THE AVENUE JANUARY 19, 2012
Yesterday, the World Bank released a new less optimistic forecast for global growth in 2012. It warrants a look back at the year that just passed. 2011 was marked by slower growth in both developed and developing countries. The protests of Arab Spring, Japan’s catastrophic earthquake, and the Eurozone’s debt problems contributed to slower growth around the world.
But in the midst of a sluggish uneven recovery, a new economic order is being built, one that has major implications for U.S. businesses and policymakers. Our new Global MetroMonitor, a study of economic growth in the world’s 200 largest metropolitan economies, finds that metros generated disproportionate shares of the increases in employment and income growth in their nations. At the same time, 90 percent of the fastest-growing metro economies among these 200 were outside North America and Western Europe.
The top performer was Shanghai, where income grew at a brisk 9.8 percent rate in 2010-2011, and employment expanded at a 5.8 percent rate. In fact, all 12 Chinese metro areas among the world’s 200 largest ranked in the top quintile for 2010-2011 performance. But this is not a story only about the Chinese metros. The three largest Turkish metro areas (Izmir, Ankara, and Istanbul) were in the top 10 fastest growing large metros in the world in 2011. In Izmir, a 10 million people metro on the Western coast of Turkey, employment and GDP per capita increased by about 5.5 percent in 2011. In comparison, Kansas City, with an economy about the same size as Izmir’s, witnessed declining employment and GDP per capita last year.
While Tokyo, New York, and London will remain the largest metros of the world for years to come, the growth centers are shifting to South and East. This long-term trend was accelerated by the recession. From 1993 to 2007, the 42 metro economies in developing countries added 2.5 percent to the GDP of our sample of 200 largest metro areas in the world, but then added another 2.2 percent in just the four years from 2007 to 2011.
The growing metropolitan areas in developing countries represent new centers of demand and consumption. Income (GDP per capita) levels have been growing fast in these places. Incomes in Almaty, Moscow, and Mumbai have doubled in the last 15 years, and they’ve risen 50 percent or more in Buenos Aires, Jiddah, and Kuala Lumpur in the same period. Several of these metro areas today are at or beyond the point where metros in South Korea and Taiwan were in the 1990s.
This new economic order presents U.S. decisionmakers with an opportunity they should seize. U.S. businesses are already re-orienting their trade towards emerging markets. From 1997 to 2007, U.S. merchandise exports to developing countries added five percentage points to U.S. goods exports, but then added another five percentage points in just three years from 2007 to 2010. Policy should follow suit. The National Export Initiative is a good start, but more needs to be done to connect the federal efforts with Metropolitan Export Initiatives (MEIs) on the ground. To remain competitive, national decisionmakers should help metros stay competitive, by investing strategically in their innovative clusters of firms, infrastructure to support their trade flows, and institutions that provide them with skilled and adaptable labor forces