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A tale of two cities

By Darryl D'Monte

It's London, not Shanghai, that we in India should be emulating. London is emerging as the world's foremost global city

Mumbaikars love to dream about turning their city into Shanghai , just as the earlier model was Singapore or Hong Kong . It may be only a distant memory, however, that half a century ago, London was where Mumbai's planners took their cue from, emulating its move to build satellite cities as "counter-magnets". London , under Margaret Thatcher, suffered several declines but under its dynamic, if mercurial, current Mayor Ken Livingstone, has clearly emerged the world's foremost business and financial centre.

Urban Age, a Deutsche Bank initiative in collaboration with the London School of Economics, recently held its global conference on Mumbai as a ' Maximum City '. Its experts emphasise the connection between the physical form of cities and their social relationships. The entire issue of governance is central, as some of Mumbai's experts also correctly reiterate. London saw a problematic period at the height of Thatcherism between 1985 and 2000, when the democratically elected London City Council was abolished and planning was almost done away with as well, as witnessed in the redevelopment of the derelict Docklands, now the hub of the financial centre.

In 1997, London saw the election of its first mayor, Ken Livingstone, who exercises certain powers over 33 boroughs. It is under this left-wing mayor that London has followed Singapore 's example in levying a congestion tax on cars entering the central business district, originally £ 5, now upped to £ 8. This now raises around £ 300 million a year, with operating costs of £ 7 million. The big difference is that the entire revenue is spent on improving public transport. The fine for not paying the charge has been raised from £ 80 to £ 100. New York is thinking of following suit. London also has dedicated bus lanes and is proposing to install three new tram lines. There will be a fast cross-town rail system, like the RER in Paris , which will get you from Heathrow airport to Canary Wharf in the Docklands in 20 minutes.

One of London 's most significant initiatives in recent years has been in housing. It has defined its geographical limits and no expansion can take place outside this area. The private sector has been encouraged to invest in new "brownfield" sites -- typically, derelict industrial areas -- but the catch is that half the housing in any new redevelopment project will be reserved for what the British call "key workers": firemen, nurses, cleaners, policemen and the like, at affordable rates. This is precisely what Mumbai ought to have done for the 280 hectares of mill land, had it not fallen prey to the greed of property developers.

One can forgive the British government for the somewhat self-serving title of its recent meet in Mumbai: ' London and India : Partners in Globalisation'. The star attraction was none other than Mayor Livingstone. All the Indians present may not have sensed the contradiction in a (former?) left-wing politician now becoming the apostle of the new theology -- cities as receiving centres of international finance capital.

John Ross, economic advisor to the mayor, who followed Livingstone and Mumbai's Municipal Commissioner Dr Jairaj Phatak, to the podium in Mumbai, pointed out that cities were not so much a physical conception any longer. They were the product of economic planning, which, when translated into practice, determined the shape of cities. As the eminent expert on global cities, Saskia Sassen explained earlier in November at the Urban Age conference on Mumbai, "the whole of a city is greater than the sum of its parts".

Dr Sassen is conducting a study of 65 leading global cities and London figures on top of the list. Among other factors, investor protection, ease of business, the strength of its equity market and the less punitive corporate tax regime determine this ranking, along with, of course, such indices as quality of life, safety and basic services like health, housing and transport. In 2005, London offered more IPOs (initial public offerings) on the London Stock Exchange (LSE) than its two US counterparts, the NASDAQ and NYSE, put together -- in the region of $ 40,000 billion.

The political process that has brought about this transformation is nothing less than remarkable. In the 1960s and 1970s, London was seen by urban planners throughout the world as the epitome of all that had gone wrong with excessive concentration of growth. London 's planners vigorously pursued an industrial dispersal policy to coax factories and offices to relocate outside the metropolis. The South East region as a whole was flourishing, in sharp contrast with the depressed North.

The rapid growth of manufacturing in and around London in the 1930s and 1940s prompted the regulation of new factory jobs through the issue of Industrial Development Certificates (IDCs) for setting up new projects over a certain size. Planners also established a green belt around London to halt its further growth. The development of new towns -- including today's much-maligned 'garden cities' -- beyond the green belt further arrested the capital's growth and led to its subsequent decline. In the 1950s, London lost 165,000 jobs and 500,000 during the following decade. The job losses continued through the 1970s and 1980s. Between 1961 and 1983, the number of manufacturing jobs dropped from 1.4 million to 583,000.

In the last Regional Development Plan for the Metropolitan area (1996-2011), Mumbai's planners -- who took their cue from the former political masters, in a sense -- noted that these job losses had led to inner city blight in London , a general degradation of the environment and loss of revenue to the local authorities. In 1979, Margaret Thatcher's new government reversed its 30-year-old policy of diverting growth from London and the South East. Her goal was economic recovery, to be achieved by encouraging private investment and removing obstacles to private enterprise. The IDC system was first suspended and later abolished in 1982.

The government introduced new enterprise zones with minimal planning controls and incentives such as tax holidays. It refurbished old industrial premises and constructed new estates to attract high-tech industries. To protect existing jobs, it provided financial subsidies on capital, labour and rent. It set up an Urban Development Corporation to channel private investment into redevelopment of derelict industrial sites. The most visible impact of this planning volte face was the Docklands redevelopment towards the late '80s. It also manifested itself in the establishment of new industries, warehousing and shopping centres in London.

From excessive control, Thatcherite London swung the other way -- to outright laissez faire . The classic case was the Docklands, which has strong parallels with the mill lands of Mumbai, both of which were derelict. Thatcher did away completely with planning itself and allowed builders to decide what to put up in what was a depressed East End . The result was not difficult to envisage: there was a spurt in private investment, with foreign real estate firms like the Canadian Olympia & York . However, supply greatly exceeded demand and after a few years, this firm actually became insolvent. In recent years, with London emerging as the foremost finance centre of the world, the Docklands have witnessed a boom, even if the original residents have got a raw deal in the process.

In terms of the governance of this all-important city, Thatcher abolished the powerful Greater London City Council, which was also dominated by the Labour Party. Ironically enough, Ken Livingstone was its last leader. In Mumbai, he recalled how the city, with 33 boroughs (the equivalent of wards), with between 250,000 and 400,000 residents each, had "no oversight, no central administration". It was "actually rolling backwards". Since it was the most dynamic financial centre in the world, the situation couldn't continue. Prime Minister Tony Blair imported the directly-elected mayoral system directly from the US . Under this new system, the bureaucracy was removed and Livingstone had to build an administration from scratch.

One of the first decisions that Blair made was to transfer the Underground to the mayor's control. There had been an "entrenched" bureaucracy there, which had ridden roughshod over the captive customer base. In a matter of just one year, Livingstone had as many as 27 senior managers removed. "The US political system is relatively more responsive to delivery," he observed. However, he stressed the need for the system to be honest and transparent.

The sheer scale of global capitalist development, of which London was, in a sense, the conduit, required changes in governance. There could no longer be the laborious Royal Commissions -- equivalent to our parliamentary or other committees -- to deliberate for years over a problem and then do nothing about it. In the US , as many as 400 mayors want to sign the Kyoto Protocol on climate change. This is not, as may be imagined, because they are particularly concerned about global warming, but because they see the writing on the wall: climate change is becoming a political issue and votes depend on it. These cities have vowed to reduce their greenhouse gas emissions by 80% by 2050 -- much more than the Bali summit committed the G8 countries to doing. "The closer the governing class is to the electorate, the more responsive it is," Livingstone concluded.

Not that he can become a dictatorial overlord of London . Once a month, he is questioned by a committee on each and every issue, including the expenditure of funds. For the five years he headed the Greater London City Council, he virtually never left the building to make an official visit as part of his duties. Now, the private sector, whatever reservations they may have originally nursed about a "Red" mayor, saw the purpose he had brought to the management of this global city. When he successfully stood for a second term, business actively lobbied for him.

London is not that easy a city to manage, though. It has some 8 million people but, fortunately, there is a broad consensus on governance. The mayor requires some basic skills -- to deal with environmentalists or trade unions (which are presumably, like in Mumbai's mills and docks, not as much of a power to reckon with these days). London is a major subsidiser of Britain , as Mumbai is of India . In New York , a tenth of the city's revenue goes to the nation's exchequer. By contrast, Shanghai keeps only a fifth. London contributes £ 20 million to the state every year.

Livingstone has no illusions that his city can only grow if the proper investment is made in its infrastructure (shades of what experts say about Mumbai). Some £ 30 billion extra is needed in transport, housing, infrastructure like sewers. He has to negotiate with "a coalition of interests". Boroughs whine about getting back the revenue they have raised -- presumably the loudest comes from the City (with a capital C, which is where the financial centre is physically based, cheek-by-jowl with the Docklands). He believes that the government has to invest if London has to continue as a dynamic city. With the city's GDP rising, tax revenues will correspondingly rise.

The purpose for Livingstone bringing his road show to Mumbai was apparent. He wasn't here to sing his own praises but to find ways of investment -- either way. Since 2006, it was apparent to British leaders that the leading investment destinations would be China , India and Russia . "Are we going to grow with them, or are they going to erect barriers," he asked his audience, consisting largely of well-heeled businessmen from Bombay First and other associations. Somewhat surprisingly for a one-time left-winger, he thought that the concept of the nation was restrictive, in that nations erected barriers to investment. The USSR had been the epitome of a State-controlled economy, but once the barriers came down it found that it had been isolated from world competition and the system collapsed.

According to Goldman Sachs, by 2050 China , the US and India will be the three biggest economies in the world. This "G3" in 20 years will command half the world's GDP. India requires $ 40,000 billion in investment by then, the same as the US does, while China requires $ 70,000 billion. For the first time, however, political leaders don't call all the shots in advanced economies -- business and civil society do. London has witnessed a greater inflow of younger people than any other city in the world. In that sense, it is distinct from Paris , which represents an older, if more genteel, culture. The world's financial centre speaks 300 languages and its multi-faceted cuisine has put paid to the dour image of British cooking, possibly an oxymoron. This is how London has reinvented itself -- and keeps reinventing itself -- something that Mumbai has been trying to do, without a clear sense of purpose or direction.

InfoChange News & Features, January 2008