The Network Effects that Make Cities Better Problem Solvers

Harvard Kennedy School PolicyCast · March 19, 2018


Bruce Katz explains why cities have avoided populism and partisan bickering to become hubs of policy innovation.

Cities are more than governments, they’re networks. That’s why they’re so resilient, that’s why they’re so adaptive, that’s why in many places they’re so prosperous: they’re ecosystems.”

In this episode of PolicyCast, we’re joined by Bruce Katz, Centennial Scholar at the Brookings Institution, and author of the book The New Localism: How Cities Can Thrive in the Age of Populism. He spoke on campus as a guest of both the Center for Public Leadership and the Ash Center.

Katz is a firm believer in the power of cities to improve peoples lives, and makes his case through examples like Pittsburgh, Indianapolis, and Copenhagen, all of which confronted major crises in the last several decades and emerged stronger through multi-sectoral, interdisciplinary problem solving.

He also warns well-functioning cities like Boston, New York, and Seattle that they are at risk of falling behind by not investing in the infrastructure fostering their success.

Each week on PolicyCast, Host Matt Cadwallader (@mattcad) explores the ways individuals make democracy work by speaking with the world’s leading experts in public policy, media, and international affairs about their experiences confronting our most pressing public problems.

Note: This transcript was automatically generated and contains errors.

Matt: Where is the intersection between urbanism and populism?

Bruce Katz: Well to some extent I think they’re both byproducts of this global age, this global economic restructuring, which to a large extent have lifted billions of people out of poverty, but for many mature economies have created a sense of economic and cultural onyx. Populism is a way, think Bernie Sanders, think Donald Trump, populism is a way to exploit grievances, real grievances. Localism is the way, from the bottom up through networks of institutions and leaders where you actually solve problems because even at the local level no one’s waiting for a speech, they want to know what have you done lately. That’s the difference between the local and national level.

We’re looking at the United States and Europe in particular in this book, and we’re really trying to juxtapose these outcomes of this very disruptive period.

Matt: I mentioned before this growing sense that cities are aware innovation is happening. Do you think that’s a result of the kind of the paralysis we see at the federal level here in the United States and that national governmental levels elsewhere in the western world? Is it a result of that or are other factors kind of influencing it and they just happen to be converging at the same time?

Bruce Katz: Yes, I think a lot of folks when you say the word city immediately think government, but cities are not governments, cities are networks. That’s why they’re so resilient, that’s why they’re so adaptive, that’s why they’re so, in many places, so prosperous, they’re ecosystems. National governments they’re just governments, states are just governments, which means they can be hijacked by partisanship and ideological polarization, and they are many times. Cities are networks and when they collaborate to complete and they collaborate to problem solve they really can, over a period of time not overnight, create a whole new reality for themselves.

In the book we focus on places like Pittsburgh. I mean no place had an economic shock like Pittsburgh in the late 1970s, but after investing, what we say thinking like a system and acting like an entrepreneur and investing in the future at scale over a sustained period of time, Pittsburgh’s like the it city today. There are signals and messages here about how cities are able to sort of adapt in periods of crisis, which I think really apply to many places.

Matt: Can you explain that network effect a little bit more because in my conception cities are kind of hubs of a larger network that comprises a country or a state or what have you. What makes cities different in terms of those network effects?

Bruce Katz: I think within the city or the county or the metropolis, I mean what you’re really talking about is public, private, civic, university, other community leadership, which can come together around particular issues. I might be a crisis like Pittsburgh or it might be an enormous opportunity that is out there to be seized because of technological changes, which advantage a particular place. The interesting part about cities is when they problem solve it does tend to be multi-sectoral and interdisciplinary. This is a really important issue and that’s why it’s structural and not cyclical.

When national governments problem solve it tends to be very specialized, compartmentalized, bureaucratic. I was Chief of Staff at HUD, so when we did something it was basically HUD, the Housing and Urban Development department did something, or energy, or transportation. When cities come at an issue and they crack at an issue it’s a kaleidoscope effect. I mean you’ve got people from business and civic and neighborhood and metropolis, and you’re trying to come at the same issue, let’s say traffic congestion or affordable housing, from multiple different vantage points. That’s where innovation happens. It happens in the middle, in the interstices of disciplines and sectors. That’s why cities are so innovative.

Matt: Just recently we had professor Stephen Goldsmith.

Bruce Katz: Oh sure, great guy.

Matt: Former mayor of Indianapolis on the show and he mentioned how cities have seen somewhat of a fundamental change in their portfolios. A century ago cities were expected to do a few kind of simple tasks, compared to today when they’re really they oversee a lot of what people’s daily lives, everything from global climate change to just the regular trash pickup, that kind of thing. Do you agree with that and why do you think that’s happened?

Bruce Katz: Well I totally agree with Steve and he was a great mayor of Indianapolis. I think it’s because cities don’t just have government power, they have market and civic power, they’re the centers of global trade and investment, they’re the engines of their economy and that’s why they’re at the vanguard of problem solving. In the US, and frankly all around the world, if you say the word power what people think about is political power and mostly representative, democracy, who won which election. Cities have different kinds of power and that’s why the stories in our book around Pittsburgh, investing in the future, or Indianapolis, or St. Louis, or Cincinnati creating new kinds of private civic institutions to regenerate neighborhoods and commercialized research. That’s the kind of power we don’t normally talk about, but it’s becoming much more interesting at a period where the Federal Government, like Elvis, has left the building.

Matt: You’ve brought up three cities in particular Pittsburgh of course, Indianapolis, and Copenhagen in Denmark. What was it about these three cities that stood out?

Bruce Katz: Each of these cities is creating a model. In Pittsburgh it’s around growth and really understanding that in a major metropolis, whether it’s in the United States or anywhere, you really have to invest in centers of excellence and an ecosystem of universities, mature companies, startups, scaleups, incubators, community colleges, investors, it’s an ecosystem effect. Pittsburgh understands that growth is not Steve Jobs going into his garage and having a good day, it’s really an ecosystem effect and they basically perfected that. Indianapolis was really about a network of public, private, civic university leaders formalize and collaboration.

When the central Indiana corporate partnership comes together backed by private and civic capital, they meet to decide not to discuss, and they have steered and stewarded the Indianapolis economy in really smart ways for 40 years. It’s a very formal structure. Copenhagen, which in some ways may be the most important story of all of them. Everyone thinks that Copenhagen they’re a bunch of cyclists. Those Danes, I mean what do they have to eat in the morning? What we’re focusing on is the structural mechanism where all the public assets along their harbor and to this area between the downtown and airport, I’m talking about the land and the buildings owned by the government, were transferred under the eges of a publicly owned, privately driven corporation. That was able, over 30 years, to spur regeneration and then use the revenue, the yield, from the disposition of public assets to service the debt on a 21st Century transit system.

In the US when you say transit it’s like let’s go to the voters and ask them to pass a half a cent sales tax, or occasionally the Federal Government wakes up and invests something. In Copenhagen they built a mature transit system off the value of what the government owns. In the US we don’t even know what the government owns and we don’t know what it’s value is. That’s a really smart strategy, and I think it sends a message that cities are not poor, they’re very wealthy actually. We have to think about public wealth, we have to think about private and civic wealth, we just don’t have to think about pension liabilities. We’ve got to think about the broader city and what it brings to the table.

Matt: I was actually in Copenhagen about six months ago and I was blown away by the transit project that you’re describing. An enormous subway ring in the heart of the city. There was a tremendous amount of construction happening at the time. I wish it was happening in Boston right now.

Bruce Katz: Boston, like Seattle, like New York, is leaving a lot of value off the table because we haven’t really structured the way we dispose of public assets to get the long-term benefit of it. The other thing about Copenhagen, which is really quite interesting, is the whole transit system is basically financed by land sales and land leases very smart, and then when they dig up the soil they move it out to the north harbor so it’s protected against climate change and rising seas. These folks are just doing a virtuous cycle.

Matt: Yes, and there’s nothing really new about it. Hong Kong is famous for doing exactly that, having the transit system own the land, develop the land, and that pays for the transit system.

Bruce Katz: Hong Kong, Singapore, there’s versions of this in Hamburg, and Leon, and Bilbao. We’re just going to have to really start thinking here because the national government is a health insurance company with an army. A small local foundation has more discretion than most cabinet secretaries to actually take risk, so let’s just understand we’re in the 21st Century, not the mid-20th Century. We’re big government and compartmentalized government was “solving problems”. This is a different century, it’s a network century.

Matt: You’ve described these different cities and it seems they’ve all kind of taken a different approach to find some measure of success. What is the common thread that ties them all together because it seems like they’re all doing very different things.

Bruce Katz: Crisis, I mean really. I mean each of these stories is a story of crisis. Pittsburgh the collapse of the steel industry, Indianapolis realizing that there was no core. I mean the whole population and job decentralized to the periphery. Copenhagen 30 years ago was 18% unemployment and fiscally bankrupt. I mean we think of Copenhagen as Zurich in the north, but it was flat on it’s back. Crisis is a good thing if you actually respond. I would say because of the drift of the national government, and many state governments, a lot of cities and counties of metropolitan areas are in a quiet crisis and it’s going to require us in the United States to innovate in really new and very transformative ways.

Matt: It seems like the difference between a success story, in this case, and a failure is good leadership essentially, forward thinking, really thinking about the future. You described Pittsburgh and Indianapolis especially versus maybe a city like Detroit where things just kind of spiraled. Do you worry that populism might seep in at the city level and undo the kind of forward thinking leadership that is required for success?

Bruce Katz: Absolutely and again I think populism, in many cases, is just about exploiting grievances and about obstructing. It’s hard to know whether anything positive happens. You can go back into American history and look at the agrarian populous movement and a lot of really good things did happen there. I do think we need to understand, as we’re grappling with economic insecurity and cultural anxiety and big hairy audacious challenges, what would populism, as defined, mean at the local level in a positive way? I think we need to take this much more seriously, though at the end of the day again, cities are networks, they’re not governments. This is not just about who gets elected to the city counsel or the mayoralty or the county executive position. This is about other stakeholders stepping up and taking responsibility for their city.

Matt: So far we’ve been talking about individual cities but of course cities don’t exist in a vacuum, and I’m reminded of the Amazon HQ2 competition. What happens when cities are competing kind of against each other and have this kind of race to the bottom? Is that a threat to this?

Bruce Katz: I don’t regard the Amazon HQ2 competition necessarily as only about a race to the bottom. We’ll see who they choose, maybe I’ll revise, extend my remarks. I think what Amazon said to the world was that urbanity and walkability and livability and transit connectivity really matter and talent really matters. The main signal they sent to cities was not throw your tax incentives at us because we’re doing a data warehouse and we’re just going to let everyone race to the bottom, but let’s try to understand what really makes us special and do you tick the boxes on what our preconditions for corporate success and the preconditions of their view is urbanity.

In many ways cities already won with this competition as a collective, and now each city has to basically decide well you know we do have X, Y, and Z but we don’t have A, B, and C. How are we going to get A, B, and C because it’s not like this is the last competition we’ll ever have, there’s going to be foreign direct investment, domestic direct investment, growing companies and entrepreneurs from within. I think this was more positive than negative actually from my perspective.

Matt: You mentioned crisis being the catalyst for a lot of the success of some of these cities. What about cities that kind of … Of course my parochial thinking, I’m thinking of Boston. Boston of course has some of the things that Amazon’s looking for like a subway, etc., but it’s not investing in the subway quite in the same way it might if it were experiencing a crisis. What happens for those cities that do have a little bit or have some of what they need? How do they keep up?

Bruce Katz: Yes the biggest challenge I think to prosperous cities is not populism, it’s complacency. The sense of that well yes affordability’s bad and the transit system is not as good as it should be, but everyone seems to still come here and we’ve got Harvard and MIT. We’ll be fine. Complacency is the biggest challenge. I think at some point you get punished for bad habits and inability to sort of deal with what’s being discussed around the kitchen table. Everyone in this region understands affordability is a crisis and transit is a crisis and congestion is a crisis. Get a grip, so the question is how are you going to innovate out of this because Silicon Valley’s not doing it. I think Boston potentially has more ability to deal with this, but it’s going to require a new state local relationship frankly. The states really do matter to this because in a place that’s fragmented as the Boston metropolis they can knock heads and get everyone in the same room.