Many in the West think of the Asian Pacific as the world’s factory. But in reality, cities and the creative economy are key factors in the region's future economic development.
There was growing recognition of these factors at last weekend's APEC CEO Summit in Honolulu. Chinese President Hu Jintao said China should make innovation "a main driver of growth." President Susilo Bambang Yudhoyono of Indonesia announced that his country had formed a new Ministry of the Creative Economy. U.S. Secretary of State Hillary Rodham Clinton made an impassioned case for the connection between diversity and economic growth, noting the prosperity gains that come from unleashing the talent and capabilities of women.
The shift to the creative economy is already evident throughout region. Singapore has the highest Creative Class share—the percent of workers in technology, science, academia, medicine and the arts whose jobs require them to think and innovate—of any nation in the world: 47.3 percent. Australia is close behind, with 44.5 percent. Canada has 40.8 percent; New Zealand 40.1 percent and America just over 35 percent. Malaysia is at 25 percent, and the Philippines are 20 percent. This is a great start. But the key is to extend the creative economy across manufacturing, service work, and even agriculture.
At the summit, leaders highlighted the key role cities play in this transformation. By 2020, as many as seven billion people may be living in mega-cities, clusters of giant metropolitan areas that drive so much of the world’s economic activity. "Mega-cities are becoming city states," former Chicago Mayor Richard Daley said, "the most powerful force in the world economy." He noted that nations could learn much from city governance. "Cities and their governments are much more flexible than national governments," he added. Public-private partnerships provide a model for rebuilding not just cities but national and global economies.
The Asia Pacific nations are already in the vanguard of this shift, with the most urban regions in the world. Four of the five biggest mega-regions in the world are there—and six of the ten biggest, and 25 of the top 40. Though APEC nations account for only nine percent of the world’s population, they produce almost half of all global economic output and nearly three quarters of all global innovation.
But if cities unleash tremendous creative and entrepreneurial energies, they require substantial oversight and investment on the parts of governments before they can succeed. Cities and megacities need not just virtual infrastructure, broadband and the like, but physical infrastructure to connect them internally and to each other, to speed up the velocity of moving people, goods, and ideas. China in particular has taken a leadership position with high-speed rail.
The economic crisis is not just a financial crisis but the product of a deep and fundamental economic transformation. Like the Great Depression of the 1930s, it is likely to be a generational event, and we will be feeling its effects for at least another decade or more. Key to figuring out the way forward is harnessing the power of the innovative, knowledge-driven creative economy. It can be a powerful force for long-run prosperity, but as it is currently organized it is generating deep and pronounced economic, social and geographic inequality. Jobs and labor markets are increasingly divided between well-paid, well-educated members of the creative class, an increasingly marginalized blue collar working class, and a rapidly growing but poorly compensated service class. The global economy is spiky and growing spikier, and it will take fundamental institutional reform to cope with this and create a system with can generate shared prosperity.
This is especially evident with the ongoing jobs crisis, especially in many nations where is particularly acute among less skilled blue-collar workers and older industrial regions. It's not enough to focus on improving education and skills and stabilizing manufacturing jobs. We need to upgrade the huge mass of low-skill service jobs in fields such as retail sales, personal care, food preparation and service and so on, which compose more than 45 percent of the workforce in most nations and are among the fastest growing of all jobs. I raised the analogy to the upgrading of manufacturing jobs in the advanced nations with the rise of new social compacts after the Great Depression. These jobs, which were among the lowest paying and most dangerous, were transformed into higher-wage family supporting jobs and eventually into higher-skill jobs as well by tapping the innovative capabilities of workers. The only way to overcome the growing inequality in the U.S. and world economies is to tap the innovative and creative capabilities of the 45 percent of the workforce who toil in the service sector today, turning their jobs into family supporting careers, just like we did with manufacturing jobs 70 or 80 years ago.
Too much of the dialogue remains focused on patching up a badly broken system. But it is clear that the conversation is turning in a subtle and gradual fashion to the deeper structural issues that will have to be dealt with before real recovery can set in. More and more, world leaders are beginning to acknowledge and even actively concern themselves with the vital role that human creativity and cities will play in charting a path to the future—to a broader, more sustainable, and more widely shared prosperity. Here's hoping we can accelerate that realization.
Photo credit: Nicky Loh/Reuters