ASIA
26 March 2014
Urbanization and slums in Asia
Economic theory paints a nice picture of urbanization as a driver of economic development. Unfortunately, too many Asian people who migrate from the country to the city end up in squalid slums.
There are many good reasons for people to leave the country for city life ("urbanization"). Job opportunities, availability of services, bright lights and excitement, or an escape from constraining social and cultural traditions in rural villages. In short, more opportunities for a better life.
Businesses located in cities can enjoy economies of scale and agglomeration, including through industrial clusters, resulting in economic efficiencies. Cities can also become hubs of creativity, innovation, technology development and higher education.
"Push" factors can also contribute to urbanization. Hunger and poverty, conflicts, natural disasters and environmental factors like desertification. And as population grows, rural areas are sometimes reclassified as urban, especially when they join agglomerations with other villages.
Economic theories, like those of Richard Baldwin and Sir Arthur Lewis, provide useful insights into the process of urbanization.
Richard Baldwin’s theory of the “great unbundlings” is instructive. Until the mid-18th century, with exception of a few cities, every region in every nation was quite similar, namely poor and agrarian. Trade costs were prohibitive, both within and between nations. So each village consumed what it produced. In other words, each village’s consumption was “bundled” with its production, with very little leakage outside the village.
And then came the first unbundling. Rapidly falling transportation costs (thanks to steamships, railways and the telegraph) enabled geographical separation (“unbundling”) of production and consumption. Goods could be produced in the most efficient place, usually a factory located in a city, and then be transported to consumers. This meant that there was much greater trade both within countries, and between countries.
These factories could now achieve economies of scale and economies of agglomeration. Innovation could take place thanks to mutual learning from the clustering of people together.
This first unbundling initially took place in Western Europe and the US in 19th century. Large scale migration from the countryside to urban centres provided the manpower for these factories. There was also large scale migration from the Old World to New World in this first phase.
Another phase then began in East Asia in the 1950s, starting with the rise of Japan, then Hong Kong, Korea, Singapore and Taiwan, followed by ASEAN, China and India. Again, a large wave of migration from rural to urban areas began, which continues to this day, as Asia became the world's factory.
Even though the capitalist sector might develop quickly, wages do not increase because of the continued flow of the unlimited surplus of labor. This means that capitalists make high profits. But this helps fuel growth, as the profits are invested. In the initial stages of this process, output does not decline in the subsistence sector, because the marginal productivity of that surplus labor is negligible.
Eventually, the reservoir of surplus labor in the subsistence sector is exhausted, and wages in the subsistence sector begin to rise. This also pushes wages in the capitalist sector upwards and reduces profit levels. The process of capital accumulation slows down. This is known as the "Lewis turning point".
At this point, we no longer have a dualistic economy. The capitalist and subsistence labor markets are now integrated. Development can no longer be based on cheap labor. Investment in both physical and human capital, along with innovation, must become the new drivers of development.
Lewis’s model is very useful for analyzing urbanization and industrialization in developing Asian countries like China and India. In recent years, China has seen rising wages in its major cities, as its surplus labor has evaporated, leading some analysts to argue that it has reached the "Lewis turning point".
The region's urban population has risen from 33% of total population in 1990 to some 43% in 2010. The United Nations projects that Asia's urbanization rate could rise to 56% in 2030, and further to 64% in 2050. But despite its rapid urbanization, Asia is still the second least urbanized region of the world, after Africa.
East Asia leads the urbanization process, with its urban population rising from 32% to 50% from 1990 to 2010. China's urban population almost doubled from 26% to 47% over this period.
South-East Asia is less advanced in its urbanization with its urban population having increased from 32% to 42% between 1990 and 2010. Malaysia's urban population rose from 50% to 72%, while that of Indonesia increased from 31% to 44%. South Asia is further behind, with its urban population only increasing from 28% to 33%. Urbanization in India rose from 26% to 30%.
A common image of Asian urbanization is the growth of mega-cities, cities whose population exceeds 10 million. And 12 of the world’s 21 mega-cities are indeed in Asia (including 7 of the largest 10 cities). Cities like Tokyo, Delhi, Mumbai and Shanghai.
In reality, however, most of the region’s urban population lives in secondary cities and small towns. As of 2009, 60% of the urban population in continental Asia lived in cities with a population of less than 1 million, while only 21% lived in cities of from 1 to 5 million.
While poverty rates are lower in urban areas than in rural areas, urban poverty is a growing phenomenom. And as urbanization continues in Asia, the region's poverty will increasingly be urban in nature. Urban poverty has similar features to rural poverty. But a life in urban poverty can also mean a lack of familiar social and community networks, social problems like crime and violence, exposure to pollution resulting in acute respiratory and other infectious diseases, and a greater risk of HIV/AIDS.
As a general rule, more developed countries have relatively high rates of urbanization. Globally, some 75% of the population in high income countries is urban, and in Asia the urbanization rates of Japan and Korea are 69% and 83% respectively.
So looking ahead, urbanization will continue to be a feature of Asia's development.
Like much of the developing world, developing Asia suffers from an "urban divide". The rich live in well-serviced neighbourhoods, gated communities and well-built formal settlements. And the poor are confined to inner-city or peri-urban informal settlements and slums.
Indeed, too many Asian cities in developing Asia are characterized by slums, poverty, congestion, crime and violence. Many cities have unreliable power supplies, intermittent water availability, insufficient treatment of wastewater before it is discharged into local waterways, flooding due to poor drainage and uncollected garbage.
When rapid urban growth does not come with basic urban infrastructure, slums expand and the urban divide widens. The lack of basic services is due to inadequate planning, construction and social services.
Asia's slum population has declined significantly as a proportion of total urban population over the past decades in tandem with the reduction in poverty in the region. But about one-third of Asia's urban population still lives in slums, and the actual number of the slum population is still growing as urban populations grow.
East Asia is a little better off than the regional average, with 28% of its urban population living in slums in 2010, down from 44% in 1990. China's slum population is 31% of its total.
In South-East Asia, 31% of its urban population lived in slums in 2010, a substantial decline from 50% in 1990. Slum populations in poor countries like Laos and Cambodia are close to 80% of total urban population, while in the Philippines and Vietnam they are over 40%
The slum situation in South Asia is the worst in the region, with some 35% living in slums in 2010, well down from 57% in 1990.
Unfortunately, many local governments are ineffective and/or corrupt. Building collapses and factory fires are ever too frequent, especially in Bangladesh and India, and are usually due to building owners flouting building, safety and fire regulations, often with the complicity of local authorities.
Further, as Asit Biswas has argued on this website, urban water services in many parts of India have steadily deteriorated. Two decades ago, urban households used simple carbon filters to clean water or boiled it before drinking. With steadily declining water quality, many households now use reverse osmosis (RO) to purify water for drinking. Today, one would be hard pressed to find a single city where people can drink water straight from the tap without any health concerns.
Many Asian cities, and especially their slum populations, are located in areas with a high risk exposure to natural hazards. For example, Manila with nearly 12 million inhabitants is at a high risk of cyclones, floods and earthquakes, and frequently suffers from natural disasters.
In addition, climate change will pose great challenges to Asia's urban populations. Measured by future populations that will be exposed to half metre sea-level rises, 15 of the world's 20 most exposed cities are in Asia. The list of 20 is: Kolkata; Mumbai; Dhaka; Guangzhou; Ho Chi Minh City; Shanghai; Bangkok; Rangoon; Miami (US); Hai Phong; Alexandria (Egypt); Tianjin; Khulna; Ningbo; Lagos (Nigeria); Abidjan (Cote d'Ivoire); New York (US); Chittagong; Tokyo; and Jakarta.
The highly visible disparities in wealth, services and opportunities across the urban divide can also create great frustration, tension and a sense of exclusion for the Asia's urban poor and slum dwellers. On top of that, rampant corruption, disputes over land tenure and widespread human rights abuse, together with an increasingly well-informed populace, can lead to socially explosive situations.
Fragile democracies and authoritarian regimes should beware of restive urban populations.
Executive Director
Asian Century Institute
www.asiancenturyinstitute.com
Businesses located in cities can enjoy economies of scale and agglomeration, including through industrial clusters, resulting in economic efficiencies. Cities can also become hubs of creativity, innovation, technology development and higher education.
"Push" factors can also contribute to urbanization. Hunger and poverty, conflicts, natural disasters and environmental factors like desertification. And as population grows, rural areas are sometimes reclassified as urban, especially when they join agglomerations with other villages.
Economic theories, like those of Richard Baldwin and Sir Arthur Lewis, provide useful insights into the process of urbanization.
Richard Baldwin's “Great unbundlings”
How did urbanization get started?Richard Baldwin’s theory of the “great unbundlings” is instructive. Until the mid-18th century, with exception of a few cities, every region in every nation was quite similar, namely poor and agrarian. Trade costs were prohibitive, both within and between nations. So each village consumed what it produced. In other words, each village’s consumption was “bundled” with its production, with very little leakage outside the village.
And then came the first unbundling. Rapidly falling transportation costs (thanks to steamships, railways and the telegraph) enabled geographical separation (“unbundling”) of production and consumption. Goods could be produced in the most efficient place, usually a factory located in a city, and then be transported to consumers. This meant that there was much greater trade both within countries, and between countries.
These factories could now achieve economies of scale and economies of agglomeration. Innovation could take place thanks to mutual learning from the clustering of people together.
This first unbundling initially took place in Western Europe and the US in 19th century. Large scale migration from the countryside to urban centres provided the manpower for these factories. There was also large scale migration from the Old World to New World in this first phase.
Another phase then began in East Asia in the 1950s, starting with the rise of Japan, then Hong Kong, Korea, Singapore and Taiwan, followed by ASEAN, China and India. Again, a large wave of migration from rural to urban areas began, which continues to this day, as Asia became the world's factory.
The Lewis Model
Nobel-prize winning economist, Sir Arthur Lewis, provided some simple but powerful insights in his seminal 1954 article entitled “Economic Development with Unlimited Supplies of Labor”. Lewis argued that developing countries have a dualistic structure, with a capitalist sector and a non-capitalist ‘subsistence’ sector. The capitalist sector attracts the migration of workers from the subsistence sector, since the latter is characterized by surplus labor and workers can earn more wages in the capitalist sector than in the subsistence sector.Even though the capitalist sector might develop quickly, wages do not increase because of the continued flow of the unlimited surplus of labor. This means that capitalists make high profits. But this helps fuel growth, as the profits are invested. In the initial stages of this process, output does not decline in the subsistence sector, because the marginal productivity of that surplus labor is negligible.
Eventually, the reservoir of surplus labor in the subsistence sector is exhausted, and wages in the subsistence sector begin to rise. This also pushes wages in the capitalist sector upwards and reduces profit levels. The process of capital accumulation slows down. This is known as the "Lewis turning point".
At this point, we no longer have a dualistic economy. The capitalist and subsistence labor markets are now integrated. Development can no longer be based on cheap labor. Investment in both physical and human capital, along with innovation, must become the new drivers of development.
Lewis’s model is very useful for analyzing urbanization and industrialization in developing Asian countries like China and India. In recent years, China has seen rising wages in its major cities, as its surplus labor has evaporated, leading some analysts to argue that it has reached the "Lewis turning point".
Urbanization trends in Asia
The past few decades have seen a progressive urbanization in Asia, consistent with Baldwin's and Lewis's theories.The region's urban population has risen from 33% of total population in 1990 to some 43% in 2010. The United Nations projects that Asia's urbanization rate could rise to 56% in 2030, and further to 64% in 2050. But despite its rapid urbanization, Asia is still the second least urbanized region of the world, after Africa.
East Asia leads the urbanization process, with its urban population rising from 32% to 50% from 1990 to 2010. China's urban population almost doubled from 26% to 47% over this period.
South-East Asia is less advanced in its urbanization with its urban population having increased from 32% to 42% between 1990 and 2010. Malaysia's urban population rose from 50% to 72%, while that of Indonesia increased from 31% to 44%. South Asia is further behind, with its urban population only increasing from 28% to 33%. Urbanization in India rose from 26% to 30%.
A common image of Asian urbanization is the growth of mega-cities, cities whose population exceeds 10 million. And 12 of the world’s 21 mega-cities are indeed in Asia (including 7 of the largest 10 cities). Cities like Tokyo, Delhi, Mumbai and Shanghai.
In reality, however, most of the region’s urban population lives in secondary cities and small towns. As of 2009, 60% of the urban population in continental Asia lived in cities with a population of less than 1 million, while only 21% lived in cities of from 1 to 5 million.
While poverty rates are lower in urban areas than in rural areas, urban poverty is a growing phenomenom. And as urbanization continues in Asia, the region's poverty will increasingly be urban in nature. Urban poverty has similar features to rural poverty. But a life in urban poverty can also mean a lack of familiar social and community networks, social problems like crime and violence, exposure to pollution resulting in acute respiratory and other infectious diseases, and a greater risk of HIV/AIDS.
As a general rule, more developed countries have relatively high rates of urbanization. Globally, some 75% of the population in high income countries is urban, and in Asia the urbanization rates of Japan and Korea are 69% and 83% respectively.
So looking ahead, urbanization will continue to be a feature of Asia's development.
Slums in Asia
While urbanization should offer the prospect of a better life, many urban dwellers end up living in slums, which are a manifestation of urban poverty. According to UN Habitat, a slum household suffers from one or more of the following deprivations: dwellings made of non-durable material; overcrowding; lack of access to improved water; lack of access to improved sanitation (ie, a toilet); or insecure land tenure.Like much of the developing world, developing Asia suffers from an "urban divide". The rich live in well-serviced neighbourhoods, gated communities and well-built formal settlements. And the poor are confined to inner-city or peri-urban informal settlements and slums.
Indeed, too many Asian cities in developing Asia are characterized by slums, poverty, congestion, crime and violence. Many cities have unreliable power supplies, intermittent water availability, insufficient treatment of wastewater before it is discharged into local waterways, flooding due to poor drainage and uncollected garbage.
When rapid urban growth does not come with basic urban infrastructure, slums expand and the urban divide widens. The lack of basic services is due to inadequate planning, construction and social services.
Asia's slum population has declined significantly as a proportion of total urban population over the past decades in tandem with the reduction in poverty in the region. But about one-third of Asia's urban population still lives in slums, and the actual number of the slum population is still growing as urban populations grow.
East Asia is a little better off than the regional average, with 28% of its urban population living in slums in 2010, down from 44% in 1990. China's slum population is 31% of its total.
In South-East Asia, 31% of its urban population lived in slums in 2010, a substantial decline from 50% in 1990. Slum populations in poor countries like Laos and Cambodia are close to 80% of total urban population, while in the Philippines and Vietnam they are over 40%
The slum situation in South Asia is the worst in the region, with some 35% living in slums in 2010, well down from 57% in 1990.
Some future challenges
If Asia maintains its rapid development, this will continue to have a positive effect on urban poverty and slums. But experience shows that a growing economy is not sufficient to solve these problems. Effective action by governments, especially at the local level, is necessary to implement the necessary urban planning, and to provide infrastructure and services.Unfortunately, many local governments are ineffective and/or corrupt. Building collapses and factory fires are ever too frequent, especially in Bangladesh and India, and are usually due to building owners flouting building, safety and fire regulations, often with the complicity of local authorities.
Further, as Asit Biswas has argued on this website, urban water services in many parts of India have steadily deteriorated. Two decades ago, urban households used simple carbon filters to clean water or boiled it before drinking. With steadily declining water quality, many households now use reverse osmosis (RO) to purify water for drinking. Today, one would be hard pressed to find a single city where people can drink water straight from the tap without any health concerns.
Many Asian cities, and especially their slum populations, are located in areas with a high risk exposure to natural hazards. For example, Manila with nearly 12 million inhabitants is at a high risk of cyclones, floods and earthquakes, and frequently suffers from natural disasters.
In addition, climate change will pose great challenges to Asia's urban populations. Measured by future populations that will be exposed to half metre sea-level rises, 15 of the world's 20 most exposed cities are in Asia. The list of 20 is: Kolkata; Mumbai; Dhaka; Guangzhou; Ho Chi Minh City; Shanghai; Bangkok; Rangoon; Miami (US); Hai Phong; Alexandria (Egypt); Tianjin; Khulna; Ningbo; Lagos (Nigeria); Abidjan (Cote d'Ivoire); New York (US); Chittagong; Tokyo; and Jakarta.
The highly visible disparities in wealth, services and opportunities across the urban divide can also create great frustration, tension and a sense of exclusion for the Asia's urban poor and slum dwellers. On top of that, rampant corruption, disputes over land tenure and widespread human rights abuse, together with an increasingly well-informed populace, can lead to socially explosive situations.
Fragile democracies and authoritarian regimes should beware of restive urban populations.
Author
John WestExecutive Director
Asian Century Institute
www.asiancenturyinstitute.com
REFERENCES:
- Baldwin, Richard, Graduate Institute of International Studies, Geneva. Globalisation: the great unbundling(s)- Lewis, W.A. Economic Development with Unlimited Supplies of Labor. The Manchester School. May 1954.
- United Nations, ESCAP. Statistical Yearbook for Asia and the Pacific 2011. People -- Demographic Trends. Urbanization.
- UN Habitat. State of the World's Cities 2010/2011 - Cities for All: Bridging the Urban Divide
- Baker, Judy L.. Urban Poverty: A Global View. Urban Papers. The World Bank Group.