This time, a new book, a new vision, and some valuable additions to my mental tool-kit, which as you know is rather deep but very small. Something to celebrate and learn from, even though I think maybe half of the book is profoundly wrong. The book is from “global strategist” Parag Khanna. Called Connectography it has made me re-think my assumptions and views. In many ways the whole book is less than the sum of its parts – the maps alone are beautiful and some of them are even useful. Buy the book. To encourage you, I’m going to draw out what I consider its most useful seven points, while sneaking in a commentary on each one.
- Cities Are The Future (and the Past)
“Dividing the world into political units is utterly secondary to the fact that mankind is becoming a dense coastal urban civilization. By 2030,” says Khanna, “more than 70 percent of the world’s people will live in cities, with most of them located within fifty miles of the sea.” “Cities pursue their own interests across increasingly permeable state boundaries”, and urban land is expected to triple this century.
Khanna draws attention to two new phenomena, one being the growth of “megacities”. If we define these as cities with more than ten million people, there were only two of these in the year of my birth – New York and Tokyo. By 2025, according to Khanna, there will be at least forty megacities. Mexico City already has more people than Australia. Tokyo-Osaka has more people than the rest of Japan. Nigeria, in terms of wealth, is essentially Nigeria, he says, and Johannesburg is South Africa. Other megacities today include Shanghai-Nanjing, Greater Istanbul, Jakarta, and Manila. In my opinion, Khanna cheats a bit – or at least anticipates the future – by combining Boston and Washington DC into one megacity, and he does the same for “Los Angeles-San Francisco”.
In addition “the fastest growing category of city in the world is one with populations of around a million”. These are essentially “pop-up cities” built around one major company or industry, often new “factory towns” serving a major company – such as Apple with its iPhone manufacture or a particular industry or function. There are also new cities which are “Special Enterprise Zones” given economic privileges within a country. Examples of SEZs include Dubai Internet City, Bangladesh Export Processing Zones Authority, Guangzhou Knowledge City, and the Malaysian Multimedia Super Corridor, and the airport cities – “aerotropolises” - such as Seoul’s Incheon Airport.
This trend is vitally important. It is only recently that more people live in cities than outside them, and wealth is increasingly concentrated in cities. In fact, I would say that wealth is really an urban phenomenon, if by that we include places such as Silicon Valley – concentrations of talent in highly bounded geographical areas with a great deal of internal interconnection and identity. Europe’s advance in wealth from about 1450 grew out of cities which were centers of ideas, trade, and commerce, enclaves of “bourgeois” ideology in a sea of aristocratic rural estates. In 1500 there were only five European cities with 100,000 people; by 1600 there were fourteen – Amsterdam, Antwerp, Constantinople, Lisbon, Marseilles, Messina, Milan, Moscow, Naples, Palermo, Paris, Rome, Seville, and Venice. You will note that half of these were important ports. Without the expansion of these cities, the modern world based on business and trade would never have developed.
Today the world’s twenty richest cities are magnets for talent from around the world with large concentrations of knowledge and money. More than three-quarters of the world’s big companies are based in these twenty cities. Increasingly, it is the big cities that get bigger and wealthier – but this is just a continuation and acceleration of the trend started in Europe in 1500.
Where I disagree with Mr Khanna is his effective extraction of global cities from their homelands. On the last page of his book he waxes eloquent about “a planetary civilization of coastal megacities”. The fourteen large European cities in 1600 were all different from each other, even as they traded with each other – and many of them were effectively city-states with their own governance. Venice was Venice, not part of Italy or even Northern Italy. Those fourteen cities could perhaps be described as a civilization of coastal megacities, trading with the planet as they knew it.
But today – New York is firmly rooted in America, London is very much the capital of the UK with a series of overlapping elites that are predominantly English even when some members of the elite come from abroad, the Chinese megacities are more like each other than any other cities, and so on. These cities face the world, trade with the world, and in their distinctive ways even make the brave new world, but their diversity is rooted, for each individual city, in the values, personal networks, ways of doing business, and world-views of the nations of which they are part.
You can take the Beatles out of Liverpool and England, but you can’t take Liverpool or England out of the Beatles. Nor should you want to. The glory of the world is its diversity, and the diversity is rooted in different national histories. By doing things differently, we learn how to do the best things and to them the best. The trouble with books like Khanna’s is that they are so iconoclastic that they miss the rich texture of national history, and the way in which we are all lucky prisoners of it. That too is the trouble with the EU, but don’t get me started on that again.
- Infrastructure Networks Are Vital
Most books on networks – including Superconnect, which Greg Lockwood and I wrote – concentrate on networks of people, including those facilitated by the internet. But Khanna adds a valuable dimension, which is networks of things and specifically infrastructure, which he defines as “our physical capacity for global interaction”.
Roads and bridges, canals, ports and quays, ever more powerful ships, ever faster and less uncomfortable horse-drawn carriages, and in the case of the Netherlands, land adjacent to the sea and claimed from it – these were the key ingredients of early modern expansion.
Add in the construction of cotton mills equipped with the steam engine, and you have Britain’s industrial revolution. The steam engine not only powered factories, but also railways and steam ships – the infrastructure revolutions of the nineteenth century. Even so, Britain only spent 5-7% of its national income on infrastructure, peaking at 10 percent by 1914.
By contrast, the United States began spending on infrastructure in a big way, especially on railways and roads across the entire continent, reaching around 20 percent in the later nineteenth century through to the First World War.
From 1945 onward, devastated Europe and Japan began spending 20-30% of GDP on infrastructure, and from the 1990s China began spending a whopping 40%. China’s GDP growth rates of seven to ten percent seen since are clearly not unrelated.
Today infrastructure comprises highways, high-speed railways, oil and gas pipelines, viaducts, telecom systems, electricity grids, internet cables and servers, science parks, subway systems, and other symbols of what Khanna calls “our emerging global network civilization.”
It is curious how the importance of physical networks has been overlooked by many policy-makers and commentators. Even the virtual world requires physical infrastructure. Physical connections are as vital as personal and social ones, and greatly facilitate the latter. As someone who lives part of each year in Cape Town, I have been struck by how beneficial the city’s new bus system has been in connecting parts of the city, increasing social mobility and decreasing the time and cost of getting to work.
- Infrastructure Alliances are a Source of National Advantage
Khanna says that one way “competitive connectivity takes place is through infrastructure alliances, connecting physically across borders and oceans through tight supply chain partnerships. China’s relentless pursuit of this strategy has elevated infrastructure to the status of a global good on par with America’s provision of security.”
Infrastructure projects “are things countries desperately want, and China is their leading provider. With most of the world’s future infrastructure yet to be built, China is out to become the world’s largest infrastructure exporter.” Particularly in South America and Africa, countries want “China’s infrastructure finance and low-cost telecom equipment. China sends far larger contingents of construction crews than troops to live on foreign soil”.
“China is building all this new infrastructure … to efficiently access raw materials and bring them back home for the manufacturing and construction industries and then to use export processing zones near major markets to accelerate its throughout.”
This is much better value for money than military spending and more effective at spreading the new Chinese “neo-mercantilist” system throughout the globe. It is very 80/20.
- There are Big Differences in How “Connected” Different Countries Are
Khanna sees a new “supply chain world” – “supply chains are the complete ecosystem of producers, distributors, and vendors that transform raw materials (whether natural resources or ideas) into goods and services delivered to people anywhere”.
Supply chains are “systems of transactions”. We are seeing the full fruition of Adam Smith’s division of labor and David Ricardo’s comparative advantage – “a world where capital, labor, and production shift to wherever is needed to effectively connect supply and demand. If ‘the market’ is the world’s most powerful force, supply chains bring markets to life.” The basic principle of all systems is “to maximize flow: allowing all parts of a system to connect to all other parts.”
The McKinsey Global Institute has constructed a Connectedness Index, measuring the density flow of goods, finance, people, and data – the value of economic connections relative to GDP. Germany scores 110, China 62, and the US only 36.
It’s interesting that in Khanna’s “planetary civilization of coastal megacities” there are such differences in national Connectedness. Germany has a far higher score than any other EU country except the UK, and the differences between countries are really marked.
This seems to me to undermine many of his theses. Yes, cities are important. Yes infrastructure is vital. But where the battle for advantage is really being won is at two different levels – that of the individual firm (about which Khanna says very little), and that of the country where the enterprise is based. The EU’s share of world trade keeps falling, but Germany’s is robust. Germany has no megacities, whether coastal or not, and very little coastline.
The trading mentality, entrepreneurial skill, and the ability to identify niches that can be expanded into lucrative global segments – these attributes trump almost everything else. The attributes are based on national commercial experience, education and attitudes, history, and sometimes also geography – and they are very different between all the nations on earth.
- Inequality Undermines Social Cohesion
“The United States, China, India, Brazil, Russia, Turkey, Nigeria, Indonesia, Bangladesh, and Pakistan – the ten largest countries by population (minus Japan) – are also the most unequal countries in the world. Precisely the policies essential to mitigating inequality – universal access to quality education and health care, flexible labor markets combined with worker protection, and widespread access to capital – are lacking in many large countries.”
“We should … shade cities and provinces [on maps] according to their wealth … the concentration of wealth and talent in New York City and Silicon Valley give a much more accurate rendering of the American economy, as they do for China, where coastal cities are as wealthy as South Korea, and remote inner provinces as poor as Guatemala. Extreme inequality challenges the notion of coherent national units … Median incomes tell us much more than average incomes, and in America median real incomes are stuck at 1980s levels.”
“Major cities account for 85 percent of America’s GDP … much as the gap between first-tier cities and the rest is growing, so too is the gap within cities. NYC’s inequality has become as severe as in many third world countries.”
Once again, there is a contrast with Germany, which “has more millionaires and billionaires per capita than any other country, yet with lower inequality.”
Because globalization is an 80/20 phenomenon, the trend is towards ever-greater inequality. This matters if there are pockets of poverty and deprivation within wealthy societies.
I am neither American nor German, but it seems to me that the US has a great deal to learn from Germany, just as that country learned an immense amount from America after 1945. The answer is not big government – that only alienates and creates dependency, and is appalling value for money. But a change in attitudes and a move to combine individualism with kindness and creative local solutions in long overdue. Without huge changes, the land of the free is not going to be a pleasant place to live, nor again the beacon for humanity that it once was.
- Global Cities Are Melting Pots
“As the number of global migrants surges, connected and open cities feature ever-higher percentages of foreign-born residents.” Dallas has 24%, Sydney 31%, New York City and London each have 37%, Hong Kong 38%, Singapore 43%, and Dubai an eye-popping 86%.
Diversity of residents is valuable, but Dubai is not a good model. As Khanna himself points out, foreign residents there have no rights as citizens. London offers a far better model.
- Migration is Economic Development
Khanna stakes out an extreme liberal position here. “There is no higher morality,” he writes, “than allowing people to move to wherever they need to be … National sovereignty and territorial integrity are no longer sacrosanct principles; in fact they can be highly immoral …”
“Borders are not the antidote to risk and uncertainty; more connections are.”
Borders versus connections is a false antithesis. Both are essential for a civilized world that is both stable and dynamic. A borderless world would rapidly become unpleasant, chaotic, and violent.
Yet the rights of countries to protect their borders should be balanced against the economic and social value of encouraging diversity. Paradoxically, diversity and democracy can only be protected within nations which are at peace with themselves and have a deep sense of national identity. Too much or too rapid immigration of different kinds of people, against the wishes of existing citizens, will inevitably upset the applecart.
Migration and effective borders, governed by rules that are fair and sensible for both hosts and would-be migrants, are both good things.