenditure on land, plant and buildings, assistance with labour costs and labour training, and the provision of necessary infrastructure. Initially the programmes targetted almost exclusively on manufacturing industry, and upon the creation of new units of production (either as new firms or new branches of existing firms). Only gradually was the range of assistance extended to existing local manufacturing firms and to service establishments. In addition to this series of incentives a system of controls was operated on both manufacturing (Industrial Development Certificates) and office (Office Development Permits) development away from the assisted areas. Throughout the whole of the 1950s, 1960s and early 1970s, the whole of London was classed as a prosperous region and therefore viewed as a source of employment export to the depressed regions of Britain predominantly in the north and west. The period since the mid-1970s has seen a remarkable reversal. As the national economy went deeper into decline it was realized that no areas could be relied upon to generate employment for transfer elsewhere, it was realized that what had hitherto been regarded as a "regional" problem had become an "urban" problem, and it was realized that the continuing growth of some sectors (commercial services, leisure, high technology industry, and information processing) would not find employment for the types of workers being released by the rapidly declining manufacturing sectors. These changes led eventually to the creation of a set of policies designed to help the inner areas of the largest cities, including London. In some cases these

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policies have b e e n i m p l e m e n t e d by the existing structure of Local G o v e r n m e n t , in o t h e r s they have r e q u i r e d t h e creation of new ad hoc agencies.

16.2. The Changing Structure of London's Economy T h e key e l e m e n t in t h e changing e c o n o m y of L o n d o n since 1950 has b e e n the loss of m a n u f a c t u r i n g e m p l o y m e n t . Consistent d a t a series over a 35-year p e r i o d are not easy to obtain but T a b l e 1 uses index n u m b e r s to indicate t h e e x t e n t of t h e e m p l o y m e n t decline. Total e m p l o y m e n t rose by 10% b e t w e e n 1951 and 1961 a n d only b e g a n to decline significantly a f t e r 1966. M a n u f a c t u r i n g e m p l o y m e n t maint a i n e d its 1951 level t h r o u g h t h e 1950s but declined sharply a f t e r 1961. T h e a v e r a g e a n n u a l r a t e of j o b c h a n g e in L o n d o n was + 1 8 000 in the 1950s, declined to —34 000 in t h e 1960s mostly in m a n u f a c t u r i n g , stayed at this level in the 1960s, and has f u r t h e r d e t e r i o r a t e d to - 6 0 000 in t h e 1980s. In s o m e periods, such as the early 1970s t h e r e w e r e e m p l o y m e n t gains in services, but since 1974 this sector t o o has b e e n losing j o b s ( B u c k , 1984). T a b l e 2 shows the absolute m a g n i t u d e of j o b loss f o r 1951-81 by sector. Table 1: Employment change in London, 1951-1983

1951 1957 1961 1966 1971 1976 1981 1983

Total employment

Manufacturing employment

104.3 107.3 110.0 109.5 100.0 94.2 90.5 87.4

131.3 n.a. 131.6 119.0 100.0 75.7 65.3 58.6

Source: Buck, 1984 F o r t h e 1950s s o m e m a n u f a c t u r i n g sectors e x p a n d e d but a n u m b e r of t h e old traditional industries such as clothing and f u r n i t u r e e x p e r i e n c e d substantial decline. In t h e service sector t h e r e is generally g r o w t h , especially in b a n k i n g a n d finance, and in professional services. A f t e r 1961 all t h e m a n u f a c t u r i n g sectors lost e m p l o y m e n t a n d t h e c o n s u m e r services also declined, reflecting L o n d o n ' s declining resident p o p u l a t i o n . T h r o u g h o u t t h e 1970s t h e decline in m a n u f a c t u r i n g c o n t i n u e d in all sectors: by 1981 only two m a j o r sectors, electrical engineering a n d t h e m a n u f a c t u r e of m e t a l goods h a d declined by less t h a n 5 0 % c o m p a r e d with 1951 e m p l o y m e n t totals

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and the greater part of this decline had occurred in the last decade 1971-81. In services, there was continued growth of banking and finance, and of professional services, but all other sectors declined. Shift-share analysis has been used to demonstrate that London's economy, at least when measured in terms of employment, performed significantly worse not only than the national average when compared on a sector by sector basis, but also significantly worse than the other major British conurbations such as Clydeside, Tyneside and the West Midlands (Danson, Lever and Malcolm, 1980). Indeed London, unlike some of the other major cities in Britain, has a significantly positive structural component not only overall (reflecting the predominance of service activities in the capital) but also Table 2: Employment change in London, by sector (thousands)

Agriculture Mining Food, drink Chemicals Metals Mechan. eng. Instrum. eng. Elec. eng. Shipbuilding Vehicles Metal goods Textiles Leather Clothing Bricks, etc. Timber, furniture Paper, printing Other manufacturing Construction Gas, elect., water Transport Distribution Insurance, banking Professional services Misc. services Administration

1951

1961

1971

1981

17.1 2.7 128.2 95.9 28.8 161.1 54.0 183.0 13.3 100.5 81.6 26.8 21.5 177.4 33.1 89.9 173.3 80.5 283.2 85.2 420.3 617.4 186.9 293.1 612.5 317.1

11.6 3.7 121.7 93.9 26.0 180.1 65.5 217.2 10.7 101.9 83.5 22.8 16.4 128.4 36.8 80.6 195.2 72.3 280.9 78.1 433.7 663.6 240.0 367.2 648.9 280.9

5.2 4.7 93.6 82.6 21.4 135.9 37.9 165.7 5.7 66.0 63.6 17.8 13.1 90.0 23.4 53.8 159.2 52.5 249.6 62.3 422.2 558.7 279.0 434.1 618.4 316.0

2.0 5.0 69.0 45.0 12.0 68.0 22.0 115.0 1.0 45.0 45.0 7.0 4.0 31.0 10.0 28.0 118.0 27.0 162.0 45.0 374.0 477.0 463.0 570.0 451.0 315.0

1082.2

650.0

4032.2

3513.0

Total manufacturing

1448.9

1453.0

Total

4288.3

4490.0

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in manufacturing for most years in the 1960s and 1970s. Over that period the employment total in manufacturing might have grown by 0.3% per year had each sector in London performed as well as its national counterpart. In reality the economy of London declined by 2.4% per annum in employment terms relative to what one would have predicted given its industrial structure. The massive job loss in manufacturing from 1.45 million in 1961 to 650 000 in 1981 and an estimated 583 000 in 1983 has a number of explanations. Studies of industrial decline in London covering the 1960s and early 1970s showed that the largest component in the job loss was firm deaths and plant closures (as opposed to outmigration of plants or in situ decline of non-mobile, continuing plants) (Dennis, 1980; Gripaios, 1977) and a more recent study (North and Leigh, 1983) confirms that this trend continued in the period 1976-81 in Inner London. This latter however, drew attention to the fact that the major component in employment decline in Outer London in this period was employment displacement in surviving plants in association with rationalization, restructuring and labour shedding in large plants whose employment levels had been relatively stable prior to the mid-1970s. Although shiftshare analyses appear to show that London has a relatively favourable industrial mix, North and Leigh (1983) point to the fact that th e firms and subsectors actually located in London were often amongst the most backward, concentrating upon the most mature products, towards the end of the product life cycle, for which demand has generally been weak in the longer term or because of underinvestment in the higher technology branches of sectors, thereby weakening their competitive position. Enterprises in London have also suffered a number of problems in local factor markets. A number of studies have shown that the poor quality and limited range of premises, together with the relatively high cost of industrial floorspace, have made it difficult for firms to compete with those outside London. Fothergill, Kitson and Monk (1982) have shown that London experienced a 12% decrease in industrial floorspace in 1967-78, compared with a 10% increase nationally, a factor which they ascribe to the increased competition from higher rent paying commercial office usages. Evidence on labour supply problems is ambiguous. During the period 197679 when demand was quite strong there was some evidence of labour shortages in some industries such as electronics and craft furniture, but since 1979 the generality of the recession has ameliorated these problems to some extent although there remains evidence of a preference for employment in white-collar services where wages are at least at the same level and working conditions are usually preferable. The impact of the decline in manufacturing is most clearly seen in rising unemployment. Even the growth of employment in some services does not achieve a corresponding decline in the registered unemployed totals as recruitment into these expanding sectors is most usually achieved from labour pools who are not the registered unemployed of London - namely, females returning to employment and previously unregistered as unemployed, school-leavers and those leaving tertiary.

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Sources: LBS, 1980; LBS, 1983, A Review of Unemployment. Jobs and Industry Committee, 29/3/1983, Item 80.

education, and commuters resident from outside the GLC area. Figure 1 gives an indication of the rise in the rate of unemployment in London from 1971 to 1982. In 1971 the British male unemployment rate was approximately 4.3%, by 1979 it was around 6.8%, by the end of 1982 it was 16.0%. The corresponding rates for the GLC area were 2.3%, 4.4% and 12.2%, consistently below the British average. What is significant, however, is the male unemployment rate for the Inner London boroughs. Figure 1 gives the rate for one typical borough, Southwark, where the rates are 3.6% (i.e. less than the British rate in 1971), 8% in 1979, and 20.4% in 1982. Even despite the continuing population loss the Inner London unemployment level trebled between 1979 and 1983, whilst the proportion of unemployed out of work for more

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than a year increased from 25 % to 35 %. Male unemployment rates in the worst inner city boroughs such as Hackney and Tower Hamlets are now approaching 30.0%, and unemployment rates amongst young males are approximately 40.0%, despite the fact that the national Youth Training Scheme has the effect of removing very substantial numbers of young unemployed from the official register for periods of up to one year and therefore excluding them from the calculation of the rate. By early 1985, 37% of Inner London's registered unemployed had been out of work for over one year: this figure in addition to conveying an impression of the psycho-social damage done by long-term unemployment also has financial implications, as for most unemployed the rate of state benefit received by the unemployed declines over time and drops sharply after one year.

16.3. Economic Policy in London In describing and evaluating policies for economic regeneration within London it is useful to distinguish between those which are implemented by the existing structure of local government, namely the Greater London Council and the boroughs, and those which are implemented by external agencies such as the Department of the Environment. A number of commentators have also categorized policies in terms of the amount of intervention which has been involved in the policy (Boddy, 1984; Miller and Miller, 1982; Lawless, 1981). The least level of intervention are those policies described as "market-based". These take as their rationale the assumption that the interplay of market forces will in the long run suffice to achieve the restructuring of a local economy. In this model the most competitive firms will prosper and expand (albeit not necessarily in terms of employment) and local authority's role is to ensure that local constraints in factor markets (labour, capital or space) are removed. Local authorities in this way allow entrepreneurs to take decisions based on competitiveness and profitability and, if necessary, intervene to facilitate the corporate decision even if this means a reduction in employment. The second approach we may term "neo-Keynesian". This too is concerned with improving efficiency and competitiveness but places greater emphasis upon saving and creating jobs in the short term for reasons of equity. It recognizes the need for a greater level of intervention by local government which might become involved for example in subsidizing uneconomic firms to assist them through periods of distress because of their importance in the local economy both through direct and indirect multiplier effects. These subsidies may take several forms such as the provision of start-up capital to new firms, grant assistance for capital expenditure projects and subsidy on rents for industrial premises. The third approach has been termed "socialist" in that it represents a much higher level of intervention and takes as its starting point the needs of workers rather than firms. It therefore uses resources

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released in the restructuring process for socially useful purposes and bases investment decisions upon social criteria defined by the workers and communities generally.

16.4. The Neo-Keynesian Approach Local authorities had generally been involved in physical, rather than economic planning prior to the 1970s. Their concern was generally with the physical environment and throughout the 1960s there was substantial criticism of the trend for urban renewal (house clearance, road-building, etc.) to be counter-economic. In some cases industrial premises were removed and the. costs of relocation proved unacceptably high to many inner city businesses: in many more cases the uncertainty attaching to long-running discussions over urban motorway programmes, the loss of local labour forces, and the disruption of the local market for products caused a severe attrition of the inner city small firm sector. The early 1970s saw a rapid increase in the attention paid by local authorities to economic policy with efforts directed in three main areas (Boddy, 1982; Young and Mason, 1983). Firstly, there was a major growth in the provision of sites and premises for industry, particularly small units for new enterprises. By 1974, three quarters of local authorities in Britain were offering this type of assistance. Secondly, local authorities were undertaking the specific promotion of sites and locations, usually with Economic Development Officers in attempts to win inward investment. Lastly, about a third of local authorities were offering "soft" loans and grants to small businesses to offset capital expenditure on buildings, sites, and machinery, and less commonly to assist with operating costs. This activity had been funded in a variety of ways including the Urban Programme, Section 137 of the Local Government Act of 1972, the 1975 Community Land Act (until 1983) and by drawing upon rates balances and mainline programmes.

16.5. The Urban Programme, 1978 The major change, in London and elsewhere, came about in 1978 with the passage of the Inner Urban Areas Act. This created a complicated hierarchy of small designated areas in which local authorities would channel central government finance into economic, social and environmental projects. The three tiers of the hierarchy in London are illustrated in Figure 2 which lists the Partnership, Programme and other Designated Authorities together with the undesignated authorities. It is clear from the figure that a three-zone model of London has been applied with an inner-city/ west-end relatively affluent area (Kensington-Chelsea-Westminster-City) sur-

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rounded by an almost complete ring of areas in receipt of some form of assistance, and this in turn surrounded by a complete ring of outer boroughs, none of which receive assistance. The schemes have two elements - one is the use of increased financial assistance, the other is the development of a mechanism to co-ordinate intervention by a wide range of public sector agencies and departments of local government. The climate when the Partnerships and Programmes were set up was one of optimism. For example, the Hackney-Islington Partnership Strategy (August 1978) included these three objectives: (i) halving the net rate of decline in firms and job opportunities by the end of 1982 (ii) reducing resident unemployment levels to at least the London average by the end of 1982 (iii) raising average household incomes to the GLC average during the 1980s By 1983-84 London received about £70M (at 1981 prices) under urban programme grants, as Table 3 shows. There is a clear relationship between the authority's status, the amount received and the proportion going on economic and employment projects as opposed to social and environmental projects. The powers granted to local authorities under the Inner Urban Areas Act have placed a strong emphasis on the property needs of small businesses. Apart from powers to assist in the establishment of worker co-operatives in Designated Areas (Section 3 of the I U A A ) almost all the powers relate to loans (or grants to small firms towards interest) for land acquisition and site preparation, or to rent grants to enable new leases to be taken out in areas which have been declared Improvement Areas. Loans or grants can be made available towards environmental improvements, and grants of up to 50% are available towards the conversion or modification of industrial or commercial properties. Some elements of the Urban Programme in London have received approval, but on balance criticism has outweighed approval in a number of respects. On the positive side, there have been real improvements in environmental standards in areas within the Designated Areas and there have been some innovative developments on the economic side such as the Hackney Fashion Centre. The administrative structures set up to deliver urban programme assistance have been criticized but they have included the voluntary sector in a new way and provided a means by which local communities have been able to inform local authorities of their wishes. Within the Partnership areas some 800 groups receive UP funding in projects dealing with social services, community facilities, health, and information and advice schemes (GLC, 1984). Criticisms of the Urban Programme assistance in London are of four major types. The first is that whilst Greater London has received about £300M between 1979/80 and 1983/84 under the Urban Programme (at 1981/82 prices), five times this amount, £1530M, has been lost to the same area by the reduction in the Rate Support Grant (GLC, 1984). Table 4 shows that in Inner London the £260M of UP money received

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Table 3: Urban Programme Allocations, London, 1983-84 (£M 1981-82) Total allocation

Partnership Islington Hackney Lambeth Programme Hammersmith Tower Hamlets Brent Wandsworth ODD Ealing Haringey Greenwich Lewisham Southwark Newham Traditional urban prog.

10.1 10.4 12.8

Employment-related projects

ER projects as %age of all

3.6 3.3 4.0

36 32 31

5.3 1.7 (2.0) 1.5 1.5

1.5 1.0 0.9 1.4

28 62 58 94

0.7 0.8 0.5 0.6 0.5 0.5

0.7 0.8 0.5 0.6 0.5 0.5

100 100 100 100 100 100

1.4

10

(3.8) (1.2) (2.9) (1.5)

13.8

Figures in brackets refer to LDDC expenditure.

from central government was more than offset by a loss of £860M of RSG money (relative to what would have been received had 1979/80 funding from RSG been maintained in real terms). In Outer London, where a much smaller area is eligible for UP benefits, receipts of £35M are offset, in a ratio of twenty to one, by the decline of £670M in RSG. The Rate Support Grant system in the UK is the mechanism by which central government seeks to equalize local authority income, relative to demands for rate-borne expenditure. In practice recently, central government, anxious to reduce public sector expenditure, has clamped down upon local authority expenditure by reducing in real terms the value of RSG, whilst at the same time using it as a sanction against local authorities who fail to implement central government policy, as for example in the case of raising public sector housing rents. As most of the GLC boroughs are Labour controlled they have a reluctance to implement central, Conservative, government policy and have suffered substantial cuts to RSG, as Table 4 shows. The consequence of this has been that UP expenditures have tended not to be used on innovations in economic development and employment but to reduce the inroads on social and environmental services provided out of the rate base. The second criticism of the UP in London relates to the timing of projects and the

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Table 4: RSG and UP Funding to London, 1979/80 - 1983/84 (£M 1981-82) Reduction in RSG (%)

Cumulative RSG loss over 1979/80 level

Cumulative UP gain since 1979/80

UP/RSG loss as %age

Partnership Islington Hackney Lambeth

52.6 26.7 37.2

84.7 50.2 81.4

43.0 46.0 50.8

50.8 91.6 62.4

Programme Hammersmith Tower Hamlets Brent Wandsworth

27.3 44.7 27.3 37.1

40.9 63.0 55.4 89.3

21.2 20.3 4.1 3.6

51.8 32.2 7.4 4.0

ODD Ealing Hâringey Greenwich Lewisham Southwark Newham

12.4 28.3 49.7 39.8 47.8 5.8

24.9 48.3 66.5 83.5 85.3 14.6

2.3 3.3 30.4 11.5 34.6 25.1

9.2 6.8 45.7 13.8 40.6 171.9

Inner London Outer London GLC

43.5 23.5 31.5

864.8 667.8 1532.6

261.4 34.8 296.2

30.2 5.2 19.3

extent of future uncertainty. Many of the first tranche of projects initiated three, four and five years ago are now coming to an end. Thus new projects have to be brought forward merely to retain the status quo and current employment: any further job creation requires additional projects. For example, in March 1984 a total of 107 voluntary projects in Hackney, Islington and Lambeth, with a total value of £2.9M, expired. It was initially assumed that these projects would on expiry be adopted by mainline funding programmes - e.g. in housing, education and social work services but, as we have already seen, local authorities are in considerable difficulty sustaining existing levels of services without adopting projects from UP. The DoE, as the governing department in charge of the UP, is insisting on an increasingly large capital element in UP projects as opposed to revenue elements. In consequence many projects which provide employment, but require little in the way of capital expenditure, are finding it difficult to meet the DoE targets of a 2:1 capital:revenue ratio in the Partnerships and 3:1 capital: re venue ratio in the Programme authorities. The voluntary programmes, especially those with a high ethnic minority content, are being designed to switch UP assistance to the small business sector, particularly in its

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emphasis on premises, sites and plant, so that urban policy is coming to resemble more closely regional policy of the 1960s. The third major criticism of the Urban Programme is that, even when it is directed at industry, the needs of the client groups are not well served and the amount of leverage achieved by UP expenditure is small. Data from a panel of firms (North and Leigh, 1983; Leigh, North, Gough and Escott, 1982) suggests that financial assistance in the form of loans or grants is not a reliable instrument of local economic policy. Many local authorities regard themselves as lenders of last resort, supporting the more marginal projects which have failed to gain the financial backing of other institutions such as banks. It is also argued that many local authority staffs lack the financial or business expertise to enable them to judge the economic viability of projects put to them. Thus the success rates for economic assistance made to local businesses is likely to be low, and the level of financing is likely to be inadequate to rectify fundamental weaknesses in the structure of many firms. It is extremely difficult to assess the impact of financial assistance to local firms because employment changes result from a wide variety of factors of which the level and type of assistance is only one. Most authorities attempted to keep expenditure within a certain range, as the Inner Urban Areas Act specified a maximum level of £1000 per job created, but it has been increasingly difficult to adhere to criteria of this type. Lastly, the spatial scale at which assistance is being offered presents problems. There is a danger that the authorities are all competing for the same stock of mobile investment and employment creation. Public monies are therefore being used simply to spatially redistribute a fixed stock of employment. Lastly, if local authorities were to take a share in the equity of companies, it would offer them the opportunity to influence managerial decisions in a way which the current system of loans and grants does not. Fourthly, the U P has been criticized on the grounds that although the Partnerships and Programmes were designed to integrate a range of policies, there remains a considerable conflict between the agencies of local government and central government. Local authorities remain critical of central government's perceived inability to describe or predict the local impact of national policies, whilst restricting their role in the inner cities to project approval. A statement made by the Borough of Hackney to the Department of Environment Committee reviewing the operation of the policies typifies the difficulties which have emerged: "Instead of becoming a vehicle for greater co-operation between the two levels of government, the detailed scrutiny of every single project, however small, by the D o E is a constant source of conflict and suspicion . . . the effectiveness of the Partnership is being severely restricted by the high-handed interference of central government, the straitjacketing of local initiatives and priorities by restrictive regulation, the sheer wastefulness of staff time due to red tape and duplication, and the lack of sufficient enabling legislation."

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16.6. Premises and Property There is considerable evidence that the quality and size of premises within London have acted as a constraint on industrial development, especially during the period 1976-79. Had premises been more readily available, and of a better structure, then firms might have been able to expand output, introduce new products and new production processes and thereby increase productivity and competitiveness. Local authorities have had a long-running interest in the provision of industrial and related premises dating back to the creation of industrial estates in the 1940s and 1950s. Local authority construction and letting of premises has been a relatively uncontentious element in economic policy primarily because it has led to the creation of fixed assets which, even if tenant businesses fail, remain as an attractive factor to other enterprises: in this respect they differ from capital grants and loans which are irretrievably written off after business failure. For most London boroughs the debate has centred on whether the local authorities should be the direct providers of industrial accommodation or whether they should seek to encourage the private development of accommodation by planning and fiscal policies. Changes in central government policy, however, have influenced the recent outcome of this debate. Although commentators (e.g. Leigh, North, Gough and Escott, 1982) have stressed the advantage to local authorities of maintaining control over a part of the industrial stock of premises, the current central government policy has been one of giving tax incentives to the property developers to increase the rate at which premises were provided. Consequently local authorities have increasingly tried to attract developers into their areas by the use of leaseback agreements which have the effect of guaranteeing rents to the developers for a period of years after the completion of the site and premises. The range of premises required to facilitate economic development, however, is rather wider than the private developers are likely to provide. A simple policy of the provision of standard units of flexible design is inadequate. There is undoubtedly a need to provide a stock of old, cheaply converted and cheaply available premises for small and new enterprises in addition to new and rather more sophisticated buildings for high technology sectors. The provision of the latter, though, may create a vacancy chain effect and at the end of the chain the reduction in demand may alleviate pressure on rates on the poorest building stock (Valente and Leigh, 1982). Local authorities, having become increasingly dependent upon private developers for the provision of premises, have correspondingly had to create schemes of temporary financial assistance to firms in order to alleviate private sector rentals. There are a number of schemes to offer rent subsidies and rent-free periods to firms facing the additional cost of relocation or moving into new premises. Such palliatives, however, are likely to have only a limited effect as long as pressure on land from commercial usages remains high and rents overall remain correspondingly high. The G L C report (GLC, 1984) concluded that: "There is, however, accumulating evidence that property-biased methods of market interven-

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tion are not in themselves capable of making a major contribution to the task of maintaining even baseline manufacturing employment presence in the inner city."

For example, one recent review to a Partnership Committee found that between 1977 and 1981 a local Industrial Development Programme had created 132 000 sq. ft. of industrial floorspace which represented 13% of all new floorspace developed over that period. Some 332 people were employed in this IDP floorspace, but only 209 jobs were actual new creations or retentions, as others were short-distance transfers, and of this 209, 75% would have located or remained locally even without the floorspace. Thus perhaps only 40-50 jobs - either new or maintained - might be attributed solely to the IDP floorspace programme.

16.7. Urban Development Grant In 1981 the government set up an advisory panel of managers from major sources of finance (banks, pension funds, insurance companies, etc.) to advise it on how more private sector finance could be attracted to the inner cities. The major recommendation of this Financial Institutions Group (FIG) was the introduction of the Urban Development Grant initiative. Under this scheme, which was based on the American U D A G programme, the intention is to attract private capital into inner city areas on projects which without such assistance would be unprofitable. Individual projects are assessed, and if acceptable, 75% of costs to the local authority can be recovered from central government. Only local authorities which have designation under the 1978 Inner Urban Areas Act are eligible. Projects approved cover a wide range including Table 5: U D G Allocations, London 1983-84 U D G award (£000) Brent Ealing Greenwich Hackney Lambeth Southwark Wandsworth Tower Hamlets Lewisham Islington GLC Total

1 822 365 436 2 532 1 035

1 800 3 017 120 590 2 700 363 14 780

Total cost (£000)

Gearing

11 000

1:9 1:2

1 200 1 13 6 11 20 1 3 9 1 80

500 574 114 050 096 160 363 250 903 211

1:2

1:4 1:5 1:5 1:6 1:9 1:5

1:2 1:4 1:4

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the refurbishment of industrial premises, construction of industrial and warehousing accommodation, improvement of difficult-to-let council housing, recreational, •leisure and community facilities, and so on. Nationally, the expenditure on U D G for 1983-84 is about £60M of which almost £15M is earmarked for London (Table 5). It is hoped nationally to achieve a 1:4 public:private ratio, and as Table 5 shows, the London schemes are close to this. Three-quarters of the schemes represented in Table 5 are for the construction of, or refurbishment of industrial premises for small workshop or factory unit space. Perhaps significantly, the most attractive schemes in the list in Table 5, namely the Manor Park and Willesden Green projects in Brent, and the Clapham Junction scheme in Wandsworth, are shopping and office developments where the ratio is in the range 1:6-1:9. The lower rates of leverage, in the 1:4 range are typically those of industrial premises. To date no estimate of employment effects is available.

16.8. A Case Study of Local Authority Assistance: Southwark It is interesting to examine the job impact of the programmes of local authority (i.e. Borough) level within London. For this case study we select the Borough of Southwark at least in part because it has rather better developed monitoring procedures than most Boroughs: "The boroughs vary considerably in the extent and depth of their research into their local economies. Some, most notably Southwark, have gone much of the way towards establishing continuous and detailed monitoring of local industry" (Damesick, Howick and Key, 1982: 140).

Southwark's real interest in local economic development began around 1975 when the local unemployment rate began to rise steeply (Figure 1) and reports suggested a future rate of industrial job loss of around 20 000 per annum. The policy developed in two phases. The first covering 1976-79 was short-term and designed to stabilize the current situation; the second, covering 1979-85 was designed to create a basis for growth. Some 5000 new jobs would be created and an unspecified number maintained. The policies were the familiar mix of providing premises, mainly small-sized, direct financial assistance, with the formation of a £3M Southwark Fund for the Development of Industry and Commerce, and use of Section 137 of the 1972 Local Government Act, and the declaration of three Industrial Development Areas under the powers of the 1978 Inner Urban Areas Act. These were supported by improving the local services, infrastructure and facilities and by the use of Manpower Service Commission schemes for improving industrial labour training. Turok (1984) provides a valuable and detailed account of the impact of the financial assistance programme. Between 1978 and 1982, 119 firms employing 4098 workers

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received £4.4M in grants and loans, but of these only 56 firms received amounts over £15 000, a sum totalling approximately £4.0M. Of the 56 firms, 37 continued in business until 1984 and 19 closed with a loss of 754 jobs. Of the 37 firms four were excluded from the study and the remaining 33 had a total employment before receiving assistance of 1694, and by 1984 employed 1665, a loss of 29 jobs. A similar exercise was conducted for those firms receiving assistance with premises and there the net effect was a loss of 219 jobs (although some of this is in firms who received assistance with both premises and finance). The outcome would appear to be a depressing deterioration in the economic position of the firms who did receive assistance. However - surviving firms were asked to estimate the net effect of receiving benefit: of the 38 assisted firms still operating, 21 said they had been unaffected, but the other 17 indicated that 50 jobs had been created and 114 jobs saved (a gross effect of +164 jobs) and 33 jobs had been attracted to Southwark and 74 discouraged from moving away (a locational effect of +107 jobs). It is clear that the capacity of local authorities to make major changes in their local economies, relative to both the magnitude of their aspirations and the problem, is small.

16.9 Market-Based Approaches Market-based approaches have been developed largely since the election of a Conservative national government in 1979 and are based upon a belief that the role of local and national government should be to facilitate the operation of the private sector to become more efficient. Within London we can identify two major policy initiatives of this type, the Isle of Dogs Enterprise Zone, and the London Docklands Development Corporation. The Enterprise Zone concept emerged around 1978 based on the concept of creating Hong Kong-like economies where the private sector was permitted to flourish with the minimum of regulation. The initial concept would have granted EZs freedom from almost any type of planning conditions, only a limited role for Employment Protection Act provisions (these relate to redundancy compensation and "unfair dismissal" tribunals) and a minimal level of anti-pollution, health and safety standards. When the EZs were actually announced in May 1980 they fell well short of this level of relaxation of industrial controls. Their major advantage to firms located within them was their exemption from rates for periods up to ten years, exemption from Land Development Tax, faster planning procedures and exemption from Training Board levies. London's E Z was located in the Isle of Dogs north of the River Thames in Tower Hamlets where there had been a massive reduction in port and port-related activities and employment. The Isle of Dogs E Z was designated in May 1982, a year later than the other ten EZs in the first round of designation, and

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this makes it less easy to assess its impact. The DoE consultants identified 353 jobs in the E Z , or scheduled to come to it by late 1983, but not all of these are attributable to the area's E Z status: for example, over half of these jobs are in one plant which had already an agreement to move to the area with the Port of London Authority before the E Z was designated. By February 1984 the London Docklands Development Corporation was estimating 1000 jobs in the E Z but this figure has been seriously challenged by local groups (e.g. AIC/JDAG, 1984). A further major criticism of the E Z is that it merely achieves short-distance transfers of existing employment and it has been argued (Morphet, 1984) that other developments in Tower Hamlets have been deferred in order to give the E Z the maximum opportunity to attract development. Savings on rates may be offset by rising rents from property developers in the area, and businesses in the surrounding area are likely to complain of unfair competition. The Isle of Dogs E Z has a further problem, unshared by the other British EZs, namely that it has been absorbed within the London Docklands Development Corporation. Thus whereas the other EZs are operated by the host local authorities and therefore have some measure of democratic accountability, the Isle of Dogs is operated by a non-accountable Development Corporation. The L D D C grew out of the suggestion in the 1977 White Paper on the Inner Cities that a New Town type of administrative structure might be the most appropriate mechanism for wholesale redevelopment of inner city areas. Two Urban Development Corporations were declared in May 1980, one in the London Docklands and the other in inner Merseyside under the 1980 Planning and Land Act. The annual budget of the L D D C is currently running at around £40M of which in 1983-84 the largest element was in transport and land servicing (£13M), followed by environmental improvement (£6M), community and industry support (£5M) and land reclamation and land acquisition (£4M each). The net effect of the L D D C is difficult to discern but undoubtedly a substantial number of short-term construction jobs have been created, estimated to be around 300. However, the major employers attracted to the area or expected include 2000 transferred jobs in newspaper publishing and 200 administrative jobs, to set against an estimated loss of 1500 jobs in a wide range of manufacturing and processing industries. The overall impression given by critics is that the L D D C may attract substantial employment and investment to what is a highly accessible inner city site, but that these jobs are unlikely to be filled by local residents. Meanwhile pressure on space, and rising rents, are undermining the existing stock of local-employing small firms who are either leaving or closing. Much of the public sector money in the L D D C is being used to prepare and service sites and thus may well pass into private corporate profits of the new occupiers.

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16.10. The Socialist Approach The socialist approach to economic development in London is largely attributable to the election in 1981 of a left-wing Labour administration for the Greater London Council. Whereas prior to that there had been an attempt to administer Conservative central government policy after 1979 and Labour government policy before that, after 1981 a new, socialist economic strategy was developed. This had a number of basic principles, namely (i) the strategy would be directed primarily at the needs of workers rather than private capital, (ii) resources shed in restructuring would be used constructively in the meeting of socially useful ends rather than left idle, and (iii) the role of local authorities would be to strengthen the influence of communities and labour organizations in framing investment strategies. The GLC has clear difficulties in pursuing this type of strategy within a national economy still dominated by market processes. However, the major step has been the creation of the Greater London Enterprise Board, formed in July 1982 and funded from local rate income (the G L C can raise up to £40M per annum from Section 137 powers, and a further £30M from its own superannuation/pension fund scheme). GLEB's priorities include: (i) an emphasis on restructuring manufacturing rather than service sectors (ii) involvement with large and medium-sized firms rather than the small firm sector (iii) encouraging producer co-operatives (iv) the use of the GLC's own purchasing power (v) the development of a series of technology networks to create information banks on socially useful products (vi) municipal enterprise to create social infrastructure (such as cable television, domestic heating schemes, etc.) (North and Leigh, 1983) In the shorter run GLEB has made a number of opportunistic deals with major companies at the point of closure. For example, when Austin Furniture with 400 employees was placed in the hands of the Receiver, GLEB was able to save 150 jobs by buying the factory for £1.25, releasing, and providing a revenue grant of £20 per week per employee, provided that unions were represented at board decisions. A second example is provided by Associated Automation, a firm threatened with closure and bought out by GLEB to create a worker co-operative with 182 jobs engaged in new product development in a high technology field. The socialist alternative thus works at two levels: one with a macrostrategy for restructuring the economy, the other at the more immediate level of the threatened establishment. The GLC's change in strategy can effectively be traced to the 1981 GLC elections. It is worthy of note that the Borough elections in 1982 produced a number of much more left-wing administrations who have also adopted radical, alternative economic strategies: Southwark, for example, which we used as a case study, effectively

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terminated their "neo-Keynesian" approach after a more radical administration was returned in 1982.

16.11. Conclusions: The Future It is difficult to predict the future shape of economic development policy in London, for it depends upon a number of uncertain factors. It is worth while to make five basic points in the light of recent experiences. Firstly, just as regional policy in Britain was always most successful when the national economy was growing, so with urban economic policy. The deepening recession since 1979 has not only made an economic policy for the inner cities more necessary, it has made it more difficult to operate successfully. It is not easy to identify ways in which strengthening local urban economies can create net additional employment or output at the national level (Lever, 1983). The justification for regional policy, particularly in the 1960s, was not merely that greater spatial equity was achieved by relocating employment away from the south and midlands to the west and north, but that there was a net addition to the national economy by using spare resources and relieving pressure on space and labour in the most expansive regional economies. Recent reviews of regional policy (Department of Industry, 1984) have increasingly stressed the social rather than the economic benefits of seeking to alleviate locally high unemployment rates: it rather looks as though urban economic policy must be viewed in the same light. All the evaluative exercises conducted on urban policies such as those in London have a tendency to draw attention to the small numbers of real new job creations: in large measure the more "successful" elements in the policies either achieve short-distance transfers (e.g. the Enterprise Zones) or assist in creating small businesses which are likely only to replace existing businesses offering the same product or service. In this case only by policies aimed at demand management are the businesses created likely to be viable in the longer term. Secondly, many of the policies being developed have an explicit spatial dimension the incentives and assistance are only available within a defined area. However, such area based initiatives appear to take little or no cognizance of the shape of local labour markets. In a much earlier study of local labour markets in London, Metcalf and Richardson (1976) drew attention to the lack of correlation between unemployment rates at the Borough level and the numbers of redundancies and vacancies declared in each Borough, a phenomenon which they attributed to the openness of local labour markets. Similar studies in other cities have demonstrated that the benefit of employment creation in area based initiatives leaks away from the area very rapidly, both as direct employment and in the form of income expenditurebased secondary employment. Areas for receipt of assistance should therefore be

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c h o s e n for their potential attractiveness to businesses r a t h e r t h a n merely b e c a u s e of locally high u n e m p l o y m e n t rates. Thirdly, despite the political stance of t h e G L C and s o m e of the B o r o u g h s , t h e r e is an increasingly p r e v a l e n t view, at least as discernible in policy, that the public sector a l o n e does not have the resources, or in some cases t h e expertise, to p r o v i d e additional e m p l o y m e n t at a sufficient rate. In c o n s e q u e n c e , increasing use is being m a d e of schemes designed to lever private sector m o n e y into u r b a n d e v e l o p m e n t , t h e U D G p r o g r a m m e being t h e best e x a m p l e . F r o m this two p r o b l e m s e m e r g e . Firstly, to be most efficient the public sector e x p e n d i t u r e should w o r k on the marginal p r o j e c t : d e v e l o p m e n t s which would have gone a h e a d anyway d o not r e p r e s e n t an efficient use of public m o n e y . Secondly, t h e r e is concern that financial incentives by lowering o p e r a t i n g costs may just be being c o n v e r t e d into private shortr u n profits r a t h e r t h a n c o n v e r t e d to long-run investment and e n h a n c e d competitiveness. A good e x a m p l e of this latter p r o b l e m is the raising of rents by p r o p e r t y o w n e r s inside E n t e r p r i s e Z o n e s ( T a l b o t , 1984). F o u r t h l y , the d e v e l o p m e n t of u r b a n policy in L o n d o n and elsewhere is m a k i n g increasing use of t h e voluntary a n d c o m m u n i t y sectors. T h e failure of c o n v e n t i o n a l business to sustain e m p l o y m e n t levels and the fact that cutbacks in public sector e x p e n d i t u r e have restricted the public sector's ability to c o m p e n s a t e have e n c o u r aged a wide range of initiatives in which local authorities use p u m p - p r i m i n g f u n d s to set u p c o m m u n i t y - b a s e d schemes of e m p l o y m e n t . T h e s e may create e m p l o y m e n t , they may (viz. the C o m m u n i t y P r o g r a m m e ) o f f e r services to the local c o m m u n i t y which it would not b e possible to provide on a viable commercial basis, and in s o m e cases they may e n h a n c e c o m m u n i t y spirit. W h e t h e r what is being c r e a t e d , h o w e v e r , is a viable business is o p e n to considerable d o u b t . Lastly, the e x a m p l e of L o n d o n quite clearly shows the i m p o r t a n c e of the political nexus within which policy is f o r m u l a t e d and delivered. W h e n legislation is e n a c t e d by a national g o v e r n m e n t of o n e political character but requires i m p l e m e n t a t i o n by local-regional g o v e r n m e n t with a totally different political complexion, t h e n the least that will h a p p e n will be zero (e.g. S o u t h w a r k ' s refusal since 1982 to use I n n e r U r b a n A r e a s A c t p o w e r s ) and the worst that will h a p p e n is outright conflict as in the case of the G r e a t e r L o n d o n Council.

References Association of Island Communities/Joint Docklands Action Group (1984) Stifling the Island's Enterprise. AIC/JDAG, London. Boddy, M. (1982) Local Government and Industrial Development, Occasional Paper No. 7. School for Advanced Urban Studies, University of Bristol, Bristol. (1984) Local Economic Employment Strategies, in Boddy, M. and C. Fudge (Eds.) Local Socialism, pp. 160-91. Macmillan, London.

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Buck, N. (1984) Job Loss in London. ESRC Inner Cities in Context London Project Working Paper. University of Kent at Canterbury, Canterbury. Damesick, P., C. Howiek and T. Key (1982) Economic Regeneration of the Inner City: Manufacturing Industry and Office Development in Inner London, Progress in Planning 18(3), pp. 133-266. Danson, M. W., W. F. Lever and J. F. Malcolm (1980) The Inner City Employment Problem in Great Britain, 1952-76: A Shift-Share Approach, Urban Studies 17, pp. 193-210. Dennis, R. (1980) The Decline of Manufacturing Employment in Greater London, 1966-74, in Evans, A. and D. Eversley (Eds.) The Inner City, pp. 45-64. Heinemann, London. Department of Industry (1984) Regional Industrial Development. Cmnd 9111, HMSO, London. Fothergill, S., M. Kitson and S. Monk (1982) The Role of Capital Investment in the U r b a n Rural Shift in Manufacturing Industry, Industrial Location Research Project Working Paper No. 1. Dept. of Land Economy, University of Cambridge, Cambridge. Greater London Council (1984) Government Policy and the Inner Cities. GLC Inner City Conference, 5 - 6 April 1984. Gripaios, P. (1977) Industrial Decline in London: An Examination of Its Causes, Urban Studies 14, pp. 181-90. Lawless, P. (1981) Britain's Inner Cities: Problems and Policies. Harper and Row, London. Leigh, R., D. North, J. Gough and K. S. Escott (1982) Monitoring Manufacturing Employment Change in London, 1976-1981: The Implications for Local Economic Policy. Report to the Department of the Environment, London. Lever, W. F. (1983) Urban Economic Development Policy and the National Economy. O E C D , Paris. Metealf, D. and R. Richardson (1976) Unemployment in London, in Worswick, G. D. N. (Ed.) The Concept and Measurement of Involuntary Employment, pp. 203-20. Allen and Unwin, London. Miller, C. and D. Miller (1982) Local Authorities and the Local Economy, Town and Country Planning, June, pp. 153-5. Morphet, J. (1984) Area Based Employment Initiatives, in Planning and Employment in London. London Branch RTPI, Working Party on Employment, London. North, D. and R. Leigh (1983) Alternative Approaches to Urban Economic Policy: the Case of London. Paper presented to the Anglo-Canadian symposium on "Strategies for Regional Industrial Diversification and Change", University of Calgary, August 1983. Talbot, J. (1984) An Evaluation of the Enterprise Zone Experiment With Reference to an Empirical Study of the Tyneside Zone. Paper presented to the British Section of the Regional Science Association Conference, 5-7 September 1984, University of Kent at Canterbury, Canterbury. Turok, I. (1984) The Impact of Urban Economic Policy in a Context of decline: a Study of Southwark, London. Paper presented to the British Section of the Regional Science Association Conference, 5-7 September 1984, University of Kent at Canterbury, Canterbury. Valente, J. and R. Leigh (1982) Local Authority Advance Factory Units - A Framework for Evaluation, Planning Outlook 24, pp. 27-35. Young, K. and C. Mason (Eds.) (1983) Urban Economic Development. Macmillan, London.

17. Policies for Urban Economic Development in the Federal Republic of Germany Manfred

Konukiewitz

17.1. Looking Back: Policies for Urban Growth Policies evolve incrementally, and to understand today's policy landscape we have look at yesterday's. A review of urban policies with regard to economic development in Germany should therefore start out with some historical background. A major turning point in West German urban policy was in the late 60's when a sense of an acute urban crisis developed on the background of a traditional physical structure seen unfit for the dynamism of central business district expansion and the new dimensions of automobile and public transport traffic. The urban crisis caused the cities to alarm the public to the impending collapse of urban functions unless a major public effort was undertaken. It should be noted that the crisis was not perceived as one of economic erosion or lack of economic strength, but rather as one of severe imbalances caused by rapid growth. The cities' ills were defined in terms of infrastructural inadequacies demanding physical restructuring on a grand scale, guided by comprehensive development planning and supported by massive public investment. It is not a coincidence that at the same time general economic policy identified an "infrastructural gap" as the major factor hindering the economy from sustaining the unusually high growth rates to which policy makers and the public had become accustomed until the mid-60's. The policy responses by governments on federal and state levels were almost completely non-partisan and flowed out of a wide professional consensus on how to cope with the urban crisis. They can be summarized in 3 elements: (i) Facilitate central business district expansion into adjacent, decaying residential quarters; restructure these neighborhoods through urban renewal programs in order to provide a better environment for and better access to the central business districts. The major instrument towards this aim was the Urban Development Assistance Act of 1971.

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(ii) Take pressure away from the cities by building satellite towns which are selfsubsistent in that they have their own supporting infrastructure at least in the service sector, if possible also in the provision of jobs. Funds and legal procedures from the Urban Development Assistance Act were also applied to these "development areas". Additionally, however, social housing subsidies from federal and Länder budgets were targeted in large numbers for these satellite developments. (iii) Expand public transport systems as well as regional freeways to ease the flow of traffic in urban areas and to increase the mobility of the working population in the region. The objectives behind these various laws and programs were never amalgamated into a single policy document, but they can be viewed as a coordinated package which reflected a political as well as a professional consensus. These policies did not explicitly aim at restructuring the economic base of the cities. However, they did have definite effects on the urban economies at least with regard to the following aspects: - Expansion of the retail trade and consumer service functions of the city cores was facilitated by local planning and governmental funds. - A substantial number of small and medium-sized firms, mostly engaged in industrial production or the traditional trades, were relocated with public assistance from a central urban setting to new industrial developments on the fringes or even in the suburbs in order to eliminate their negative influence on residential or commercial functions. - High public and private expenditures for construction and renewal inflated the size of the construction business, setting the stage for a painful contraction of this sector in the years following 1974. The legislative and administrative activities of the early 70's framed the basic institutional and legal structure for federal urban policy which has since been maintained. However, new perceptions of urban problems generated in the course of that decade brought about changes and re-orientations in the policy objectives, albeit without abrupt turns. By 1975, the issue of suburbanization gained prominence on the public agenda, because the "urban flight" became more visible than ever in the statistical records as well as in the local government treasuries, as local revenues are linked to the government revenues from personal income tax.

17.2. Responses to Urban Economic Decline The issue focus of urban policy shifted again in the late 70's, when problems of urban economic development and adjustment gained political recognition after unemployment rates rose rapidly in some urban areas. The major promoter of urban economic

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development policies was the state of Northrhine-Westphalia which, at the time, started a major effort to improve the economic viability of the Ruhr area cities ("Aktionsprogramm Ruhr"). This effort was triggered by a widening gap between the Ruhr cities and the other agglomerations with regard to economic development: The Ruhr area as the major old industrial center had not only suffered the job losses in the coal mining industry, but was now affected by the crisis situation in the steel industry as well. As a result, unemployment rates rose to levels substantially above the federation-wide average, reaching more than 15% in some cities. What made the situation worse was that these unemployment rates were based on a below average level of labor force participation, thus aggravating an already poor income situation of private households. While these problems concentrated and cumulated in the Ruhr area, they also became visible in other urban regions, such as the Saar area (Saarbrücken/ Neunkirchen) with a similar monostructure in mining and steel production, and the North German coastal cities with the crisis-ridden ship-building industries. For the traditional policy structures in the Federal Republic these new urban problems pose a challenge: - while regional economic policies had hitherto been focussed on economic development of peripheral rural regions, they were now confronted with needs and demands from urban areas. - while urban policies in the past had been primarily concerned with managing and channeling growth, they were now confronted with the need to address urban decline. Interestingly, the initial reaction to these new challenges did not come from departments responsible for economic or urban policies, but from labor market policies. In 1979, a special program for regions with special employment problems was initiated by the Federal Ministry for Labor and financed by federal government and the federal employment agency. At the time of initiation, it became clear that the then moderate economic growth was not sufficient to improve the employment situation in certain rural areas as well as in some urban regions particularly in the Ruhr area. This was not a specifically urban program but one with a large impact on the labor markets in the involved cities. All three sections of this program were limited in funding levels and in time perspective. Section 2 has provided grants to firms hiring unskilled workers or those with long-term unemployment, providing between 70 and 90 per cent of their wages as a public grant for a period of 12 months. Section 3 was basically a public works program which sought to reduce unemployment while at the same time improving the social services in the designated areas. The program sought to provide an extra stimulus to the labor markets in lagging regions and departed in several aspects from the routine programs covered by the

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those two years, while they have remained high in rural areas with a tradition of high unemployment. What is even more important is the change in absolute distribution. In 1983, the unemployed are clearly concentrated in urban regions, while in 1979 this is not yet the case.

12 and above

100 km

Figure 1: Labour Market Development 1979 and 1983 Source: Statistics from the Federal Research Institute for Regional Geography and Regional Planning.

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(ii) The second reason is derived from the electoral arithmetics of government. Urban areas with economic problems do not have much political leverage with a federal administration which perceives its voting base to be mainly in other regions, particularly rural regions. There have been a number of recent instances which have indicated that the rural and agricultural lobby is presently one of the most powerful pressure groups, while others, like trade unions or the National Association of Cities, have lost influence. (iii) The third reason is of an organizational-bureaucratic nature. Spatially targetted economic policy has since 1971 been a prerogative of the Joint Task, combining 11 state governments and one federal government in a slow, unwieldy decisionmaking structure. Because of the basic immobility of the Joint Task the responsible bodies have been slow to address themselves to the new kind of regional problems in the cities, apart from the minor programs which have been pointed out. This is why some of the states most severely affected are increasingly trying to move outside the Joint Task framework in improving conditions for urban economic development.

17.3. Regional Impacts of Sectoral Policies So much for the "official" urban policies in the Federal Republic. But we also have a "hidden" urban policy with much more impact in terms of funding, which isn't being regarded as such because it is billed as "sectoral policy". However, when the economic sectors like coal mining and steel production happen to be concentrated in urban areas, programs designed to aid those sectors must also be considered in terms of their urban impact. Table 2 lists those programs which are not spatially targetted but have high relevance for economically distressed urban areas. Significant effects at least for the economies of the Ruhr cities emanated from major program decisions in energy and coal policy which were taken around 1970, even though the urban dimension was of little relevance in the decision-making process. The substitution of coal through oil severely curtailed the sale and eventually the production of domestic coal, creating massive adjustment problems in the coal regions, i.e. primarily in the Ruhr area. In a series of major program decisions involving the federal government, the state of Northrhine-Westphalia, and the coal companies, a system of subsidies was devised with the objective to maintain capacities for coal production at a minimum level and to make domestic coal competitive on the market with imported coal and other imported energy resources. The strategic rationale was to keep a domestic energy supply system intact and to limit dependence on foreign energy resources. Thus the coal industry became the branch with the largest single bloc of subsidies, most of them supporting the

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Labor Assistance Act. It was an example of an "active labour market policy" favored by the earlier social-liberal coalition. The approach was discontinued by the Kohl cabinet which relied more on global supply-side strategies to boost economic growth, counting on a "spill-over" effect for weak labor market regions. These new challenges did not bring a fullscale revision of economic development and urban policies on the federal level. They have, however, initiated incremental revisions and additions which indicate an increased sensitivity to urban economic development problems. The following policy actions some of which will be elaborated can be named as reflecting the shifting focus: (i) The authorities of the Regional Development Assistance System, a "joint venture" of the federation and the Länder under the Regional Economic Policy Act of 1969, decided in 1981 to initiate a special program for "steel communities" with the purpose of creating new jobs there. A similar program was launched in 1984 for the coastal city of Bremen. Both programs represent a departure from past assistance schemes which favored rural areas with a lagging economy. (ii) The cities and higher levels of government have become more aware of the role which small local firms play in economic development. These firms are often located in or very close to residential neighborhoods, and in the conflict between business and residential functions, policy makers and planners generally have sided with residential uses, as evidenced by amendments to the Federal Building Act or by the tightening of immission standards in mixed urban areas. Meanwhile, efforts are made to improve the prospects of these firms along several lines. A major review of planning and building law is under way with the objective of "streamlining" decision-making and planning procedures, adapting them to the needs of local firms which are often frustrated by a complex planning mechanism. (iii) More implicit than explicit is a re-orientation in the urban renewal policy which has also influenced the federal urban renewal program without, however, any changes in the formal program structure. Whereas previously the relocation of "disturbing enterprises" had been one major goal of renewal policy, favoring the clean and clear separation of industrial, commercial, and residential functions, the current trend is to make these functions more compatible by using technical devices for the reduction of environmental pollution, or simply by re-interpreting planning standards. The motive behind this change is the desire to lift the strain which relocation has meant to small local business in most cases and to develop these businesses in their grown setting as part of the urban economy. In 1985, the Federal Government expanded its budget for urban renewal by 50 Mill. D M with the intention to spend at least part of the money to redevelop industrial wasteland for new industrial and commercial uses. Table 1 gives an overview of the various programs which have been mentioned and provides information on their budgetary impact.

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Table 1: Spatially Targetted Programs (with relevance for U E D )

Type of program 1)

2)

Level of federal funding (Mill. DM)

Matching grants for local governments a)

Urban Development Assistance Program

1971 -

280

(1984)

b)

Local Transportation Systems

1971 -

2.568

(1983)

Special program for regions with special employment problems

1979 1982

a)

Section 1: "In-house" training for new qualifications

413

('79-'82)

b)

Section 2: Incentives for hiring hard-core unemployed Section 3: Grants for hiring unemployed service personnel

73

('79-'82)

373

('79-'82)

c) 3)

In operation for . . .

Regional economic policy initiatives a)

"Steel communities program"

b)

Bremen program

1982 1985 1984 1987

(not specified) 80

('84-'87)

It seems fair to conclude from what has been said that the Federal Government does not have an explicit and substantially funded policy for the economic development of urban regions, particularly those in economic distress. (An exception is the preferential treatment which Berlin has always enjoyed due to its disadvantaged location). In fact, it could be argued that for all the benefits the cities have received from the programs mentioned, there have been other decisions taken by the Federal Government which have negatively affected local governments revenues and expenditures particularly in old industrialized regions. When one tries to explain this, at least three major reasons can be pointed out: (i) Severe economic distress in urban areas is a relatively recent phenomenon in the Federal Republic. It is much more recent than in Great Britain or the United States. It could be argued that it is too young to have made a profound impact in the policy arena. This is visible in Figure 1 which compares the regional distribution of unemployment in 1979 and 1983. It shows unemployment rates have risen in urban areas between

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Table 2: Non-Targetted Economic Programs (With High Relevance to U E D ) 1)

Coal subsidies a)

Grants for improving productivity in coal mining

b)

Grants for R & D in coal mining Grants for production and marketing of blast furnace coke

c)

2)

4)

184

(1984)

60

(1984)

1967

550

(1984)

1981 1985

600

(1984)

Steel subsidies a)

3)

1969 -

Grants for investments in steel industry modernization

Ship-building subsidies a)

Finance arrangements for new vessels

1976 -

250

(1984)

b)

Grants for production of advanced merchant ships

1979 -

253

('81—'83)

1978 -

9

Advisory services to small and medium-sized enterprises a)

Model project "technology transfer centers"

(1982)

economies of the Ruhr cities. Similar sectoral programs have been launched for the steel industry and the ship-building industry. If one looks at the funding levels, one will quickly see that they are much higher than most programs in the "official" urban policies. Considering further that these high funding levels have been maintained over a succession of years it is clear that these programs have a much larger impact. On the other hand, the federal government has been very reluctant to launch an industrial policy which might help urban areas to develop strengths in new technologies. The one major case where the federal government has done this is the case of the nuclear energy industry, and if one looks at the state of that industry today, one might even see reasons for that reluctance. The model project "technology transfer centers" is only a minor, demonstrative program but one with high potential for the future. It is one with a distinct urban dimension because the transfer centers are mostly located in lagging urban regions. They usually have an independent institutional base (chambers of commerce etc.) and are partially funded by the federal government.

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There are other programs with more funding designed to facilitate technological change, but they have no specific targetting. Research commissioned by the Ministry of Planning, Building and Urban Development indicates that the main impacts are in urban areas. It should be said, however, that the subsidies for the coal mining and steel industries to a large part serve the modernization of these industries. As a result, one can say that Germany has some of the most technologically advanced "declining industries" in the world. This is certainly more than just a cynical statement, when one observes, for instance, that as a result of most recent developments the German steel industry as a whole can no longer be considered an ailing industry.

17.4. The Role of the Länder The picture would not be complete if the activities of state governments in urban economic policies were not mentioned. It has been pointed out already that, in the constitutional system of the Federal Republic, the Länder (states) have an important role in policy-making and implementation. This role has already been elaborated for participation in federal or joint programs. In addition, the Länder also develop policies and programs independently from the federal government and may set priorities differently according to their perceptions of needs and their political composition. There are basically four ways in which federal and state activities can be related: (i)

Federal program/ state implementation

Example:

(ii)

Joint program/ state implementation

Example:

(iii)

Federal or joint program/ additional or complementary state programs

Example:

(iv)

No country-wide program/ independent state programs

Example:

Federal Building Law ambient air quality standards; Urban renewal and development program; regional assistance programs; Urban renewal and development program; regional assistance programs; employment programs; technology transfer programs; General fiscal support for local governments; development of industrial parks; recycling of industrial wastelands; planning standards.

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The Länder thus have, and make use of, a substantial authority to develop policies and programs of their own. A state with an especially deep involvement in urban economic development in Northrhine-Westphalia, one of the major reasons being the concentration of industrial decline in the Ruhr area. The most important state activities in this area include: (i) An independent urban renewal and development program The program's budget is much larger than the comparable joint program for the state. In contrast to the joint program, it also includes funds for - development of industrial parks; - measures to improve business and industrial facilities in mixed residential/ commercial settings. (ii) The real estate fund Ruhr As part of the special action program for the Ruhr area, the state has appropriated roughly 500 million DM for a real estate fund designed to acquire industrial wastelands, develop them for new uses, and to sell the new lots to interested firms of local governments. The program was initially limited to the Ruhr area; because of its successful operation, it was extended to other areas in the state. The fund is managed by an independent state-owned development agency. (iii) Development of planning procedures and norms for the improvement of mixed residential/industrial settings Conflicting objectives and norms in building and planning law, in emission and immission regulations, and in health and safety standards for industrial enterprises are usually resolved in local planning processes. The state has actively developed guidelines and demonstrative projects to help mutual adjustment of residential and commercial functions in mixed settings. (iv) Independent programs assisting research, development and application of new technologies These programs with high funding levels operate in the following fields critical for urban development in the Ruhr area: - energy resources and coal utilization - coal mining technology - steel technology - application of new technologies in small and intermediate firms. This is just an example of numerous state activities in economic development policies with relevance for the cities. Other states which are active in this regard are Saarland, Berlin and Bremen, all of which have a high proportion of declining industries, and Baden-Württemberg which is actively supporting the introduction of high technology in its traditional tool and vehicle industry.

18. Evaluation of Recent Policy Innovations in Berlin (West)* Manfred. Kern

18.1. Introduction The economy of Berlin is closely integrated into the political, economic and social system of the Federal Republic of Germany. Despite its disadvantageous geographic and political location, Berlin has established an efficient and dynamic economy similar to that of the rest of the Federal Republic of Germany. This can be illustrated by some general comparisons: Berlin is the largest industrial city in Germany in terms of the number of companies; in terms of the number of employees, Berlin ranks second after Munich. Berlin's annual per capita gross national product exceeds that of the Federal Republic of Germany as a whole, or to make an external economic comparison: Berlin's total G N P last year was about half that of Denmark or Norway. Despite this impressive overall economic performance Berlin suffers from a few structural defects. There is, first of all, the permanent loss of its function as the capital of Germany as a whole. Before the war industry was already important, but the revenues of the city mainly came from public and private services. After the war Berlin was forced to live from its industry alone. The administration of the German Empire as Berlin's historic and most important economic base was reduced to a point of memory. And the private service sector, especially banks and insurance companies, moved their headquarters and their management and took up residence in the big cities of West Germany. These are facts and conditions that cannot be changed within a reasonable length of time. But to make it still more complicated, Berlin's industry has additional structural problems in itself, partially caused by postwar politics. The industry produces mainly investment goods; the major branches of this investment goods * My special thanks to Carsten Meyer-Oldenburg for his critical review of the final version of this paper.

The Future of the Metropolis © 1986 Walter de Gruyter & Co. • Berlin • New York

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industry are the electrical industry and mechanical engineering. Both branches have to go through a fundamental structural change, caused mainly by the so-called "micro-electronic revolution". Together with the declining economic growth rates of the past years, this structural change has led to a significant and dangerous decrease in the number of jobs available in industry (for more detailed information see Ewers and Stein in this volume).

18.2. The New Structural Policy of the Berlin Senate Taking these severe structural problems into consideration, in 1981 a newly elected Senate started a strategy of re-vitalizing Berlin and its economy. The aims of this, for Germany, unique and comprehensive regional program are - to modernize the industrial structure of the Berlin economy, - to increase the competitiveness of firms, - to improve the skills of white and blue collar workers and of management, - to foster new companies - especially in high-tech areas and - last but most important, - to create as many new jobs as possible in all branches of industry and service sectors with expanding markets (Berlin Senate, 1982). The different instruments of this program are based on four main elements: - amendment of the Berlin Promotion Law - structural innovation policy - a budget policy promoting investments - financial incentives for additional apprenticeships. Within the present regional policy the first two points are by far the most important ones and, furthermore, contain most innovative elements of the applied structural policy. Therefore, it is justified to discuss only them in more detail.

18.3. Main Features of the Berlin Promotion Law Berlin has a special preferential system - the so called Berlin Promotion Law - that is supposed to off-set the geographical isolation of the city. In general this system includes - lower personal and corporate income taxes - accelerated depreciation and special investment (or capital) grants, - favorable credit terms, and - turnover tax privileges (preferences).

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383

The last point, the turnover tax allowances, was changed substantially a short time ago. Therefore, only this point of the Berlin Promotion Law is important for an evaluation of the recent policy innovations in Berlin. In general, the basic idea of the Promotion Law is that a Berlin entrepreneur who has sold goods to a West German entrepreneur is entitled to reduce the turnover tax he owes by a certain percentage rate of the amount of the invoice, provided that the goods have been produced in Berlin (West) and have been transferred from there to West Germany (Berlin Promotion Law, 1982: 1). In order to achieve its purpose the Berlin Promotion Law had to be amended several times. The main idea of the latest amendment of the turnover tax privileges is to promote and stimulate the production of goods (and services) in Berlin more effectively. This way it can be expected that a greater number of jobs will be created and secured in the Berlin economy, especially in its industry. Other goals are to employ more highly qualified people within the city and to intensify the cooperation - concerning goods as well as services - between Berlin companies. Finally the turnover tax reform is expected to contribute to a more efficient distribution of subsidies paid by all taxpayers. The way to put this into effect is to give West Berlin suppliers more financial incentives to produce as much as possible added net value in Berlin. Depending on the degree of the Berlin added net quota, a Berlin entrepreneur may deduct from his turnover tax debt 3% to 10% of the billed amount of his sales of finished and unfinished goods to West Germany. In this respect, the Berlin net value added quota is the ratio of the Berlin net value added to the economic turnover of the business establishments located in Berlin (Berlin Promotion Law, 1982: 14). Before 1983 the amount of the net value added was computed as the difference between economic turnover and intermediate material input. During the past years, this indirect or subtractive method did not produce sufficient incentives to increase the Berlin net value added. Especially for entrepreneurs with permanent establishments in Berlin and in West Germany, a clear cut distinction was neither possible nor necessary between the Berlin net value added and the complete West German intermediate input. This effect led to a statistically verified tendency of underestimating the volume of intermediate input or overestimating the volume of Berlin net value added (Ring, 1982: 309). From the standpoint of a Berlin entrepreneur, this missing distinction did not create sufficient incentives to concentrate all of the production and employment in Berlin. This was valid especially for all intangible components of the intermediate input like management, research and development, advertising or marketing. As far as the location of an industry was concerned, it was irrelevant whether these important parts of the value of the products were created in Berlin or in West Germany. So since the beginning of 1983 the above mentioned and very important amendment of the Berlin Promotion Law allows Berlin entrepreneurs to calculate their added net

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value and their turnover deductions much more accurately. This additive or direct method now includes all components of the added value, some of them even with an additional weighting factor (Berlin Promotion Law, 1982: 14; Crone-Erdmann and Scholz, 1983). Such addable amounts are possible for certain Berlin employees, for Berlin apprentices and for Berlin entrepreneurs who are not corporations, associations or estates according to the Corporate Tax Law. The other components of the Berlin net value added are the Berlin profit, the Berlin wages and salaries, the costs for pension fund provisions for the Berlin employees, the Berlin interest payments, the depreciation and maintenance costs for movable and immovable assets, the costs for rents and leases, as well as payments on building leases, and finally the chargeable amount for included Berlin services (Berlin Promotion Law, 1982: 14, CroneErdmann and Scholz, 1983).

18.4. Preliminary Evaluation of the Amended Berlin Promotion Law At present it is not possible to evaluate the reform of the turnover tax preferences exactly. To give the Berlin companies a chance to adjust to the changed framework, the legislator stipulated a transition period lasting until the end of 1986. However, a cautious and preliminary evaluation is already possible. The German Institute for Economic Research (DIW) tried this in the beginning of 1984. Most results were clearly positive. Companies accept the reformed preference system and try to increase their net value added. The companies now emphasize an increased procurement of goods manufactured in Berlin. In order to accelerate this desired effect, the Berlin Chamber of Industry and Commerce has organized an exchange for advance services. Furthermore, a substantial number of firms have already created or started to create new jobs for better and highly qualified workers in the corporate sectors of management, marketing, research and development. Other attempts concentrate on the deepening of production and on increasing the purchases of additional services supplied in Berlin. All these measures will strengthen the ability of the Berlin entrepreneurs to compete. It will also increase the chance for more investments in sophisticated productions. In the intermediate term and in the long run this will push up demand and, therefore, create new jobs in the Berlin economy (Ring, 1984: 43).

18.5. The Berlin Innovation Policy The turnover tax preferences and other benefits belong to the permanent framework of economic policy in Berlin, mainly financed and politically supported by the government of the Federal Republic of Germany. In addition to this, the Berlin

Evaluation of Recent Policy Innovations in Berlin (West)

385

Senate in 1981 started its own structural policy to accelerate the modernization and restructuring of the Berlin economy. The main components of this additional regional program are - the Berlin center for innovation and new enterprises - the innovation fund - the high tech assistants' program, and - the high tech education and training program. In November 1983 the Technical University of Berlin and the Berlin Senate created the so-called "Berlin Center for Innovation and New Enterprises" ("Berliner Innovations- und Griinderzentrum", " B I G " ) to foster the establishment of new companies, especially in all areas of high technology. This way young entrepreneurs are given assistance to transform concepts into marketable products. When doing this Berlin had a lot of American examples in mind: Silicon Valley in California, Boston and the research and industry area of Route 128 in Massachusetts and finally Minneapolis in Minnesota. BIG is a $1.5 million science park; the first of its kind in Germany. It is, therefore, a genuine pioneer in this field. The basic idea of the innovation center is a kind of breeding ground for new companies with new technologies. It helps "incubate" start-up companies by providing them with inexpensive office space, access to the resources of the Technical University and management guidance. This way the innovation center almost exactly copies what American universities and research centers first successfully achieved (Phalon, 1984: 44). In the innovation center about 20 small high-tech companies are at present in operation. All these companies remain legally and economically independent, but of course they have close contact to each other and to other scientists. Furthermore, they are anchored to university environments and in particular can use the scientific facilities of the Technical University. In this way it is expected that research results can be translated more quickly into marketable products "at the cutting edge of technology" (Hamilton, 1983). Among the first tenants of BIG is a firm specializing in automation of processes in the motor vehicle, printing, tire, household appliance and food industries. Furthermore, an industrial robot with special application for palettizing is in preparation. Other entrepreneurial ventures are concentrated on hydraulic transmission and control systems, on silicates for insulation, on tailor-made hardware and software solutions for science and technology, on producing printed circuits inexpensively, on turnkey solutions for control and regulation problems or on welding metallic glass without crystallization (Allesch and Fiedler, 1984). These and the other firms are all small. Therefore, they are under no pressure to leave when they have successfully completed the founding phase. But similar to the American experiences, at least two companies are already growing rapidly and in this sense nearly ready for "take-off". The "innovation fund" is a genuine invention of the Berlin Senate and part of its

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various promotion programs. Though the fund functions independently of the innovation center, it nevertheless is a kind of " n a t u r a l " complement. Since 1982 this fund has allocated about D M 12 million to assist 26 companies doing high-technology work in the city. Seen under financial aspects, this is a special variant of public venture capital. It can be given as a credit with favorable terms, as a public participation in equity or - in particular cases - as a conditionally repayable subsidy according to the necessities of each individual situation (Berlin S e n a t e , 1984). B y making these kinds of venture capital available, the Berlin innovation fund will further the willingness of technology-orientated firms and newly-formed businesses to innovate. T h e " i n v e n t o r s " of the innovation fund emphasize that in principle all phases of an innovative process can be financed, i.e. conception phase, development phase, and product introduction into the market. Innovation projects in already existing small and medium-sized firms are funded, as well as the founding of new enterprises. A s a general condition they all must be working on new technical products, on new production processes or on new production-based services. A n o t h e r condition emphasizes the regional importance and stipulates that all these activities are to be performed in Berlin (Allesch and Fiedler, 1984: 33). T h e Berlin Senate has also established a special "assistants' p r o g r a m " to accelerate the transfer of high technology know-how from the universities to small and mediumsized firms. T h e S e n a t e offers to pay 4 0 % of a young university graduate's taxable gross salary during a one-year internship with a Berlin company. This subsidy however is limited to a maximum of D M 24 000 per graduate and D M 48 0 0 0 per company. Within the past two years more than 130 medium-sized firms have taken advantage of this program (Berlin S e n a t e , 1984; Hamilton, 1983). M o r e than 9 0 % of the innovation assistants entered into a permanent contract with their company. " A c c o r d i n g to information provided by the companies concerned, in many cases projects could be undertaken for the first time which have played a large role in ensuring the soundness of small and medium-sized businesses" (Allesch and Fiedler, 1984: 34). A n o t h e r step in this direction is a special trainee program for advanced students to gain more practical know-how (innovation internship). Similar to the innovation assistants' program, but on a lower level of knowledge and experience, small and medium-sized Berlin firms are encouraged to hire qualified students for a threemonth j o b . Again the S e n a t e offers to pay a fixed percentage of the costs: Since March 1984, smaller enterprises that offer qualified work experience can receive subsidies of 4 0 % (maximum D M 4 8 0 ) of the gross salary of the students. T h e aim of this part of the S e n a t e ' s policy is to get smaller companies used to scientific thinking and to give students practical experience as early as possible. Through the placement of suitable students those enterprises are given an opportunity to employ extra personnel with initial scientific qualifications for a limited period of time. O f course,

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387

another important goal of this special promotion program is that the participating enterprises become acquainted with a future staff member. Both instruments, the innovation assistants' program as well as the innovation internship experience, are unique in the area of regional structural policy in the Federal Republic of Germany. Together these innovative variants of personneltransfer belong to a broader system of technology-transfer. It consists of three highly specialized technology transmission agencies, each of which is responsible for advancing the transformation of research results via product ideas and prototypes into marketable products (Hamilton, 1983: 9). New developments - especially those in all areas of high tech - as well as the handling of new technologies require highly qualified skills and abilities. For this reason it is often difficult for small and medium enterprises to invest sufficient capital into the training of skilled manpower. Therefore, in addition to its structural policy, the Berlin Senate started institutional initiatives to promote industry-wide activities on professional and follow-up training outside of the companies. The first decision in this direction aimed at promoting high-tech education. In October 1984 the Senate gave initial assistance to found the "Center for New Professions" ("Gesellschaft fur neue Berufe"). The partners of this Center are some leading German data processing and software companies. They have just started to train young people for industrial jobs of the future. For the first three years the Senate will subsidize the Center for New Professions with DM 7 million. The center will start with courses in new information and telecommunication technologies. Furthermore it will offer courses in marketing and distribution. Both fields are considered to be key factors for many branches in their future ability to compete. With all these measures the Senate is trying to reinforce the technology transfer and to accelerate the transformation of research results into marketable products and into improved manufacturing know-how. All these steps together are an interesting attempt to revitalize an economic region. Furthermore, they are an attempt "to create the spiritual 'scene' in which a self-enhancing network of creativity and commercial innovation may flourish" (Hamilton, 1983: 11). In this experimental sense the Berlin economy is always an ideal test market, not only for new products or new services, but also for the efficiency of new instruments and strategies in the realm of regional policy.

18.6. Preliminary Evaluation of the Berlin Innovation Policy As in the case of the new Berlin Promotion Law it is still difficult to definitively evaluate the success of the Senate's structural innovation policy. The span of time between 1982 - the beginning of the policy innovations - and 1985 is much too short

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to do this in a scientific manner. But, of course, a preliminary comment is possible in a specific as well as in a general sense. Seen specifically, the Senate's innovation program has one remarkable highlight: the Berlin Innovation Center or BIG. This idea met with widespread approval, not only in Berlin, but all over Germany and Europe. And indeed conditions are good for this small "Silicon Wedding" to develop splendidly (The Berlin Innovation Center is located in the district of "Wedding"). We have an unusually favorable infrastructure of scientific know-how and research capacities, supported by proved financial incentives. Much more important is that we have a long waiting list of interested entrepreneurs and young companies who want to start research and production in the innovation center. Therefore, the Berlin Senate decided to expand this center considerably. At present another part of the old AEG buildings - where BIG is located - is being reconstructed step by step and will be finished by 1990. This new innovation center received the impressive name "Humboldthain Research and Technology Center". The Chamber of Industry and Commerce supports this part of the Senate policy with its own activities, especially in the realm of technology transfer. The Chamber is doing this because it knows well that the decision of a big data-processing company to expand its Berlin division considerably was based on the excellent experiences with the first German innovation center (Chamber of Industry and Commerce, 1984). With regard to the growing waiting list and to the good acceptance of BIG, the conditions should be specified under which young but growing companies should leave the innovations center. The managers of BIG should strictly restrict themselves to their incubator function. The following stages of growth and successful penetration of new markets can definitely only be realized under conditions of national and international competition. Therefore, all BIG entrepreneurs should prove themselves in the market and leave the Center as early as possible. In addition to the problems of leaving BIG, the entrepreneur faces some dangers when entering it. High technology seems to include a broad range of technical and marketable opportunities. Some of them may be lasting while others are not. With some of them, entrepreneurs may be able to create new markets while with others they will fail. Thus, the management of each innovation center is forced to make selections on the basis of knowledge that will only be available in the future. In this methodological sense, innovation centers cannot substitute the approved trial-anderror-steps of market processes. But of course they can and should try to supplement and to accelerate permanent search for new products and processes. The promotion of personnel-transfer is another highlight of the Senate policy. It is more directed at existing small and medium-sized firms. From a scientific as well as a practical point of view, personnel-transfer seems to be an appropriate instrument to improve the innovative potential of the small-business sector of the Berlin economy (Ewers, 1984). This is of special importance because the bulk of the 2200 Berlin

Evaluation of Recent Policy Innovations in Berlin (West)

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industrial enterprises consists of small and medium-sized companies. Increasing the transfer of ideas and of people between scientific research institutes and firms, therefore, provides a promising regional basis for further technology-based economic growth (Hamilton, 1983: 8). From this point of view, it would be useful to expand the program of personnel-transfer substantially - not primarily in financial terms but in the number of real transfers. The Senate innovation fund is somewhat more problematic. It already was qualified as a kind of "public" venture capital fund, and strictly speaking that is a contradiction in itself. To supply the economy with venture capital is an essential entrepreneurial task! For the government, venture capital is nothing else but a new and additional form of subsidy. However, successful innovation policy needs no new financial subsidies but rather effective incentives like the BIG and an economic climate that favors entrepreneurial activities. To be fair on the other side, the innovation fund stimulated the foundation of now more than 10 private venture capital companies. This concentration of venture capital is unique in Germany and a good starting point for financing further technology-based regional growth. The availability of venture capital at present already amounts to more than DM 250 million. But after having bred such a lot of private venture capital firms, the Senate's innovation fund has done its duty and should be abolished gradually in favor of BIG, the personnel-transfer-program and similar measures (N.N., 1984). As a general evaluation it can be said that with the structural policy innovations, the Berlin economy has improved its position in the fields of technological innovation, modernization and further economic growth. A new entrepreneurial capitalist spirit has started to pervade the Berlin industry and service sector. More and more young people from Berlin and from West Germany start or want to start their businesses on a self-employed basis. But on the other side, it must be seen clearly that the lasting and difficult structural problems of the Berlin economy cannot be solved within a few months. Especially the loss of more than 100 000 industrial jobs since 1970 cannot be off-set in the short run. On the other side, the US economy has shown us that it is possible to create millions of new jobs in an acceptable time span. It should be possible to stimulate a similar increase of employment within regions like Berlin or the Federal Republic of Germany as a whole, which are by far smaller than the USA. But therefore, of course it is necessary to adapt the successful strategies of the American example. As Birch has pointed out, within the permanent processes of structural change, it makes no economic and political sense to subsidize the losers. Lasting gains in production and employment can only be realized by promoting the winners of structural changes (Birch, 1979, 1981). This in principle is the outline of the regional policy of the Berlin Senate, too. With regard to industrial as well as overall employment during 1984, the Senate was able to achieve a significant change for the better. And in the medium or long term, Berlin

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has a growing basis of creativity and commercial innovation that will keep the Berlin economy running (Hamilton, 1983). Thus, contrary to the famous words of John Maynard Keynes ("In the long run we are all dead") and despite its specific geopolitical situation, the Berlin economy will not die but be viable and flourishing.

References Allesch, J. and H. Fiedler (1984) Berlin Centre for Innovation and New Enterprises. 2nd Edition, Senate for Economics and Transport (Ed.), pp. 33-4, Berlin. Berlinförderungsgesetz (1985) Gesetz zur Förderung der Berliner Wirtschaft, Dokumentation der Industrie- und Handelskammer zu Berlin (Ed.), Berlin. Berlin Promotion Law (1982) Law for the Promotion of the Berlin Industry. (Berlin Promotion Law), Wirtschaftsförderung Berlin (Ed.), Berlin. Berlin Senate (1982, 1984) Economic Report, No. 15, 1982; No. 16,1984, Berlin. Birch, D.L. (1979) The Job Generation Process. Report of the MIT on Neighborhood and Regional Change, Cambridge, Mass. (1981) Who Creates Jobs? in The Public Interest 65, pp. 3-14, New York. Chamber of Industry and Commerce (1984) Economic Report 1983/84, Berlin. nach neuem Maßstab. Crone-Erdmann, H.-G. and H. Scholz (1983) Absatzförderung BerlinFG-Novelle trat 1983 in Kraft, Industrie- und Handelskammer zu Berlin (Ed.), Berlin. Ewers, H.-J. (1984) Zukunftsträchtige industrielle Arbeitsplätze - Prioritäten aus Berliner Sicht, Deutsches Institut für Wirtschaftsforschung (Ed.), DTW-Symposion "Strategien für mehr Arbeitsplätze in Berlin", pp. 60-73, Berlin. Hamilton, D. (1983) Berlin and Its Economic Future. Report on an International Meeting at the Aspen Institute Berlin, November 2-4, 1983, Berlin. N.N. (1984) Innovationsfonds auslaufen lassen, Die Berliner Wirtschaft 21, p. 937, Berlin. Phalon, R. (1984) Incubator Program Helps Firms Hatch, Economic Impact 46, pp. 44-7. Ring, P. (1982) Neuordnung der Berliner Absatzpräferenz: Zu einigen umstrittenen Punkten, Deutsches Institut für Wirtschaftsforschung, Weekly Report 24, pp. 309-14, Berlin. (1984) Berliner Wirtschaft nutzt Anreize der neuen Absatzförderung. Erste Erfahrungen mit der novellierten Herstellerpräferenz, Deutsches Institut für Wirtschaftsforschung, Weekly Report 4, pp. 41^1, Berlin.

Chapter 2: Economic Transformation and Political Change in Metropolitan Areas

19. The Advanced Industrial Metropolis: A New Type of World City Richard V. Knight

19.1. Introduction This paper is concerned with how we think about cities, particularly industrial cities, and how we envision their future. Cities have existed for more than 6000 years. Yet at least until the advent of the industrial revolution, all have been of a similar type, have performed the same basic functions for society, have been built in similar ways, and have taken somewhat similar forms. The industrial city, which is only now beginning to be recognized as a new type of world city, however, is founded on a different set of values. Its development is taking forms that are very different from those of traditional cities. Although the general philosophical framework used in thinking about traditional cities also can be used for industrial cities, certain distinctions have to be made between these two types of cities if we are to increase our understanding of what is, in the context of the history of cities, a new type of world city. Industrial cities differ from traditional cities in some very significant ways which are explored below. But, these differences are difficult to discern because the values that underly industrial cities have yet to be fully articulated. Industrial cities of world stature are still in the initial stages of being established. Only their institutional base has been formed. They have yet to be built in a physical or cultural sense. We must increase our understanding of the underlying differences between traditional cities and industrial cities so that industrial metropolises will be able to capitalize on their own particular advantages as they are transformed into advanced industrial cities. Moreover, institutional frameworks for industrial cities must be designed to accommodate the massive structural changes that are now occurring in the global economy. With the advent of the global economy, the role of the advanced industrial metropolis is changing as one time manufacturing centers become knowledge centers. This transition from production to knowledge will continue because as technology is advanced and as instantaneous worldwide communications become

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more widespread, more and more industrial and cultural activities will be rationalized and restructured on an international basis. This application of advanced technology and the concomitant restructuring of industries is driven by powerful global forces that are very difficult to shape. Locational advantages on which the industrial metropolis was founded have been eroded and their manufacturing activities are declining. As a result, the comparative advantage of industrial metropolises is changing. Industrial regions that initially depended on manufacturing activities for an economic base are becoming more and more dependent of knowledge-intensive activities. It is on the continued development of their knowledge resources that the evolution of industrial cities depends. T h e advantages that have accrued as a result of the expansion of knowledgeintensive activities are, however, of a temporal nature. These new advantages could easily be lost if the communities are unaware or unsupportive of them. T o retain their knowledge resources, industrial metropolises will have to upgrade their human and cultural resources and their built environments, i.e., build "world-class" advanced industrial cities that can compete effectively for the talent worldwide. This is because knowledge resources are manmade. They are likely to be lost unless development strategies designed to strengthen them are implemented. This, however, requires a major revaluation of contemporary industrial development policies. Most industrial development efforts are geared towards retention of manufacturing activities. These cannot succeed in light of present economic realities. T h e basis for most economic development policies are locational advantages. Natural advantages such as locational advantages can be exploited by transportation and infrastructure improvements. However, shifts in these natural advantages which are brought about by complex set of forces such as technological advances, the development of new sources of energy or raw materials, of new markets, etc., are eroding these traditional advantages. And once these shifts occur there is little that can be done to regain the old advantages. Production activities have always gravitated towards locations where production and distribution costs can be minimized. But industrial metropolises are basically temporary encampments of manufacturers; whenever locational advantages shift, companies must relocate production operations in order to remain competitive. T o offset these changes, industrial metropolises must develop strategies based on new advantages. These are advantages being created because of the shift to knowledge work throughout the industrialized world. Once industrial development strategies are geared to knowledge-intensive activities, considerable potential is unlocked because knowledge resources are manmade advantages. Advantages that can be enhanced at the metropolitan or regional level. Unlike the growth of industrial metropolises which was based on natural advantages and was of an accidental nature, development of the advanced industrial city depends on manmade advantages and must, therefore, be of an intentional nature.

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Knowledge resources represent a distinct advantage as a basis for economic development in advanced industrial societies. As technology advances, the knowledge content of goods and services produced increases. Industrial development policies in advanced industrial metropolises should therefore become more concerned with how and where knowledge is produced. The value added by workers engaged in knowledge intensive activities is increasing, while value added by production workers in manufacturing activities is declining. However, very little thought has been given to the contribution of knowledge resources in wealth creation. As a result there are no policies geared to the development of knowledge resources particularly at the local level. A major problem lies in defining knowledge resources and their role in the economy. Corporate administrative and related technological, professional, managerial, business or specialized industrial and cultural activities may have begun as appendages of manufacturing operations. But in recent decades these knowledge-intensive functions have become resources in their own right. As industrial firms have expanded their operations worldwide, these activities - which began as support services for locally based manufacturing plants - have been upgraded and expanded in order to serve the growing worldwide operations. In contrast to manufacturing operations, which have been declining in industrial metropolises over the last two decades as manufacturing has been relocated elsewhere, knowledge intensive activities have grown steadily. As a result, they have become increasingly dominant. This legacy of knowledge resources from the industrial and scientific revolutions now provides industrial metropolises with a new basis of comparative advantage - based on knowledge resources. This can be used to establish a special niche for industrial cities in a developing global economy. These new advantages should not be taken for granted, however, because as the role of knowledge in industrial production increases, competition for knowledge resources will become more and more intense. While many advanced industrial metropolises now have large concentrations of these knowledge-intensive advanced industrial activities, their comparative advantage will erode unless a concerted effort is made to conserve them. The only way to conserve knowledge resources is through use, expansion and upgrading. To do that and to assure continuity of their knowledge base, industrial organizations have to be able to attract talent. They have to be able to offer prospective knowledge workers a quality of life that is competitive with that of other world class cities as well as a stimulating work environment. The question for the industrial metropolises remains whether they will have the forsight to see the opportunities and build world class cities in order to capitalize on their knowledge resources, or whether their resources will be spent on trying to sustain traditional production activities. Industrial regions have a choice. They can remain tied to production of goods and undergo long term secular decline, or they can make the transition to knowledge

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production and develop with the global economy. Strategies that would enable industrial metropolises to secure their knowledge base and sustain their development as knowledge centers should be carefully considered as part of a comprehensive development strategy. Conventional industrial development policies aimed at shoring up declining manufacturing activities should not be abandoned. They should be reevaluated, however, in the context of a broader and longer term development strategy and resource allocation. The prospect of building the advanced industrial city as a new type of world city is not simply an idle speculation. It is conceived as a strategy for sustaining the development of industrial metropolises and offsetting the declines that are occurring in manufacturing activities throughout industrialized nations. It is a strategy for conserving the human and cultural resources that have been carefully nurtured over the last century or more. It is a strategy which constructively deals with the reality that these are resources which could be lost within a decade unless action is taken to secure them. Knowledge intensive activities have become an integral part of the advanced industrial economy. They need to be woven into the cultural fabric of the industrial metropolis. To do this, we will have to increase our understanding of the role that knowledge plays in advanced industrial and scientific activities and build communities that are responsive to the needs of organizations and persons engaged in knowledge intensive activities. The advanced industrial city must be planned in ways which honor the cultural, psychological and physical needs of advanced industrial and cultural activities. The industrial city is unlikely to fit the mold of traditional cities. It is being shaped by different forces and values. These new values may be tempered by traditional values, but the advanced industrial city will, in all likelihood, be of a different nature. Consequently, each city should develop its own unique strategy for growth and future development. If the building of these prototype cities is left to occur in an ad hoc fashion, however, many manufacturing metropolises particularly those in decline will forfeit the opportunity. Most are still unaware that such an opportunity even exists. Building the industrial city is a challenge that no advanced industrial nation can afford to overlook, the social costs of not building these new cities could be tremendous. Moreover, those metropolises and nations that seize this unusual opportunity will, in a sense, be creating their own futures. The world industrial city will be a major milestone in the history of cities.

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19.2. The Role of Cities in Advanced Industrial Societies 19.2.1. Defining the City Cities are, by definition, the centers of civilizations. They are centers of power and they serve as anvils on which the new values which shape future civilizations are forged. They are organic in nature. Their primary role, if they are to survive, is to enrich and pass on their culture to succeeding generations. Traditional cities were built over centuries with their values being hammered out through political, religious and social strife. These values are now considered to be traditional values. They are based on the "moral order." Industrial cities are being built as new values based on scientific and economic necessity are being created. These new values based on the scientific order will themselves be forged over time as the scientific revolution proceeds. Eventually they will be articulated through the form and the aesthetic of the advanced industrial city. The process of building the industrial city is, already, well underway. The first step, the institutionalization of new values created by the industrial and scientific revolutions has already occurred at the organizational level. Many industrial and nonindustrial corporations, research, medical and university centers have already established firm footholds in very competitive global markets. The next step involves institutionalization at the community level of the values these organizational forces are creating. As a practical matter this will not be easy. Ironically, the process necessary for acceptance of the new values that underly industrial and scientific society is more difficult in today's industrial metropolises than in areas where these organizations do not presently play as great a role. This is because industrial regions have been jaded. They developed accidentally on the basis of locational advantages and have inculcated attitudes and behaviors which are not conducive to the building of advanced industrial cities. A whole mindset existing in industrial metropolises must be changed. Industrial cities will not develop unless they become intentional cities which strive to foster the knowledge worker culture. Industrial cities are competing with traditional cities, the traditional repositories for knowledge resources. They will have to do so on the basis of their manmade advantages, namely on values, their human and cultural resources, their built environments and through providing the quality of life that is necessary to sustain these activities. If industrial regions do not build intentional cities that are world class, they will be unable to conserve their knowledge resources and they will decline along with manufacturing activities. Most world-class cities are of a traditional nature, i.e., capital cities which have been built on the moral order. But industrial cities are being built on the newly emergent scientific order. What makes industrial cities so different is that unlike traditional capital cities, they are not based solely on values, institutions and traditions which

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have been forged over centuries and are now widely accepted and unchallenged as the moral order. They must contend with and help to forge the relatively new and little understood values and traditions of the industrial and scientific order. In spite of the values that the industrial and scientific revolutions have contributed to mankind, the institutions that now govern them are generally mistrusted. This is particularly true in industrial regions which, in the long run, stand to benefit most from them. T h e nature of the changes that these institutions have left behind as they adapted to competitive pressures - namely plant dislocations and the expansion of headquarters related activities - are not well understood and that is a fundamental factor creating this mistrust. Moreover, these centers of advanced industrialized activities are not yet appreciated. This is because the nature and role of knowledge resources are not understood. Their present and potential contribution to development can not and will not be perceived as long as industry continues to be defined in terms of manufacturing activities alone. Knowledge activities such as advanced industrial and scientific activities usually begin in an inconspicuous manner. They evolve gradually as science is advanced and new knowledge is gained through a long process of applying technological and scientific advances to manufacturing processes. T h e fact that most industrial metropolises are presently losing factory jobs and population, tends to obscure the job replacement and increasing economic power that results from the steady upgrading and expansion of advanced industrial and scientific knowledge activities. Clearly, what characterizes an industrial metropolis as an imminent world city is not the presence of manufacturing activities per se, symbolized by smokestacks and factories around which these regions originally grew. Rather, it is the presence of central science-based organizations which contribute the knowledge inputs and governance for manufacturing facilities which are now being built around the globe. As science advances and the contribution of knowledge to advanced industrial production increases, the actual value added on the production line by unskilled workers decreases. Concomitantly, the value added by knowledge workers, whether on-line by highly skilled craftsmen or off-line by technical, managerial or professional workers, increases. In short, as the global economy expands and manufacturing operations are rationalized at the global level, the demand for centralized knowledge-intensive activities and for the infrastructure necessary to support global operations increases. Advanced industrial metropolises should be viewed in terms that account for all the value which is being added there today. T h e contribution of knowledge resources, human and cultural resources and the broad array of specialized production and knowledge support services should be accounted for explicitly. If industrial metropolises are perceived only in terms of how value-added traditionally has been measured - i.e., in terms of the number of workers engaged in factory production

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jobs or of the tons of goods and materials produced or shipped locally - they will be seen as declining rather than as being in transition. Real wealth, however, continues to be created in industrial metropolises and rather than declining, it is increasing. We haven't yet learned to deal with the fact that its form is changing. It is for this reason that the concept of the advanced industrial city is presented as a euphuism for the potential transition of manufacturing centers into knowledge centers and for the cultural transformation of industrial metropolises into world cities.

19.2.2. The Advanced Industrial City What makes it difficult to define the advanced industrial city is the fact that it is based on a new form of power, namely industrial and scientific knowhow. Institutionalization of this power, although well advanced at the organizational level - notably, international corporations both industrial and non-industrial, research centers and university and medical complexes - is only just beginning to occur at the broader community level. The term "industrial metropolis" is used to describe industrial agglomerations where the organizations that comprise their institutional base have not organized or used their power to build such an advanced industrial city. Such a world city will not occur by accident as did the industrial metropolis. The building of the advanced (world) industrial city will have to be a willful act through implementation of carefully chosen strategies. The idea of the advanced industrial city is important, however, because before it can happen, the vision of what such a world city will be like must be created and the concept translated into achievable goals. It has been said that before a thing is possible it must be conceived as possible. And conceptualization is just the first of many steps in the building process. The concept must be well developed because major commitments will be required in order to upgrade institutions and attributes of the environments on which knowledge-intensive activities depend. Advanced industrial and scientific activities, unlike the factories from which they have evolved, are dependent upon their environment for support. If their needs are not accommodated, they will relocate. Whenever this happens, the institutional or power base upon which the world industrial city could be built diminishes. If the city building process is not begun immediately, many industrial metropolises may find that they have lost the opportunity to anchor their institutional base and to build a world city. Moreover, industrial metropolises are at a disadvantage because traditional cities will be able to exploit their already well developed environments and their cultural strengths, attributes which address the needs of advanced industrial societies. Industrial know-how is a new form of power that has yet to be articulated within the context of a city's economic base. This makes it very difficult to perceive and its presence, tenuous. Just because an industrial metropolis happens to have a strong

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institutional b a s e , d o e s n o t m e a n that the o r g a n i z a t i o n s b a s e d w i t h i n the m e t r o p o l i s will r e m a i n o r that t h e y c a n b e s e c u r e l y a n c h o r e d . A d v a n c e d industrial activities m a y a l r e a d y be p r e s e n t in a f u n c t i o n a l s e n s e , y e t , scientific v a l u e s h a v e not b e c o m e i n t e r w o v e n into t h e city's cultural ethic. Y e t , these activities r e q u i r e a n d in m o s t c a s e s c o u l d sustain a c o s m o p o l i t a n e n v i r o n m e n t . T h e cultural a n d institutional o r i e n t a t i o n of t h e o l d e r industrial r e g i o n s t e n d s to r e m a i n a l i g n e d t o the n e e d s of t h e p h y s i c a l m a n u f a c t u r i n g activities a n d the u n s k i l l e d w o r k e r s a r o u n d w h i c h t h e y o r i g i n a l l y f o r m e d . T h e built e n v i r o n m e n t a n d the g e n e r a l a m b i e n c e of t o d a y ' s industrial cities c o n t i n u e t o reflect t h e w o r k i n g class v a l u e s w h i c h d o m i n a t e d t h e i r m a n u f a c t u r i n g origins. In s h o r t , the industrial city still has t o b e built. In t h e a d v a n c e d industrial cities, the n e w scientific v a l u e s will b e

articulated

culturally a n d p h y s i c a l l y in a e s t h e t i c , p s y c h o l o g i c a l a n d spatial t e r m s . T h e f o r c e s f o r t h e v a l u e shift a n d t r a n s f o r m a t i o n are the s a m e f o r c e s that d r i v e the industrial a n d scientific r e v o l u t i o n s .

M o r e o v e r , w i t h the a d v e n t of t h e c o m m u n i c a t i o n s

and

i n f o r m a t i o n a g e , w e s e e m t o h a v e e n t e r e d a n e w era in w h i c h the rate of c h a n g e h a s b e e n g r e a t l y a c c e l e r a t e d . T h e cities m u s t c r e a t e m e c h a n i s m s to a c c o m m o d a t e rapid c h a n g e . It is i n t e r e s t i n g to s p e c u l a t e o n h o w industrial cities will l o o k w h e n t h e y are built b e c a u s e t h e y will m i r r o r t h e t e c h n o l o g i c a l facilities, t h e a e s t h e t i c a t t i t u d e s a n d t h e d o m i n a n t social structure o f the m e t r o p o l i s . I n d i c a t i o n s are that t h e y will b e v e r y d i f f e r e n t f r o m traditional cities, b o t h in respect to the cultural v a l u e s that u n d e r l y t h e m a n d in the w a y that t h e s e v a l u e s a r e a r t i c u l a t e d in their spatial s t r u c t u r e a n d townscape. T h e g l o b a l c h a l l e n g e a n d the w a y industrial m e t r o p o l i s e s p e r c e i v e a n d r e s p o n d t o the o p p o r t u n i t i e s that rapid structural c h a n g e s c r e a t e will h a v e a p r o f o u n d e f f e c t o n t h e i r f u t u r e . T o d a y , t h e y h a v e a c h o i c e t o m a k e that has p r o f o u n d c o n s e q u e n c e s . T h e y c a n c o n t i n u e their p r e s e n t p o l i c i e s o f r e t r e n c h m e n t , tying their f u t u r e t o the f o r t u n e s o f m a n u f a c t u r i n g activities, o r t h e y can f o r m u l a t e n e w p o l i c i e s a i m e d at t r a n s f o r m i n g m a n u f a c t u r i n g c e n t e r s into k n o w l e d g e c e n t e r s . T h e i m p l i c a t i o n s o f this t r a n s f o r m a t i o n n e e d to be w e l l u n d e r s t o o d b e c a u s e , in o r d e r t o sustain their d e v e l o p m e n t as k n o w l e d g e c e n t e r s , t h e y will h a v e to b e a b l e t o c o m p e t e f o r t a l e n t o n a w o r l d w i d e basis. T o d o this t h e y will h a v e t o u p g r a d e t h e i r institutions, their h u m a n a n d cultural r e s o u r c e s a n d i m p r o v e their a m b i e n c e t o sustain a quality of life c o m p e t i t i v e with o t h e r w o r l d cities. W h i l e m a n y industrial m e t r o p o l i s e s h a v e the p o t e n t i a l f o r b u i l d i n g w o r l d cities, t h e i m p o r t a n t q u e s t i o n is w h e t h e r these o p p o r t u n i t i e s will b e p e r c e i v e d o r s o u g h t .

A

s t r o n g institutional b a s e is essential b u t n o t sufficient t o o v e r c o m e t h e p r o b l e m s i n h e r e n t in the transition of a m a n u f a c t u r i n g c e n t e r into a k n o w l e d g e c e n t e r . A g r e a t d e a l o f vision a n d l e a d e r s h i p is r e q u i r e d if industrial m e t r o p o l i s e s a r e t o c a p i t a l i z e o n t h e i r industrial h e r i t a g e a n d build w o r l d cities. T h e y h a v e t o a c c o m p l i s h in a f e w d e c a d e s that w h i c h it has t a k e n traditional cities c e n t u r i e s to establish: an i d e n t i t y , a s e n s e of p l a c e , a n d a sense of their p a r t i c u l a r f o r m of p o w e r a n d d e s t i n y .

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Industrial metropolises could easily lose the organizations which could serve as their institutional base as a world city of the future. Knowledge intensive activities of advanced industrial, scientific, commercial and cultural organizations must continuously advance their capacities. Thus they are consistently outgrowing the communities where they are based. Knowledge and science based industrial activities require very different kinds of environments and services from those required by labor-intensive manufacturing activities from which they evolved. The working class neighborhoods which grew up accidently around mills and factories early in the industrial revolution are not well suited for workers in today's advanced industrial activities. Older industrial areas which have become blighted and dysfunctional need to be redesigned and rebuilt in a way that meets today's standards. Similarly, schools and other services need to be upgraded. Individuals and organizations engaged in advanced industrial activities are under constant pressure to improve their performance. They need to be in communities which are responsive to their needs because they are part of a learning based society. Industrial cities can compete with traditional cities only if they understand the differences that exist between them. They must lead from their own particular strengths. The key to building an industrial city lies in recognizing differences in the nature of the power from which industrial and traditional organizations derive their advantage. Traditional cities are centers of traditional forms of power. They form around institutions founded on the moral order. They are, primarily, centers of political, religious and financial power which comes from making and administering laws that govern relationships. Their interests are basically those of preserving the status quo. In contrast, industrial cities are centers of new forms of power. They form around institutions founded on the scientific order and their power comes from understanding the laws that govern natural and social phenomenon. In short, they are change agents. Institutions that form the base of industrial cities do not control relationships, in fact, the source of their power is their ability to adapt to change. This makes them vulnerable to changes, particularly changes occurring in technology and in the political economy of the global marketplace. The advanced industrial city must therefore be an open city and responsive to change.

19.2.3. The Role of Cities The role of all types of cities is, however, basically the same - that of governance. Traditional cities such as national capitals govern territories over which they have political advantage or sovereignty. Industrial cities govern technologies or advanced industrial and scientific activities in which they have scientific or market advantage.

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Cities are not only the centers of civilizations but they are also their principal artifacts. They are places where the values on which a particular culture or civilization depends are forged, articulated and institutionalized. Consequently, to understand a city, we must understand the values that underly their power. They determine the city's role, the functions performed there, and the nature of its development. To govern effectively, a city must have autonomy, i.e., control and command, over its domain whether it is of a territorial or technological nature. Its stature is determined by the extent of its influence. To be a world city, a metropolis must have sufficient power and autonomy to command and control resources that are critical to the functions it performs at the global level. Its success at governance also determines its future because this is how it maintains its power base. Cities are very elitist institutions. To understand the differences in different types of cities, we must take into account differences in the composition and in the values that underly the elitism in different types of world cities. The problem of understanding industrial cities is related to what C. P. Snow calls the problem of two cultures - the splitting up of the intellectual and practical life in western society into two polar groups, the traditional and the scientific cultures. The industrial and scientific culture is not well understood or appreciated by the literary "intellectuals". Traditional culture is not understood or appreciated by the "scientists". "Between the two (poles) lies a gulf of mutual incomprehension - sometimes hostility and dislike, but most of all, lack of understanding." Snow argues that "the scientific culture really is a culture, not only in an intellectual but also in an anthropological sense." And that "there are common attitudes, common standards and patterns of behaviour, common approaches and assumptions. This goes surprisingly wide and deep. It cuts across other mental patterns, such as those of religion or politics or class" (Snow, 1961). These differences in the cultures and in their underlying value base have a very significant effect on how we perceive and think about cities. Viewed from the perspective of traditional cities, industrial metropolises are thought of as being declining manufacturing centers. But viewed in the context of an advanced industrial society, industrial metropolises are seen as being transformed into knowledge centers and evolving into a new type of world city. The industrial and scientific revolutions, which have given rise to this new form of power and a new type of institutional base for cities, are now sufficiently advanced that the "capitals of technology" can be established. This new type of world city is, however, still difficult to discern because of the worldwide restructuring of industrial activities that are now underway. This restructuring is bringing about some profound changes in the economies of advanced industrial countries. Particularly, this is the case in areas where manufacturing was initially concentrated. As manufacturing is rationalized at the international level, industrial organizations are moving the less

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skilled and more labor intensive operations away from industrialized and developed areas to less developed areas. Concomitantly, industrial organizations are upgrading and expanding the more knowledge-intensive functions such as the administrative, research and associated professional, technical, and specialized business services required by their growing worldwide networks of manufacturing operations. As a result, many industrial metropolises are undergoing a transition from manufacturing to knowledge centers. This transition is extremely challenging. The opportunities are great. But there are major problems that have to be addressed if the opportunities are to be realized. Moreover, unless the nature of the transition is well understood by the community at large, the community's knowledge resources will be dissipated. Available financial resources will be used to perpetuate outmoded structures and programs instead of shifting to support new structures and programs aimed at adapting to change. The choice of resisting or adapting to change is a very difficult choice for a community to make. But if it is not made, communities run the risk of forfeiting their option of becoming an advanced industrial city. It is exremely dificult for a community that began accidentally and boomed on the basis of exploiting its natural advantages, to change its policies and to plan for a future based on its manmade advantages, i.e., on its human and cultural resources and on its quality of life. In order to maintain its knowledge resources an industrial metropolis has to be able to upgrade its manmade advantages and offer a quality of life that is competitive with that offered by other world class cities. This transition from manufacturing to knowledge centers is occurring at a rapid pace which cannot be controlled or effectively modified by governmental interventions because it is driven by powerful market forces that are global in origin. Moreover, it is not simply the transition from one industry to another, i.e., the movement of manufacturing jobs from sunrise to sunset, or from low-tech to high-tech industries. It involves a transformation in the nature of work and of the industrial culture: from one based on the work ethic and a narrow range of economic opportunities provided by unskilled factory jobs, to one where a broad range of career opportunities are pursued through continuing education either on or off the job. What is required is a shift to a learning-based society where all individuals have access to the educational resources they need in order to advance their careers. The challenge is basically one of upgrading existing institutions and of providing new institutions within the older industrial metropolises so that development can be sustained. The key to understanding the potential development of industrial metropolises and their emerging advanced industrial cities, lies in understanding the nature of the comparative advantages on which their institutional or economic base is founded, namely their industrial and scientific knowhow. These knowledge resources, created by a diverse array of industrial, scientific, commercial and cultural organizations, take many different forms. They have evolved organically and incrementally over

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the course of the industrial and scientific revolutions. During the last century, particularly with the advent of the communication or information age, knowledge resources have become a critical factor in wealth creation. Knowledge should, infact, be treated as a factor of production in advanced industrial activities along with the traditional factors of land, labor, capital and entrepreneurship. Advanced industrial cities are evolving in many industrial metropolises because agglomerations of knowledge-intensive activities are of sufficient scale and represent sufficient economic power to constitute the institutional or economic base for this new type of world city. Knowledge-intensive activities are being expanded to meet the needs of worldwide manufacturing and marketing activities. As a consequence, knowledge resources within industrial and cultural organizations are being upgraded to meet world standards. In short, the combined power and the autonomy of organizations founded on industrial know-how is now of a sufficient magnitude in many industrial metropolises to sustain the development of the advanced industrial city on the basis of knowledge production. But this development is taking a different form from traditional development based on goods production. Industrial metropolises have to build world class environments or cities in order to compete with traditional cities for knowledge resources. This does not mean, however, that the challenge of building a new type of world city will be perceived or, if perceived, pursued, by all of the industrial metropolises. Not all industrial metropolises enjoy such opportunities. Although the existence of such an institutional base is necessary, it is not sufficient for building a world city. Moreover, an institutional base can be easily lost if the environment is not upgraded to meet the requirements of advanced industrial, commercial and cultural organizations that are based there. In fact, it takes extraordinary vision and leadership to reverse the decline of a manufacturing center and to facilitate its transformation into a knowledge center. Population decline and infrastructure obsolescence are difficult to reverse. 19.2.4. Role of the City in the Industrial Metropolis The primary problem of building a world class city in industrial metropolises, however, is one of a perceptual nature. Industrial metropolises, particularly those that are in decline are so aware of their weaknesses and so severely stressed by job losses and governmental cutbacks, that all their efforts become reactive and defensive in nature. Moreover, they do not have the capacity to identify new advantages or to plan strategically for their development. In fact, the conceptual tools that they would need, such as a framework or methodology for assessing knowledge resources, do not exist, because knowledge is not generally considered to be a factor of production. And in addition, should the opportunity for building an advanced industrial city be perceived, it would require building a regionwide

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consensus and strategy for implementing it. Most industrial metropolises represent geographical groupings of independent municipalities. Few have metropolitan forms of government or other mechanisms for adequate regional planning. Nevertheless, the future of the industrial metropolis depends upon its success in creating a quality of life which is competitive with that offered by other world class cities. The likelihood that world class cities will be built in industrial metropolises depends on several related factors: On how the challenge of worldwide restructuring is perceived; On whether industrial metropolises redefine their role in the global economy; On the extent to which they are able to build a regionwide concensus and mobilize resources towards common goals; and, On how they alleviate the adverse affects of structural changes that occur during their transformation into knowledge centers. Unfortunately, the futures of industrial metropolises are usually viewed in terms of the trends in activities that dominated their original growth, namely manufacturing. Consequently, their development efforts have not changed. Programs designed to capitalize on the expansion of manufacturing are perpetuated and become defensive and reactive in nature. Defensive manufacturing strategies are aimed at short term objectives - such as reducing labor costs and taxes - which can actually have an adverse effect on knowledge-intensive activities. Yet longer term goals such as upgrading skills, educational and cultural institutions, and amenities - necessary for supporting knowledge-intensive activities - are often viewed as counterproductive by manufacturing interests. Few industrial metropolises have developed the capacity either to understand the nature of the worldwide restructuring that is occurring in industry today, or to anticipate and plan for any future developments that differ from those of past trends. Consequently very few industrial metropolises are aggressively pursuing opportunities relating to knowledge or science based activities. For the most part, they take the future for granted. They continue to follow past practices which focused on declining manufacturing activities. The purpose of this paper is to present a new perspective for conceptually viewing the development of industrial metropolises within a knowledge-intensive framework. This perspective is necessary to account for the increasing role of knowledge resources in advanced industrial activities and the acute need for upgrading the institutions and environments which support such knowledge-intensive activities. The thesis presented, is that industrial metropolises can sustain their development if they respond to opportunities created by the global economy if they transform themselves into world-class cities.

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19.2.5. City D e v e l o p m e n t a n d t h e C h a n g i n g N a t u r e of W e a l t h C r e a t i o n Rethinking the nature of wealth creation is particularly important because knowledge has become the "basic strategic resource". As technology has advanced and as international trade has expanded, the knowledge required to compete effectively in increasingly competitive one-world markets has increased. Although technological advances usually reduce the amount of materials and labor required in manufacturing, they usually increase the amount of know-how required and necessitate expansion of the knowledge base. What is becoming increasingly important in advanced industrial societies is not where a product is physically fabricated but where the knowledge base is maintained. This is because fewer and fewer persons are being required on the production line while more and more are required to access, support and advance the knowledge base which governs and supports the manufacturing process. Knowledge is now an essential resource in the creation of wealth. The contribution that knowledge makes to the creation of wealth should be explicitly accounted for along with contributions of the more traditional classifications of economic resources; land, labor and capital. Knowledge has characteristics that are very different from the traditional factors of production and, therefore, should be accounted for explicitly. Classifying knowledge as a form of capital, e.g., as technology or as human capital, does not sufficiently account for its special characteristics. Although the contribution of knowledge to the production of goods and services is increasing, knowledge's contribution is becoming more and more difficult to conceptualize or to measure compared to that made by land, labor and capital. There are several reasons for this. First, knowledge, by nature, is intangible. Knowledge exists only in the mind and therefore cannot be readily measured or quantified as can the more tangible factors. Since knowledge is a state-of-being, it cannot be quantified or measured directly. It can, however, be measured in qualitative terms, but even these measurements have to be made indirectly. It should be noted that knowledge is not synonymous with either information or information flows nor can it be approximated in terms of the equipment or utilities required for storing, processing or communicating information. Information can be measured in physical terms. Knowledge is the capacity to use information. Another factor which makes it difficult to conceptualize knowledge as a factor of production is that it appears to be expanding at an exponential rate. Knowledgeintensive activities are not only growing, they are becoming increasingly complex as advanced industrial and cultural organizations become increasingly specialized, interdependent and internationally oriented. Unlike the other factors of production which, by definition, are in limited supply, and therefore governed by the rules of scarcity, the amount of knowledge is not limited

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by tangible constraints. Knowledge is gained through experience of a practical or theoretical nature and thus can be reproduced or replicated. In fact, it is through use that knowledge is advanced and the stock of knowledge is maintained or transmitted from one person to another, from place to place or from generation to generation. There is still another aspect of the problem that will have to be overcome before we can fully acknowledge the contribution that knowledge makes in the wealth-creation process. This is basically a philosophical issue and depends on one's ideological outlook. It concerns the way we think about wealth in general. Consequently, it requires a réévaluation of the assumptions and ideas which, through use over the centuries, have shaped our concept of wealth. These ideas are deeply ingrained in our consciousness. And that actually prevents us from acknowledging knowledge as a basic resource. I refer specifically to the notion that only agricultural and manufacturing activities are productive and that services which do not produce products are by their nature non-productive and, consequently, do not contribute to wealth. Services are thus generally viewed as being unproductive, a drain on the economy. Since knowledge is not tangible, it is usually thought of as a service and, therefore, is not considered to be a form of wealth. Conventional wisdom would have us classify an activity not directly related to the production of goods as being a service, i.e. as non-productive. Early in the industrial revolution, when technology was limited, this convention was appropriate because most value was added through physical work. But this convention is highly misleading in advanced industrial activities which are science-based and where very little manual labor is required. Knowledge workers are to be found in all types of activities. Although some knowledge workers such as skilled craftsmen, engineers or foremen work directly on the production line in manufacturing type industries, most are engaged in nonproduction activities in technical centers, office buildings or research parks. They are employed by all types of organizations in all types of industrial categories including agriculture, mining, construction, manufacturing, utilities, service, social, cultural, governmental and not-for-profit activities. Our practice of categorizing knowledge workers as service workers and service workers as being non-productive prevents us from recognizing knowledge as a basic resource. The problem of conceptualizing knowledge as a resource or form of wealth is basically ideological in nature. Ideology shapes the way national income and national product accounts are defined and thus it determines the way national income is measured and the way we think about wealth. This is even more of a problem in socialist countries which do not recognize the value contributed by land or capital. Socialist countries do not measure services, interest or rent because they do not consider them as contributing to their national welfare or output. Our difficulties in perceiving or conceptualizing knowledge as a form of wealth can

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best be approached from an historical perspective. The idea that services are unproductive was strongly reinforced in 1776 when Adam Smith in his seminal work, "The Wealth of Nations" argued that "There is only one sort of labour which adds to the value to the subject upon which it is bestowed" (Smith, 1978). This idea, that only workers engaged in production create value, is still widely held. Production jobs are still regarded as being the economic backbone of the industrial metropolis. This is why most industrial development efforts are still geared to chasing smokestacks. Even the recent wave of efforts to expand "high tech" industries focuses on the production of goods rather than on the production of knowledge. The conventional wisdom that manufacturing activities serve as the "engine that drives the local economy" needs to be challenged. This task of conceptualizing knowledge as a factor of production, and of knowledge workers and knowledge-intensive activities as contributing to the creation of wealth, has to be undertaken if we are to increase our understanding of the advanced industrial metropolis. To do this we must have an operational definition of the knowledge worker. Considerable research is required to develop the ideas and conceptual tools necessary. We can begin, however, with a working definition (with the intention of revising it as found necessary). For example, we can classify a worker as being a knowledge worker if knowledge is critical to the tasks performed, i. e. if the worker has to possess the know-how or has to know how to access and evaluate information in order to perform his tasks. A knowledge-intensive activity is an activity where know-how or experience, which may be of a practical or theoretical nature, is essential. Knowledge intensive activities are not determined by the industrial classification, work setting or occupational classification (although occupational classifications are somewhat similar in a conceptual sense). They may be located on the production line in the familiar form of skilled craftsmen, a foreman or technician, but they are more likely to be found outside the factory in an office or laboratory setting or in a business, technical, government, educational, medical or research center. The idea that knowledge is a resource, i. e., a form of wealth, and should be treated as an investment will be very difficult to establish unless a clear distinction is made between knowledge workers, production workers and service workers. We can do this by becoming more cognizant of what the term "services" connotes and why this is the case. We still hear variations of Adam Smith's idea that if a worker is not manufacturing a product, then "his services generally perish in the very instant of their performance, and seldom leave any trace or value behind them . . ." To further emphasize that point Adam Smith added, "The labour of some of the most respectable orders in the society is, like that of menial servants, unproductive of any value, and does not fix or realize itself in any permanent subject. . ." (Smith, 1978). He was referring to lawyers, doctors, clergy, accountants, generals, etc. This practice of viewing non-production workers as a drain rather than a contributor to wealth-

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creation continues today with statements such as "we-cannot live by taking in each other's washing" or "overhead costs eat up the profit", or "paper work is make work", Some prominent economists are still making such pronouncements. (A few are cited below.)

19.2.6. Overcoming Midas Mania and the Fear of Goods Once we can differentiate between knowledge, production and service activities, we will be able to overcome our manufacturing bias. Then we will be able to increase our understanding of the contribution that knowledge workers and knowledge-intensive activities are making, particularly in major industrial metropolises. These biases toward the traditional factors of production, land, labor, and capital will be very difficult to overcome, however, because when the case was being made for labor by Adam Smith and others, it was overstated and oversimplified. It was overstated and over simplified in order to overcome entrenched interests. A situation similar to the one we face today when we try to treat knowledge as an economic resource. Adam Smith's basic argument was based upon a distinction between two types of labor, productive labor found in manufacturing and non-productive labor found in services. As the nature of wealth creation has changed, this distinction has lost its usefulness. It desperately needs to be reworked. Knowledge workers, whether they be in manufacturing or services, need to be considered as a distinct category by themselves. Smith argued that only production workers created value as a way of challenging the powerful vested interests of his day who believed that all value was inherent in the land and that gold was the measure of wealth. The idea that labor and industrial capital contributed to value and, therefore, should receive compensation was strongly resisted by those whose incomes were based on land holdings or trading privileges secured from the monarch. Economic history is replete with earlier battles fought over interest paid on loans and profits derived from the exchange of goods. For reasons of practicability, each factor of production had to have a philosophical basis before it could be accepted and incorporated into political thought. The same is true of knowledge if it is to be widely accepted and treated as an economic resource. The basic issue that Adam Smith had to counter was the "Midas mania" of the Mercantilists and their "fear of goods". Adam Smith was addressing the needs of the industrialist capitalists right at the offset of the industrial revolution. The progress of these industrialists was hindered by the monopolies and privileges that commercial capitalists and merchant adventurers secured from the State in order to control trade and the accumulation of wealth (as they perceived it at the time). Smith had to counter the notion that the wealth of nations is determined by the amount of bullion that is stored in its treasury. He had to also overcome the age old notion advanced by

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the fundamentalists, universalists and physiocrats that all value came from the land. Smith provided the philosophical basis for a new form of economic activity, manufacturing and new forms of economic power, industrial capital and labor. His instinct and his thesis was that the wealth of nations is determined by its human resources. He wanted to see resources shift from the service of sovereigns to more productive labor in manufacturing. Adam Smith, and other classical economists who followed, had to overcome the notion of the Physiocrats that value is inherent only in a commodity and that agriculture was the only source of surplus from which all classes of society derived their revenue. Smith believed that the wealth of nations would increase if individuals were allowed to pursue their own self interest and betterment under free market conditions. Larger markets would lead to greater specialization, increased productivity and the accumulation of capital stock which would further increase the amount of goods that could be produced. But Midas mania was well entrenched. Christopher Columbus, for example, when justifying his search for gold, argued that "Gold is a wonderful thing. Whoever possesses it is master of everything he desires. With gold, one can even get souls into paradise." This quote is taken from " A History of Economic Thought" by Erich Roll. Roll then notes that even "Martin Luther,who did not share this last sentiment, implied a similar regard for gold in his great attack on trade. He said that the Germans were making all the world rich and beggaring themselves by sending their gold and silver to foreign countries; Frankfurt, with its fairs, was the hole through which Germany was losing her treasure" (Roll, 1940). Don't these arguments sound familiar? There are still those who question the value of the convention and conference industry and want to restrict trade when imports increase.

19.2.7. Overcoming Goods Mania and the Fear of Technology The fear of goods has been overcome but the undue emphasis we now place on the production of goods, on production workers and on capital goods (plant and equipment) gives rise to new fears associated with the loss of production activities. Wealth creation is generally viewed in terms of the number of production workers that are employed. Consequently, the loss of production jobs is viewed as a decline in wealth creation. This fear that our ability to create wealth is declining stems from a lack of understanding of how wealth is created in advanced industrial societies. Industrial jobs have not actually declined, they have changed and thus we must change the way we think of them. If we consider industrial production in the context of how industries are now organized, i.e. from a global level, we will find that the value of industrial production continues to increase. What has changed is the way and the place that value is created or added. Some work and jobs are shifting from labor-intensive to knowledge-intensive activities, e.g., from mechanical to electronic

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and bioengineering processes. Other work is shifting from labor-intensive to capitalintensive activities (automation), and some jobs are shifting from developed regions to less developed regions (out-sourcing). 19.2.8. The Role of Knowledge in Advanced Industrial Societies As science, industrial and managerial arts and legal and social systems have advanced, and as markets have been internationalized, a whole range of highly specialized knowledge-intensive activities and institutions have been put in place. New organizational forms such as multinational corporations, international professional and specialized business service firms, trade and professional associations, medical and educational centers, and research institutes have evolved. They handle the tasks of governing technology, i.e., managing and advancing our industrial and cultural know-how and apply the technology on a global basis. Knowledge is essential to the functioning of advanced industrial societies. It should not be surprising that, as industry becomes increasingly science-based and technology-driven, labor intensive activities will be replaced by capital- and knowledgeintensive activities. We have to correct our bias towards physical capital, however, by increasing our understanding of human capital and its institutional basis, i.e., the knowledge sector. This "fear of knowledge" is hindering our progress because knowledge is becoming an increasingly important factor in economic development in industrial and in less developed nations alike. In order to advance our thinking, therefore, we must begin by differentiating between knowledge workers and workers in traditional manufacturing or service industries. The distinction must be made between workers whose work tasks are of a tangible nature, simple, repetitive, primarily manual and require physical strength; and workers whose work tasks are more intangible, complex, primarily mental and require the exercise of judgements, considerable experience and communication skills. Experience required may be of a theoretical or practical nature and gained through education or through apprenticeship programs and vocational training, i.e., in the skilled crafts, or on the job.

19.2.9. Changes in the Nature and Place of Work Just as Adam Smith provided a conceptual framework for the expansion of the manufacturing sector, the shift of work from the field to the factory, and for establishing labor as an economic resource, we must now provide a conceptual framework that will account for the expansion of the knowledge sector and the shift of work from the factory to the office, technical center, laboratory, hospital, library, classroom and - to a certain degree - back into the home. We will not be able to have

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confidence in our advanced industrial society unless knowledge is viewed as an economic resource along with the traditional resources, land, labor and capital. We no longer question the viability of a nation because its agricultural workforce is declining due to mechanization. We are not concerned with the fact that farm workers declined from 95% of the total workforce at the beginning of the industrial revolution to roughly 5% today. This is because we know that the value of output produced by that sector has continued to increase. In fact, we now question a nation's vitality if a large share of its workforce is still engaged in agriculture. We are aware that new jobs were created in manufacturing as agriculture was mechanized. Similarly, the decline in the number or share of "production workers" or factory jobs due to automation or out-sourcing should not be interpreted as evidence that industrial society is failing or, alternatively, that we are becoming a "Post Industrial" or Service Society (Galbraith, 1967; Bell, 1973). Clearly the automation of manufacturing cannot be fully appreciated as long as it is considered in the context of traditional industrial capitalism. Technology and automation will continue to be resisted until knowledge is thought of as a factor of production. The vitality of an industrialized economy will continue to be questioned as long as it is measured by the number of people engaged in manufacturing, i.e., until our conceptual framework is revised.

19.2.10. Growth of the Knowledge Sector Although the eminence of manufcturing has replaced the eminence of agriculture it is misleading to think of services as replacing manufacturing. The traditional concept of the service or tertiary sector as outlined by Colin Clark in "The Conditions of Economic Progress" (Clark, 1940) no longer has much meaning particularly at the metropolitan or city level of analysis. Jean Gottmann, in his study of "Megalopolis" (Gottmann, 1961), found it necessary to define the quaternary sector of economic activities. Quaternary activities are services relating to transactions, in contrast to domestic services such as retail and repair services. Others have found it helpful to subdivide further adding a Quinary sector which includes control activities and government. When we distinguish betwen knowledge and service workers, we find that it is the knowledge-intensive or advanced services that are growing, both in terms of value added or contribution to Gross National Product, as well as in terms of the numbers of workers and the composition of the labor force. It has been estimated that the knowledge sector will double from one-third of the labor force in 1972 to two-thirds by the turn of the century (Fuchs, 1968; E.P.A., 1973). In fact, when trends in employment and contribution to national income are examined, traditional (tertiary) services are found to be declining in advanced industrial nations while others are expanding (Abler and Adams, 1977).

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Uneasiness concerning the decline of manufacturing production workers, are compounded by concerns with negative trade balances in some advanced industrial nations. In today's economy these negative trade balances are largely due to changes in exchange rates, the concomitant rise in the aggregate value of imports and the decline in the aggregate value of exported goods. Production jobs are still viewed as the primary source of wealth. The fear is that production jobs are being exported overseas. The negative trade balances confirm those fears. Moreover, since services are still thought of in terms of the more menial services such as household servants, salesclerks, waitresses, shoeshine boys and taxi drivers, they are expected to decline since they are tied to manufacturing. Everyone knows that "we cannot live by taking in each other's washing." Professional services such as legal, medical and educational services are still not viewed as being viable exports. Economists have studied particular aspects of the knowledge sector, including the contributions that education and technology have made to economic growth (Dennison, 1962; Greenfield, 1966; Becker, 1964; Machlup, 1962). What we still lack is a comprehensive conceptual framework or knowledge theory. Most economists have difficulty explaining the nature of the value creation by knowledge workers such as professionals or administrators. In fact, some question the vitality of an industrial economy when they see manufacturing industries declining and only those industries classified as services growing. Especially concerning is the fact that most of the growth occurs primarily in business, legal, health and educational services. Along with the decline of production jobs in manufacturing, rising imports and an unfavorable balance of trade, the growth of services is commonly viewed as an indicator of weakness. For example, Robert Reich in "The Next American Frontier" (Reich, 1983) blames the nation's decline on global developments and on industry's inability to implement high, value-added flexible-manufacturing systems fast enough to offset the loss of high volume, standardized production operations. Operations that require machinery and unsophisticated workers can be accomplished more cheaply in developing countries. (Some commentators use a stronger expression than decline, and argue that the whole capitalist system is haemorrhaging.) Another noted economist recently argued in his column that the growth of services do not contribute to economic development in the United States. The gist of his statement was that the United States is falling behind because it is becoming a nation of lawyers, doctors and teachers, litigating against each other, caring for each other's sicknesses and spending half their lives in classrooms. This general distrust of services is a very unhealthy situation in what is rapidly becoming a knowledge-based and learning-based society. I can understand researchers questioning the value of their own research when they have difficulty advancing such knowledge. But that is the nature of research and why it requires a person with unusual patience and commitment. But even professionals often portray themselves as being unproductive. A very successful corporation lawyer once agreed

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with the premise (forwarded by the chairman of a major corporation) that lawyers do not add to value of products, that they add only to costs. The lawyer added the caveat, that "legal costs are costs which corporations cannot avoid." We know the knowledge worker is in trouble when even an articulate lawyer, unable to explain the value of his services, thinks of himself as unproductive and a drain on society. The old notion that the labor of a service worker is unproductive and thus adds nothing of value is strong indeed. But this negative view of services hinders development of knowledge-based activities and cities alike. Services need to be seen in terms of their value rather than in terms of their cost. We must think about knowledge as an economic resource and as a factor of production and be able to conceptualize its contribution to the nation's welfare. A philosophical basis is required to explain this new form of economic power and its implications. This is particularly true of the implications for cities as well as for basic and applied research, for the advancement of knowledge and education, etc. Like any economic resource, knowledge has certain properties that must be identified if it is to be conserved, utilized fully and passed on to the next generation. Our advanced industrial societies have learned to think almost exclusively in terms of goods. We tend to measure progress in terms of goods, commodities and other such tangible assets. Now, in order to advance our thinking about an advanced industrial society we must incorporate knowledge and intellectual property into the equation. This is especially critical to the development of advanced industrial cities.

19.2.11. M o n i t o r i n g K n o w l e d g e Activities If something is intangible, it is even more necessary to be able to conceptualize it than if it is tangible. Economics relies heavily on quantitative analyses and on historical statistics and concepts which are based on past models of how the economy functions. Since the role of knowledge has never been a significant part of the equation, it has not been monitored by the statisticians. But as society's stock of knowledge has expanded, its role has increased. Now knowledge must be factored into our analyses. Although we cannot measure the actual flow or exchange of knowledge, we can measure the income flows that are generated as it is produced or used. Knowledge transactions involve various forms of payments such as professional fees, tuition, patents, licenses, royalties, dividends, franchises, insurance premiums, conference fees and honorariums. Some organizations are now referring to these assets as intellectual properties. Many businesses have established special divisions to manage them. Some corporations have also created new positions at the vice presidential level with the responsibility for managing technology. Typically, this includes

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inventorying technology that is in use or is "on the shelf", and developing new ways to increase its value through wider internal application, further development or sale. As the value of intellectual properties increase it becomes harder for communities to monitor them. Protection of patents and other proprietory interests and precautions against corporate espionage, computer break-ins and other forms of white collar crimes are becoming an increasing concern of technology-driven organizations. Some technological advances and other types of secrets are being protected by limiting documentation, by not applying for patents, and by very tight employment contracts with the workers involved. The secret formulas for Coca Cola are classic examples. As local institutions evaluate their knowledge resources, knowledge resource assessments at the community level will become more difficult unless they concentrate on the income flows that are generated.

19.3. Knowledge Resources and Economic Development 19.3.1. Advanced Industrial Societies Intangibles such as knowledge are becoming increasingly important in the economies of advanced industrial nations and cities. This is because as they develop and upgrade their institutions, human and cultural resources and their environments, their comparative, advantages change. Specialized activities that take advantage of highly developed industrial, commercial, cultural and social infrastructures also expand. This is the legacy of the industrial revolution that they have inherited. Knowledgeintensive activities are expanding because the demand is expanding for know-how required to increase productivity and welfare. As industry becomes increasingly science-based, as new applications for existing know-how are discovered, and markets are expanded globally, even greater recognition will be given to the importance of know-how. One of the primary differences between knowledge and labor is that knowledge does not have to be applied directly on the production line. In comparison to knowledgeintensive activities, production activities are footloose. The location of production is dictated by the costs of assembling materials, labor, etc., and the cost of distributing manufactured products to markets. As the costs of these factors change the location of production changes. Knowledge-intensive activities can only be based where knowledge resources are established. Knowledge-intensive activities are not moved to lower cost locations because the necessary support systems would not be available there. Knowledge-intensive activities are more deeply rooted and are difficult to relocate. This is the prime reason why they remain based in the older industrial regions and why they have become the principal generator of wealth in advanced industrial economies.

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19.3.2. Examples of Knowledge Intensive Activities Knowledge produced in these industrial metropolises is exported to global markets and accounts for a growing share of export earnings of advanced industrial economies. These exports of knowledge-intensive activities take a different f o r m f r o m the tangible forms of exports - such as trade in commodities, merchandise and capital goods - and thus cannot be easily measured as they are exported. They can, however, be measured in terms of income flows generated in payment for t h e m . T h e methodology used for measuring the trade in services can be used for measuring the trade in knowledge-intensive activities. This methodology is outlined in a study of metropolitan trade and development in the United States between 1940 and 1970, see " E m p l o y m e n t Expansion and Metropolitan T r a d e " (Knight, 1973). A few examples of how knowledge is being exported will serve to demonstrate how knowledge-intensive services are traded. T h e first example concerns the export of industrial know-how. Traditionally, industrial knowledge was exported in the form of finished products, materials or machinery. But that was when manufacturing operations, corporate headquarters, research activities, etc., were all part of a single complex or located in the same city. Now in advanced industries with multi-national companies with many manufacturing facilities located around the globe, manufacturing and knowledge-intensive activities have been decoupled and are found at different locations. Industrial know-how is now being exported in the same way that capital is exported. It takes the form of equity in many joint ventures between industrial organizations based in advanced industrial nations and their partners in other industrial and developing countries. T h e partners, usually nationals of the country where the investment is m a d e , supply the capital required to finance the plant, equipment, inventory, possibly a distribution network, etc. In return, they receive a controlling interest in the venture (51 percent share of stockholders' equity) while the industrial organization provides the know-how and receives the remaining shares in the joint venture. T h e know-how provided by the industrial organization has to cover a diverse array of expertise in a wide range of activities including production technology, equipment purchases, raw materials utilization, manpower training, financing, merchandising, and technical assistance for clients, including legal, insurance, accounting matters, etc. This know-how, gained f r o m years of experience in different types of settings and political environments, is usually based at centralized administrative (headquarters) offices and auxiliary facilities such as regional and divisional offices, research, computer, technical and training centers. T h e corporation acts as the mechanism for governing technology and for the corporate culture to survive, it must be able to advance its know-how and to continuously adapt it to changing societal needs and values.

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The income generated from the use of these knowledge resources in joint ventures, flows back into the economy of cities where the resources are based. These income streams represent a return on the industrial organization's investment in the development of its knowledge resources. The value of the knowledge resources is established at the time the joint venture is established. Clearly, the know-how adds value to the capital invested. This is reflected in how the income earned by the venture is apportioned between the investors. One well may question the rationale used to justify the return on knowledge resources. One could argue that knowledge should be a free good. But there are costs to acquiring knowledge, and as is the case with any resource, unless there are adequate controls and incentives to justify development of the resources, they will not be developed. In the case of natural resources there may not be any opportunity or social costs of any significance to leaving the resources idle. But in the case of manmade resources, the costs are high. Manmade resources left dormant deteriorate. Their conservation requires use. One may also question the way that knowledge resources are controlled. One could argue that knowledge is a form of power and that everyone should have the right of having access to it. There is, however, no quick, easy or cheap way to acquire knowledge. Talent, interest, commitment and time are required to replicate it. For a developing country, or for a new industrial group to catch up with the established leaders in a field, is becoming more and more difficult as technology advances. And although the idea of leapfrogging ahead of the leaders may be appealing, but the probabilities of succeeding are not high. There is no substitute for the experience and wisdom gained through years of practice, research and trial and error. But there are new inventions and innovations. Incremental advances of existing knowledge bases are always possible. And there are many institutions now geared specifically to such efforts. New knowledge is usually of a proprietary nature. But in time, it may become institutionalized and enter the public domain. With improved communications and more open societies, new ideas and knowledge will probably enter the public domain more rapidly. When knowledge resources are utilized in other nations, they are gradually replicated and transferred to the joint venture partner in the host country. And this upgrading of the knowledge base contributes to their development. However, new knowledge frequently is also gained in the process of exporting or transferring it. And this new knowledge flows back to the parent organization as it monitors its application. The parent is in the advantageous position of being able to evaluate the feedback in the context of other worldwide operations, and it is well positioned to take advantage of any new knowledge acquired in the process by applying it to other situations. These information flows back to where the knowledge is based, can result in an increase in the knowledge stock. This too is a form of return on the knowledge resources invested. The combination of the transfer and synergistic advancement of

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knowledge which results from its export, is one of the reasons why it is so difficult for emerging nations to catch up with industrialized nations. Most of the advances made in industrial know-how are, and will probably continue to be, concentrated in industrial centers where the knowledge base was originally established and where it continues to evolve. The second example of trade in knowledge-intensive activities concerns the acquisition of knowledge. Whether knowledge is of a theoretical or practical nature, considerable living expenses including travel costs are usually incurred as it is being acquired. This is because considerable personal interaction is required to effect the transfer. Knowledge is not to be confused with information which can be communicated in an impersonal manner through lectures or mass media. Knowledge can only be acquired through actual experience. Consequently, the acquisition of knowledge generates significant revenues for cities that are knowledge centers. Visitors spend considerable income while attending universities, conferences, expositions or training programs; while serving on trade missions or scientific and cultural exchanges, or while visiting medical centers for diagnosis or treatment. Universities and medical centers are the largest exporters of knowledge, and consequently, the largest generators of foreign exchange in many advanced industrial cities. For example, in Boston's regional economy, MIT and Harvard along with numerous other universities and colleges, medical centers, financial services, consulting firms and state and federal government agencies - now dominate the institutional base of the city. Knowledge-intensive activities have replaced the traditional manufacturing activities in the Boston region's economic base (or export sector). Most cities recognize the contribution that conventions and tourism make to their economies. There are very few major metropolises that have not upgraded their conference and convention, hotel and airport facilities in order to increase their earnings from these types of activities. The conference and exposition industry is growing. Competition for this growing industry also is intense among the Chambers of Commerce. For example, Berlin invested over one half billion dollars in its standard-setting International Congress Center. Since its opening in 1979, the ICC has become Berlin's worldwide trademark. The convention and travel industry is expected to continue to expand as the role of knowledge and the exchange of knowledge increases worldwide. The late Herman Kahn of the Hudson Institute, forecast that the travel industry, which includes travel for conferences, business, educational and personal reasons, will be the largest American industry by the turn of the century. It will employ roughly half of the U.S. workforce, he estimated. It should be noted that a great deal of personal travel is also for the purpose of gaining experience and knowledge of other places, ancient civilizations, environments, cultures etc. This type of experience is considered by many to be as enrichening as the acquisition of tangible possessions.

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Health services require a special note because these knowledge-intensive activities have also become a very important source of export earnings for some cities. The world renowned Mayo Clinic is the economic base of Rochester, Minnesota. A single medical center, or some other type of world-class resource, may provide an adequate institutional base for a world-class city. Medical centers which offer state of the art procedures, now attract patients practicioners, researchers and students on a worldwide basis. Advanced medical services are now being restructured to serve global markets. In order to benefit from the services of specialized teams of experts and the facilities they have built, patients must now travel to these clinics for diagnosis and treatment. In order to reduce the travel required of patients, and in order to better utilize their resources, upgrade their facilities and expand their markets, some centers are now establishing satellite-linked clinics in different parts of the world. The Cleveland Clinic, for example, which is now the largest employer (8500 workers) in the City of Cleveland, Ohio (once a manufacturing center but rapidly becoming a knowledge center), is establishing satellite centers on each major continent. Other examples of international trade in knowledge intensive activities abound. They can be found in most industry categories. Accounting, legal, engineering, financial, advertising, insurance organizations, etc. also are becoming increasingly internationally oriented. They have to be able to provide services on a global basis in order to serve clients whose operations are expanding internationally. Insurance services, the pooling of all types of risks, is a particularly interesting example of trade in knowledge-intensive activities. They do not require either the provider or purchaser to travel. They can be distributed through agents. Direct contact between provider and purchaser is not essential. Lloyds of London is a classic example of a centrally based knowledge-intensive activity that provides services to clients throughout the world. Lloyds' clients do not have to visit London. Agents are able to transmit all the information required through electronic communications. Financing, engineering, design and advertising are functions which are of a similar nature. Most of the major commercial buildings designed or engineered in the United States, and most of the commercials created in the U.S., are produced by firms based in New York. New York has the largest and most diverse pool of talent and supportive services to draw from. Very little travel is required. Plans, proofs, contracts, etc. can now be transmitted almost instantaneously throughout the world at very low cost. These examples also demonstrate why an established knowledge base grows in such an organic fashion, usually at its original setting. Knowledge-intensive activities entail values that are of a cultural nature and require elaborate support systems for their survival. They benefit from what economists refer to as "agglomeration economies", economies created from the clustering of similar activities in major agglomerations. They cannot prosper unless the necessary support systems are

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present. They perish rapidly if relocated into what are often referred to as "cultural wastelands". They cannot grow in a cultural vacuum. They must be deeply rooted. They cannot be transplanted as easily as manufacturing activities can.

19.3.3. I n t e r n a t i o n a l T r a d e and K n o w l e d g e Activities Clearly, knowledge-intensive activities are becoming increasingly important in international trade. As already noted, payments for these activities may be included in the cost of goods shipped or they may take the form of payments for services. Most services that are traded internationally are exported by developed nations and are highly knowledge-intensive in nature. In the balance of payments accounts of international trade statistics, they are usually grouped into a single category which in the United Kingdom, for example, are called "invisibles". The United Kingdom is, in fact, the largest exporter of "invisibles". As in many advanced industrial nations, it is the U.K.'s earnings from exporting know-how which enables it to offset deficits in its trade balances (which includes trade in goods and raw materials) and ultimately to maintain the value of its currency. The balance of payments is an accounting identity. International accounts are, by definition, always in balance. Imbalances, or negative balances in one set of accounts, such as in the trade or merchandise accounts must be offset by favorable balances either in services, in income transfers (dividends, interest or government aid), or by capital flows. Changes in the demand for and supply of currencies used in international transactions are brought into balance through adjustments of the exchange rates. Unfortunately, balance of payments accounts, like other forms of national income accounts, do not permit us to distinguish between the return on capital investment and the return on know-how or between labor- or knowledge-intensive goods and services. If this were possible, we would find developed countries exporting knowledge (and natural resources) in exchange for other forms of wealth. The distinctions between these two different kinds of trade and capital flows are extremely important in documenting trends in the global demand for knowledge. Negative trade balances in merchandise are indicative of a highly developed economy, one that exports knowledge and imports manufactures. And this is the case whether the economy concerned is national, regional or metropolitan in scale. Growing deficits in the merchandise account i.e., in trade as it is currently defined, should not necessarily be viewed as a sign of a weakening industrial economy. The economy may be in the advanced stages of the transition from manufacturing to knowledge-intensive activities. The value of services exported by advanced industrial economies generally expands, while the value of goods exported declines and the value of imported goods increases.

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As international trade in services increase, services are becoming an increasingly important issue in trade policy and in international negotiations. In 1984, the General Agreement in Tariffs and Trade (G. A.T.T.) conference, for the first time in its history, created a committee to specifically consider trade policies proposed by member nations concerning the terms of trade for services. The development and protection of knowledge resources lies at the core of issues concerning international trade in services. Trade in knowledge-intensive activities (both goods and services) will be addressed more comprehensively once knowledge is treated as a form of wealth and as a factor of production. International trade is also increasing in many industrial and cultural activities geared directly to consumers, particularly those which facilitate the exchange of people, ideas or information such as communications, travel, publishing, films, performing and visual arts, entertainment and international events. Instantaneous worldwide communications, reductions in travel costs and time, rising educational levels and rising real incomes have expanded markets and accelerated these exchanges. The Olympics, for example, has become a major international business venture. Clearly, such activities and the facilities designed for them are part of the global economy and should be regarded as having value and contributing to economic and cultural progress. Once we are able to think of the export of intangibles such as knowledge in terms of the activities and income flows that they generate, we will be able to give them parity with the export of goods and their foreign exchange earnings. Then we will be in a position to improve our understanding of the nature of city development and the role of advanced industrial cities in the global economy. Advanced industrial, commercial and cultural organizations are under constant pressure to advance their knowledge base, to expand their markets, and to manage their knowledge resources more effectively. Their success in expanding their knowledge resources, i.e., sustaining their own development, will not only determine their future and the future of the cities where they are based, but also the development of the global economy.

19.3.4. Advanced Industrial Cities: Development Poles in the Global Economy Another question that needs to be addressed is whether the growth of knowledgeintensive activities will be sufficient to sustain the development of advanced industrial cities. Of course, the answer depends in large part on the perspective that is used to define the market or demand for knowledge. When viewed from the vantage point of the industrial metropolis, knowledge-intensive activities are generally perceived as destroying traditional manufacturing jobs and not offering opportuni-

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ties for either dislocated workers or new entrants into the labor force that come from disadvantaged backgrounds. But when viewed from the vantage point of the global economy, they are seen as growth poles. Skepticism about the ability of knowledge-intensive activities to sustain development in most advanced industrial nations still runs high, however. There are two reasons for this. First, the demand or size of the market for industrial know-how is not known. This is because the market is global in nature and it is difficult to measure or predict because it depends on how rapidly the less developed countries develop. Secondly, the indirect impacts of expanded knowledge-intensive activities are usually understated while the indirect impacts of industrial dislocations are usually overstated. Moreover, such an evaluation would also have to account for the fact that the relocation of manufacturing activities to developing areas also increases the demand for knowledge-intensive activities produced in advanced industrial nations. Advanced industrial cities act as development poles in the global economy because the advanced industrial, commercial and cultural organizations which comprise their institutional base operate in highly competitive global markets. They are under constant pressure to advance their knowledge base, to expand their markets, and to manage their knowledge resources more effectively. Their success in expanding their knowledge resources, i.e., sustaining their own development, will not only determine their future and the future of the cities where they are based but also the development of the global economy.

19.3.5. D e v e l o p i n g C o u n t r i e s and K n o w l e d g e T r a n s f e r s Growth in the demand for knowledge will depend on whether ways can be found to facilitate its transfer between developed and developing countries. And this is not a one-way transfer, it will require mutual respect and great sensitivity to the values on which these cultures are based. Access to information, technology and knowledge is an issue of increasing concern in all developing countries. National development plans which for the last two decades have been primarily concerned with industrial development - establishing basic industries and capital formation - are now placing greater emphasis on the social development and on human and cultural resource issues. Several key international organizations and commissions such as the United Nations conferences on the New International Economic Order, the Taif conferences of O P E C leaders, and the Brandt Commission's North-South conference, reflect a growing concern for the development of knowledge resources in developing counties. Jean-Jacques Servan-Schreiber, who surveyed these issues in "The World Challenge" (Servan-Schreiber, 1981) concluded that "the only way that developing countries can come to terms with the serious disadvantage that they are now in, and

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which could lead to world chaos, is for a massive transfer of technology." He predicts that the training and the development of human resources and the development of knowledge resources will soon become the priority of all priorities in the Third World. Servan-Schreiber's observations are very much to the point. He notes that "The passage from the old (labor intensive) method of production to the new (knowledge intensive) method is valid everywhere and at the same time. . . . What is needed to begin the transfer of technology, is an extension of the soft infrastructure of computerized society: the means to link every workplace, in every location, to a worldwide network of knowledge; the means that makes it possible to combine all essential information with human work, the means that disseminate the elements necessary for on-the-spot training of people according to their needs. Communications and education, then, are the first of these soft infrastructures that can be extended all around the planet." Servan-Schreiber describes some interesting projects which seek to address these issues. Once ways are found to facilitate the transfer of knowledge, economic development will quicken and the effective demand for industrial know-how will increase. The potential market for the know-how that advanced industrial cities produce is certainly sufficient to sustain their development; the question is whether the potential will be realized? Which cities or countries will take the lead in developing these potential markets.

19.4. Industrial Regions and the Global Challenge The future of the industrial metropolis in the global economy hinges on its success in building a world class city. Industrial regions which were founded on locational advantages, and which have prospered by creating environments favorable to manufacturing activities, are now at a critical juncture in their development. They have to transform what have been called "nitty gritty" environments into "cosmopolitan" environments so that they can offer a quality of life competitive with other world-class cities.

19.4.1. Transformation of Manufacturing Centers Into Knowledge Centers This transformation of mill towns and manufacturing metropolises into livable cities and knowledge centers is already underway but it is not well understood. A better understanding of the nature of the transformation is particularly critical to industrial regions because, if they do not facilitate the transformation, they could easily lose their knowledge resources which could serve as a foundation for future develop-

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ment. There is a great deal of apprehension about the future of industrial regions because most of these regions continue to pursue manufacturing strategies even though there is a growing awareness that manufacturing jobs cannot, in the long term, provide adequate economic opportunies to sustain their development. For the lack of an alternative strategy, resources are dissipated in attempts to perpetuate old values rather than adapting to new values and creating new opportunities. Industrial regions have a tremendous stake in the outcome of this transformation to a knowledge-based society. Those which anticipate and adapt to the transformation and are able to conserve their knowledge resources, will be able to compete with more traditional world class cities including those which are international commercial and governmental capitals. There is no reason why industrial metropolises which take advantage of their legacies from the industrial and scientific revolutions, i.e., their human, cultural and knowledge resources, will not be able to build world class cities.

19.4.2. Cultural Transformation and N e w Values The transformation is, however, particularly challenging because the critical resources are by their nature difficult to control. Knowledge resources to a high degree are self governing. They require highly cosmopolitan settings where high value is placed on the quality of life. In order to remain competitive in global markets, organizations must be able to attract talent that can advance their knowledge base. And to do this they must be able to offer both an attractive career opportunity and an attractive living environment. To be competitive, i.e., to retain and upgrade its world-class knowledge resources, industrial cities must offer a quality of life which is competitive with other world-class cities. Cosmopolitan environments in democratic and open societies founded on humanistic values are essential to knowledge-based activities. Knowledge-based activities are founded on values that differ from those on which manufacturing activities are founded. It is hazardous to speculate as to the type of ethic that will supplant the work ethic, but it appears that it will be some form of a career ethic. In the context of the career ethic, opportunity is seen as something the individual creates and is responsible for, not as a job right which is the responsibility of the government or industry to provide. This change from a mill town mentality, where worker and owner class interests are viewed as being in conflict - i.e., engaged in a zero sum game - to a society that is learning-based and expansive in nature, requires a fundamental value-shift. A shift which is even more difficult to effect than the actual industrial restructuring of the economic base. A whole new culture of the city will have to emerge as new values such as the career ethic, a world-view, a sense of place and a longer time perspective are established.

The Advanced Industrial Metropolis: A New Type of World City Cities will also have to learn how to think about the future as they redefine their roles in the global economy and formulate policies that will enable them to sustain their development. New conceptual tools and development capacities will be required to deal with all the perceptual, methodological, psychological and political problems that will inevitably arise as advanced industrial cities evolve into world-class cities. There will need to be a strong consensus about the future of the city. Major policy changes and commitments may be required in order to mobilize the resources needed for the city to take the necessary initiatives.

19.4.3. City Development in the Industrial Metropolis A great deal of insight into the process of city development can be gained from examining the growth, decline and development of industrial metropolises. They are at the forefront of this change from the machine to the information age. Industrialized activities can be found in the economic base of all metropolises, but since they are clearly dominant in industrial regions, the worldwide restructuring of industrial activities tends to have its greatest impact there. Moreover, industrial cities are a new type of city in the history of cities. They are still in the formative stages of city development. In fact, they are still in the process of establishing their institutional base. This base, which is comprised of industrial and cultural organizations which were founded there for one set of reasons, will change because these organizations will change and if they remain they will remain for a very different set of reasons. The new reasons for staying need to be understood by the communities so that they can securely anchor these organizations and not loose them through mergers or relocations. 19.4.4. Securing the Institutional or Power Base The situation in most industrial metropolises is highly precarious at the present moment. As organizations which comprise their institutional base have reorganized their operations to meet the global challenge, the nature of industrial activities that have remained and expanded locally has changed significantly. Over the last decade or so, knowledge-intensive advanced industrial activities have become increasingly dominant. These changes in the nature of the economic base have brought about a significant change in the nature of the local requirements that must be provided by the community if they are to retain such activities. Changes occurring in organizations that comprise the institutional base of the city have created a whole new set of requirements that must now be met by the community if these organizations are to be securely anchored. The community must become sensitive to these needs and be able to accommodate them if they are to sustain their development.

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1 9 . 4 . 5 . Establishing a Planning Tradition Most of the older industrial communities have been slow to respond to change. In some metropolises, suburban communities have - through upgrading educational and other public services and improving their residential environments - drawn both citizens and organizations out from the central city. Although this may satisfy the immediate needs of families and organizations, and strengthen the suburban economy in the short run, it does not necessarily contribute to city development or address the longer term needs of the metropolis or of its organizations, or of its citizens. Some metropolises have begun to take a long-term regional view. A few cities have created development authorities with the capacity to improve regional transportation systems and infrastructure. Others have established new-towns and new commercial and communication hubs, within the city or at satellite locations, in order to meet specific regional needs while at the same time preserving traditional values and old sections. All the efforts which have been successful have included major investments for educating and involving citizens in the planning process. For the process to work, a consensus must be created. Over the centuries, world-class cities have established the tradition Of planning. Their citizens now expect urban design of the highest standard. The majority of metropolises - particularly, industrial metropolises in advanced industrial nations - lack such a planning tradition and thus do not have any mechanisms for effectively responding to change. Their growth was of an accidental nature. Their fortunes were based on natural or locational advantages such as access to resources and markets. Social costs were ignored and public services were kept at a minimum in order to keep production costs competitive. Many industrial communities still define economic development primarily in terms of lowering unit labor costs, increasing worker productivity and keeping tax rates down. Unlike traditional world-class cities, few industrial metropolises have even the semblance of a comprehensive long-term plan or a strategic framework for city development. Old industrial metropolises generally resist change by denying that the change is of a structural or permanent nature. In many cases, this position is held until it is too late to respond effectively. In the absence of growth to propel them or leadership to redirect them, most politicians and administrators prefer to react to change on an ad hoc basis. Then, as their institutional base erodes, the communities become increasingly depressed and demoralized. Many industrial firms that grew up in mill town communities have had to move their corporate headquarters and research centers in order to give their employees and their families the option of living in more cosmopolitan environments. These corporate moves are not always of a voluntary nature. A firm that is unable to to upgrade its human resources is unlikely to stay abreast of its competitors. If it loses

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control through merger or acquisition, it may be forced to move its management functions to the parent company's city. Even in a large metropolis, the loss of an organization such as a Gulf Oil from Pittsburg, a Xerox from Rochester, or even a General Foods, Arco or Allied Chemical from New York, means erosion of that city's power or institutional base.

19.4.6. Can Accidental Metropolises Build Intentional Cities? The future development of industrial metropolises, like their past development, hinges upon the course of the industrial revolution. But there is an important caveatin the past, their growth depended on natural advantages such as being in the right place at the right time; in the future, their development will depend on man made advantages such as creating the right type of environment for knowledge activities. If their development is to be sustained, it will have to be planned. Either these industrial metropolises will develop into world class cities or they will gradually devolve into smaller and perhaps specialized or regional manufacturing centers. The nature of the industrial revolution has changed. The previous phase, the industrialization of agriculture and the shifting of work from the field to the factory, appears to have run its course. The combined pressures of mechanization, urbanization, rapid population growth and rising real incomes that gave rise to the "exploding metropolis" have eased greatly. In fact, in many areas of the more advanced industrial nations, net-migration to the metropolis has been reversed. They are losing population, particularly their young. As a result, many industrial communities are in decline.

19.4.7. Industrial Transition From Production to Knowledge Activities The present (advanced) phase of the industrial revolution involves the automation of manufacturing processes and a change in both the place and nature of work. As manufacturing processes become more science-based and as industries are restructured at the global level, production operations that were labor intensive are being "robotized" or "deskilled" and "decoupled" from the high-skilled manufacturing operations and moved out of the city to "greenfield locations" and in many instances "offshore". Consequently, traditional routinized jobs on production lines are declining particularly, in the older manufacturing centers. Work is shifting from factories to offices, technical centers, medical centers and classrooms. With instantaneous world-wide communications and air travel, global operations and markets can be closely monitored and technical, managerial and financial support can be provided from a centralized facility where ever and when ever it is

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needed on very short notice. The only production jobs that will remain in the older industrial cities are those in the high skilled, technology driven and highly capitalintensive industries or in new industries. As industries mature, and as the craftsman's knowhow becomes codified into a science, even skilled manufacturing jobs will decline. The future of industrial cities will increasingly depend on the continued expansion of knowledge-intensive, advanced industrial activities and on how successful they are in making the transition from labor-intensive manufacturing activities.

19.4.8. T h e E n i g m a of t h e Industrial City The evolution of a world-class city in the midst of a nitty gritty manufacturing metropolis is not easily perceived. For most, including the image makers and the media, the advanced industrial city remains an enigma. Stories about residents abandoning the central city for the suburbs, of plant closings, of deteriorating infrastructures, high crime rates, breakdown of discipline in the schools, political and fiscal stress, etc. are commonplace. Stories about increases in the workforce, rising real incomes, the new construction of office buildings and hospitals, etc., are rare and usually discounted because they do not fit the negative image that most people have of older industrial cities. Akron, the capital of the rubber industry, is an interesting case in point. The city has lost all of its tire manufacturing operations but very little else has changed. With all the factories either laying idle, dismantled or being converted into research centers and offices, its air quality has improved remarkably - from among the worst to one of the best in the Nation. Interestingly enough, nobody can really explain why Akron's workforce is now larger than when the mills were operating. And consequently, thosfe living in the region lack confidence in its future. Over the years a powerful idea has been engraved into the world view which is that only production workers create wealth. (All other types of work are viewed as being unproductive.) These factory jobs provide families with the opportunity to leave the farm and become established in the city. In factory towns particularly, people have come to think solely in terms of the actual fabrication or production of end products. They are unable to conceptualize wealth that takes the form of intellectual properties. This mill town mentality is highly anti-intellectual, which creates problems for the younger members of the community who are attending community colleges and other higher education institutions, in order to have careers. Even though the industrial workforce increasingly is becoming engaged in the business of providing know-how to the worldwide operations of the major rubber companies still headquartered there, Akronites continue to suffer from a traditional mindlock. And this has major implications. There is very little interest in building a cosmopolitan city in

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Akron, which, in turn, creates real recruiting problems for the major institutions that are headquartered there. 19.4.9. Industrial I m a g e s a n d C o n c e p t u a l Lags The pervading view of places like Akron, Cleveland and Detroit is that these old industrial cities are in a long secular decline that cannot be arrested. The cause of their decline is that the local industrial workforce is dominated by mature industries that are either slow-growing or declining nationally. Moreover, the community's share of these declining activities continues to shrink. This is certainly a powerful diagnosis and one that is difficult to counter. It is built on traditional concepts. It reinforces the community's worst fears. Moreover, such findings can easily be verified using published data and well accepted analytical tools such as location quotients, input-output and shift-share analyses. Such a mindlock cannot change unless the traditional perspective of the industrial metropolis is changed. Traditional analyses do not account for the important structural changes that occur with the transition from goods to knowledge production such as: Upgrading of the functions performed; Increases in the value added by workers in advanced industrial activities; Important linkages between the expanding corporate administrative and auxiliary activities in manufacturing industries and related managerial, technical, professional, and specialized business services; or, Income and employment multiplier effects because export bases of cities and regions are changing. The perceptual and psychological adjustments that have to be made as an industrial metropolis becomes an advanced industrial city appear insurmountable unless there is a conceptual framework which accounts for the new forms of development. When I began my research on industrial cities, I could not have been more pessimistic about the future of old industrial cities like Akron, Cleveland, Birmingham or Turin. At times I tended to agree with Frank Lloyd Wright, who commented upon visiting Pittsburg, that it would be better to start over than to try and improve the situation. Fortunately, prior work on metropolitan development (Greenfield, 1966; Stanback and Knight, 1970; Knight, 1973) and on the development of the New York Economy (CHR, 1972), provided a sufficient basis for formulating a new development thesis (Knight, 1973). Industrial cities are very difficult to read because they were not planned or designed. They began as temporary encampments of manufacturers which prospered primarily because of the natural or locational advantages the city had. Factories sprung up along shipping and rail lines. Neighborhoods grew around them as urban workforces expanded. If one should try to read an old industrial city by relying primarily on one's senses - on what one sees, smells, reads and hears while walking around the city - he

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will find a city that is blighted, poorly maintained and is being abandoned by industry and citizens alike. But, alternatively, if one examines the institutions that have been established and the human and cultural resources that have been formed, and if one considers the value of the industrial and cultural knowhow that has been developed, the sense emerges that some sleeping giants may be stirring in the rustbelt.

19.4.10. Consequences of Misdiagnosis It is very important that we revise our conceptual framework because a very negative set of processes can be set into motion if a city's situation is misdiagnosed. And here I will refer to events in Cleveland, a city I have studied in depth. After several major plant dislocations, the press began to ask what had gone wrong. Firms blamed many different parties. They blamed the unions for pricing their members out of the market. They blamed workers for a decline of the work ethic. They blamed government for unfavorable tax policies and social programs that undermined the work ethic. They even blamed the media for exploiting worker management differences. Unions and populist politicians blamed the firms for carpetbagging and for exploiting workers and the community. The corporations were viewed by many, including academicians, as all-powerful, lacking social responsibility and unwilling to make a commitment to the community. The media in general, the newspapers, in particular, fanned the controversies. The environment became increasingly hostile to its institutional or power base. Over a relatively short period of time, a fourth of the major industrial corporations based in the Cleveland region left town or were lost through mergers and acquisitions. The city's legacy from the industrial revolution dissipated rapidly. But the loss of the headquarters of major firms in mining, steel, machine tools, chemicals, electronics, etc. did not cause as much concern as the dislocation of manufacturing plants. Firms and individuals began to disinvest. The talented young went away to school not to return. Companies which remained - and major law, accounting, and management consulting firms - began to have difficulty recruiting talent from outside the region. The retired headed to warmer and less depressed climes. The prophesy of decline became self-fulfilling.

19.5. City Development in the Context of the Global Economy 19.5.1. Redefining the Industrial City The advanced industrial city is a new type of world city, one that differs significantly from other types of world cities built on the moral order such as political, religious,

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financial capitals, etc. The advanced industrial city which is built on the technological order must sustain its development by facilitating the upgrading and expansion of knowledge-intensive activities of internationally oriented industrial and cultural organizations. Unlike the traditional manufacturing center, whose primary role is the production and distribution of manufactured goods, the primary role of an advanced industrial city is the production and distribution of knowledge. The advanced industrial city is basically a technology capital. Its function is the governance of technology and it is the home of corporations and other science-based organizations such as medical centers, universities and research centers that administer and advance technology. The primary function of such cities is the production and distribution of knowledge and the management and advancement of technology on a worldwide basis. Administrative and auxiliary offices and all the related professional, technical and business services required by major multinational corporations and other internationally oriented organizations comprise their institutional and economic base. Advanced industrial cities, the capitals of technology, are very different from traditional world cities because the governance of values based on the scientific order give rise to a culture that is distinctively different from the culture associated with the governance of values based on the moral order. Industrial and cultural organizations do not have a monopoly over the provision of services as do national governments. Knowledge cannot be controlled, even totalitarian governments cannot prevent it from crossing national boundaries. Consequently, competition is fierce in sciencebased activities. The only way an individual or organization can remain competitive in technology is to advance the state-of-the-art. In contrast to national capitals which have a vested interest in preserving the status quo, advanced industrial cities must act as change agents. Whereas the traditional city has a culture that resists change the advanced industrial city must have a culture that fosters change. Redefining the industrial city involves revaluating one's world view, from the perspective of a particular city and conceptualizing the city's development in the context of global developments. Advanced industrial cities have to learn how to mirror the global culture on a local scale with a local flair. The city's citizens need to think globally and act locally. They also need to understand the historical evolution of their city and the unique set of values that underly its development. To wit, a conceptual framework needs to be formulated that accounts for the transition of production centers into knowledge centers. The main challenge for industrial metropolises is to identify and enhance their knowledge resources and to increase their understanding of the factors involved in knowledge production, especially the role and the nature of the knowledge worker. Admittedly, this is a big order. Attaining this sense of the advanced industrial city should be placed high on their agendas. This is what industrial metropolises will have to do in order to develop the knowledge-based economy. I would like to be able to

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say that I have been able to elaborated such a conceptual framework, because I have been wrestling with these issues for some time. But in all candor, I have to admit that it is only recently that the need for this new framework has become so patently clear. I have found that I cannot advance my own work on city development without addressing these issues and that is why I chose to try and develop some of these ideas so that you could consider them at this congress.

19.5.2. Institutional Ecological A p p r o a c h My own research has been focused on what I believe to be the critical aspects of change in major metropolises. Namely, changes which are occurring in the nature of development in the industrial and cultural sectors. To gain insight into the nature of these changes, I have found it necessary to take an institutional approach. This involves making in-depth case studies of the changes occurring in the leading industrial and cultural organizations that comprise the institutional or economic base of the city. These organizations are important because they operate at the leading edges of the global economy. If they are to survive, they have to adjust to the realities of increasingly competitive, one-world markets. If they are to prosper, they have to identify and capture new opportunities that the global economy offers. Such operations require considerable vision, leadership and management savy. Organizations that wait and react to change usually lose position and control. Only those that are proactive can position themselves in global markets. But required organizational changes can be traumatic for the communities where these organizations are based. Rarely are these changes anticipated by the community at large. Rarely are they understood when they occur, even by those within the organization that are making the change, let alone by those that are dislocated in the process. The community's reactions, the unions' reactions, the local residents' reactions are usually counterproductive and, in the long run, dysfunctional because the changes are not understood. Why is this so? I believe it is because only one side of these changes is perceived. Only the negative aspects of change fit into their world view, positive aspects do not. It is for this reason that I emphasize the use of the term development when referring to transition in the industrial sector. The declines in production workers are permanent. They are structural, not cyclical. The smokestacks and armies of Chaplinesque workers will not be returning. These old familiar values are being destroyed. The other side of the development story is unfamiliar and difficult to present, especially to those who have a strong work ethic. The worker that views the creation of a job as being the responsibility of the mill owner, and whose primary concern is that he not be exploited, will find the knowledge worker's world very threatening indeed. The

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shift from thinking about work in terms of jobs, to thinking about work in terms of careers and lifelong learning, requires breaking the old industrial mind lock. This transition is not only difficult to conceptualize but it is very difficult for communities to accommodate particularly when the industrial sector dominates a region's economy. For a variety of reasons most communities go through a long period of denial before facing up to the fact that the changes are of a permanent nature. It may be politically expedient to use public resources to maintain obsolete programs or infrastructure. Unfortunately, however, resisting or reacting to change usually results in resources being dissipated. This approach has appropriately been called "feeding the problems". The alternative would be to examine the nature of the changes and then to shift resources in ways that will best accommodate them. This task of thinking about or creating the future, as Alfred North Whitehead has argued, is one of the primary roles of the academy. City development should be a top priority of future studies and research. Are not cities one of the most important artifacts created by man? Why are most of our urban policies and urban-research programs problem driven? Research into historical processes and explorations of emergent trends and new opportunities should be on an equal footing with problem oriented research. I tend to agree with the view that the future will not happen if we wait for it. I think we are at the threshold of a new era of development and that cities will play a very important role. The question that remains is which cities will be able to turn it to their advantage.

19.5.3. Berlin: A Prototypical World Knowledge City? Berlin is a very interesting example of city development because of the conditions that shaped its development, and its continuing viability as a knowledge center under adverse circumstances. Even though it is no longer the capital of Germany and it is isolated from its hinterland, it has a rich industrial heritage on which to build its future as a knowledge center. Like every metropolis, Berlin has a memory and that makes it very difficult for the city to adjust to change because many see its past as being more glorious than its future. This pride based on past accomplishments can make it very difficult to step back sufficiently to gain a broader perspective or to change its vision. Berlin's historical development makes a fascinating case study. The city's development is a prototypical example of a backward region catching up with events in an industrializing world. I am speaking of its origins which go back to the Thirty Years War. At that time, Germany was an economically backward country. Its economic basis was a feudalist system of agricultural production. It had only primitive industry which was still ruled by medieval guild regulations. Politically, the distinguishing characteristic was the multitude of small states ruled by absolute princes. Each

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individual state had got so far on the mercantilist road as to possess a "national" currency for its own territory. In 1701, Frederick The Great, the elector of Brandenburg, with the consent of the emperor, assumed the title of King of Prussia. With the establishment of the Prussian monarchy, Berlin became a capital. This occurred about the same time that Peter The Great, in order to modernize Russia, moved its capital from Moscow to St. Petersburg (1703). Frederick increased his power by expanding Brandenburg into Prussia. He used a strategy for expanding his power similar to that used by Louis XIV in France. He made Berlin Prussia's political and symbolic center. In order to attract nobles and large landowners into the life of the court, he built planned extensions in the western districts of the city. A Versailles type "entertainment center" was built in one garden-like suburb, Sanssouci, on the outskirts of Berlin beyond the walled city. The army was also based on the periphery in neighboring Potsdam. The royal court and the army became the basis for the city's commercial economy. Manufacturing (gold and silver, porcelain, iron and steel, foundries and gunpowder) in particular was intensively promoted. But Berlin's development as a capital city was curtailed by the polycentrism of the German city system in the Holy Roman Empire. While Frederick The Great put Berlin on the map and established its political power base, it was under Bismark's rule, that the foundations for its future as an industrial city were firmly established. With the collapse of the Holy Roman Empire in 1806 and reorganization of Germany in 1815, Berlin's regional influence was substantially expanded. This allowed Berlin to become, along with Vienna, one of the two most important cities of the German Confederation. Manufacturers took advantage of Berlin's geographical position as a major hub of transportation systems in Europe, and of its political position by founding the German Customs Union in 1834 which enabled it to develop the railroad and machine tool industries. The success of locally based firms in machinery, chemical, munitions, garment and electrical industries enhanced the industrial character of Berlin. After the Franco-Prussian War (1871), Berlin became the political, financial and cultural center of Germany. What is important to us today, is the nature of the strategy that Bismarck implemented in order to increase Germany's power. He sought to unify the numerous and loosely federated German provinces through industrialization. It was in the process of industrializing the nation that this major industrial metropolis took form; he was not trying to build a city per se. His approach was to support emergent industries by creating an efficient industrial and social infrastructure. Basic research, education and technical training; efficient and low cost utilities; transportation improvements, and advanced social programs in the area of housing and social security to meet the needs of the rapidly growing industrial proletariat, were all addressed in his comprehensive approach to industrialization. Economic development during the nineteenth century made

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Germany into an industrialist and capitalist country. It liberalized Germany's political and social structure and created the institutional base for its capital, Berlin. Germany, under an authoritarian form of government, was able to avoid creating the type of industrial slums that plagued other industrialized cities of the day. Berlin is one of the earliest and best planned industrial metropolises. The planning began in 1825 when the Prussian police-president laid out a network of new streets on unoccupied land within the city limits (Matzerath, 1984). Building codes of 1853 and the Hobrecht Plan of 1858-62 shaped peripheral growth in the outer rings beyond the walls. The city grew rapidly as workers migrated to the city from all over Germany to take factory jobs. Population grew sixteen fold, from 250 000 in 1825 to 4 million, one hundred years later. The city's planning framework favored industrial development and the building of low grade tenements during a period when the industrial character of Berlin was being reinforced by the addition of the electrical and telegraph industries. Planning began during the period 1850-1871 when the Industrial Revolution was at its peak and growth was occurring at a rapid pace. In 1920, a law was enacted creating Greater Berlin. Official and functional urban areas in eight municipalities, fifty-nine rural districts and seven estate-districts were merged to form an enlarged City of Berlin. Along with the Prussian Law on Housing Construction of 1918, the building ordinance and the zoning plan of 1925, provided the legal basis for socially-oriented metropolis-wide planning. This framework and its clearer social goals allowed "Garden City" planning ideas and "Bauhaus" design concepts to be implemented. With the collapse of the Empire and the Revolution of 1919 - which led to the fall of the Weimar Republic and the seizure of power by the Nazi dictatorship - planning efforts were refocused on self-glorifying monumental architecture, a discontinuity with its past traditions. Berlin's development as a world city was disrupted by the Second World War. The Adolph-Hitler-Stadt which was to have been the symbolic center of a universal empire never became a reality. In only a few isolated buildings was Albert Speer's fascist style of monumental simplicity put into reality. Although de facto, the West gave up its claim that Berlin would be the capital of a Germany that would eventually be reunited. The city has continued to develop on the basis of its advanced industrial and cultural activities. To conclude these observations on Berlin's development, let me address the question of whether Berlin has a future. To this question I must reply the same as I would in any city endowed with a strong industrial and cultural heritage. To the extent that Berlin is able to sustain the development of its industrial and cultural knowledge base and provide this industrial and cultural know-how to advanced and third world nations alike, it will prosper. City development is the forging of values that can be shared by a civilization at large. Berlin is fortunate to have been what historians have referred to as an anvil of

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civilization. Some very significant contributions of both an industrial (scientific and managerial) and of a cultural nature, including many in the realm of city building and planning, have been made by Berlin. And there is no reason why these developmental processes should not continue. The values forged in Berlin, and the knowledge base needed to support them, will be improved upon by someone, somewhere. Why not by someone here? The advancement of knowledge-intensive activities requires the creation of environments that offer a competitive quality of life. The talent required to advance knowledge-intensive activities will seek out those environments that are conducive to their work. Can Berlin create such an environment? Does it have the political will? If Berlin can attract and retain talent and advance its knowledge base it can expand its knowledge-intensive activities by exporting know-how and by applying existing know-how to the needs of other countries, especially those in the Third World. Of course, part of the knowledge base required is considerable sensitivity to the culture and priorities of host countries. The proposed center for international development makes a great deal of sense in this regard. Cities play a critical role in economic, social and cultural development. I think Berlin's experience in the development of Germany, when fully researched and critiqued, will enable Berlin to make extremely valuable contributions to the next phase of city development. That is, city development in the context of a global economy. Berlin grew with the industrialization of Germany. Moreover, Berlin, like few other cities, has first hand experience of both the use and the misuse of power in the name of improving the human condition. As we have found during this conference, a great deal can be learned from comparative and historical evaluations of city development. Past development has to be evaluated if we are to benefit from experience. Developing cities do not have to repeat all the past mistakes. But they are likely to unless development is carefuly evaluated. Is this not the discipline that we all seek? To wit: If Berlin can focus its efforts on managing and advancing its industrial and cultural know-how by making them more accessible to advanced and developing nations alike, then Berlin will, by advancing the democratic development of the global economy, assure its own future.

19.6. Conclusion Concerns about how an advanced industrial city actually works in an economic, social and political sense and doubts as to its legitimacy, i.e., whether such a city can earn an "honest" living by producing and exporting knowledge, are sure to linger. Clearly, the real challenge before us is to shape these new ideas so that the new forms of wealth and development can be clearly conceptualized, documented and made real. Although the advanced industrial city and its associated knowledge based

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society is present in a structural sense, we lack the philosophical framework for understanding it in a cultural sense. Consequently, it cannot be fully acknowledged or articulated. The advanced industrial city is thus structurally present but culturally absent. In order to increase our understanding of the advanced industrial city, the manifestations of the knowledge-based society will have to be defined at the metropolitan or city-region level. Once the particular attributes of a specific advanced industrial city have been identified, then those attributes can be enhanced in ways that are conducive to continued development of that city. As these attributes are articulated, the industrial city will be thought of in terms of its man-made resources, its human and cultural resources, its institutional base, and the quality of life that it offers. Each city must learn from its past so that it is able to capitalize on both its scientific contributions and its cultural traditions and on the values that underly them. An industrial metropolis, by achieving world-class status through building an advanced industrial city, will not only secure its future by improving the welfare of its citizens, but in the process it will also be contributing to economic, social and cultural progress at the global level. As the advanced industrial city evolves, it will also, by its nature and the conditions placed on its development, become an increasingly humanistic place.

References Abler, R. and J. S. Adams (1977) The Industrial and Occupational Structure of the American Labor Force, Papers in Geography No. 15, Pennsylvania State U . , University Park. Becker, G. (1964) Human Capital. A Theoretical and Empirical Analysis. Columbia U. Press, New York. Bell, D. (1973) The Coming of Post Industrial Society: A Venture in Social Forecasting. Basic Books, New York. Clark, C. (1940) The Conditions of Economic Progress. Macmillan, London. Dennison, E. F. (1962) The Sources of Economic Growth in the United States. Committee for Economic Development, New York. Dunn, E. (1971) Economic and Social Development: A Process of Social Learning, Resources for the Future. Johns Hopkins Press, Baltimore. Fuchs, V. (1968) The Service Economy. Columbia U. Press, New York. Galbraith, J. K. (1967) The New Industrial State. Houghton-Mifflin, Boston. Gappert, G. and R. V. Knight (Eds.) (1982) Cities in the 21st Century. Sage Publications, Beverly Hills, Ca. Gottmann, J. (1961) Megalopolis. Twentieth Century Fund, New York. Greenfield, H. (1966) Manpower and the Growth of Producer Services. Columbia U . Press, New York. Hirschman, A. O. (1970) Exit, Voice and Loyalty. Harvard U. Press, Cambridge, Ma. Knight, R. V. (1973) Employment Expansion and Metropolitan Trade. Praeger Pub., New York.

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(1977) The Role of Corporate Headquarters and Related Advanced Services in the Growth of the Cleveland Region. The Cleveland Foundation and Case Western Reserve University, Cleveland, Ohio. Machlup, F. (1962) Production and Distribution of Knowledge in the United States. Princeton U. Press, Princeton. Matzerath, H. (1984) Berlin, 1890-1940, in Sutcliffe, A. (Ed.) Metropolis 1890-1940,pp. 289318. Mansell, London. Pirenne, H. (1925) Medieval Cities. Princeton U. Press, Princeton. Reich, R. (1983) The Next American Frontier. Penguin Books, New York. Roll, E. (1940) A History of Economic Thought. Prentice-Hall, New York. Servan-Schreiber, J. J. (1981) The World Challenge. Simon and Schuster, New York. Smith, A. (1978) The Wealth of Nations. Penguin Books, New York. Snow, C. P. (1961) The Two Cultures and The Scientific Revolution. Cambridge U. Press, New York. Stanback, T. M. and R. V. Knight (1970) The Metropolitan Economy. Columbia U. Press, New York. (1976) Suburbanization and the City. Appendix B. Allenheld, Osmun and Co., Montclair, N.J. Stewart, M. (1984) The Age of Independence: Economic Policy in a Shrinking World. The MIT Press, Cambridge, Ma. Sutcliffe, A. (1981) Towards the Planned City: Great Britain, United States and France, 17801914. St. Martins Press, New York. U.S. Environmental Protection Agency (1973) The Quality of Life Concept. Environmental Studies Division, Washington, D.C.

20. Big City Politics - New Patterns and Orientations at the Local Level of the Welfare State Adalbert

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20.1. Introductory Remarks 1 The present status and function of local government within the (Western) political systems appears to be closely related to the challenges to and uncertain future of the advanced intervention and welfare state. Under the impact of economic, social and cultural changes the concept of the intervention and welfare state, as it developed in the post World War II period, has been shaken. On the one hand, the traditional welfare state concept of the (social democratic) left has been questioned, undergoing a difficult process of readjustment and partly yielding to neo-liberal and neo-conservative positions that have gained ascendancy and have, in some key Western countries, also won electoral majorities and government power, prepared to cut back welfare state policies and expenditures and to strengthen the reign of the market forces. On the other hand, it is particularly on the local level that, partly as the result of new cultural and social movements, there is an increasing number of local initiatives and actions trying to fight the individual and social problems caused by the economic crisis and the manifold aspects of change, especially such phenomena as mass unemployment and social marginalization. Unconventional programs and measures try to give immediate and pragmatic answers to pressing needs without always having clear linkages to a traditional ideological line of thought. The paper will discuss some key areas of local politics and local government in which basic assumptions of the traditional welfare state appear to have been questioned and in which, at the same time, local initiatives and activities can be observed meant to cope with some of the gravest consequences of the socio-economic development. The main thesis of the paper is that the local level and local government should, in such unconventional efforts, not be seen in a mere "stop gap" and crisis-management role, but should be interpreted as an arena and an agent that might help to gain the conceptual and practical potential for redefining and redesigning a welfare state more adequate and responsive to the new challenges.

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Thus, the shape and pattern of a "new municipal interventionism" become visible which, on the one hand, rejects the neoconservative dismantlement of welfare stste policies and, on the other, revises the traditional welfare state in some basic concepts and instruments.

20.2. Challenges for Redefining the Welfare State and Repercussions on Local Government Vis-à-vis the economic and social crisis phenomena that have been emerging and deepening since the mid-1970s in most of the advanced industrial countries, the intervention and welfare state, as it developed in the post World War II period, has been questioned in some of its key assumptions and goals as well as in its institutional and instrumental methods for formulating and delivering its policies. The major challenge undoubtedly comes from crucial changes in the economic development, particularly through the new technological revolution. Especially due to technological changes, the industrial countries have been pushed ahead towards what has been called a "métamorphose de la société salariale" (Aglietta and Brender, 1984). Apart from the oil price shocks of 1973 and 1979, it is particularly the technological change that has set the stage for structural unemployment, threatening to make mass unemployment a long term phenomenon, resetting the agenda for social policies. In addition, the traditional confinement of economic policy to the "formal economy" has been drawn into doubt, the attention increasingly turning to segments and potentials of an "informal economy". Another major thrust stems from cultural changes that picked up momentum in the late 1960's, still under economic growth conditions of the welfare state, and have been accelerated in the wake of the economic crisis. These changes may be seen particularly in an increasing pluralism of life styles, a growing importance of the issues of "quality of life", a shifting balance between working time and leisure time, but also a growing skepticism regarding the traditional ideas of progress and the belief in the ability of the political and administrative system to turn further economic and technological progress into a real social one. Given the rapid change of the economic and cultural contexts and given also the pressing challenge to cope with the transition to a post-industrial society, it is small wonder that the almost "classical" welfare state concept and constellation has come under attack, with new concepts and also new power relations on the ascent. The problematic of this development has been tackled from different conceptual, ideological and political positions ranging from right to left. Blaming much of the present crisis on "policy failures" of an active intervention and welfare state, neoconservative positions have managed to gain ascendancy and, in most key

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Western countries, to win electoral majorities and governmental power. They claim that, in order to overcome the present crisis, it is necessary to "free the market forces" and to dismantle a good deal of the welfare state operations, particularly in the field of social policy spending. This doctrine is most blatantly expressed in the call of deregulation and "pure" market relations (Friedman and Friedman, 1980), including a reappraisal of hierarchy instead of equality and elbow competitiveness instead of solidarity (Gilder, 1981). But also from liberal ground the "end of the social-democratic century" (Dahrendorf, 1980) was proclaimed with regard to essential goals and methods of the traditional welfare state. Finally, there is ample criticism also from "reformist" positions on the left. Apart from positions that see the beginning of "recapitalization of capitalism" (Miller, 1978), there are attempts to redesign and reorientate the welfare state in order to restore its capability to cope with the challenges of the present development and situation (for the US see e.g. Bowles, Garden, and Weisskopf 1983, for the FRG see e.g. Strasser, 1979). It should be noted, though, that such reformist positions cannot be adequately lined up in a simple right/left scheme, as there are also moderately conservative currents in which crude and ideological options for the self-regulation by the market forces are rejected (for the instructive Italian discussion see Donati, 1984). The outcome of the intensified social and political struggles on the international level where a new division of labour and power is taking shape and within the individual national states is still unclear. In order to explore the perspective of the development, two features of the past development of the welfare state should be taken into account. - Whatever elements of the welfare state were achieved in the past, they can be seen to be based on a political (class) compromise in different "mixes". So, reflecting the ambiguity of such compromises, a good deal of the welfare state regulations, on the one hand, contribute to social progress and individual emancipation and, on the other, contain elements of social control, if not oppression. - Welfare state regulations have not always been clearly geared to and defined by ideological options and conceptually grounded political programs. Instead, a good deal of them, as Polanyi (1978) showed, surfaced as pragmatic answers, "technical" measures, steps put forward in a trial and error fashion, mirroring efforts of social actors to mitigate the detrimental effects of the economic and social transformation of the overall society. To choose the local level and especially local government as the area and unit of analysis for studying these developments and their implications appears to be particularly promising for a number of reasons. First, while socio-economic developments and political decisions taken at central levels of government remain, as it were, abstract regarding their consequences and side-effects, they have concrete impacts on the local level where they are experienced in the life situations of individuals, households and groups in the most personal and immediate way, be it that they

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benefit or suffer from these developments and decisions. So, the "impact pattern" is much more clear-cut on the local level than on any other level. Second, driven by and voicing these pressing concerns and oppressing contexts on the one hand, protest groups and social movements have sprung up and gained momentum particularly on the local level. Responding to these locally particularly visible and mobilizable needs and demands, on the other local governments have come out with new strategies and modes of action forming a pattern that we prefer to call a "new municipal interventionism". The "grassroot" demands and pressures and this responsiveness of local government may add up to a noticeable change in the agenda, interest articulation and overall "political culture" within the local realm and arena. Gradually, such local change may turn out to be a change potential and change agent with some leverage on larger scale changes beyond the single local setting. Third, while on the central levels of government the controversy about the future fate of the welfare state tends to be fought out along ideologically defined and fuelled political party battlelines, the local level is likely to follow some "conceptual pragmatism" which is shaped by the concrete and actual needs on that level. Being shaped pragmatically rather than ideologically, the concepts and patterns of the "new municipal interventionism" thus probably tend to cut across political party lines, finding supporters among local politicians and administrators regardless of what their respective national party's stand on the issue may be. At least implicitly rejecting a blunt abandonment of welfare state policies, but also finding fault with crucial features of the traditional welfare state concept and reality, the still often fragmented "unconventional" and innovative measures and actions of such a "new municipal interventionism", although mostly not spelling out a more comprehensive concept, ambition or even vision and although often enough not even thinking of or aiming at a "grand scheme", may be intepreted as breaking the ground for and adding up to reformulating and reforming key elements of the traditional welfare state's instrumental and procedural methods to achieve and to secure social security and progress. In the following, we will first (in Chapter 20.2.1. to 20.2.6.) discuss a number of key issue areas, trying to show the two-sided and two-pronged dynamics in which, on the one hand, the traditional welfare state consensus and routines have been questioned and in which, on the other, unconventional and innovative forms of local initiatives and actions have sprung up. Then (in Chapter 20.3.) we are going to discuss some of the similarities salient in these changes and the potential that they may hold for the future development of the welfare state and its policies in general. In pursuing our argument we shall, we admit, be selective in terms of concentrating our attention on developments that may still be marginal in the sense that they take place at the margins of the local arena and of its political and administrative agenda, while main parts of the local agenda continue to be shaped and occupied by traditional forces, interests, concepts and routines. By focussing on these incipient

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developments we expect, however, to decipher some of the fundamental and, as time goes on, large-scale changes of welfare state policies that appear to be in the making. 20.2.1. F r o m t h e W e l f a r e State E q u a t i o n of E c o n o m i c , Technological a n d Social Progress to t h e Struggle A b o u t Conflicting G o a l s Among the basic assumptions on which the advanced welfare state rests an equation between economic growth, technological modernization and (general) social progress certainly looms large. Capital and labor, while disagreeing as to the distribution of the benefits of economic growth and technological advances as well as to other key problems of managing the economic development, have found themselves in a wide agreement on the necessity and compatibility of economic and technological modernization. State intervention into the economic development was not so much concerned with the direction and quality of growth as with its smoothness and steadiness in terms of output and job-creation. The respective concept of intervention can be seen in the neo-Keynesian belief in the effectiveness of centrally formulated policy incentives to private investors, taking the implementation on the local level for granted. Starting with the political and social changes of the late 1960s and with the economic crisis of the mid-1970s, this economic policy belief system was shaken on a number of grounds. - Particularly due to environmental protest groups that, as the Greens in the F R G , even succeeded in challenging the traditional political party system, the latent conflict between economy and ecology came to the surface, claiming increasing attention on the political agenda. The mounting environmental damages (for instance, the "dying of the forests" - "Waldsterben" - in the FRG) has laid bare the limits of economic growth and technological modernization strategies that ignore environmental and social costs. Confronted with these controversies in the immediacy of the local arena, local government cannot help taking sides in this goals conflict. - In the area of economic incentive policies, the linkage between economic growth and full employment has been fatally broken, as technological advances (e.g. robots in mass production) may lead to an improved economic performance of the enterprise in terms of turnover and profitability, but often leads to the reduction of the working force. While central government policies are mainly oriented to a tout prix improving the technological competitiveness of the national economy in the international markets, local government, being closely exposed to the social miseries and political demands resulting from unemployment, finds itself in a growing tension and conflict between implementing such centrally formulated economic policies and an increasing local pressure to give high priority to the preservation, if not creation of jobs.

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- As modernizing the nation's economy is given top priority on the central government's agenda, the traditional goal of promoting a regionally balanced economic growth as a means of providing, if not guaranteeing regionally equalized life chances is fading, making the fate of economically poor cities and regions even more precarious. So, local government is called upon to become active in an increasingly conflictual setting. In the field of traditionally conceived economic and industrial policies there is growing evidence that, in order to implement and better target incentive programs, strategies of "active implementation" are required involving local government agencies particularly in a consulting function (see Konukiewitz and Wollmann, 1985, with further references). This appears to hold true particularly for middle-sized and small enterprises which, in regard to their job creation potential, constitute a sort of paradox. On the one hand, they appear to be better performers in terms of job creation than large corporations, as soon as they manage to pass the "kick off" stage (e.g. introduction and application of new production technologies etc.). On the other, lacking the know-how and specialization of large companies, they have more difficulties in getting over the "kick off" period. So, local government assistance is particularly needed. It is in the field of technological innovation and modernization that, consequently, local governments in most of the Western countries have shown great readiness to attract enterprises of economic growth sectors into town by mobilizing specific local resources, for instance, "industrial parks" meant to tap the knowledge potentials of existing local universities. But experience also shows that the outcome of such public efforts and subsidies may be meager in regard to job effects. Whereas, under economic growth conditions, economic policies and industrial policies, from central government's, but also from local government's point of view, were tailored to economic expansion and, thus, predominantly to promoting new plants at new locational sites, the changed economic context has led local governments increasingly to focus on preserving the status quo of their economic base by assisting the industrial plants already located and still producing within the municipal boundaries in their struggle to stay economically afloat. Most local concepts of preserving rather than expanding the existent economic base are geared to new forms of cooperation and corporatism, as local capital and local groups and associations get together under the common goal of the survival of "their" city. Again, middle-sized and small firms are regarded to be the crucial clientele of this reorientation of local government's economic activities. The "new municipal interventionism" can have, on this score, different patterns. First, local action groups and trade unions may join with local government in some concerted activities (see for the U. K. B oddy and Fudge, 1984). Furthermore, actions for local redevelopment may involve particularly those locally located enterprises

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that do not have the spatial mobility of big companies. In a telling term, in Germany, this entire realm of municipal activities has been called "taking care of the existent plants" (Bestandspflege). Again, additional local engagement and activities are required that go beyond the instruments and administrative patterns of the traditional economic policy of municipalities (Kommunale Gewerbepolitik) and particularly entail the provision of consulting and related services to local business. At this point, a mounting tension and goals conflict is shaping up between the thrust and "philosophy" underlying central government's economic policy and businessrelated strategies of local government. While central government, in its economic policies in general and its economy-related research and development (R & D) policies in particular, is determined and oriented to promote the national economy to become and to remain technologically competitive in the world's markets, local government, operating under the immediate political and social pressures in the very local context and, thus, prompted to give highest priority to stabilizing the local employment situation, may assist firms to survive that, economically speaking, are worlds apart from standing any test of international competitiveness and uptodateness. In other words, while national government gives top priority to the technological modernization of the national economy, accepting if not calling in the market forces that take their toll among those business branches and firms that are "unfit to survive", local government follows an economic policy orientation that is increasingly guided by a general social policy concern, as local government, confronted with the alternative of having to give social services to people that have lost their jobs, prefers to give financial and other aid to local business to prevent them from laying off these people to begin with. This tension and goals conflict lies even more open, when it comes to local level initiatives in regard to small firms in the areas of trade, service, and craft where, particularly in the most recent development, the border between the formal economy and the "informal sector" (small firms producing goods and services based on "alternative" organization and calculation principles) becomes increasingly blurred. Innovatively linking up municipal subsidies and services to such self-help initiatives and groups appears to constitute a particularly important potential of a "new municipal interventionism". It is true, the net effect of such local initiatives in terms of job preservation or even job creation remains limited, all the more as the structural changes through which people are put out of work are unleashed by technological developments on a secular and global scale. They are, to a large extent, beyond any municipal reach, and so are the large multi-national corporations that are relatively mobile in their locational decisions and, therefore, largely immune from local pressures. In addition, it cannot, of course, be local government's business to block the technological modernization path in an unrealistic attempt to "stop the clock" of such changes. But such local initiatives may contribute to widening and alerting the political and economic

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discussion on technological progress as the lever for economic growth. It may prevent this discussion from taking a narrow, onesided view and may, instead, open up a discourse in which issues like local environment, labor market consequences, social integration etc. are picked up in more than a token manner and are seriously considered when it comes to weigh the gains and costs of technological modernization and to influence its pace. 20.1.2. Towards a (Re-)Widening of the Local Responsibility for Combatting Poverty and Unemployment The social security system, as it has developed as part and parcel of the advanced welfare state, rests on the assumption of a "full employment" society that is only temporarily beset by periods of "seasonal" unemployment due to business-cycle fluctuations, making large-scale poverty appear to be a historically overcome phenomenon. While, historically speaking, taking care of the "urban poor" was viewed to be one of the traditional tasks of municipal government, the gradual evolution of welfare state intervention in the areas of income maintenance policies has, in variations and different "mixes" from country to country, lead to the establishment of social security systems that, being centrally regulated and also centrally administered, tended to relieve local government from direct involvement (see e.g. Heidenheimer et al., 1983). In the German development, the traditional local government's engagement in seeing after the "urban poor" has been historically followed through in that public assistance - as contrasted with social security entitlements - is paid out of the municipal coffer (technically speaking: as far as cities not subordinated to counties kreisfreie Stadte - are concerned), according to the Federal Social Assistance Act of 1960. The German development of income maintenance policies and systems has, to wit, led to a bifurcated system. On the one hand, the general social security schemes covering old age pension, sickness and unemployment are based on some insurance principle (the would-be beneficiary pays a monthly "social security contribution" out of his/her current income into a centrally administered pool which is fed also by corresponding employers' contributions and, in part, also by general revenue payments). The entitlements to these "pools" are regulated by federal legislation. On the other hand, public (or social) assistance is entirely paid out of general tax money, that is, municipal revenue money, while the provisions (e.g. income test) under which a "needy" person may turn to public assistance are spelt out in federal legislation (Federal Social Assistance Act). When federal government, in the reformist 1970's, proposed to improve the "needy's" entitlement to public assistance, the cities consented, demonstrating their confidence that, under economic growth and full employment conditions, the number of those who are not covered by the general social security schemes would remain small, if not minimal,

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thus making municipal expenditures out of public assistance entitlements appear to be all but irrelevant (for some details see Konukiewitz and Wollmann, 1985: 333 f.). The assumptions underlying the general social security schemes as well as the public assistance scheme have been shattered by the advent of long-term unemployment on a massive scale in the wake of the economic development. As far as the general social security schemes are concerned, local government faces the fact that the more the present unemployment situation is marked by long-term unemployment of the individuals concerned, the larger the number of persons become that turn to municipally financed public assistance as the "social net of last resort". Obviously based on the assumption that the individual unemployment is a temporary fate dependent on the business cycle, the unemployment security scheme provides that the income maintenance payments out of this scheme (Arbeitslosengeld and Arbeitslosenhilfe) expire after a certain period of unemployment. Thus, quite paradoxically, the long-term unemployed falls out of the unemployment scheme, thus becoming dependent on the municipally financed public assistance. The demand of long-term unemployed for public assistance has been further increased because in recent years the federal and also some Länder governments, in pursuing the "consolidation" of their budgets, have been eager to reduce the entitlements provided by social security schemes. This holds true particularly for the unemployment security scheme with the almost grotesque result that the Federal Labor Office (Bundesanstalt für Arbeit) which administers the unemployment security scheme reports to have achieved a considerable surplus in current 1985, whereas the municipalities report dramatic increases in public assistance payments due to growing numbers of long-term unemployed that turn to the municipally financed public assistance after the expiration of their unemployment payments. The financial distress into which the unemployed, particularly the long-term unemployed is thrown constitutes only one side of the coin. The other side is a sociopsychological one. While "seasonal" unemployment may be an experience which the individual concerned may socio-psychologically come to grips with, particularly thanks to the very expectation that it is temporary, short-term to be ended with the next upward fluctuation of the business cycle. On the contrary, "structural" longterm unemployment tosses the individual concerned in a socio-psychologically much more desperate situation, robbing him/her of the hope of an early reentry in a stable working and, thus, living situation. This is particularly true for young people who may face life-long unemployment without having set foot in the labor market to begin with. Pointedly it has been said that an increasing number of people are threatened by a kind of "social death". So, local government is facing a challenge of a scale that is unprecedented even if one remembers the historical task of the municipalities to take care of the "urban poor". Firstly, the cities, particularly the big cities where unemployment figures are comparatively high, are confronted with what was historically called "pauperism"

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(see Leibfried and Tennstedt, 1985), a phenomenon not to be defined and understood in mere financial and statistical terms. Secondly and perhaps even more importantly, the municipalities witness a socio-psychological malaise of a growing number of persons, particularly younger ones, who are threatened by, to repeat that frightening term, "social death". Under these conditions it is crucially important, that local governments develop a wider and, as it were, more offensive concept and understanding of their social policy responsibility. Instead of the somehow reactive and regressive strategy of giving social assistance payments to the unemployed, it would be individually more helpful and socially more meaningful to use this money for giving people the chance to keep their job or to get a job. Yet, even if providing a job opportunity is to be considered to be the crucial dimension in a local strategy of social integration, it would be wrong to reduce these local initiatives to a mere public works stance. Instead, it should be complemented by local initiatives combining elements of employment, education and training. Such concepts of widening the traditional municipal tasks in the social policy field appears to be particularly important for young people whose social integration is extremely jeopardized by a long-term unemployment and a perspective "without future" with "no future". In fact, in most of the EC countries (see Kommission der Europäischen Gemeinschaften, 1983; for the FRG see Deutscher Städtetag, 1984) a whole spectrum of local initiatives and programs can be observed, particularly meant to provide work, training and assistance to young people. Among municipalities, particularly those with high unemployment rates, there is a growing concern for and interest in such strategies (see Maier and Wollmann, 1985, with an account on the situation in the FRG). To indicate the wide scope of activities (see European Centre, 1984), mention might be made of - local plans that define areas for (often centrally cosponsored) anti-unemployment programs and training schemes - local projects that, by giving some subsidies to cooperatives in the social, cultural and economic fields, create unconventional forms of training and public employment, - local programs to assist "new entrepreneurs", often linked with attempts to stimulate technological innovation on the level of small scale cooperatives or enterprise (see Sharman, 1983). Of course, the restrictions of such local initiatives of providing "new employment" and guaranteeing a minimum level of social integration are obvious. Most of them are linked with centrally inaugurated and funded anti-unemployment (labor market) programs which are, in turn, limited (for the "ABM"-program in the F R G see Engelen-Kefer, 1984). The municipalities are financially too squeezed to be able to launch major programs without central government assistance. In addition, there is severe criticism of such "second labor markef'-strategies particularly on the ground

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that a "second labor market" is in fact a "second class labor market" that may even work in the direction of lowering the job security and job conditions on the "first" labor market and may, by some sort of "symbolic politics", take the responsibility from the central government's shoulders to set steps towards a truly active labor market policy. Notwithstanding this criticism, the empirical evidence points out important merits of such local initiatives that not only bring some noticeable alleviation, particularly in cities with dismally high unemployment rates, but may also send political signals and exert some pressure "from bottom up" on the central levels of government to engage in a more active labor market and education policy (see Lafontaine, 1984). Finally, such local initiatives may be also viewed as reflecting a changed understanding of social and civic rights in the sense that these include not only an entitlement to some minimum income for securing bare subsistence and survival, but encompass also the claim to a minimum of social participation and integration in terms of paid work, individually and socially useful activities and education. 20.2.3. Public Social Services and Informal Work: Changing Patterns of Cooperation The expansion of the scope of public policies and the public sector has lead, first, to an ever wider public involvement in matters and processes that had been hitherto taken care of by societal and private actors and their informal economy and, second, to an ever growing role of public bureaucracies in implementing such public policies. On both scores, the ambivalence of the modern welfare state becomes evident. On the one hand, it is a clearly progressive normative goal and legitimization that the state should, for the sake of the individual social status, for instance, regulate the delivery of transfer payments and of social services, substituting forms of subsistence that had been provided by the family and other social contexts in the case of personal need. On the other hand, there are "etatistic" and bureaucratic costs of such normatively progressive policies in the sense that, through the dominance of public definitions of problems and problem solving, "etatistic" action patterns may prevail and that, through the crucial role of public bureaucracies, "bureaucratic" modes of action may be salient. As the operation and implementation of the advanced welfare state take place largely on the local level, it is here that these implications become most manifest. This appears to be particularly true because social policy formulation and delivery in a mass society calls for activities that are standardized and suitable for routine implementation and delivery, possibly by largescale bureaucratic operation. The ambivalence of this development towards a standardization, routinization, monetarization and professionalization of social service delivery with increasing features of an "industrialized" mode and selling "ready-made products" may be observed on the local level particularly in two dimensions.

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First, the expansion of welfare state policies has been accompanied by a steady growth of welfare state bureaucracies, particularly social service bureaucracies, both public and non-public ones, with professionalized personnel and staffs. It is true, the advent of professionalization of social service delivery has marked an important progress in terms of providing such services of a high professional standard to those needing them, regardless of individual and social status. Additionally, it should be noted that, as particularly the case of the social workers shows, it can be the very professional debate in which reforms of traditional approaches are considered and pushed, so that it would seem exaggerated to equate professionalism with rigidity. But, by and large, professionalization, particularly in conjunction with the standardization and routinization that comes with the "mass production" of social services, has tended to "define out" and "organize out" social and individual problems and problem-solving approaches that do not fit the rules for routine operation. Second, an important segment of the public or quasi-public social services that have been developing on the local level (such as kindergartens, day care centers, old age asylums etc.) are meant to provide services in life situation that were formerly, particularly in pre-industrial times, taken care of by the family and other societal networks, such as the church. Again, there are two sides to the coin. On the one hand, the benefits from the expansion of public and quasi-public services are considerable, ranging from lessening the inner-family conflicts and dependencies to permitting women to enter the job market, thus breaking out of the traditional division of labor among sexes. On the other hand, however, important social networks have been crippled as a result of this development, weakening the sense of solidarity and self-help as a source of mutual assistance. The limitations inherent in the logic of professionalization and bureaucratization of social services have been laid bare by the economic and cultural development of the 1970's. - As such services are bound to be personnel-intensive, highly resistant to rationalization, there is an inbuilt "cost explosion" (see e.g. Swedish Institute, 1984), making the operation of such professional social services ever costlier for local government. - As the personal services, in order to be "delivered", essentially require an intensive interaction ("co-production") between the provider and the consumer of such services, service delivery by professional staffs and bureaucracies tends to become the more ineffective, the more help, consulting etc. of a very "personal" kind (drug addiction, psychic disorders etc.) is needed, which is the case particularly in a period of mass unemployment, especially among young people. - On a more general level of cultural and value changes, a growing number of people who are caught in the triangle of work, leisure and consumption show new aspirations for personal contacts, social interaction and a reconstruction of the

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manifold informal relations that are felt to be needed in order to counteract the anonymity in urban life as well as the rising insecurity in the labor market. At this point, the conceptual and strategic importance of the linkage between a restructuring of social service on the local level and a concept of work becomes visible that is wider and more manifold than the traditional concept of work within formal and regulated wage relations. Any reflection on the future of work should depart from the "divisions of labor" (Pahl, 1984) that comprise formal work as well as household activities, community work, mutual aid, self help etc. (see Pencoast, Parker and Froland, 1983). Regarding public social services, studies like "Time to Care" (Swedish Secretariat for Future Studies, 1984) show that work based on mutual aid relations, solidarity and mutual care has much more practical relevance in quantitative and qualitative terms than has been perceived and recognized in the traditional way of thinking of the welfare state, particularly in terms of the amount of public money spent, of the number of professionals employed etc. Various currents appear to converge to bring about an "informalization" of the welfare state particularly in the realm of social service delivery. First, the development in the labor market in terms of wage cuts, job insecurity and unemployment as well as the squeeze of public budgets points in this direction. Second, the expansion of a selfservice economy (Gershuny, 1983) unfolds some similar dynamics. Third, social and political impulses come from the groups that, growing in the 1970s to'become sociocultural urban movements in some urban and national contexts, turned into advocates of a redefinition and redirection of public funding and of a reform of the "bureaucratized" mode of social services delivery. These growing individual and social needs are mirrored, particularly on the local level, by an increasing readiness of consumers and clients of such services to organize themselves. So the welfare state, particularly on the local level is challenged to find new forms of interaction with such groups. While, in welfare state politics, collective action has been, traditionally, recognized only in the field of production (especially trade unions), increasingly collective organizations of client and consumer interests, also self help and protest groups will have to be dealt with, particularly in the urban arena. So, the area of social services is an increasingly important field of activities for local government and the local level. Besides tackling the "problems of matching social services with the clients' needs" (Grunow and Hegner, 1980), in some municipalities special funds were established meant to give (albeit limited) help to project groups, cooperatives etc. in the social and cultural fields. Apart from their immediate effects of providing help to those who need it, these municipal initiatives are bound to redefine some ground-rules of social service delivery. In most countries concerned, a debate has begun and steps have been taken as to how public funding of social services should be redirected from subsidizing traditional social service organizations, public as well as non-public, to giving public money to individual persons and

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societal organizations in order to revitalize the informal networks for social services and mutual help, such as maternity leave, the funding of self-help groups etc. It should be born in mind, though, that local government, in taking the lead in bringing about an "informalization" of welfare state operations would break some ground that, in turn, is marked and possibly marred by considerable ambiguities (see Evers, 1984). On the one hand, the local promotion of informal activities, particularly of the self-help type, would certainly strengthen the less monetarized and more consumer-oriented life styles. It would also encourage individuals and groups to voice claims to and politically mobilize pressure for receiving public help in order to organize such activities, thus realizing and materializing their social citizen rights. On the other hand, some gains of the "formalization" of the welfare state in terms of legally and bureaucratically defined standards may be loosened, opening a breach for an inequality of standards, for an increased dependency of such initiatives on the political, if not personal whims of local powerholders, for a new local corporatism etc. Furthermore, the borderline appears to be blurring between a (progressive) readiness to strengthen self help initiatives as an avenue towards rediscovering the resources of solidarity in collective groups, on the one hand, and a (conservative) strategy to "privatize" and "familiarize" the life risks again, exposing the individual to the "healthy whip" of being "free market" individuals, on the other.

20.2.4. F r o m Social a n d Cultural I n t e g r a t i o n t o Socio-Cultural S e g m e n t a t i o n As welfare state policies in the post World War II period were directed at bringing about a full employment society that would unfold its socially equalizing potentials towards a "middle class society", it has had also culturally levelling-off effects. These were materially confirmed and strengthened by a "consensual consumer model" in terms of a "Fordist model of accumulation" (Aglietta and Brender, 1984) centering around the mutual stimulation of the production and consumption of durable goods (e.g. cars, owner-occupied housing). Some of these consumption patterns have had a tremendous impact on the urban development, such as the mass "consumption" of cars and owner-occupied housing, propelling the expansion of middle class suburbia in the post-war period. Furthermore, in most of the advanced industrial countries, these levelling-off effects of consumption patterns were reinforced by welfare state policies that provided and enlarged key infrastructural and social services, such as the health and education systems, but also urban infrastructure in areas like mass-transit, social (public) housing etc. It may be well argued that major policies in the 1960's and early 1970's, such as housing and urban renewal policies, were based on the idea that "substandard" families should be "lifted up" to the standards of a "modern" ("middle class") society. Again, the ambivalence of the modern welfare state becomes visible. On the one hand, there are good

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(normative) reasons for such a raising of living standards to a socio-normatively acceptable level. On the other, such a policy tends to "define out" groups and values that do not conform with these normatively imposed standards. Belying the conceptual naivité, if not latent imperialism and the socio-cultural bias of such earlier concepts, the recent development in most industrial countries indicates a deepening of the social and cultural segmentation. In fact, it has become more difficult now than in the three welfare decades after World War II to achieve a consensus on the integration of different social, cultural, and ethnic groups around a basic common cultural orientation and a clearly defined socio-political scheme of distribution and participation. A number of trends underlying this development may be distinguished. - Related to and mirroring developments that have been linked with changes in individual options for more "post-materialistic values" (see Inglehart, 1977) or with the formation of new cultural and social movements (see Melucci, 1981; Touraine, 1984), the conflicts on the local level have been increasingly shaped and fuelled by socio-cultural segmentation. Castells (1983) and others analysed the impact that minorities had on urban development and life, as soon as they became culturally and politically self-confident. The examples range from the struggles of colored people in US-American and British cities to those of immigrant workers in French and West German cities. - Reflecting different stages of this socio-cultural segmentation, the dissident groups and movements on the local level have changed orientation. Whereas, formerly, they tended to strive for political participation in "main stream politics" and for getting a share of the economic and social benefits of the "main stream society", a good deal of these groups have meanwhile engaged in a kind of social and cultural self-defense, refusing to become part of the modernization process of the "main stream society". - The development on the labor market, particularly long-term unemployment, as well as the cutback on social funds have sharpened the social segmentation by causing a "rehierarchization" of the labor force and by deepening the social cleavage between those who are gainfully employed and those who are not. In addition, the traditional division of labor and of social roles between the sexes has been reinforced. This increase of socio-cultural segmentation and the emergence of a "dual society" (the French call it a "société à deux vitesses") poses a major challenge to local government. Whereas, in the USA, cities have a history and an extended experience with deep socio-spatial segmentation, in most European countries the appearance of such problems is of more recent date. As the goals, aspirations and formulae through which and for which consensus could formerly be established (such as employment, life-styles etc.) have lost their integrative spell, urbanism as a way of social integration, urban consensus-finding and conflict-resolution has become less and less

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viable. Thus, in a situation of change and uncertainty in which traditional key concepts and assumptions of the welfare state have been eroded, while new generally acceptable and shared ones are not in sight, coping with the socio-cultural segmentation has become the most demanding political challenge in the local arena.

20.2.5. Towards Mounting Conflicts in Central/Local Governments Relations The concept of the advanced intervention and welfare state, as it climaxed in most Western countries in the 1960's and early 1970's, rested on the idea of a kind of "systems politics" in which the key role in policy formulation should be played by central government, while local government should be in charge of implementing these centrally formulated policies. So, throughout the Western industrial countries, attempts were made, in the 1960's and 1970's, to improve the decision-making and "steering" capacities of central government and, at the same time, to gear local government to such a top down "systems model". Consequently, the drive to "modernize" the political and administrative machinery was pursued particularly in two directions. First, especially regarding central government, the decision-making and "steering" capacities were meant to be improved by introducing more sophisticated information and planning techniques (e.g. of the PPBS type). Second, steps were taken to make the lower levels of government, particularly, local government fall in line with and to comply with such a top down steering model (e.g. an ever denser body of centrally formulated legislation and programs, top-down planning systems, "golden reign"-type matching grants, sweeping rounds of amalgamating local governments in order to "streamline" intergovernmental relations). It is true, these institutional changes appear to give ample evidence of central government's intention and success to curb the autonomy of local government and to reduce it largely to the function of obediently implementing centrally formulated policies and programs. Yet, it should be noted that, at the same time, countervailing tendencies became effective at least partly offsetting the centralizing trends. First, the standing and say of local government in its intergovernmental relations with the upper levels of government became the more confirmed and strengthened, the more the welfare state policies expanded and the more crucial local government's role became in implementing these policies. Second, the massive amalgamation of local governments through which central government hoped to "streamline" local government as an implementation agent sort of "backfired", as amalgamated cities increased their administrative and also political "muscles". (These developments have been convincingly analysed by implementation research that looks at the real conflict pattern in intergovernmental relations instead of merely at formal institutional arrangements, if not normative prescriptions. For an internationally comparative account, voicing a warning against a onesided "centralization" thesis, see

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Heidenheimer et al., 1983: 275. For an instructive piece of research on the intergovernmental relations in the F R G , see Scharpf et al., 1976, 1978). Under the onslaught of the economic and fiscal crisis that started in the mid-1970's, the central/local governments relations have changed, particularly because the political agenda of the central government and the local government levels appear to have drifted apart. This particularly holds true for the priority that social problems are given on the respective agenda. In periods in which progressive majorities and governments prevailed on the central/federal level (as it was the case in the US in the 1960's and in the F R G in the 1970's), central/federal government took the programmatic lead in the further development of social policies and of welfare state programs, finding itself in wide consensus with local government that, in view of continuing economic and fiscal growth, went along. Under present economic and fiscal conditions, however, particularly in countries where conservative parties have won majorities and gained power on the central/federal level, central/federal government tends to give top priority to the promotion of economic growth and the technological modernization of the national economy, while trying to "consolidate" its budget particularly by cutting back on social policy expenditures (see also Szeleny, 1984). While central/federal level government curtails and refrains from governmental intervention, e.g. active labor market policies, local government is confronted with the individual needs and miseries that come with long-term unemployment on a mass scale, prompting local government to engage in initiatives and activities of "new municipal interventionism". Regarding these increasing tensions between central and local governments, a case in point is offered by the constellation in the FRG where the federal and the State {Lander) governments are eager to consolidate their respective budgets by shifting the financial burden, particularly in the case of unemployment security payments, onto the shoulders of local government that, as was mentioned before, carries the responsibility of maintaining the "social net of last resort"for all those who are not or are not any more covered by the general social security schemes. A similar conflict that is additionally fuelled by an open political party confrontation has developed in the UK between the Thatcher government and those local governments that resist its strategy of fiscal austerity particularly in the social policy field. This applied especially to the Greater London Council which, in some key areas (public mass transport, employment, social economy) formulated some innovative welfare state policies which flew in the face of the central government. These appear, however, to be exceptional cases in the international perspective, mirroring a clear confrontation of political parties and differing socio-political options. And even in such cases there seems to be a strong limitation to the potential degree of local opposition and resistance, as the final dismantling of the Greater London Council by the Thatcher government demonstrates. The same holds true for the local experiments undertaken by the PCI in Italy, showing the restrictions in counteracting the political logic and power of central government.

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20.2.6. From "Planned Change" to New Modes of Urban Conflict-Resolution and Political Bargaining In conformity with the planning orientation, if not planning euphoria that characterized the intervention and welfare state in its heyday, local government, too, was inspired by concepts of "planned" urban development, introducing planning instruments and procedures in order to guide the on-going urbanization and agglomeration processes. In fact, looking at the sophisticated urban development plans that were worked out, for instance in the F R G , by municipalities in the 1970's gives the impression that it was particularly at the local level that attempts were made to translate the planners' high-flying ambitions into action. The introduction of new planning procedures, it should be remembered, went hand in hand, in most countries, with the formal opening of new procedures for citizen participation, as a kind of complement of direct democracy to the traditional "representative" decision-making model. In part this was also in reaction to the upsurge of citizen protest against the increasing scope of public projects changing the urban environment (urban renewal, innercity freeways, etc.). Fuelled by the rapid urbanization and agglomeration processes under way during the economic growth period until the early 1970's and by the massive physical, social and ecological transformation that the urban and metropolitan areas underwent, the urban arena became much more conflictual and politicized than in the "quiet" 1950's. The scheme and attempts to combine global reform strategies with new procedures of interest articulation in the local setting in terms of citizen participation etc. failed, when the economic crisis of the mid-1970's destroyed the assumption of unlimited material, financial, and natural resources and when the confidence in a smooth welfare planning backed by well-functioning citizen participation crumbled. This holds true even where such local experiments draw world-wide attention and recognition, such as in Bologna. In addition, such new avenues towards grassroot interest articulation have often grown politically barren in that procedures of citizen participation were mostly resorted to and used by middle-class groups, at best "advocating" interests of less articulate groups, and in that, furthermore, public agencies learned to "tame" such procedures by turning them into administrative routines. So, when the time came to cope politically with the growing socio-cultural segmentation and confrontation on the local level in the late 1970's, these attempts at institutional and political learning turned out to be of little avail. The efforts that have been undertaken since the mid-1970's to come to grips with the situation of confrontation, mutual ignorance and corporatist self-defense on the local level by developing strategies and forms of political exchange and bargaining have led to instable and conflictual patterns. Yet, in many local "scenes" local groups found new ways and forms of interest articulation beyond the former concept of an "integrative" participation tailored to middle-class behavior. They often surface as a

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kind of self-defense in terms of organizing social and economic interests (cooperatives, selfhelp groups) or the interests of specific socially, territorially and culturally defined groups (minorities, neighborhoods). Thus, the very notion of participation has been changing. Within the welfare state planning concept, it meant regulated and anticipated participation of individuals or groups in what was seen as and treated as a public project. In the context of the changing urban "scenery", participation can be viewed as a process of bargaining between a public agency and social groups that pursue and seek support for their own project with overtones and contents often alternative, if not opposed to the values of the political and societal "main stream". From such concepts and processes of policy-making and planning, an array of unconventional modes of participation has developed. Politicians and bureaucrats organize hearings, they invite activists for informal talks and negotiations, special boards are created, which decide on subsidies for unconventional social initiatives, negotiate their conditions, possible prolongation etc. But, in most cases, these new links between public agencies, municipal administration and such grass-root groups, while bringing about a new mix of the elements of a representative and a direct democracy in the local arena, still lack the stability and the political "clout" that would be necessary to have a noticeable and lasting impact on the local political culture and on decision and action patterns on the local level.

20.3. Mapping the yet Uncertain Future of a "New Municipal Interventionism" Our overview has so far tried to combine some reflections on the erosion of key assumptions and features of the intervention and welfare state, as it developed in the post World War II period, with a sketch of what we regard to be innovative and unconventional initiatives and responses of local government and of the local level. In doing so, we could not help being selective as to the many facets of the development, focussing on the following ones: - the economic development that local government, vis-a-vis the deep ecological, social and cultural changes, can not view any more only from the narrow perspective of just increasing the technological competitiveness and productivity; instead, the economic development has to be dealt with and also legitimized within a wider logic including ecological, social and cultural concerns (20.2.1); - the social policy field in which new forms of pauperism and "social death" require strategies that, going beyond the guarantee of some minimum income on a temporary basis, engage in an active social integration, centering around public programs for employment, education and training (20.2.2);

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- the social services that, instead of further professionalization and monetarization, require new forms of cooperation between the providers of such services and the individual and collective clients as co-producers, engaging them in forms of informal work and card (20.2.3.); - the socio-cultural development where local government, confronted with an ever increasing diversity of life-styles, orientations and (sub-) cultures, is challenged to provide the setting for more cultural pluralism and tolerance (20.2.4); - central/local relations in which local government, under the pressure of the needs and conflicts on the local level, must focus on social policy issues as a result of the economic and fiscal crisis, particularly of long-term unemployment on a mass scale, while the central federal government concentrates on the promotion of the technological competitiveness of the national economy, and tending to cut down on social policy expenditures (20.2.5.); - the political arena and political process where local government, facing new collective actors, movements, ways of protest and interest articulation, needs to find new modes of participation for these interests and new ways of bargaining (20.2.6.); In order to summarize these reflections and findings in a more systematic way (see also Blanke, Evers and Wollman, 1985), some common features and trends might be condensed like this:

1. A n e w logic of public (municipal) intervention In a number of fields, such as anti-unemployment policies, combatting emergent pauperism and social exclusion, but also environmental protection, a new logic of public action seems to take shape that we call "a new municipal interventionism". - It might be regarded to be " n e w " in the sense that the municipalities redefine substantive areas of their action and involvement, including those in which traditionally they have not been active or ceased to be active in the historical development. This applies for instance to the concern for labor market developments that, apart from some indirect aspects in connection with traditional municipal business policy (Gewerbepolitik), has so far not been on the local agenda. Contours of a comprehensive social policy concern of local government become visible that, in trying to cope with socio-economic, socio-psychic, socio-cultural etc. consequences of the present changes in the very nature of growth and development in a comprehensive way, has to encompass and combine key segments of what has been so far pursued in a sectorally and institutionally fragmented manner. On the one hand, the border between what is seen to be "economic" and what is considered to be "social" is shifting and blurring, as especially social and public initiatives in the field of work and employment show. On the other hand, besides attempts to

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guarantee a minimum of social integration e.g. for youth, there is also the need to recombine and reconsider different sectors of local social policy (as e.g. health, education, youth, social assistance). Looking at this (re-)emergence of a responsibility of local government in the field of "social policy", one might well argue that history has run full circle (Ashford, 1984), linking the present orientation of local level activities to what historically was essentially a local concern before the emergent welfare state claimed to take over. - As municipalities intervene infields which are typically labor-intensive (particularly personal services of all sorts), a type of "communal production of services" (Grauhan, 1978) may take shape that poses an alternative to strategies, as they are being presently discussed predominantly with conservative overtones, namely, first, "remonetarizing" these fields of labor-intensive services on the basis of further deregulation of the labor market (widening low-paid private services, like in the US), second, stimulating such services to be provided in unpaid (family) activities, thereby touching a key issue of future full employment strategies. - As a good deal of these municipal "interventions" consist of assisting formally organized but also informal groups in an increasing spectrum of activities (e.g. providing personal care and services, partly in a self-help fashion), the municipalities, in doing so, appear to take steps towards overcoming the hitherto prevalent logic of a clear separation and distinction of state, private and market functions, and towards exploring the potentials of innovative ways of service provision, by combining (i) state interventions (ii) "private" organizational forms and (iii) principles of collective solidarity, traditionally often seen as exclusive or rival components and strategies.

2. An increasing involvement of the informal economy and of social networks Most of the steps of a "new municipal interventionism" involve or touch the informal economy as well as social networks, in many ways influencing and drawing on the balance in life-styles between formal work, informal work, leisure and consumption. - In the area of social services the involvement and combination of traditional new forms of self help and voluntary activities is characteristic. - The initiatives often create or support "intermediary" institutions or agents for improving the chances of a fruitful interaction between the traditional municipal administration on the one hand, and the social groups, on the other, notwithstanding both sides being guided by different imperatives (formal responsibility versus solidarity, formal contracts versus trust etc.). - These local interventions are based on a concept of daily civil rights and duties that

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is in some aspect different from the traditional one. It urges concrete solidarity beyond an abstract "taxpayer's solidarity"; it is based on the conviction that the (local) society should offer and guarantee measures and opportunities for social integration that go beyond the mere entitlement to receive some minimum income for subsistence. The concept and profile of "citizen rights" by which these municipal interventions may be guided differs from the traditional "industrial citizenship" which hinges almost exclusively on the exchange between individual job-related contributions (social security contributions, taxes) and public payments and services. The concept of a (local) citizenship should reconsider this formula geared to the status of gainful employment in traditionally provided (industrial) jobs and should take other modes of socially valuable activities into account as an equivalent individual contribution and input into the collective "pool".

3. New forms of local conflict-management and compromise-finding - In view of the increasing socio-cultural segmentation breaking up on the local level and the sharpening cleavage between a "main stream society" population still firmly rooted in the secure part of the labor market and a still growing segment of the population at the margins of a system of welfare and social integration, it is one of the crucial challenges of the local arena to develop patterns of conflict resolution that are able to cope with these social and political tensions. In some of the local initiatives and programs that were mentioned before, a new sense of solidarity between the different groups appears to be already at work. New forms of solidarity action cross-cutting social hierarchies emerge particularly between members of groups that, benefiting from the socio-economic development in traditional terms of secure income and growing private wealth, but feeling increasingly uneasy with it in view of their changing cultural options, and those individuals and groups that, having been victimized by this socio-economic development, find themselves at "the margins of the society". In conflicts about urban renewal, in actions against the closing down of firms and industrial plants, in new projects of job-creation and job-training and the like, a cooperation between these middle-class people that often bring in valuable expert knowledge and groups that would be all but powerless if left alone has been shaping up. Such a new sense of solidarity on the local level differs considerably both from a sort of "Victorian ideal" of "gooddoing" charity and from the traditional form of labour and class solidarity geared to the working sphere. It appears to be fed by a complex notion of common interests and values, still often expressed in the form of alternative and/or communitarian Utopias. - In venturing into new areas of compromise-finding, traditional social actors, particularly the churches and trade unions, are going to play an important role by

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becoming "go-betweens" and mediators in politically and ideologically fuelled conflicts. Examples may be drawn from conflicts around the squatters movement showing that church representatives were helpful in "interpreting" and mediating between otherwise speechless, if not hostile worlds. - New modes of interaction and a kind of "new contractualism" can be observed between traditional local administration and public authorities on the one hand, and social groups, cooperatives, associations, self-help groups, but also squatters groups, on the other. This applies particularly to areas where public agencies show the readiness to cooperate with and fund such groups which requires new ways of political/social bargaining and contracting. It is true, the empirical traces and referents of what this paper tried to grasp as the changing role and function of local government are still fragmentary and also ambiguous, like bits and pieces that do not yet fall into a coherent and comprehensive mosaic. Many of the initiatives and actions on the local level that attract our attention, be it local programs for employment and social integration, new action patterns and subsidy patterns regarding local groups, unconventional support for cooperatives in the field of cultural and social services as well as economic activities, are still often of an ad hoc, temporary and pragmatic nature. Their proponents and promotors - social activists, "free lance" consultants and participants, administrators and even politicians - are often neither inspired by long-term perspectives nor by clear conceptual or ideological ideas and commitments. But there is mounting evidence that these local initiatives, while still fragmented and often unrelated to each other, are adding up to break ground for redefining the role of local government and, beyond that, redesigning crucial elements of the welfare state at large. Turning to the influence that a changed local agenda might have on central government policies, such attempts of local government and local level actors are bound to be seen as an uphill fight, of course, given the distribution of power within the national systems, federal or unitary. Indicatively the Greater London Council finally lost out when it dared to challenge the Thatcher Government. It would be naive to assume that a central level government, carried by an electoral mandate of its own, would easily yield to local governments' demands that run counter to central government policies. But there is evidence that the political system at large does respond, at least gradually, to demands and perceptions articulated and generated often at first at the local level. Such changes may get under way through the national political parties that, mostly with inertia, react to issue changes at the local and grassroot level of interest articulation. It may also work through shifts in the perceptions and values of the general public and the electorate mainly sloped through the every day experiences on the local level. In closing, mention should be made of a conceptual and methodological problem that particularly a research question such as ours runs into when trying to map still uncertain territory. A conceptual approach that focuses on conscious decisions and

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purposeful acts of political and social actors, c o n s e q u e n t l y e m p l o y i n g behavioral research m e t h o d s and techniques, runs the risk of analytically missing a n important facet of the political and social reality. A s to the research question and field w h i c h interests us here, there are s o u n d reasons to a s s u m e that its political and social reality is, to a considerable extent, also shaped and constituted by what is not fully i n t e n d e d and e v e n c o m p r e h e n d e d by the actors involved and what is, so to speak, d e v e l o p i n g "behind the actors' back", contributing to and adding up to a m o s a i c that reflects shifts and changes in the societal and welfare state d e v e l o p m e n t s at large. Sidney Webb, the f a m o u s thinker and activist i n social policy, o n e of the founders of the Fabians, m a y have had this kind of individually u n i n t e n d e d and unreflected, b u t societally and "systemically" relevant changes in m i n d w h e n , relating to the d e v e l o p m e n t of the early welfare state i n last century's England, h e wrote: "All this has b e e n done by 'practical men' ignorant, that is to say, of any scientific sociology, believing socialism to be the most foolish of dreams and absolutely ignoring, as they thought, all grandiloquent claims for social reconstruction . . . They builded better than they knew" (Webb, 1920: 49). Note 1 The following article relates to a contribution to the Conference on " The Future of the Metropolis" held on October 25th/26th, 1984 in Berlin and is based on the paper presented at a session of the Research Committee on the Comparative Study of Local Politics and Government within the International Political Science Association held on October 6th, 1985 in Paris.

References Aglietta,M. a n d A . Brender (1984) Les métamorphoses de la sociétésalariale. Calmann-Levy, Paris. Ashford, Douglas E. (1984) The Managerial Welfare State, unpubl. Ms. Blanke, B., A. Evers and H. Wollmann (Eds.) (1986) Die zweite Stadt. Über neue Formen kommunaler Politik im Bereich von Arbeit und sozialen Diensten. Leviathan Special Issue. Westdeutscher Verlag, Opladen. Boddy, M. and C. Fudge (Eds.) (1984) Local Socialism? Pento Press, London. Bowles, S., P. Gordon and T. Weisskopf (1983) Beyond the Waste Land. A Democratic Alternative to Economic Decline. Anchor-Doubleday, New York. Castells, M. (1983) The City and the Grassroots. Edward Arnold, London. Community Development Journal (1984) Review Section: Voluntary and Statutory Collaboration in the Social Services. Vol 19. No. 3, pp. 181-200. Dahrendorf, R. (1980) L'après social-démocratie, in le débat, Paris. Deutscher Städtetag (Ed.) (1984) Kommunale Aktivitäten im Bereich Arbeitslosigkeit, Reihe D. Heft 17, Köln.

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Donati, P. (1984) Risposte alla crisi dello stato sociale. Franco Angeli, Milano. Engelen-Kefer, U. (1984) Arbeitslosenunterstützung oder Lebensförderung - Was kann der "Zweite" Arbeitsmarkt leisten?, in Ausgrenzung in die neue Armut, Foum der SPD am 5.12.1984. SPD-Parteivorstand, Bonn. European Centre for Social Welfare Training and Research (1984) Report on the European Expert Meeting on Young Peoples Access to Work. Vienna. Evers, A. (1984) The Different Futures of Self Help. European Centre for Social Welfare, Training and Research RP 2, Vienna. Evers, A. and H. Wintersberger (1985) On the Future of the Welfare State or: Towards a Policy of Lifestyles, in Evers and Nowotny and Wintersberger (Ed.) Can there be a new Welfare State? Gower, London (forthcoming). Friedman, M. and R. Friedman (1980) Free to Choose: A Personal Statement. London. Fürst, D. and D. Schimanke (1985) Changes in Economic and Social Structures in the Federal Republic of Germany. (Bundesforschungsanstalt für Landeskunde und Raumordnung, Heft 18), Bonn Bad Godesberg. Gershuny, J. (1983) Social Innovation and the Division of Labour. University Press, Oxford. Gilder, G. (1981) Wealth and Poverty. New York. Grauhan, R.R. (1978) Kommune als Strukturtypus politischer Produktion, in Grauhan, R. R. and R. Hickel (Eds.) Krise des Steuerstaats?, Leviathan, Special Issue 1/1978, pp. 7-25. Westdeutscher Verlag, Opladen. Groupe Long Terme "Changements des modes de vie" (1983) Comment vivrons-nous demain? La Documentation Française (part of the documents concerning the preparation of the 9th Plan), Paris. Grunow, D. and F. Hegner (Ed.) (1980) Welfare and Bureaucracy? Problems of Matching Social Services to Client's Needs. Oelgeschlager, Gunn & Hain, Cambridge. Hanf, K. and F. W. Scharpf (Eds.) (1978) Interorganizational Policy Making. Sage, Beverly Hills. Heidenheimer, A. J., H. Heclo and C. Teich Adams (1983) Comparative Public Policy. The Politics of Social Choice in Europe and America, 2nd ed. Saint Martin's Press, London. Inglehart, R. (1977) The Silent Revolution. Changing Values and Political Styles Among Western Publics. Princeton University Press, Princeton. Jarre, D. and F. Pavelka (Ed.) (1985) New Social Initiatives in European Countries. Publication of the German Association for Public and Private Welfare. Frankfurt. Kommission der Europäischen Gemeinschaften (1983) Gemeinschaftsaktion zur Bekämpfung der Arbeitslosigkeit: Der Beitrag der örtlichen Beschäftigungsinitiativen. Brüssel. Konukiewitz, M. and H. Wollmann (1985) Urban Innovation: A Response to Deficiencies of the Intervention and Welfare State?, in Clark, T. N. (Ed.), Research in Urban Policy, Vol. 1, pp. 327 ff. AI Press, Greenwich, Ct. Leibfried, S. and F. Tennstedt (1985) Armenpolitik und Arbeiterpolitik. Zur Entwicklung und Krise der traditionellen Sozialpolitik der Verteilungsformen, in Leibfried, S. and F. Tennstedt (Eds.) Politik der Armut und die Spaltung des Sozialstaats. Edition Suhrkamp, Frankfurt. Maier, H. E. and H. Wollmann (Ed.) (1986) Lokale Beschäftigungspolitik. Birkhäuser, Basel. Martin, G. (Ed.) (1983) Decentralisation et politiques sociales. Actes du colloque de Grenoble, Janvier 1983. Paris.

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Melucci, A. (1981) Ten Hypothesis for the Analysis of New Movements, in Pinto, D. (Ed.) Contemporary Italian Sociology. Cambridge. Miller, S. M. (1978) The Recapitalisation of Capitalism, in Social Policy. November/ December. O E C D (Ed.) (1981) The Welfare State in Crisis. O E C D , Paris. Offe, C. (1984) Contradictions of the Welfare State. London. O'Neill, P. (1983) Health Crisis 2000 (ed. by the Regional Office of the World Health Organization). Copenhagen. Pähl, R. E. (1984) Divisions of Labour. Oxford University Press, Oxford. Pancoast, P. C., P. Parker and Ch. Froland (Ed.) (1983) Rediscovering Self-Help. Its Role in Social Care. London. Polanyi, K. (1978) The Great Transformation. Edition Suhrkamp, Frankfurt. Rouban, L. (1984) Evaluation des politiques publiques et mouvement de dérégulation aux États-Unis, Revue Française d'Administration Publique 29. Roustang, G. (1985) Une autre place de l'économie dans la société, Revue de psychologie et sciences humaines, Juin. Schäfer, G. (1981) Trends in Local Government Finance in the Federal Republic of Germany, Since 1950, in Sharpe, L. J. (Ed.) The Local Fiscal Crisis in Western Europe, Myths and Realities, pp. 229-42. Sage, Beverly Hills. Scharpf, F. W., B. Reissert and F. Schnabel (1978) Policy Effectiveness and Conflict Avoidance in Intergovernmental Policy Formation, in Scharpf, F. W. and K. Hanf (Eds.) (1978) Interorganizational Policy Making, pp. 57-114. Sage, Beverly Hills. (1976) Politikverflechtung. Athenäum, Königstein. Sharman, N. (1983) Appraisal of Local Government Employment Initiatives: The Experience of the Greater London Council, in Bekemans, C. (Ed.) Local employment initiatives. Assen (NL). Strasser, J. (1979) Grenzen des Sozialstaats. Europäische Verlagsanstalt, Frankfurt. Swedish Secretariat for Future Studies (1984) Time to Care. Pergamon Press, New York. Szelenyi, J. (1984) Cities in Recession. Critical Responses to the Urban Policies of the New Right. Sage, London. Touraine, A. (1984) Le retour de l'acteur. Fayard, Paris. Webb, S. (1920) The Basis of Socialism: Historic, in Shaw, G. B. (Ed.) Fabian Essays in Socialism.

Chapter 3: Development Options and Constraints for the Economic Future of Berlin (West)

21. Metropolitan Development to and Beyond 2000 Some Hypotheses applied to the City of Berlin Rainer Mackensen

21.1. Metropolitan Decline Some say cities are obsolete. They mean large cities in particular. For them, cities are growth poles; and growth is defined by the number of inhabitants in administrative units, and of gross domestic product. But there may be other dimensions of growth - 1 will, for the moment, call one the dimension of "social growth" - which must not necessarily be positively correlated with the indicators mentioned. In recent years, we have seen a series of studies dealing with urban growth and decay. Large cities are, in this context, seen as "living entities", not only growing but also dying. A refined typology has been proposed (Drewett and Rossi, 1979: 9.13), where cities run through a cyclical development, starting with urbanization, continuing through suburbanization and desurbanization, and leading back to reurbanization again. Studies in the United States (Alonso, 1978; Berry, 1978; a.o.) argued that we seem to be in a period of "desurbanization". Studies in Europe (Hall, 1981; Drewett, 1983; Matthiesen, 1983; Schubert, 1984; Cheshire and Hay, 1984) have shown that the picture in Europe is more diversified. There are cities in all periods of the urbanization-desurbanization cycle in various European regions. If growth is not the only option, and if "decline" is differentially distributed over the set of cities - what can we say about future prospects? If there are other dimensions of "growth" and "decline" than those taken into account in recent research - how can we consider the developments to come? Are cities obsolete - due to developments in population and economy, both measured in administrative units?

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21.2. The Abel-Study Beyond the question of indicators for urban growth and decline, there is another question to be asked against the background of the studies mentioned: How far does a model, derived from recent observation, help us to judge future developments? In the study a group of 14 institutes in the Federal Republic of Germany just completed (Mackensen, Umbach, and Jung, 1984) we tried to overcome both problems. We applied measures of mobility, indicators of development in the educational and health system, of social change in families and in life styles, of environmental decay, and other statistics, to the regional-urban system in the Federal Republic, for a period of five decades ahead. We decided not to build a deterministic or just a stochastic model around all these indicators. The range of possible alternative developments, and the chain of probable error terms would have made such a model spurious to a degree that any quantitative results would have suffered from high ambiguity. Instead we used partially quantitative models as far as we thought to be reasonable, and qualitative argumentation as much as we felt necessary. Can an approach like this lead to any results? At least we felt to have learned some lessons.

21.3. Ranges of Prospect For me, one of the important lessons to learn was that there is a considerable difference between short, medium, and long term results. Over a short term - say 5 years - almost nothing seems to change if you start to consider trends in detail, realistically, and interconnected. In a medium perspective - say over 15 to 20 years - many changes become visible. After a period of about 25 years of population decline beginning in 1965, the number of households will start to shrink around 1990. The proportion of older people becomes larger than that of younger ones, in general and in the labor force. The expansion of agglomerations into and beyond the fringes turns into decline. The cost of schools and hospitals reaches a level, impossible to relate to overall expenditures of public and private households. Housing reaches a point of saturation, that is: no further building can be justified by demand, in regional categories. And: changes in life styles may have penetrated the total population everywhere. But, in this perspective, we do not even start to see the consequences of all such changes. We can just state the conditions of change for further developments. So we have to go "beyond 2000", if we really want to envisage the results of such changes, although we can already start to see the impact on our private, social and societal life.

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This is true also for technological developments. Existing innovations - like the microcomputer and the electronic media - will need time to penetrate production, households, labor force, and education. If we look only at the next one or two decades, we may conclude that changes will be smaller than we might have thought. But we still know the impact to be strong, general and thorough. Of course, we can not make quantitative predictions for a period longer than 20 years. So we have to sort out what we think to be more or less probable, and what the fundamental alternatives of development may be.

21.4. Hypotheses of Long Range Urban Change Let me summarize some results of our study in the form of hypotheses, and concentrate on those with strong impact on urban development and form. These hypotheses are meant to be applicable only in the context of the Federal Republic, and no attempt has been made to consider the change in the international European and beyond - system, which as we, nevertheless, know will be decisive and influential (Mackensen, 1984). (i) Beyond 2000, the population will continue to shrink, although a change in reproductive behavior (assisted by public measures, but induced by changed living conditions and preferences in the families) will start to slow the pace of decrease. The proportion of older people will be large, but it will gradually shrink as well. So the main age group in the labor force will be middle aged adults. One of the consequences of this development will be a more cautious attitude towards innovation. (ii) Changed attitudes towards nature and landscape will increase the tendency to move to rural places. But they will also restrict the possibilities to do so: Further conversion of land into settlement will be discouraged. "Rural settlement" of urbanites does not provide an economic base for rural regions, but will only serve as weekend and holiday retreat. (iii) While prices for housing and services continue to climb, more provisional measures will be applied. Self-help reconstruction of older housing, and investmentsaving methods of road repair will amount to a considerable proportion of building activities. New housing construction will tend to concentrate around larger agglomerations and regional centers. Only there a sufficient supply of public and private services, of jobs, and of infrastructure will be provided and kept in shape. (iv) Life styles will tend to polarize around a "hedonistic" (consumption oriented) and an "integrated" ("alternative") pattern. "Hedonistics" may either depend on increasing incomes or reducing their "consumption level". "Integrated" life styles will tend to distribute time between gainful employment and informal exchange of services or sustenance activities. "Shadow economies" may contribute to a high

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degree to the "National Product", even if not included in the "formal market" and economic or fiscal accounting system. Indirect taxes will become more important than direct ones. (v) Different patterns of production, education, and health care, as compared with present ones, are certain to develop. On the one hand, society will have to use all possible technological know-how and equipment; on the other hand people will rely more on " D o it yourself", "self help", and handicraft methodologies. Production and goods will tend to cover a broader range from extremely technical to primitive processes and products. Education will, in a new combination between formal, semiformal, and informal institutions, provide learning for technological, everyday private and public practice, and cultural, natural and social capacities. And health care will have to equally offer highly specialized services and equipment for serious diseases, and traditional social provisions for casual illness, psychic maladies, and permanent nursing. Also communication patterns will develop into a similar diversity: Functional information can be assembled, processed and exchanged by electronic devices, while personal interaction will become more private and selective, and develop a pattern of its own. (vi) As a result, patterns of regional concentration will prevail. Mobility, in terms of distance and frequence of rides - social, local, regional - will increase for a number of decades, and only shrink later, when the per capita increase is absorbed by the decrease in the number of persons. All these statements rest on the proposition, that there will be no dramatic increase in international migration. Even without that, agglomerations in the Federal Republic will tend to have more than a third foreign born inhabitants, and in some parts even more. Some experts feel that with increasing differences between industrial (Central and Western, but in growing degree also Eastern European) and rural (Southern and Marginal European) societies, it will be impossible to control international migration by administrative measures. But popular and political interests in both nations will counteract the increasing migration - with public opinion, with measures of force, and finally with economic measures: The choice is either continued immigration or effective economic development in countries of origin. Both are costly, and require a high standard of productivity, which may be accompanied by social tension and conflict, and by "social decay". And all the possible alternatives will enforce a higher degree of "living together" in a multi-ethnic society and international community. Let me try to apply some of the hypotheses to a case like Berlin.

21.5. Perspectives for the City of Berlin Berlin is a double city. Despite the two separate national, political, economic and security systems - it is still one agglomeration. When I speak about Berlin, I will have

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to restrict my conclusions to the Western part; but I mean all of it: The parallel (even if time lag conditioned) development of both parts is too obvious. There is more communication, more interchange, more reciprocal awareness of each other than each party can allow itself to publish. (i) Berlin is going to profit from developments in the country as a whole, and accentuated in comparison to other agglomerations. To some extent: The previous "staying behind" as compared to both - national averages, and other agglomerations - will become an advantage for further developments. Social and economic development proceeds in pushes. The Federal Republic has had an advantage, over the West European nations in the 50's and early 60's: Cities, industrial equipment, and organizations had been all newly designed after 1950. But this situation turned into a disadvantage later: There was not enough innovation during the 60's and 70's, whereas the other nations reorganized in that time. Urban regions developed similarly: The settlements of the fringes are becoming obsolete while inner urban buildings, too long neglected, are being modernized in the 80's. Berlin experienced a high degree of social growth and modernization in the 70's; it has recently started to turn to industrial and economic modernization. At the same time, agglomerations like those of Frankfurt and Munich, had their period of urban and economic modernization during the 60's and 70's, and will be less responsive to a new push of modernization. Agglomerations like the Ruhr, where industrial, social, and urban organization was established during the 50's, may possibly follow Berlin in the next round of modernization during the 90's. But in general: Change is faster in Berlin, and the impact might be stronger and sooner. (ii) Berlin will lose inhabitants during the next 5 decades, about a quarter or more. But at the same time, the population will become younger - by losing the overload of elderly people stemming from post war developments, by a high proportion of the student population staying in the city, and by the development in the foreign population segment. The proportion of foreign inhabitants, now about 12%, may increase to almost two fifths. There is a good chance of inverting the demographic comparison between Berlin and other agglomerations in the Federal Republic. The relatively "old" composition of Berlin may become relatively young. There may be more chances for innovation in Berlin than elsewhere in the country. (iii) There will be increased discrepancies, and likely more conflicts in the city: Industry will rationalize, and more people will live on partial employment, services, and "shadow" activities. Life styles will polarize: This will cause extremely contradictory demands for services, use of open space, and housing. Tension may be aggravated as there will tend to be an overlap between life styles and income groups. Housing, communication, leisure time activities, and traffic preferences are usually subject to segregational processes. A larger part of economy (and cultural activities) will depend on visitors or tourism. This will broaden the span between "Kudamm-

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Berlin" and residential parts, between "entertainment culture", and substantial quality culture, and everyday life cultures. (iv) No comprehensive planning, urban design, or housing policy can easily be applied in a situation like this. The city becomes more diversified, or - if you wish disorderly. For the last 40 years, there has never been, nor is there now, a visible concept for urban development in Berlin. And I see little chance for one to emerge, and to be realized. Such a concept has a number of prerequisites for a realistic chance. Among them are: an intellectual vision, general acceptance of it, political power to implement it, and economic and financial strength to make it a reality. Little of all this has been present during the last one and a half centuries in Berlin, except in individual sectors, and for too short periods. If some of this were to emerge, political polarization and economic-financial dependency would probably hinder its realization in urban development. The "International Building Exhibition" (IBA) is a good example of my hypothesis - in its development through political and sectoral conflicts, and in its scattered and disparate results. There are many examples of constructive possibilities, many stimuli for discussion, but no general idea for urban development in the city as a whole and an entity. (v) But a situation like this also has advantages. It provides the chance and the tension necessary for "social innovation" and change. The conditions, to my mind, make it extremely improbable that Berlin is going to become a "Metropolis" again, as it was for 50 years around the turn of the century. It may though become a "centre of social growth", the signs of which many may not like but the impact of which may be difficult to withstand. I think that Berlin did have a leading role in political, social, and cultural development during the last decades among the agglomerations of the Federal Republic. And I do not see why it should not continue to execute a similar role during the decades to come. There is still a mystery around Berlin, which cannot be said of the other big cities in the Republic. Berlin seems to have kept this privilege, with only a few periods of disbelief, and succeeded to find esteem for itself in Germany and beyond. This is Berlin's only capital to build on for the time to come. References Alonso, W. (1978) The Current Halt in the Metropolitan Phenomenon, in Leven, Ch.L. (Ed.) The Mature Metropolis, pp. 23-42. Lexington Books, Lexington/Mass. Berg, L.v.d., a.o. (1982) Urban Europe: a Study of Growth and Decline. Pergamon, Oxford/U.K. Berry, B. J. L. (1978) The counterurbanization Process: How General?, in Hansen N. M. (Ed.) Human Settlement Systems: International Perspectives on Structure, Change, and Public Policy. Ballinger, Cambridge/Mass. Cheshire, P., D. Hay and G. Carbonaro (1985) The Decline of Urban Regions in the EEC: Some Recent Evidence and the Scope of Urban Policy, 24th European Congress RSA, Milan.

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Cheshire, P. and D. Hay (1984) The Development of the European urban system, 1971-1981; in this volume. Drewett, R. and G. Rossi (1979) General Urbanization Trends in Western Europe, Klaassen, L. H., W. T. M. Molle and J. H. P. Paelink (Eds.) Dynamics of Development, pp. 119-36. Netherlands Economic Institute, Rotterdam. Drewett, R. a.o. (1983) Settlement Structure and Urban Change, Urban Europe Series 1. Gower Pub. Co., London. Hall, P. and D. Hay (1981) Growth Centres in the European Urban System. Heinemann Educational, London. Mackensen, R., E. Umbach and R. Jung (Eds.) (1984) Leben im Jahr 2000 und danach. Arani, Berlin. Mackensen, R. (1984) Thesen zur Entwicklung des Zeitbudgets und der Mobilität in den nächsten zwei Jahrzehnten, paper presented to the Daimler-Benz-Workshop 1984, Berlin. Matthiesen, C. W. (Ed.) (1983) Urban Policy and Urban Development in the 80s - Danish Experience in a European Context-, Geografisk Centraiinstitut, Rapport 16, K0benhavns Universitet. Schubert, U. (Ed.) (1984) Towards a Theory of Urban Systems Change, Urban Europe Series 3. Gower Pub. Co, London.

22. Alternative Development Paths for the Economy of Berlin (West) - Reflections on Different Scenarios Hartmut E. Arras

22.1. A City at the Turning Point? Berlin (West) has such traumatic elements in its past as practically no other city - massive destruction - loss of the function as capital - political island situation on account of the division of Germany - political division of the city itself and construction of the wall - loss of the function as economic centre - continuous dislocation of company headquarters and important enterprise sections. A city whose self-esteem has been disturbed and whose sensitivity has grown. On the other hand, - by way of compensation of the specific difficulties, high subsidies provided by the federal government - the political task of presenting an attractive showcase of the free west - development into an internationally recognized cultural centre - on the basis of the subsidies - growing potential for science and research - at the same time an intense focal point of ideological conflicts - starting point of trigger effect for political and social change, for new forms of living and working. A city which does not take its task of finding a new identity easy, having out conflicts into which other cities still have to grow, and from which they could learn. But Berlin also means: - the large subsidies in the economic sector had the objective of reducing locational disadvantages - mainly mass production plants were established due to the financial advantages

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- low-standard jobs attracted workers with a low level of qualification, mainly foreigners - this did not help build up locational advantages - the ideological conflicts, the special status of Berlin, the wide spectrum of study disciplines also attracted young people. Political behaviour patterns in Berlin (West) fluctuated between regulative and flexible, between the search for new approaches and uncompromising rigour in carrying them out. Up to now, Berlin has been able to avoid the coldness of a city, such as for instance Zurich, where spontaneity is suppressed. Berlin at this moment? - the economic structure is (still) unfavourable - unemployment is above average - the population is (still) superannuated - search for innovations has (just) begun.

22.2. Where can the Development Lead? Something About Forecasts and Scenarios For the future development of the city, the new Senate is backing innovation and new technologies, promising products and new production processes. Berlin's economy is to be modernized and led out of the structural dead end street. Berlin is to get locational advantages. New technologies, however, are full of paradoxical potentials. Which of these potentials are going to have a breakthrough is disputed. This depends to a large extent on the behaviour patterns, on the values and the way of life of the acting parties. The characteristic of dynamic change always encompasses uncertainty about the future development and the contradictoriness of possibilities. In the '60s, broad consensus prevailed about how the '70s, the '80s and later decades were going to develop: they would be more beautiful, better, wealthier, healthier, there would be more identification with common causes. Since the general consensus generated a largely conform qualitative picture, it was possible to develop the instrument of forecasting into this picture. This in turn was what made it possible to build up a quantification of the future on this qualitative picture. The fact that we are today dissatisfied with this instrument of forecasting can be substantiated. The consensus about what the future can mean, what it is going to bring has disappeared. Varying social groups, varying active parties, individual persons each carry their own picture of the future within themselves which has in each instance been created by specific experiences, fears, patterns of reaction, aims. Such pictures, if consistently spun out, will, as a consequence of their qualitative

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structures, yield specific quantitative probabilities, and vice versa. In occupying oneself with the future at the present time, a first step has to be to make such pictures discussible, i.e. usable and visible for discussion. In order not to go blindly into the trap of looking for but one image of the future and to strive after this as the one and only aim it is important to build up several images. The issue however is not the negative image or the right kind of world. Because the future is unpredictable it is necessary to "have it out" with future potentials, with their varying possibilities, with their interrelations and dependencies. We have to learn to see the future as something open. In order to make the "futures" discussible, they have to be spelt out in an understandable form. This is a requirement which is not altogether possible to follow within the area of the German tongue if the scientific image is to be upheld independent of the quality of the contents. Every single one of the different futures can be discussed on the level of its own coherence. This creates structural consensus, without as yet evaluating its desirability. Such an evaluation has, for the beginning, to be set aside. A consensus about the structural coherence of a future enables the discussion of its consequences. Consensus thus reduces complexity. It is possible to build up qualitative structures, make them retraceable and complementable in vocal images (scenarios) and - if necessary - set up forecasts into this picture, which can in turn be substantiated and retraced. Forecasts as such are not obsolete but they require preliminary qualitative scenarios. Accordingly, forecasts are just as necessary and sensible as the setting up of scenarios. The evaluation which future or which elements of such a future are desirable can then be undertaken with the help of the derivable problem structures. The main criterion would be which of the likely problem scenes which the various futures are going to bring us is the subjectively most agreeable for us (individual and society). Such qualitative images of the future, without the relating possible forecasts, have been commissioned by the Berlin Senator for Urban Development and Environment. The time and cost range allowed only two scenarios and these had to be worked out in a brief form.

22.3. Scenarios for Berlin - Basic Structures The scenarios have been broken down into 4 segments. These are the main areas of the acting parties: politics, economics, population, and the silent partner, nature. The basic hypotheses are the interrelations between behaviour patterns and technological potential. Both are chock-full of paradoxes. The following thinkable, neither exclusive nor automatic, relations are used as bases for the scenarios:

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Scenario A - Politics: regulative and supporting the government - Technology: centralistic, hierarchical, emphasis on large-scale industry - Population: career/competition-oriented, private-minded Scenario B - Politics: flexible and open to processes - Technology: decentralized, flexible, middle technology on the highest level - Population: concerned about the whole, local identification, individual responsibility Scenario A has the title: Leeward of development Scenario B: Aggressive self responsibility of the city

. . . and Here the Synopses: Scenario A: Leeward of Development Politics:

Economy:

Population:

The development of the economy with its regional concentration outside Berlin determines political behaviour patterns: subsidies are compensating the diminishing functions of the city, a regulative attitude is becoming established. Economic targets - measured against the development policy for industrial areas - are dominating over ecological considerations. Large-scale concepts of urban development are attempting to improve the image of the city. The spatially concentrated impact of the new technologies pushes Berlin as a location even deeper into a leeward position than up to now. The number of jobs is dropping more substantially than feared. Unemployment is becoming a great problem that is apparently here to stay. The investing power of the public budget is created by increased Berlin promotion. Rationalization in large administrations has to be carried out in spite of this. Continuing high unemployment characterizes the city. From a social point of view, disparities are widely divergent. Self-help and

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self-responsibility of the city do not develop, the city rather makes a melancholic impression. Migration is very marked. Especially qualified people are leaving the city. Competitive behaviour is dominating. Nature:

The relative distance to environmental stress in Western Germany is strongly on the decline. For economic reasons, ecological possibilities for instance are ranking second behind development measures in the city area. In negotiations with the G D R some relief of environmental stress is achieved, but not to any satisfactory degree. Complementary measures from public or private parties are also insufficient.

Scenario B: Aggressive Self-Responsibility of t h e City Politics:

Politics are developing an aggressive strategy. This is combined with flexible behaviour patterns in situations of social conflict. In "processing" the objections from the public, ecological principles are given preference. Individual responsibility and margins for activity are extended to include also the "alternatives" and foreigners.

Economy:

The number of jobs is dropping. A structural change of the economy is gradually achieved. Innovative workplaces can be created. The economy is becoming more dynamic. Decentralization potentials of technology are purposefully applied to highlight the locational advantages of Berlin in this new interrelation of technologies and regional distribution. Rationalizations lead to lasting unemployment.

Population:

The average age of the Berlin population is lowered (in both scenarios). The enhancement of individual responsibility leads to rather more cooperative behaviour patterns. Living and working are becoming intermingled again. The emergence of a system of two social classes is not becoming very marked. The decrease in population will still be somewhat higher than expected today. The environmental situation is a little more problematic than in Western Germany. The stress level rises slowly. Berlin's island situation prevents a change of its own accord. Yet all endeavours are being made to take measures on the micro level to support and relieve the ecology. Intensive activity also from private sources causes stabilization which however strongly depends on the situation in the G D R .

Nature:

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22.4. Which Divergencies Will Ensue? W h e n e v e r certain potentials of technologies which are in the course of getting established have been applied up to now these have been in coordination with the prevailing concepts of the ruling power elite. The technologies of the 19th century led to a hitherto unknown economic concentration and urban conglomeration. T h e f u r t h e r development of technologies during the first half of the 20th century then automatically ignited the geographic expansion (suburbanization), since economic and locational concentration remained stable while mobility continued to grow. In the course of this evolution, the old industrial regions developed the relevant mentalities for these technologies. The other regions were poor and underdeveloped. A s o u t h - n o r t h gap was the consequence. In the present-day n o r t h - s o u t h gap inside the Federal Republic of G e r m a n y it is clearly reflected that the new technologies - like in other countries - are not going to settle (automatically) in the old industrial regions. It is therefore not certain whether the efforts which the Senate is making at present to invite the new technologies to Berlin will be crowned by success. It might just as well happen that some courageous highlights are going to be set, while on the whole the structure of the economy of Berlin is not getting the impulses it needs. Berlin would thus get into a position in which the peripheral situation within the economic area of the Federal Republic of G e r m a n y would fully come to bear. In that case, Berlin would be entirely leeward of development. If the centralizing potentials of the new technologies (as assumed in the scenario) and/or those giving preference to certain regional areas would become determinants, political countermeasures would probably be hardly possible. It has at least been impossible to prove in the past that politics has been in a position to reverse the technological/economic trends of regional development or influence them to any extent. This experience does not have to be valid for the f u t u r e as well, but it should not be ignored. T h e probability is great that in the case of such a development, social problems in the city could become virulent, strong income discrepancies would characterize the various ghetto-like districts, conflict-prone disputes might be rekindled, and behaviour patterns among the people would be dictated by competition. It would then not be improbable that policies are going to rule regulatively, bent on achievement of their aims. T h e consequence of such a scenario would be a city Berlin (West) at the side of the functioning capital of Berlin (East), which would be overtaxed by new locational standards and new framework conditions. In spite of the subsidies which cause addiction, Berlin (West) would shrink to insignificance. T h e other scenario: Aggressive self-responsibility of the city does not by necessity m e a n the opposite, a behaviour which is opposite to that in the other scenario. T h e efforts and targets may be the same f r o m the beginning. D e p e n d i n g on which utilization of the potentials the new policies meet with, they will either have no

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success or it will be possible to achieve positive trigger effects as assumed in this scenario. Here, rather decentral effects of utilization are developed. Berlin can thus launch a structural change of the economy. It is also assumed that Berlin will be using the special qualities which have grown in this city alone. With this I mean the approaches provided by the "alternative" scene. New forms of living, producing, and working have been created. If such development impulses are going to influence Berlin (West), the consequence will be a different type of city to that in Scenario A. Income disparities will be less severe. The vitality of exactly those quarters and districts will grow which are loaded with problems. It could however happen all the same that successful active enticement of new technologies will have very stratum-specific consequences. There is one not entirely undisputed opinion that the introduction of electronics to practically all work processes sets greater requirements on qualification and education, that lower qualifications will accordingly be most distinctly eliminated from work processes. Let us assume this development would reach Berlin. Highly developed products with very complex production flows can be settled there. Research and development also receive new impulses. New workplaces are generated, mainly in the area of high and highest qualifications. Since also on the alternative scene, very good qualifications are represented, the new technologies partially also take hold there. This would in principle lead to the creation of a very promising structure in Berlin. This would however be a technology which would mainly provide a living for the intellectual middle stratum and upward, and might develop into dynamite for society or - depending on the regional economic structure - dynamite for an agglomeration. Backing highly sophisticated technologies alone as a saving development strategy is too one-sided. Also middle and low technologies have to be supported at the same time. An important field is a broad integration of low and high technology. In the future, the crafts for instance will increasingly have to face keen competition from larger enterprises in the realm of production, assembly, as well as services. Products and materials which craftsmen process, are increasingly being deprofessionalized. This is most clearly exemplified by the sanitary trade. Qualitative requirements set on the craftsman are drastically reduced. At the same time, large planning offices are beginning to use CAD. Planning processes are rationalized and extended by additional work phases. It is increasingly unproblematic to produce varieties. Material lists, cost calculations, details can be automatically linked to any variety. Such fully rationalized planning degrades the craftsman more and more to an assembly worker with low requirements of specifications. Such a consequence of the new technologies would have specific impacts for the city. It would for instance further enhance income disparities. In districts with lower income groups, investments and rent-paying capacity would recede. At the same time, the quarters where

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the well and highly qualified workers live would prosper. While in such a scenario the requirements as to knowledge, independence, creativity, i.e. the cultural aspects of work would decrease for the lower income groups, they would be cumulating in the higher social strata. It would however also be possible that besides the forced use of high technologies, a parallel strategy is followed which enables the integration of different technologies. C A D for trades-people would be such a subject. The software would have to be developed to correspond to the logics of the work processes of the crafts. The craftsman could then by using C A D integrate the specific engineering know-how of his trade at least on the standard level. He could enlarge his performance spectrum. He could offer and discuss with his customers any varieties as quickly and efficiently as the large companies. His creativity would again be challenged more strongly. He could furthermore offer his services in the planning phase to those who intend to modernize their houses or homes by themselves. They could jointly determine to what extent self-help is possible and where technical know-how is required. The integration of high and low technology can expand the performance spectrum in the trade. It can improve the competitive situation with large enterprises. It would lead to an enrichment within the sense of humanization of work. It would mean greater challenge to the craftsman as a human being. A different working culture as compared with the other scenario would ensue. Also a different type of city with vital local economic cycles. It would be quite a different urban economy. Political backing of highly developed technology alone is "in" and sells well in a political sense. But the consequences might present social problems. For a city which in the past has attracted labour for mass production to such a large extent, a onesided, high technology-oriented structural change may prove dangerous. Up to now, Berlin is still lacking the initiative to integrate both high and low technology. Political concepts as to how employment of the less qualified workers can be achieved in the future are also still lacking.

About the Contributors Hartmut E. Arras has a Master of Science in City and Regional Planning (IIT, Chicago). He worked as architect with Breuer, van der Rohe and Scharoun. From 1968 to 1984 he was at PROGNOS (Basel); since 1984 at SYNTROPIE (Foundation for Future Development). His main fields of work are city development, economic, environmental and housing policy. He has published in these areas. His recent publication with C. F. von Weizsäcker and F. von Globig is Bilder einer Welt von Morgen - Modelle bis 2009.

Franz-Josef Bade is Professor of Economics in the Department of Regional Planning at the University of Dortmund. Formerly he was research fellow at the Science Centre Berlin and the German Institute of Economic Research, Berlin. He was awarded the August-Lösch-Price for his dissertation (1978) Die Mobilität von Industriebetrieben (The Mobility of Industrial Firms). His main fields of research are location theory, regional economics, organizational science and industrial economics. Among his publications is Die funktionale Struktur der Wirtschaft und ihre räumliche Arbeitsteilung (Functional Economic Structure and Spatial Division of Labour). Paul C. Cheshire is presently Reader in Economics in the Faculty of Urban and Regional Studies at the University of Reading, England. His research interests are in urban and regional economics and environmental economics, particularly in local labour markets, the economics of urban planning and in urban and regional development. He is presently the director of two studies for the European Commission; on problems of urban change in Europe and on the feasibility of setting up a small area data base for urban policy analysis. He has published widely in these fields and on the environmental economics of agricultural policy. Adalbert Evers is working as a Social Scientist at the European Center for Social Welfare Training and Research in Vienna. Present research is in the field of social policy: a comparative study in several European countries concerning the shift in the

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welfare mix. Major publications: Social Movements and Political Power. A Survey of a Political and Theoretical Controversy, in Comparative Urban Research, Vol. Ill, No. 2; The Public and Private Faces of Welfare. Social Policy in Transition (ed. with H. Wintersberger and H. Nowotny, Gower Press, Aldershot, 1986).

Hans-Jürgen Ewers is Professor of Economics at the Technical University Berlin and member of the (private) Institute for Urban Research and Structural Policy Berlin. Main research interests: dynamics of technical change, urban and regional development, environmental policies. Major publications: Innovations-orientierte Regionalpolitik (1980, Innovation Oriented Regional Policy), Die monetären Nutzen gewässergüteverbessernder Maßnahmen (1980, Monetary Benefits of Measures for Water Quality Improvement).

Joanne Fox Przeworski is a consultant on urban economic development, small businesses and public/private ventures, based in Paris (11 Quai aux Fleurs, 75004 Paris). She received a Ph.D. from Washington University (St. Louis) and a masters from Harvard University and served as principal consultant to the O E C D Project on Urban Economic Development. Besides publications in policy and organizational research she has written articles and a book about economic and political aspects of Chilean development (New York, Arno Press, 1980) and a report on the status of human rights in Chile (New York Review of Books, 30 May 1974).

Jtirgen Friedrichs is Professor of Sociology at the University of Hamburg and Director of the Center for Comparative Urban Research. His major interest is in comparative research of urban development, segregation and minority integration. He is a Senior Fellow of the Metro Center of the John Hopkins University. He recently started a joint research project on 'Comparative DemographicEmployment Mismatches in the U.S. and West German Cities' with John D. Kasarda. Major publications are Stadtanalyse (1977, Urban Analysis) and Spatial Disparities and Social Behaviour (1982). John Goddard is Professor of Regional Development Studies, Head of the Department of Geography and Director of the Center for Urban and Regional Development Studies at the University of Newcastle upon Tyne (UK). He was editor of Regional Studies from 1980-1985 and co-editor of The Urban and Regional Transformation of Great Britain (Methuen, 1983) and Technological Change, Industrial Restructuring and Regional Development (Allen & Unwin, 1985). He was consultant to the O E C D on Urban Economic Development between 1983 and 1985.

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Peter Hall has joint appointments as Professor of Geography at the University of Reading and Professor of City and Regional Planning at the University of California, Berkeley. His main current interests are the geography of high-technology industry and the history of planning in the 20th century. Dennis Hay is Senior Research Fellow at the University of Reading. He was involved in European comparative urban research 1975-85 and he is co-author with Professor Peter Hall of Growth Centres in the European Urban System (1980). Currently he is working with Paul Cheshire on Commission of the European Communities sponsored research on urban change and urban problems in the Community. John D. Kasarda is Professor and Chairman of the Department of Sociology at the University of North Carolina at Chapel Hill. He has published more than 30 articles and a book on urban demographic and industrial redistributional trends and has served as a consultant on national urban policies to both the Carter and Reagan Administrations. His current research focuses on urban structural transformation and minority opportunities in the U.S. with special emphasis on policies to revitalize larger, older cities in the Northeast and Midwest. David Keeble is Lecturer in Geography at Cambridge University, and Fellow and Tutor of St. Catharine's College, Cambridge. He is the author of Industrial Location and Planning in the United Kingdom, of Regional Development in Britain, and of Centrality, Peripherality and EEC Regional Development. He is currently chairman of the Industrial Location Research Group of the Institute of British Geographers.

Manfred Kern is Head of the Economic Division of the Berlin Chamber of Industry and Commerce and Private Lecturer for economic policy at the Technical University of Berlin. His main working fields are regional economic policy, general economic policy, especially supply-side politics ("Ordungspolitik"). He received his Ph.D. in 1972 and habilitated in 1980: Marktmacht, Preiskontrollen und Stabilisierungspolitik (Market power, price controls, and stabilization policy). Richard V. Knight is Associate Professor of Administration and Management at Antioch University, Yellow Springs, Ohio. He has been a member of the faculty at Columbia University, New York University, Case Western Reserve University, Cleveland State University, University of New Orleans and Wright State University. He is an author and lecturer specializing on the development of cities, on knowledge resource assessment and development strategies. His article is based on a book he is presently writing, Cities and the Global Economy.

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Manfred Konukiewitz earned his Ph.D. in Political Science at the Free University of Berlin in 1982. From 1977-83 he was a research fellow at the Free University. He has been working at the Federal Ministry for Regional Planning, Building and Urban Development in Bonn since 1984. He has published in the fields of regional, urban, and housing policies and policy implementation. Eric E. Lampard is Professor of Economic History, State University of New York, Stony Brook. He was a member of the Social Science Research Council Committee on Urbanization, the Committee on Urban Economics, Resources for the Future Inc. and the N R C Social Science Advisory Panel to U.S. Dept. of Housing and Urban Development. He is author of Industrial Revolution: Interpretations and Perspectives (1957), co-author of Regions, Resources, and Economic Growth (1960, 1965). His most recent publication "The Nature of Urbanization" appeared in The Pursuit of Urban History, ed. by D. Fraser and A. Sutcliffe. Roger Leigh is Reader in Geography and Planning at Middlesex Polytechnic, Enfield, London, and has researched in the fields of industrial location, local economic change and the assessment of local economic policies. Recent work on London was published under the title Monitoring Industrial and Employment Change in London 1976-81. William F. Lever is Professor in Urban Studies at the University of Glasgow. He took his first degree and doctorate at the University of Oxford with a study of problems encountered in areas of persistent outmigration. At Glasgow he has directed a number of major research projects on industrial location, the operation of local labour markets and urban economic policy. He has published widely in journals and books, and is editor of Urban Studies. Rainer Mackensen is Professor of Sociology and Managing Director of the Institute of Sociology at the Technical University of Berlin. He took his Ph.D. in 1954 at Tübingen. His main fields of work are Urban and Regional Sociology, Population Dynamics, Family Research, and Future Studies. His latest book (1984) is Living beyond 2000 (Arani, Berlin). He is co-author of Human City (1984, Mohn, Gütersloh) and New Information and Communication Technology (1985, Mohn, Gütersloh). Horst Matzerath is Private Lecturer at the University/Gesamthochschule Duisburg and Scientific Adviser to the Historical Archives of the City of Köln. Formerly he was Assistant Professor at the Central Institute for Social Science Research at the Free

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University of Berlin. He is author of Nationalsozialismus und kommunale Selbstverwaltung (1970, National-Socialism and local self-government) and Urbanisierung in Preussen (1985, Urbanization in Prussia). His main fields of work are Modern History, Economic and Social History, Urban History and Urbanization Research. Pierre Merlin is Professor at the University of Paris VIII. He was scientific director of the Institut d'Aménagement et d'Urbanisme de la Région Parisenne (1967-70), Professor (since 1968) at and President of the University of Paris-Vincennes (1976-80); creator, director (1969-76) and honorary director of the Institut d'Urbanisme de l'Académie de Paris and president of the Interministerial Committee on Touristic Planning (1981-82). He is author of twenty books on urban planning, urban transportation, demography, university policy . . . and alpinism. David North is Principal Lecturer in Geography and Planning at Middlesex Polytechnic, Enfield, London, and has published research on locational decisionmaking, the spatial aspects of company acquisitions, and monitoring industrial change and its employment consequences in London's industries. Current interests include the emerging field of local economic development and employment policy in Britain. Rémy Prud'homme is Professor of Urban Economics at the University of Paris XII. He has taught at the Universities of Phnon-Penh (Cambodia), Lille (France) and as Visiting Profesor at MIT. He has worked for governments and for various international organizations. His latest books are: The Management of Nature (1980, in French, with a Japanese translation), Urban Transportation and economic Development in Brazil (1983, in French), The Future of the Automobile (1984, in French). He is presently working on a book on automobile policies for developing countries. Marcel Roncayolo is Professor of History and Joint Director of the École Normale Supérieure in Paris 05. His publications include the three volume work Histoire du monde contemporain (Bordas, Paris 1969-1973) as well as a coauthorship of tomes IV and V of Histoire urbaine de la France (Editions du Seuil, 1983-1985). Rolf Stein is Research Assistant in Economics at the Technical University of Berlin and has worked on different research projects such as E C funded research on the impact of infrastructure on regional development, problems of public finance and urban economic development. His main current research interests are in industrial organization and regional impacts of international economic change.

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Lynn Steinberg is Research Assistant and Lecturer in Planning at Middlesex Polytechnic, Enfield, London. She is currently researching industrial restructuring and employment change in London.

Anthony Sutcliffe is Professor in the Department of Economic and Social History, University of Sheffield. He has worked on urban and planning history and his books include The Autumn of Central Paris (1970) and Towards the Planned City (1981), as editor (1984) Metropolis 1890-1940 and with D. Fraser The Pursuit of Urban History (1983).

Ingrid Thienel-Saage is Head of the Department of History of a Public School in Berlin. She took her Ph.D. in 1969 and habilitated in 1978. She had appointments as Research Assistant for the Historische Kommission zu Berlin (1965-69), as Assistant Professor in the Department of Political Science at the Free University of Berlin (1971-77) and was Visiting Lecturer at the Department of History at Stanford University (California) from 1972-73. From 1978-82 she was Private Lecturer at the Free University of Berlin.

Hellmut Wollmann is Professor for Public Administration at the Free University of Berlin, founding member of the (private) Institute for Urban Research and Structural Policy Berlin, and presently Chairman of the Research Committee on the Comparative Study of Local Politics within the International Political Science Association. Major research interests: methodology and concepts of implementation and evaluation research; empirical research on urban, regional, and housing policies. Numerous publications in these fields. Co-editor of two book series Stadtforschung aktuell and Policy-Forschung (both Birkhäuser-Verlag, Basel).

Harold Wolman is Professor of Political Science at Wayne State University, Detroit, Michigan. At the time this article was written he was Visiting Professor of Politics and Contemporary History at the University of Salford in England. From 1978-84 he was a Senior Research Associate in the Public Finance Program at the Urban Institute in Washington D.C. He earned a Ph.D. in political science from the University of Michigan and has been a member of the political science faculties of Massachusetts-Boston. His primary research interests are in urban policy, and particularly urban economic development, intergovernmental finance and politics, and housing.