Diverse economy and skilled workers for a sustainable success of a city

Recently I have run across a pair of different articles pointing to the same thing. What is necessary for a sustainable success of a city/state/civilization. Economic turbulence since the 2008 is a good point of thinking what can a city do for its success. Or the state or civilization for that matter.

There are numerous rankings of the cities. One of my favorites is the one from the Monocle, Quality of Life Survey. For the 2013 the winner is Copenhagen. There is even one ranking that placed Ottawa as number one, questioned even by one native inhabitant. And yes, I guess we all heard Detroit is bankrupt. So, If you had any doubt that cities or even states can go bankrupt, don’t. In recent years we have seen many examples of that.

Since I recently moved to Maribor that has at least one similar thing in Detroit, namely it’s also an old industrial city, relying on automotive industry going down. What does the Economist thinks are the reasons for Detroit’s success and failure eventually. Make no mistake, business models play a role. Again.

In the car industry’s early days Detroit’s entrepreneurs kept a close eye on rivals, learning to tweak designs and business models until a lucky few succeeded spectacularly. Silicon Valley’s technological metabolism is powered by similar competitive co-operation.

In a new paper Gilles Duranton of the University of Pennsylvania and Diego Puga of the Centre for Monetary and Financial Studies in Madrid suggest that a pool of skilled workers and a diverse economy are among the best predictors of long-run success. Such characteristics offer cities the best hope of stumbling on new sources of increasing returns to scale.

Industrial cities unlucky enough to lack new sources of economic fuel may discover that decline is inevitable.

Especially this last quote says that old industrial cites futures might not have a bright future. Unless they do something. Something different than what they are used to do. Or what? A study in 12 countries from 950 to 1850 shows that Europe was at first behind India and China its economic development went ahead because:

+ elites were legally blocked from expropriating property;
+ contracts could be enforced;
+ the West developed cultural emphases on independent thinking, secularism, and saving money, fostering the growth of technology and human capital.

The Economist. August 17th, 2013. Down towns. When cities start to decline, economic diversity is the thing that can save them
HBR Blog Network. August 21st, 2013. A History of the World in Three Sentences

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