Urbanisation- always a good thing for the economy?

Economic growth often implies the conversion of rural land to urban uses as regional economies transition from a rural-based economy to an urban economy based on industry and services. We all generally agree growth is a good thing, but it is not as clear to me as to whether urbanisation is a result of growth or facilitates the growth.

Urbanisation occurs naturally as firms and the public try to reduce the amount of time and money spent on commuting and transporting goods or services. This then counteracts the cause of labour and factors of production immobility, so decreasing the level of ‘forced’ unemployment. It also has the effect of potentially improving prospect for jobs, education and housing. Living in cities permits people and their families to benefit from the increase in the number of opportunities due to proximity, variety, and competition. This all contributes to the demand in an economy, which is needed to drive economies forward and fund an increase in GDP.

However as with most if not all economy changing activities, there are unintended consequences of urbanisation. The main consequence being the social impact of the influx of people, it is often associated with increases in: crime, inequality and congestion. In addition there is a lot of opposition to urbanisation from environmental groups for obvious reasons as it will increase the demand for resources that contribute to global warming.

It is clear that urbanisation has positive implications on economic growth; I initially would have argued that it cannot have this effect if there is not already a certain level of growth occurring already for the cities to be able to handle the rural flight. A city needs to be able to have the capability to supply the increase in population or it would just not work and also there would be no attraction for the new population in the first place. My view has changed since looking into the subject more closely and realising that what is helping the developing countries while they experience big increases in GDP is the increased urbanisation of their most successful areas. India is a great example as it is going through huge urbanisation and is showing that it is an integral part of the economy initially growing.

On the other hand there are examples, as ever, to show that this is not true for all countries. Parts of Africa are going through structural changes and urbanisation is a big part of those changes. I would suggest that even though these changes are occurring, they are not bringing about anywhere near the same level of growth as in India. The reason for this is Africa’s urbanisation is driven by the ‘push’ factors, which are environmental overload and degradation, resource scarcity and conflict in rural areas. Whereas India’s urbanisation is due to the ‘pull’ factors, that result from economic opportunities in the cities. Africa has experienced little industrial growth to go alongside this fast growth of cities, and some African cities are imploding due to infrastructure dilemmas. African urbanisation therefore runs oppositely to general urbanisation that provides greater access to jobs, basic services, and social safety nets.

I ultimately think that urbanisation provides more positives for an economy than negatives, providing the country going through it can handle the increased demands that it brings with it. I feel urbanisation is more welcome and has a greater chance of making a real impact when it is done due to the 'pull' factors I highlighted earlier. However as Africa gets to grips with its levels of urbanisation I see the potential for it to progress using the resources that it has, which could even see it eventually becoming a big force if it exploits its huge energy providing potential.