| Capitals should be key drivers of countries’ economic development
Since the early years of capitalism, the world has a dominating tendency towards urban living. Moreover, capitals occupy a prominent position and often accumulate national technological, financial and human resources faster than other cities and towns. This may be seen as a basis for the economic growth of the entire country, but it may also deprive other towns and regions of adequate growth and prosperity, and cause social stratification. This process depends on both objective and subjective factors, whose relationship varies in every particular case. Today the global market witnesses the competition less of the countries as a whole and more of their specific regions and cities; among the cities, capitals play a special role in the country’s socio-economic development and competitiveness on the global scale.
Should capital cities have a priority status in the strategy of a country’s economic development? Can they indeed serve as locomotives of the entire country’s economic growth? Is it fair to concentrate intentionally bigger resources in the capitals at the expense of other regions and towns?
Arguments in favor of the motion
Big cities and capitals have not gained their status despite all odds. Rather it was the result of their favorable geographic position, location at the intersection of trade routes, concentration of resources, beneficial terrain or climate. This set of auspicious factors provided bigger return from every invested resource. It is exactly for this reason that a city becomes a capital, and not vice versa. Multiple examples of this can be found among many European capitals, especially London and Paris.
Capitals a priori have advantages over other places, providing a multiplying effect from the synergy of a big economy and the entire complex of functions as a major city. In the age of globalization, markets tend to enlarge, joining countries or even groups of countries. In their turn, businesses become transnational, facilitating the movement of financial and labor resources. All this leads to the prominence of specific regions and cities as they become international rivals for bigger assets. If a capital is capable of competing with the world’s other big cities, it becomes a window to attract foreign resources, which consequently are distributed to one extent or the other all over the country.
Not all countries have enough resources to develop all sectors of the economy and all of its regions. Under rigid budget limitations, one must make a choice and concentrate his efforts on those regions and cities whose development will yield the fastest and most tangible results. This is while the dispersion of limited resources brings down effectiveness to basically a zero level.
Arguments against the motion
In developing economies, a capital’s accelerated economic growth makes it the center of the national internal gravitation, concentrating more resources than it can effectively utilize. This ends up in unjustifiably high prices of labor, land, real estate and rent, and creates considerable difficulties for engineering and transport infrastructure. Other regions could use the surplus of these resources more effectively, but they remain entirely uncompetitive compared to the capital city.
Disproportional concentration of resources and economic activity in the capital (and any other city) compared to other regions weakens a country’s general capability to compete in the global market. A country’s success depends on the cumulative accomplishments of all its regions and towns, while the outrunning growth of the capital city literally depletes other regions, absorbing the best human and financial resources, without which these regions get into admittedly inferior positions. As a result, the country as a whole loses flexibility and becomes more susceptible to the risks and fluctuations of the global economy. Moscow is one of the brightest examples of this misbalance.
Inflated living costs in the capital, and at the same time the objective improbability of guaranteeing an adequate average income for the people, lead to even bigger social inequalities than in less developed regions and towns. Almost every capital has districts inhabited by low-income and disadvantaged people. Moreover, because of the permanent influx of migrants and rapid price growth of basic resources (among them real estate) indigenous inhabitants move into suburbs or other regions. The negative social effect of economic concentration in the capital also has a negative impact on other regions, which may become depressive as a result of constant lack of necessary resources.
The question whether capital cities should be key drivers of national economic development will be discussed at the public debate organized by the Foundation for Effective Governance in partnership with Britain-based Intelligence Squared. The event will take place in Kyiv on May 31, 2011.
Encouraging a capital’s economic growth will inevitably boost the economy of the entire country.
The priority development of capital cities is motivated by objective reasons.
In the age of globalization, a capital has a better chance of competing with foreign cities and countries.
The priority development of a capital city is substantiated if the country’s resources are limited.
There is always a high chance of ineffective application of resources in the capital cities of the developing countries.
The concentration of resources and economic activity in the capital decreases the country’s general competitiveness.
A capital’s priority development brings forth negative social consequences both in the capital and in the country as a whole.
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