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(No.31) Progress and Decline of a Local City

Many local cities attract travelers these days, because of their unique culture or because nostalgic visitors wish to stroll down memory lane. From another view, this reveals that local cities are losing their appeal and falling into minor obscurity. Looking back to how things were when the city was born, we can easily understand how fast modern society is changing. Whenever I visit local cities, I try to understand how things were when the city was born. Here are some typical examples, mostly based on economical conditions:

  • A mine was developed after an important ore was discovered.
  • A good fishery ocean was close and had a good anchoring bay.
  • A transport base was developed for local agricultural products.
  • A new mass production factory was built relying on locally available cheap labor.

There were other cases as well, like Edo or Hakodate in Japan, where a politics played a major role in the construction of those cities.

Whatever the initial reasons, they may not continue long. If foundation resulted from the discovery of ore, the ore is eventually gone. Or fish may disappear when ocean currents change because of climate change. If an efficient transportation system was introduced, the transportation base may become obsolete. Today, information technology accelerates the speed of change. Modern society moves toward high efficiency, which promotes massive process and integrates individual activities into ever larger business units. The trend accelerates yearly. The document based workflow has evolved to electronic documents, which often reduce many human hands. As machines or electronic devices have become standardized, a few manufacturing companies can supply world-wide demand using well standardized assembly lines connected through well constructed worldwide transportation networks. Risking hyperbole, I suggest only the number one company can survive. Smaller companies who used to support local cities are losing ground faster than ever before.

Table 1 shows changes in Japanese business over the past 100 years ( "100 Year Business Trends in Japan," 5th revisions, Kohtaro Yano Publishing, 2006). The largest assets, land and buildings, experienced a reduction in share from 47% to 22% over 100 years. Many mines, which used to be distributed all over Japan, are almost gone and the value of wood assets fell nearly to zero. It is apparent that Japanese business has undergone dramatic changes over the last 100 years.

1905 1935 1960 2003
land 37.2% 30% 23% 16%
building 10% 21% 7.9% 6%
mine 5% 8.1% 0.4% 0.006%
wood 17.7% 5.6% 4.3% ---
railway 3.1% 3% --- ---
others 27% 32.3% 64.4% 78%
Total Yen 22.6bil. Yen 124.3bil. Yen 108tri. Yen 8021tri.

Table 1: Japanese business change (Breakdown of GDP)

Some business categories depend heavily on their locale, like agriculture and mining. Looking at today's (2004) economic composition of Japan, their economic share is only about 1.7% of GDP. Other business categories include real estate 12.1%, services 21.3%, manufacturing 21%, sales 13.5% and construction 6.4% (The data were extracted from the book, "100 Year Business Trends in Japan" mentioned above). Although many local cities emerged from economic necessity, their economic backgrounds are almost gone. We note here that some businesses related to the locale, tourism for example, are neglected in these statistics. If the trend continues, will local cities stop growing? Are there any factors that will boost local cities? We can draw many hints from existing examples.

Society is often described as knowledge society, and knowledge plays an important role in modern business. A typical example is Silicon Valley, where academic institutions like Stanford University or Stanford Research Institute play key roles in creating new knowledge, which in turn helps to produce related products and businesses. The boosted business pushes universities and institutes to hire more researchers and produce more knowledge, so the trend will continue. This model is an established landmark.

In the previous model, knowledge or technology was the core; however, it is possible to establish an attractive human life environment and attractive living community as the core of a city. Good weather, proximity to resorts, and comfortable living are the key factors. Kaiserslautern in Germany has these appealing features. Attractiveness may sometimes fall if the city grows too large. City management to keep traffic flowing or establish educational infrastructures and avoid slums becomes very important in this model. After the success of Bengalore in India, Haikou, Hainan in China seems to be pursuing this model. It is still important to keep universities or institutes in the community. Miami in Florida, USA, once pushed this model, but slum expansion and increased crime as well as no real understanding of how to create a center resulted in a failure to attract strong businesses.

In the past, Japan has been reluctant to accept many immigrants, so few excellent brains have been attracted from abroad. On the other hand, this reluctance has helped keep the number of illegal immigrants manageable. The crime rate in Japan is much lower than in other free nations. Japanese enjoy safe, easy access to the transportation infrastructure, clean cities, and very few slum areas. As Ms. Shiono described in the magazine ( Bungei Shunju, December, 2008, p.92 ), safety and a clean environment may attract foreign brains in the future. Mega city Tokyo has abundant appeal already. Other local cities throughout Japan could be attractive The Kansai area or Northern Kyushu surrounded by many historical sites and nature, and Okinawa, which offers mild weather as well as easy access to other countries, are excellent candidates.

In the past, religion could be the core of a city. A new core may be professional sports, a fast-growing area. As a business, professional sports is supported by off site audiences through TV, magazines, or computer games, whose number can be as high as 1 million times that of actual attendance. Here is a good example. Real Madrid, the professional soccer team, earns 80% of its revenue from off site sources like TV broadcasting fees and copyrights. On site viewer fees comprise only 20% ( National Geographic, 2007). The value of information continues to grow. Some sports have a strong relationship with the locale: marine sports, ice & snow sports, field sports, mountain sports, etc. This may help local cities to implement new business. A good example of local sports business is Xiaolin Si, in Zhengzhou, He Nan Province in China, where many facilities and businesses support martial arts trainees numbering as high as 100,000.

We need more than one attractive feature to hold people's attention. People tend to get bored if they have few choices. Variety of attractiveness is essential for sustainable cultural business. Some examples are cultural heritage, emerging new cultures, sports or arts. A single city cannot provide all necessities. Eventually, a group of cities will be classified, connected or layered at different levels and will work together based on each identity. The importance of this cultural variety is easily understood by the following examples. Cities encountering a new culture always became prosperous, like Beijing during the Yuan dynasty, Istanbul in Turkey located between the East and the West, and Nagasaki, Japan during the 17th to 19th centuries, when Japan closed the door to all but a few countries. The last example was very small scale compared with the former examples.

Compared to smaller cities, big cities have a better chance of surviving, which could provide a variety of attractive functions, cultures, and technologies. This is true in spite of the high cost of living. According to Tim Harford, citizens in mega cities have easy access to top level knowledge (Tim Harford, "The Logic of Life," 2008). If a company in a big city fails to provide top level products based on top level knowledge, it will eventually be expelled from the city.

(Ej, 2009.2)