Most great cities were established and grew due to a place-based function. Ports such as London and Cairo hosted trade by ship for millennia. Some cities were defensive centers in strategic locations, or located at the crossroads or terminal points of important trade routes.
Generally, cities grow when access to raw materials expands by trade, and cities attract additional labor forces. Economics evolve in response to technical and demographic developments.
Today, cities are bigger than ever before and continue to grow: more than half the earth lives in an urban area. In order to remain viable, countries must invest in their cities not only to serve the present populations but to ensure a stable, prosperous and healthy venue for the future. Cities themselves are competing with each other as centers of commerce, jobs, education, and culture within their own countries but also with other cities around the world.
Cities can be classified into three main categories: global cities, regional capitals, and all the rest. Global cities are the central hubs of the global age. They are not only trading centers, but they have assets such as office buildings, water, power, and high speed internet access. While ancient cities were tied to the original purpose, such as being a port or a military base, some modern cities have severed their geographical ties from their economics.
Global cities exist in a worldwide network, less connected to their physical location for their importance. Global cities can attract global talent and they bring global money with them. New economic hubs are connected to other hubs, and cities that are not in this network risk falling into irrelevance.
We believe that the key to relevancy in this global network is investment in urban infrastructure. Usually, it is best to plan for and build support systems in the urban environment before putting in the buildings and housing that typically makes up dense urban areas. Not all cities can be fully developed in a perfect way, but it is more cost-effective to put basic power, water and sewer units into place in advance of industrial buildings.
Schools, hospitals, roads, rail systems, and related services need modern infrastructure to encourage development along optimal paths. In many cities, housing development follows along the paths laid down by public transportation. In fact, one answer to a problem of housing in an overcrowded city is to have good transportation that makes living outside the city center a viable alternative. Many great cities have comprehensive subway and rail systems that span hundreds of miles. One can follow population growth in those cities right along the extension of transportation lines over the last hundred years.
Investment in infrastructure can bring rewards in the present in the form of jobs and increased living standards, and also serves as a platform for competing in the marketplace of the future. Infrastructure can thus serve two purposes: (1) to strengthen the local economy and (2) to attract and retain players in the international arena.
Large cities can be seen as having two economies side by side. One is the local economy that is governed by supply and demand on the local level. This economy is bounded by the maximum profitability of the region. For example, a restaurant or a retail store will be able to pay its workers based on its profitability at the local level. The other economy emerged as a function of the separation of financial markets from product markets. The biggest economic hubs – the biggest concentrations of money – are no longer restricted to manufacturing or even shipping, they now include financial hubs and other service-related industries such as communications. These hubs can access international flows of funds that are invested across national and local boundaries. Think of investment funds as a kind of “jet stream” of cash that circles the globe in search of profitable and stable places to come to earth. The decision makers that control those investments live in an ever-more sophisticated network of urban environments.
As participants in the global financial network, we know that wise investments seek the best and most stable returns. We also are aware that new technologies make participation in the global financial a more realistic possibility for those with access to wireless communications as never before. While the competition for international investments is strong, the movement of funds via wireless technologies has made the local distribution of those funds much easier than in financial systems that depended on local banks. Wireless transfers of payments via cell phones and hand-held devices have opened up new possibilities for membership in the global financial network. Investment in communications and computer infrastructure has become a key ingredient in the global financial market. Of course, accountability for the management of those funds is as important as ever to even “jet stream” investors.
Mr. Barreca brings more than 25 years of collective experience to National Standard across corporate management, finance and business law. He holds an MBA from New York University, a JD from the Fordham School of Law, a Master’s Degree in Public Policy from The City University of New York, and is currently completing his Doctoral Degree in Political Science.
Hugo Barreca is President at National Standard Finance, LLC located in New York, New York. Mr. Barreca can be reached at HBarreca@NatStandard.com. www.NatStandard.com