 Well, we're now moving into the first Session called Rethinking Cities in the global economy, which will be co-chaired By me and by chef ket Pamuk who will introduce himself in well now since I've already introduced myself Good morning, I am chef ket Pamuk. I'm the professor on Contemporary Turkish Studies at the London School of Economics Economics Go ahead. Thank you. Well, we're going to start with three presentations and then we have a number of others who are going to intervene more briefly and The first presentation is going to be from Kamal Devish Who is vice president and director of global economy and development program at Brookings? Of course also related to Sabancı University was UNDP If I listed all the jobs in the world, he had had that would occupy the rest of the morning. So Kamal over to you Professor there's professor chef ket Pamuk. Dear friends colleagues It's a great pleasure to be in Istanbul. I did represent the city although, you know, it's these are large large areas of political representation for about three years in the Turkish Parliament and When Ricky Burdett asked me to make a presentation, I told them, you know one thing I'm a macroeconomist. So what I'm going to do is try to set The whole urban development urban policy issues against the overall world economic context. I Will try to give you a feel of where we're at in the world economy in a very long historical perspective Because of course urbanization is a very long-term and historical process in a way, I Was thinking reading some of the readings that came out of the World Bank Growth Commission on urbanization and Like many other aspects of economics the articles the research is set in a national context and In a national context clearly urbanization and growth is very closely connected It's not necessarily causality as we are reminded. It's also not always there We've had some very rapid urbanization for example in Africa and some African countries Which has not led to extremely rapid growth, but overall urbanization and growth have been closely correlated and The big bursts of growth have happened When the share of urban population has been around 45 50 percent going up to 60 70 It's in that in that bracket that we see historically at the national level a major acceleration of growth growth accelerations So that led me for a moment to think well, what if we think of the whole world as one country and If we look at it that way Then in fact, we are now we at the turn of the century the year 2000 We've reached the point if we think of the whole world as one country where urbanization has reached about half of the world population And in some sense again, this is just a thought It's not a hypothesis or a research topic if you like but in a way One count help thinking are we at the point of global growth? acceleration the way one would think would happen within national borders now to say that At the time when we're still living although, you know, the recovery is there the greatest slowdown in world growth average The greatest economic and financial crisis for decades is of course a little bit risky to say that we are in a growth acceleration phase But here we are talking of long-term trends and I will come back to this issue after showing you some slides on the world economy Now these slides as I said have to do with the overall global Trends and I will try to relate them then to the problematic of urbanization and the the topic of the conference This is a graph which I always a slide which I always use which I think Reminds us of something that many of us Forget and that is that modern growth or growth really economic growth is a very recent economic phenomena I'm looking at chef get Bay one of the great economic historians Not a surprise for him, but many people are quite surprised when they look at that which shows us that in fact real GDP per capita was more or less stagnant For centuries, there was a little bit of growth, but not much Modern growth as we as we have experienced it in our own lives and as some generations before us have experienced is a very recent phenomenon per capita income in the year zero was not terribly different worldwide from per capita income in the year 1700 or even 1800 and then we've had this acceleration and of course this acceleration is linked to urbanization I haven't I haven't got the graph and I'm you know I have no time to do that kind of research as a macroeconomist But I do believe that if one makes the link one will see that the acceleration of growth or in fact the Existence of growth in the world economy is closely related to the growth of cities and the productivity The agglomeration economies economies of scale economies of scope that exist in an urban context Now the second Point I'm gonna skip this Sorry, what happened here? Sorry the second point I want to stress Has to do with convergence and divergence Trying to get ready a little bit for for this conference reading some of the Urban development and urban growth and theories and articles on that One of the big debates of course is to what extent does urbanization is urbanization a convergence phenomenon or a divergence Phenomenon and it's both of course depending on the circumstances Well, the same question can be asked about the world economy to what extent has it been a convergence phenomenon to what extent has it been a divergence phenomenon here we see the various Regions of the world in terms of per capita GDP and we see how much everybody was more or less equal for 18 centuries that this medicine data covers and then a burst of Divergence with some countries growing much from regions growing much faster and again linked of course to the fact that these regions were the ones that urbanized When we look at The more recent period the period where there has been growth We cannot really see a very clear acceleration trend although there is an acceleration trend after it with the industrial revolution But it was interrupted It was brutally interrupted by the first world war the Great Depression and the second war then took off again After the world after the second world war we've had the most golden age so to speak of economic growth worldwide Then there was a slowdown after the first oil shock and there and the slowing down of growth in the advanced economies So what caused the slowdown in the early 70s was really the slowdown in growth in the US in Europe Not quite in Japan Japan continued to grow quite rapidly at that period and the weight of the developing economies of the emerging economies Was not yet large enough in the world economy to counteract to compensate for that slowdown But that has changed towards the 1990s and and the and the new century with the emerging economies Growing increasingly fast, but also having a much through that growth having a much larger weight in the overall economy And we arrived to 2005 these data only covered to 2005 we've had the crisis of 2007 2009 and of course the big question Facing all of us economists in the world today is what will happen? Will there be growth? The type of growth we've experienced pre-crisis in the post-crisis world We don't have time to get into that topic, but the last slide I will give my own kind of answer to that question and I think it is related again to the topic of Urbanization and economies of scale which the economics of urbanization, which is a topic of this conference Now before going to that however, let me show you a picture of divergence Which in a very different way with numbers and per capita income figures is not that different from the picture That professor bird that showed us, you know of the swimming pools and tennis courts I think it was in Sao Paulo and the slums in 1820 if you take the ten richest regions countries today's countries the work that Madison did uses the same Geographical area although not the same at that time of course the political boundaries were not the same and Compare it to the tent the bottom to the poorest ten Let's say countries the rich were three times on average as rich richer than the poor three times And then you've seen if you take the top and the bottom You've seen a tremendous phenomenon of divergence over time the ratio of the ten richest countries per capita income to the per capita income in the 10 poorest countries Has reached almost 50 from three Which is which is a tremendous phenomenon of divergence of course, but having said that we're here comparing only The ten richest to the ten poorest or on the bottom part of this graph the top 20 to the Bottom 20 that does not mean that overall there has not been a catch-up phase in the world economy We know and now I'll come to that graph a little bit later That some middle-income countries some low-income countries have become middle-income and have been able to catch up So in the world economy that has been both divergence and convergence Divergence in terms of the top 10 or the top 20 the top and the bottom but convergence in terms of some others Again that to me from a macroeconomic world economy point of view very much Recalls what I'm reading in the urban development literature that in fact growth is lumpy That some areas some subregions some cities catch up But in the very process of catching up others are left behind and there's even greater divergence between the poorest and the richest So very interestingly that the urban literature and the macroeconomic literature have similar dimensions Although I'm not aware of a systematic effort in academia to link these two types of analysis One graph which is also interested which reflects a little bit what what I just said If we use Lawrence curves in terms of per capita GDP for the period 1820 to the year 2000 and you know the the more the Lawrence curve is away from the From from the straight line in the middle, which would be perfect equality the more unequal is income distribution So if we look at income distribution across countries We see that that the gene equivalent that the Lawrence curve becomes less and less equal with time Which reflects divergence overall? however, if We look at Population weighted genie coefficient and look just at the effect of India in China We see a quite interesting story the red line is The genie in other words the index of inequality Without China in India and we see that it is increasing over time However, if we put in if we take out the effect if we if we include the fact that India and China are in there and are growing much more much more rapidly then in fact the inequality is Not increasing because of the very rapid catch up of India and China weighted by their population As I said this genie coefficient is weighted by population We do it in an unweighted way it won't happen because of China and India are just two of hundred ninety two countries But that's of course not a very useful way of doing it. It's much more useful to weight the genie coefficient by population if we Look at the world as if it was just one country and there's an Indian friend of mine an economist called Sergei Palla who wrote a book imagine There's only one country and we actually plot inequality or plot the genie coefficient over time over the whole world Population considered as one single population We see also that the genie coefficient has increased quite a bit But that thanks to the rapid growth in some of the emerging and developing countries that the increase in inequality has actually stopped now now What kind of structural transformation when we look at it from a country point of view are we looking towards I Think this is a this is a very interesting slide and it's actually something showing that What I think is historically unprecedented, but again, I say that under you know with due respect to the economic Historians in this room, but I do believe that the extent of the structural transformation in the world economy is indeed unprecedented when we look at and these are just The first two slides refer to the last 20 years. This is not a very long-term analysis 2030 Well, you know macroeconomists these days are very very scared of making predictions for the next 18 to 24 months But as long as it's 20 years One can be courageous and make make some projections the long term is a little more Well, first of all, you know, it's a long term and second the short-term fluctuations tend to even out But when we look at 1990 we see and By the way, these are these are GDP numbers at market prices not at purchasing power parity prices They're just if we looked at it at purchasing power parity The share of the developing and emerging markets would be quite larger all through but I've decided to present this in market prices So in market prices in 1990 the advanced economies the industrialized economies If you like the those that are classified by the World Bank IMF as advanced economies We're still close to 80% of world GDP Low-income 1% the emerging markets 18% and emerging markets not including China and India and China and India 3% if we look at 2010 and you know looking at 2010 we don't have to make two risky projections these figures are basically what we know will happen by 2010 we see already an incredible transformation with the advanced economies going from 78 to 67 and China and India moving from 3 to 12% of world GDP Now I don't think there has ever been on this scale There have been some small countries growing very rapidly of course Japan grew very rapidly there has never been This kind of structural transformation in the in the world economy in past history Now looking forward of course who knows it's not it's not easy to say obviously what will happen I've made some forecasts These are not Kind of crazy or or far out forecasts. I've done a informal I've looked at various predictions from the IMF OECD World Bank some regional development banks So the growth rates that are in that Little space down down on the on the slide I would say are close to consensus growth rates may be somewhat more optimistic than some and If we assume that the advanced economies grow at 2% and again, this is very much a consensus forecast for that period 2% per year With the US usually a little bit faster Europe Japan a little bit slower Emerging markets 5% maybe slightly optimistic the low-income 6 I do believe some of the phenomenon that have has made growth more rapid in the developing countries as a whole is Finally reaching also the lower economy that the low-income countries and China and India seven and a half and again This is close to a consensus forecast now. Maybe we're all wrong. Maybe there will be a major slowdown I personally believe there will be a slowdown in China compared to the 910 that they're having but probably go down to Seven maybe but on the other hand, I personally believe that in India there will be an acceleration from six and a half seven to maybe eight So if we take those two figures, we arrive at China and India alone Close to one quarter of world GDP and if you take the other developing economies By 2030 the GDP of developing companies at market prices not at purchasing power parodies will already have reached more than half of world GDP So these this is kind of the the overall I think world economic context that I see I don't believe that the crisis of the last two years Will lead to a very significant slowdown of long-term growth I have I gave a lecture at the IMF World Bank meetings in Istanbul the periacops and lecture Which details the reasons for this but part of the reason is precisely The economies of scale and the economy's agglomeration that are embedded in the urbanization process and The fact that particularly since the fall of the Berlin Wall for the first time what we really have for the first time in a long time Is an integrated global economy? Where the diffusion of technology is extremely rapid technological growth itself is still significant But particularly the diffusion and of course urbanization helps the diffusion process a lot is extremely rapid And is reaching now the whole world part of the information revolution part of globalization is this reach of technology Everywhere including even into Africa into the lowest economy Lowest income economies there are the man's demand side problems We have rediscovered the importance of Keynes in economics on the demand side But provided that the demand side can be managed and I think that the way that the crisis has been managed on the Demand side shows that that policymakers have learned central banks have learned Fiscal authorities have learned so while they had forgotten some of the Keynes in lessons they have relearned it So I do believe that the demand side management Will be successful over the next two or three years and then what determines growth Of course in the long run is the supply side the diffusion of technology and the availability of Labor still coming into the modern sector You can call it the rural urban sector or the traditional low productivity and modern sector, but the two largely in overlap as We know so that process will still go on for at least two decades before we may reach the point where The modern sector or if you like the urban sector has become so large that the productivity growth will have to take Place inside that sector and that the portion of it that is due to migrating into that sector won't be large enough in that sense we Coming back to what I first said if we look at the global economy as one country We are actually at the point of accelerating growth Given the traditional economic analysis that the tradition variables will look at Final word and very important. However, and Nick Stern isn't here and he would have you know been very mad at me if I hadn't added that there is one major issue that may slow us down and that is climate change if the projections Of the IPCC are correct, and if the dangers embedded in climate change, and I believe they are although There's a lot of uncertainty around it the one factor the one new factor that may limit growth from the supply side and That in that sense may make the productivity increases associated with urbanization and remodernization Much more difficult to achieve is climate change and therefore the importance of addressing that phenomenon I think it can be addressed But it is a new constraint on world growth that we did not recognize five or ten years ago many. Thanks Thanks very much Kamal for terrific context setting for us