CITY size is back in fashion as a variable of interest and this time bigness is being viewed as an advantage. This is quite a change from the perspective that prevailed for years when countries, specially developing ones, were decidedly anti-urban and wished to retard migration to prevent cities from increasing in size.
Size was seen as a handicap and served as an excuse to explain away the problems of big cities. How should we see Karachi in this new perspective?
Of course, well-managed big cities have been around for a long time — Tokyo, New York and London are obvious examples. But somehow it was felt that such success could not be replicated in developing countries. The blame was always placed at the door of mismanagement though it was never adequately explained why such mismanagement was so endemic to developing countries and why the ability to manage declined with size.
Now, following the East Asian miracle, the emergence of dynamic big cities like Seoul and Shanghai has re-opened the debate about the possibilities and dividends of urban size.
Recent research has in fact suggested that most Chinese cities are still too small from an economic perspective and that it is much more costly to be undersized than to be oversized. The reason is that even after accounting for the negative effects of size like congestion, productivity or output per worker increases significantly with size.
We might choose to ignore these potential economic gains if small cities were exceptionally well managed in Pakistan. But given that this is not the case by any stretch of the imagination, there seems no reason to fail to tap the gains available from increases in city size.
To do that, however, calls for a re-examination of the reasons for the poor performance of large cities in many developing countries in the world. Here, I feel, the hand-wringing about mismanagement is an easy cop-out that hinders the search for what might be considerably more significant reasons.
In this perspective I wish to advance the claim that size and effective size are very different things and while Karachi is large in size, its effective size is quite small. And this divergence between size and effective size has serious implications.
The key to understanding this difference is the realisation that productivity, or output per worker, increases with city size because of the resulting increase in the size of the labour market. Not only is there a greater diversity in the labour skills available to firms but the greater number of available jobs enables labour to match itself with the job that provides the highest returns.
But, and it is a big but, this requires that it be physically possible for the optimal match to occur. If one resides at one end of Karachi and the best paying job exists at the other, it should be possible to travel to and from the location of the job in a reasonable amount of time and at a reasonable cost. In other words, the benefits of size in effect derive from the existence of an integrated labour market.
It is in this sense that Karachi is not a city of 18 million people; it is perhaps akin to six cities of three million people each. It suffers all the social and political disadvantages of a large population without deriving any of the economic benefits.
How can one understand the concept of effective size? It turns out that the indicator is a very simple one which can be illustrated with an example.
Let us consider one hour as the maximum feasible time for a home-to-job commute and two hours as the maximum feasible time for firms making just-in-time deliveries to other firms (for example, bakeries delivering fresh products to hotels).
Between 1990 and 2007 the population residing within the one and two hour circles from Shanghai port increased 200 per cent (from four to 12 million) and 130 per cent (from 10 to 23 million), respectively.
These improvements came from investments in transport infrastructure that integrated the labour market greatly reducing the divergence between size and effective size. And such investments in China were not confined to Shanghai; smaller cities like Kunshan and Suzhou showed even higher gains. Not surprisingly, the economic output per square kilometre increased between two- and three-fold within a period of five to 10 years.
The bottom line of this argument is that contrary to our belief, Karachi is not a big city; it is an ineffective agglomeration of about half a dozen small cities whose labour markets need to be integrated to avail the benefits that derive from bigness. This requires investments in transport infrastructure, rapid transit and the sensible utilisation of the circular railway that has been criminally neglected over the years.
One of the unremarked advantages of Mumbai is its suburban railway system that transports about seven million commuters per day. It is not surprising that in 2008 the GDP of Mumbai was $209bn compared to $78bn for Karachi. It is not that Mumbai is significantly better managed or has fewer social and political problems.
A large part of the difference pertains to the integration of its labour market. In terms of size Mumbai and Karachi are comparable. In terms of effective size, Karachi is much smaller, perhaps one-third the size of Mumbai.
The urban agenda for Karachi and the other major cities in Pakistan couldn’t get much clearer than this. In fact, looking ahead there should be no reason why the labour markets of Hyderabad-Karachi, Gujranwala-Lahore or Islamabad-Rawalpindi should remain unconnected to each other.
The writer is an economist who had to move from Defence to KDA on finding employment at Karachi University.