The Most Complicated Thing in the World

Width 250px i29f3412 fmt

Spatial development and urban planning define how competitive countries and regions can be, but they remain obscure on a practical dimension. As a result, there is still much to be accomplished in Russia. Mikhail Grudinin, Director General at the Russian Institute of Urban Development and Investment, has been trying to explain this to everyone from mayors to ministers.

Let us first try and see where we stand today. What do we need to know about cities and urban planning?

Urban planning featured most prominently in the 20th century. In 1900, only 13% of the world’s population lived in cities whereas by 2000, the figure had risen to nearly 47%. Today it stands at 54% and according to UN forecasts, 66% of the planet’s population will be living in cities by 2050. Russia’s urban residents accounted for three-fourths of the total population by as early as 1991, which was on a par with urbanization levels in the developed countries of the West. This percentage has not changed even day. The urbanization process is underway across the globe, but it shows a particularly strong dynamic in Brazil, China, and India. The top three countries with the highest percentage of urban populations are China, India, and the United States (these three account for 35% of the world’s city residents). Russia is ranked sixth. China has launched a mechanism to develop cities with a population of 1 million inhabitants or more, and dozens of them are being built from scratch. There are megaprojects such as the gigapolis – an über-agglomeration known as the Yangtze Delta or the Yangtze Golden Triangle. In fact, it is the first gigapolis in the word with a population of over 100 million.

Why build these special cities with 1 million inhabitants and the gigapolis?

This is an inevitable process that has to do with the fact that the world lives in a global economy in which competitiveness and productivity tend to be higher where the concentration of people is at its greatest. Where capital reaches maximum productivity, labor productivity follows suit as well. The economic effect of agglomerations has long been known – the concentration of production and other economic facilities becomes more advantageous and more efficient because it reduces transactional costs in communications, transport, and logistics by offering more compact sales markets, processing capabilities, and so forth. This promotes the development of science, human potential, and healthcare, which is an environment conducive to meeting consumer demand in various areas.

No one has come up with a better alternative to city living, which offers more comfort and a greater concentration of modern conveniences. Running water, heating, electricity, gas, sewage – all of these things need to be safe with a school, a kindergarten, or entertainment centers nearby. The city is our civilization’s primary product. Any ideas can be realized here, even those that have more to do with the rural way of life, like low-rise neighborhoods

On the one hand, the city is the origin of all major problems (ranging from the environment and transportation to social issues and crime). On the other hand, it is also a tool for solving these problems. For instance, when it comes to transportation, the solution lies in greener transportation, and with respect to water – in closed cycle water systems. Today, new cities that are being built from the UAE to China produce zero waste. Urbanization is a natural process. Back in 1950, there were only 83 cities in the world boasting more than 1 million inhabitants whereas in 2000, there were as many as 411 and in 2010 – 800. Every 40 years, the size of the urban population doubles. Soon, there will be nothing to double because everyone will live in the city. At the same time, cities account for only 1% of the earth’s surface and this 1% is home to the largest portion of the planet’s population, producing 75% to 80% of the global GDP.

Who is ultimately the primary driver of urbanization? In the BRICS countries, it is primarily the state – if China, Brazil and India want to be competitive, they have no other way. One of the main attributes of a city is the non-agricultural way of life and non-agricultural way of making money. Migration of the rural population is an irreversible process that is virtually impossible to stop. In this respect, apart from the state the population also acts as the primary driver of urbanization by selecting the urban way of life.

Moments like these when populations merge – do they offer such great cost reduction opportunities that urbanization becomes inevitable? And why do countries decide to build cities with 1 million inhabitants from scratch?

Cities should be viewed from different development perspectives. Medieval cities were built on the crossroads of trade routes (Nizhny Novgorod) or in locations offering the most comfortable living conditions. In the Soviet Union, new cities were built as ‘city factories’ (mono-industrial towns) designed to cater to some newly built industrial facilities. Today, cities may be built ignoring these rules. What kind of trade route was Dubai built on? There was nothing in that desert apart from sand and locusts. In principle, given the right vision and space, new trade routes can be organized and re-routed to the right location, investments can be attracted by creating a favorable environment for the investors, and so forth.

On the other hand, agglomeration processes have propelled urbanization to a new level. Take for instance a megalopolis like BosWash (Boston and Washington, DC) or the Tokyo agglomeration that is home to more than 50 million people. ARUP, a British company, is in the midst of designing an agglomeration stretching from Manchester to London. They assume that 90% to 95% of all jobs in the country will be concentrated there. The question of where all these people will live takes a backseat (there is enough room in England). Given such a high concentration, the territory becomes more competitive; it is not just about lowering transactional costs, but also about fostering a different living environment. An aqua park would never pay off in a village because it would only reach a breakeven point if the area were populated by at least half a million inhabitants. One cannot build a Bolshoi Theatre, a circus, or a university in a village because there will be no demand.

It is territories that become competitive, but not the people who work within them. If 95% of England’s population worked in this area, wouldn’t the remaining areas end up on the losing end?

They may also win in their own way – they will be cleaner and more comfortable to live in, while jobs can be easily reached by transportation. If England becomes subject to total urbanization, sooner or later very little will be left of it. One of the biggest urban development challenges is to foster a special autonomous environment in the city, including the ecological environment. For instance, average yearly temperatures tend to be higher in cities, so much so that some birds forget to migrate and stay in the city for the winter, thus losing their self-preservation instincts. In both Shanghai and São Paulo, many water birds live year-round and are no longer capable of finding food on their own.

Yet no one has come up with a better alternative to city living, which offers more comfort and a greater concentration of modern conveniences. Running water, heating, electricity, gas, sewage – all of these things need to be safe with a school, a kindergarten, or entertainment centers nearby. The city is our civilization’s primary product. Any ideas can be realized here, even those that have more to do with the rural way of life, like low-rise neighborhoods (which are a question of price). At the same time, cities often tend to cause irritation among their residents and the diversity of the urban community can be a source of major discomfort (take the Brazilian favelas, for instance).

Someone who is capable of maintaining control over a large city can govern a state. That is for certain. The state allows for a far greater degree of abstraction – many signals simply do not reach the head of state; he or she does not have direct feedback from the populace. All of the problems and failures can be attributed to a ‘scapegoat’ or explained by external pressures

It is a fact of life that most people consider themselves, or dream of becoming, city residents. This is not merely a question of geography – it is also a certain philosophy, a certain way of life. Essentially, it is the third generation that becomes bona fide city dwellers. The first generation that migrates from a rural area can hardly be called city residents. Their children are not quite there either as their parents tend to teach them their own way of life. The third generation become true city dwellers. On the other hand, the opposite may also hold true. Starting from the third generation, people lose their connection with nature. There are children of the cities, but there are also nature’s children as much as there are children that are a product of medical assistance. Some 8% to 10% of all people are incapable of conceiving a child on their own. They are normally third, fourth, or fifth generation city dwellers that got urbanized to such an extent that they have become physically weaker (which affected their reproductive health).

In my opinion, this is nature’s way of balancing things out. The planet’s population is growing, but this growth will stop by 2100 or 2150 at the latest. Today, we already see low birth and death rates in developed countries, as well as slow population growth coupled with high life expectancy. This is going to spread across the world – this is where globalization is certain to take mankind. In reality, we have seen a serious evolution over the last hundred years. Industrial cities are very different from post-industrial ones. We are talking about the evolution of the developed world and the evolution of post-socialist cities and third world countries – in some instances, we are dealing with dead-end scenarios colored by chaotic hyper-urbanization. Cities tend to be very different even during the same period of time and within the same country, and they change rapidly. This is why urban development and city planning are called upon to capture these trends and try to minimize the bad and develop the good aspects that may prove beneficial, or as we put it, to use city planning methods to create a comfortable living and business environment.

Should demographic and social challenges be factored in when it comes to municipal administration?

A modern city is an exceedingly complex system – according to J. Forrester’s theory, it is a twelfth-tier system. For the sake of comparison, a car is a fourth-tier system, an aircraft is a sixth-tier system, and spacecraft and nuclear power plants belong to the ninth tier. This is the most complex thing that human civilization has ever created. Naturally, the bigger the city, the more difficult it is to govern it. From the systems theory perspective, the governing system cannot be made simpler than the one it is designed to govern. It cannot be. That is why, by and large, it is virtually impossible to govern cities. Anyone who governs a city of 1 million people simply pretends to govern it – in this sense, the city is a non-linear system. Fragmentation of large cities into smaller parts is a difficult challenge that many countries in the world are trying to tackle, and the BRICS countries are no exception.

Someone who is capable of maintaining control over a large city can govern a state. That is for certain. The state allows for a far greater degree of abstraction – many signals simply do not reach the head of state; he or she does not have direct feedback from the populace. All of the problems and failures can be attributed to a ‘scapegoat’ or explained by external pressures (macroeconomic crisis or sanctions).

Mayors do not have it this easy. Like I said before, a city is a complex non-linear system. Let us assume that by building more highways to alleviate the transportation problem we create many other problems that affect the city’s social and economic climate and may exacerbate things even further.

This is an obvious example and there are many others. For instance, take the urban culture. It is believed that migrants should not account for more than 10% to 15% at any point in time – otherwise the city would not be able to assimilate, digest, and integrate them into urban culture (at least by the third generation). Anything can be mixed in and spread widely, but it is unclear what the result will be – this is a problem and a challenge for many cities. There are districts in Paris with greater than 10% of first generation migrants; by extension these areas are no longer Paris. The same can be said about London. In this sense, many of India’s existing de jure and de facto cities simply do not exist at all. When a city of three, five or ten million people is built from scratch, it will not become a city before it develops its own history and culture – we are talking about a horizon of 30 to 40 years at least.

The right city environment is very conducive to forming communities. The historic part of St. Petersburg does a far better job than an industrial city like Cherepovets. In this sense, India and China are very vulnerable. Their populations are considered city dwellers, but their rural mentality will disappear in at least two generations. The saying ‘you can take the girl out of the village, but you can never take the village out of the girl’ applies to any country.

The government’s urban development policy is the key because today’s competition does not involve countries; it involves cities and regions. It is not America that is competing with England; it is New York that is competing with London, Shanghai with Delhi, or Tokyo with Singapore. Real competition is closer to agglomerations because a large city cannot exist outside of its context, which consists of adjacent territories. The bigger the population, the greater the area of influence. When the city and the adjacent territory do their planning jointly, it plays a key role in ensuring their successful development

Complexities and governance challenges continue at other levels as well. I am speaking about a certain vision that should guide planning, take account of all factors, and make an educated choice in favor of sustainable development instead of production efficiency. This vision should factor into everything, starting from comfortable green areas and going all the way up to our perception of the future. What kind of energy will be prevalent in 2050? Will it be nuclear power or will we burn peat? Will we use solar power or produce energy by processing city waste? Cities produce so much waste that they could be completely self-reliant if this waste could be used as feedstock instead of being disposed of. A textbook example is a perfectly safe waste incineration plant in the center of Vienna. It produces energy next to kindergartens. However, these are expensive technologies, even though sooner or later they will become more affordable. There are many anchor points of this kind. For instance, take people and their homes. Obviously, housing is not leaving the cities, and people will continue to live predominantly in families. However, the more women work, the fewer families there will be; the less women opt for childbirth, the smaller the population becomes. Today, all of these factors already directly affect administrators and urban planners, even though they might not realize it.

Who shapes the vision of Russia and what should it look like? To what extent is it a conscious, well-thought-out, and professionally driven process? To what extent is this vision rooted in reality?

Any country in the world has limited space. It does not matter which one – Singapore, Monaco, Russia, Canada, or China. Virtually every country has territories that are comfortable to live in, less comfortable to live in, or not comfortable at all. Half of our territory is located in the north and is considered difficult to live in. More than 70% of our population lives in the European part of the country.

People have always settled along major transport arteries – first near roads and rivers, and later (starting in the 19th century) near railways. In fact, 90% of Russia’s population settled along the Trans-Siberian artery. By and large, the entire part of Russia beyond the Urals exists thanks to this Trans-Siberian Railroad. There was a town called Novonikolaevsk with 10,000 inhabitants. After they built a bridge across the Ob River, it became Novosibirsk with a population of 1 million. A railroad was built across the Yeniseysk province, and not through the old central town of Yeniseysk but through Krasnoyarsk. Today the latter has become the capital and nobody hears anything about Yeniseysk. In this sense, the Trans-Siberian Railroad has served as the main driver behind the system, and there are many examples of this sort. Spatial development and urban planning as such are the government’s domain. Since time immemorial, Russia has been referred to as the ‘country of cities’ or Garðaríki. However, the first Russian city that was built according to a plan was St. Petersburg. Urban development planning began with Catherine II, who issued an edict to “create special plans for all cities that would regulate their construction and street layout for each province separately.” She assigned the job to several architects who formed part of the ‘urban development commission’ headed up by Ivan Ivanovich Betsky, who was appointed by the Empress herself. Very soon, the commission adopted his name.

Today, legislation stipulates that each federal constituent and municipality should have a territorial development plan (a territorial planning layout for Russian Federation constituents and municipalities, or a master plan for local communities). The question is: what is the meaning behind it? We had a planned economy in the Soviet Union where everything was perfectly clear – the development of production capabilities and their deployment layout dictated that a certain city would have specific factories and that population planning would require a certain number of residents of a specific gender and age, while social infrastructure would be built based on the applicable construction rules and regulations. Everything was predictable in the planned economy. Cans made in Vladivostok would be sold in Murmansk, while products made in Murmansk would be sold in Vladivostok specifically to keep the railways busy. The city of Bratsk was built using panels produced by the Podolsk factory (they had the materials brought in from over 5,000 kilometers away). In the new era of market transformations, many Soviet cities have lost their competitive edge (among other things) because of the high costs that nobody factored in before. For instance, Russia is one of the highest water consumers among all civilized countries. In Europe, the water pumped to kitchen sinks is different from that pumped to toilet bowls, while in our country it is the same ‘drinking’ water. This, as strange as it may sound, has something to do with urban development planning, but let us go back to cities.

Formally, Russia has more than 1,000 cities (based on a countrywide census conducted in 2010, 1,100 townships have been assigned city status), but in reality the figure is no more than 5% of that. They have a great deal of problems that they cannot resolve on their own.

The government’s urban development policy is the key because today’s competition does not involve countries; it involves cities and regions. It is not America that is competing with England; it is New York that is competing with London, Shanghai with Delhi, or Tokyo with Singapore. Real competition is closer to agglomerations because a large city cannot exist outside of its context, which consists of adjacent territories. The bigger the population, the greater the area of influence. A city with 1 million inhabitants usually affects an area of 50-70 kilometers around it. When the city and the adjacent territory do their planning jointly, it plays a key role in ensuring their successful development because one has to take into account divergent needs and standards of living. Some people prefer a nice, safe suburb (and if it is not backed by a well-thought-out plan, a city is likely to kill its suburbs, which is often the case); some people prefer a fast-paced life or a rich nightlife.

That is why it is much more difficult to govern 1,000 cities than 85 federal constituents. If there is no urban development policy in place, Russia may as well forget about being competitive.

So there is no systemic approach or a common vision after all?

By and large, the problem of Russian cities boils down to the fact that nobody needs cities in the government system, that is apart from city dwellers who have very little idea as to how to govern them. We virtually do not have city administration specialists who would be trained specifically for this job. We have no understanding of the role that cities play in the market economy (we bill ourselves as a market economy, but our cities are anything but market driven). According to our urban development code, every city should have a master plan. We as the country’s preeminent urban development institute can say with certainty that 95% of all customers require a master plan to allocate land allotments. If zoning and construction permits could be allocated without a master plan, nobody would need them. Most of our customers do not care what is written in these documents. There are no clear-cut criteria defining a good plan versus a bad plan either. Whoever manages to do it faster and cheaper wins, and our entire legislation is geared toward that goal.

What sort of consequences does it have?

Those who take a formalistic approach destroy cities. If a surgery is botched the patient dies right away, but when an urban plan goes wrong the consequences will be felt several years later and are likely to affect several generations. These things may not be visible right away – you do the wrong zoning, adopt the wrong transport layout, or place a factory in the wrong location.

Our country does not have an urban policy and I do not even see any semblance of light at the end of the tunnel. There were some attempts to comprehend it all at the level of the Regional Development Ministry; it became clear that we needed agglomerations. Now the Ministry has been disbanded and everything has been reassigned to the Ministry of Economy and Ministry of Construction, and the level of abstraction is only growing – urban development processes have not been internalized or understood. What does a master plan, urban development, urbanization, a city for city residents, or a city for the government mean? All of these questions have yet to be answered at the state level. In the meantime, Chinese cities have become more energy efficient, environmentally oriented with better planning behind the transport system. A modern city in China is more comfortable to live in than a city in Russia, and the fact that we unfortunately lag behind in this area is a foregone conclusion.

What is interesting about China and India is that they essentially do not have their own urban development schools and widely hire foreigners for these purposes. It takes several million dollars and several years to design a city of 1 million inhabitants (these amounts and timelines are unthinkable for Russian urban development, where all work is measured in budget years and exceptions only exist to confirm the rule). Normally, more rational territorial plans promote a higher quality of life and a better business environment, which translates to a greater competitive edge for the state. However, in our case, figuratively speaking, we are ordering women to have a child in three to four months instead of nine. I think one can guess what the result is likely to be.

What is the issue with our mayors? Why don’t they want to deal with strategic issues?

There were 10 urban development institutes in the Soviet Union and post-Soviet Russia that shared 90% of the market. Today, the government has abolished the urban development licensing system. Our profession is not subject to self-regulation either, and there are nearly 300 companies on the market, the vast majority of which have no clue what urban development is all about, but according to law they are fully entitled to work in the area. Today real competition among professional urban development institutes is only possible in big cities where all of these marginal players are afraid to operate. It is truly a shame that the government has withdrawn from urban development – after all, commissioning a master plan is the government’s prerogative. When mayors began to commission master plans, we saw conflicts of interests. Far from all of them have the required competencies and the desire to work on master plans – it is much easier to turn into a developer and use the master plan to get as much land as possible. This poses a major problem for long-term sustainable development. You see, if someone embezzles money from the budget, this person will go to prison, but if the same person makes money on land by creating urban development chaos in this territory with very serious consequences, nobody would will notice so there is no liability. It is difficult not to yield to the temptation of making money in a lawful way.

A city for businessmen is one thing, but it is a different thing for politicians and especially for local residents. How can urban developers reconcile all of these differences?

This is a complex system, just like the very profession of urban development and it is rife with vital and purely technical aspects. We should break the city down into its transport layout, its water supply and sewage systems, its industrial facilities, its environmental backbone, and many other things. We need to understand all of these linkages in planning city development and use valid arguments to prove to stakeholders that the city does not belong to just one of them. If you hand it over to developers, they will keep on building until all of the parks and squares are gone. If you hand it over to environmentalists, they will evacuate every industrial facility from the city and ban changes and transformations. Professional urban developers and all of the stakeholders can and must search for compromise. In China, this issue is heavily regulated – a company that does not dabble in urban development simply cannot be in charge of a master plan, whereas it can in our country. In the existing urban development code, it all boils down to functional zoning. We carve our land into pieces and give them away to investors. Now we have to go back and try and comprehend the city as a complex system that binds together all interests, the most important of which are those of the local residents. If the city is not for the people, then who is it for? This work is not being done at the highest level; moreover, the situation is only getting worse. Most of the master plans in the country are put together incorrectly, which will have negative consequences – not just for the territory and the people in it, but also for businesses who should technically benefit too.

It is quite difficult to understand and accept it. It is even more difficult to take a step and say, “Let’s try to stop this development without asking questions about who is to blame, and move on and decide what to do.” The state should assume this responsibility, at least by way of regulating professional activities. Today, all of our urban development institutes are being privatized. In 2016, there will be no single, state-owned company working in this area. Next, regional institutions will be auctioned off along with civil institutions and other projects with a regional stake. If we never come up with a well-thought-out policy, the fruit of this labor will be bitter, which is what we are already reaping anyway.

There are plenty of examples in the world of radical city upgrades. Why is it that stories like these are not possible in Russia?

There was this story in San Francisco – it so happened that the city center was dying out. Downtown real estate was expensive, while Internet communications, parking lots, property quality, and functionality did not meet market requirements, so businesses started building upscale office spaces and multifunctional shopping centers in the suburbs. Naturally, prices in the city center fell, and what followed was class degradation and growing crime.

The Department for Strategic Planning identified the requirements for all of the players in the city’s office space market (broadband Internet, good parking facilities, state-of-the-art buildings with all amenities, and decent communications) and came up with a figure that had to be invested. The city obtained a loan on the market, some houses were demolished, selected streets were extended, some things were bought, and new buildings were built along with the requisite infrastructure. According to their plan, the project was supposed to break even in 12-15 years, but it only took 8. They easily repaid the loan and resuscitated the heart of the city. In our country, a story like this would be impossible at this stage because of the existing real estate taxation system, even though there is a growing trend whereby the system transitions to a market value base. Actually, in this area things are not as bad as in urban development – there are people who demonstrate the ability to think the right way on a statewide scale. Because there is no sufficient property tax base, the city and its fate depend in large part on the head of the region.

Professional urban developers and all of the stakeholders can and must search for compromise. In China, this issue is heavily regulated – a company that does not dabble in urban development simply cannot be in charge of a master plan, whereas it can in our country. In the existing urban development code, it all boils down to functional zoning. We carve our land into pieces and give them away to investors. Now we have to go back and try and comprehend the city as a complex system that binds together all interests, the most important of which are those of the local residents

Evgeniy Savchenko, Governor of the Belgorod region fostered an environment in which Belgorod managed to become one of the most comfortable cities in Russia. From the get-go, he approached it as an agglomeration: a city with suburbs, local communities, reliable transport communications, and social infrastructure. The governor managed to consolidate most of the outskirts, put together a comprehensive plan, and launch the development process by getting local businesses on board. However, this is an exception in Russia. As a rule, each city has to resolve its problems on its own to the best of its abilities, and like I said before, most cities across the country live on donations and resources are insufficient. Loans are short-term and expensive, and local businesses have to go a long way to understand the overall needs. Today, upgrading a city and turning it into an area of happiness is a very expensive and virtually impossible proposition from the municipal budget perspective; government officials at all levels understand that Russian cities do not have their own resources for development, that mayors and city managers as a rule are not professionals, and all mayors dream of getting financial support from the regional or federal authorities. Another question is how high of taxes they collect and keep. For instance, Ekaterinburg is a large city with 1 million inhabitants, but it keeps only 15% of everything it collects. Hence, there is no motivation – no matter how much they collect, the region and the federal level end up taking the lion’s share. There are three basic things causing problems for today and tomorrow: lack of professional competencies and ‘in-house’ development sources, the legal framework, and state policy that does not incentivize people to do a good job.

In other words, your business is getting less and less interesting?

We are currently working in four areas. The first of them is integration and joint projects with leading global project companies – if we do not keep up with the current trends, companies like ours will become a dime a dozen. The second dimension is educating and convincing the customer how urban development methods could be used to build a conformable environment with no extra costs. I am deeply convinced that most mayors are not aware of how our instrument works and what advantages it offers them. However, our customers tend to exhibit common sense and if you explain things to them, they will be able to figure it out for themselves. For instance, we tell mayors about the legacy they have a chance to leave behind on this planet. Our third objective is to get a foothold in overseas markets in the next three to four years. India and China are our priority countries. They show great demand for urbanization and we offer great qualifications, which we easily prove to our overseas partners who cooperate with us in Russia, and these are some of the leading companies worldwide. Last but not least, we constantly work with the government. We try to convey the very concept of urban development and explain why it is needed. In my opinion, we are trying to prove something that is pretty obvious.

So your ambition is to shape the government’s vision?

Yes, it is an attempt to participate in the government’s policy-making efforts. We are not the only company of this sort in the country. Our goal is to convince the government that they should be overseeing urban development and integrating its three aspects: strategic, territorial, and investment planning. The government does understand it – last year they adopted Federal Law No. 172 on Strategic Planning. Today it is vital that the process get launched without delay. After all, every region requires a clear and transparent development strategy that is tied into its competitive advantages (including those that are being created), reflected in a master plan and manifested in linkages between specific facilities and investments. We live in a market economy after all, and if we have a good strategy on paper, the required resources will be found. Needless to say, the government will have to work on creating a revenue base for cities primarily through taxes. If cities are not motivated to achieve greater capitalization and increased tax revenues, there will be no success. Leave everything as it is and they will keep on deteriorating more and more.

Can this trend be reversed?

Everything is possible. But the later it is done, the more expensive it will be. This situation is not unlike a disease – treatment is more expensive than prevention, and in many cases prevention would simply not cut it. There is another factor. Any city is very slow to respond to change – it is as difficult to develop it as it is to destroy it. To reverse this trend (by training mayors, introducing regulations, and changing legislation) would take three to five years, but this would merely be the first step. Overall it would take 10 to 15 years. There is this joke that goes like this: “Pessimists learn Chinese, optimists learn English, and realists buy an AK-47.” In this respect, I am a realist. We have no choice – we live in Russia and we need to at least tweak things to precision with mayors, try to get some feedback, and maintain a dialogue with government officials (there are veritable stars among them, like Elena Chuguevskaya from the Ministry of Economy).

On top of that, Russia has another problem – you work with a city mayor and everything seems fine until all of a sudden he or she gets replaced. Unfortunately, I know from experience that the new mayor will almost always reject whatever the old mayor was trying to do. This is our garden-variety municipal nihilism – reluctance to maintain continuity nullifies any previous efforts.

If we get back to large-scale processes that are underway around the globe, how will the distribution of population change by 2030-2050? How will this space be organized?

It is highly likely that more than 75% of the BRICS population will live in cities by 2050, with the majority concentrated around megalopolises and agglomerations. In addition, 70% to 80% of these countries’ GDP will also be concentrated there. Russia is no exception. We have a huge demand for large urban areas (especially in Siberia and the Far East) that would retain the population and keep the country intact. This is a question of geopolitics – we have made some strides in this area and come up with proposals that we communicate to the government on a regular basis (unsuccessfully for the most part).

The BRICS countries show a trend whereby the proportion of large cities is likely to increase while small towns, local communities, and minor urban settlements are likely to dwindle. By 2050, 30% of today’s cities will no longer be around. By extension, the population of cities with more than 1 million inhabitants and regional capitals will grow. The most important global trend is the emergence of global agglomerations, development of cities and suburbs, and mutual ties between satellite cities with their parent metropolises. The government needs to build agglomerations – in my view, this is the only way out for most of Russia’s cities and the BRICS countries in general. Otherwise, they will not manage to catch up with the developed world and get ahead.

Russia is a country of cities. What has been accumulated should not go to waste, that is why we need to focus more on Siberia and the Far East. This does not only mean creating advanced development territories and setting up special tax regimes – we are talking about a consistent policy of re-conquering Siberia. A second wave of industrialization and even post-industrialization in Siberia, and the Far East in general, should become the government’s flagship development policy on a countrywide scale. We should stop looking at Siberia as a treasure chest from which the country can drain resources without giving much in return – as Siberians, we have nearly formed our own ethnic group that acts as a major pillar supporting Russia.

It is also worth mentioning the current geopolitical ‘pivot to the East.’ In 90% of cases in the past, we were looking up to the West, but many things changed over the last year. Russia is being isolated from the Western world, and given the latest events, this trend is unlikely to change overnight. Even if the sanctions are lifted at a certain point in time, the relations with Europe and the United States will not be repaired quickly. Our problems with Ukraine will persist for at least one generation. In this respect, the pivot to the East offers both an opportunity and a challenge. We have a European mentality, but we need to learn to understand the way of life and the philosophy in China, Japan, and Korea without sacrificing our own. It is also because the center of gravity is shifting to Asia, where we are perceived as nothing short of Europe’s last frontier. We are the ‘white people.’ But ask yourself this: who is going to implement this pivot to the East? How many Russians speak Chinese? Who is familiar with the Chinese culture and has experience of working in China or India? All of these things will take at least 10 to 15 years of serious work, which needs to be systemic and enjoy the government’s support (I am not even talking about a country like Brazil, where I personally would love to work).

You mentioned that cities would disappear. Will the northern part of Russia become empty?

Not just the North. It depends on the geography. Urbanization and a dwindling population are all a part of one trend in Dagestan that shows demographic growth. The population of Makhachkala has nearly tripled in the last 20 years. Figuratively speaking, the population has descended from the mountains into the valley, and about 100 communities have disappeared up there in the mountains. It is hard to blame the people – they left in search of a source of livelihood, in search of a better life for their families, and there can be no other way. People cannot make a life for themselves in the village, where many professions are becoming obsolete.

As former President of Abkhazia explained to his subordinates, their region kept cultivating tea all these years and now after analyzing it, they found out that tea never actually grew well in the area and that it was an economic loss-maker – even though three generations of tea farmers grew up in the Soviet Union doing just that. Today it is cheaper to import tea. They used to mine for coal in England, but when they realized that it was 10 to 15 times cheaper to import it from Australia, they stopped and had their miners trained for other jobs. In many BRICS countries, much like in Dagestan, entire rural areas are left without jobs. Global trends change the customary ways of the economy and people flee to the cities. Each country and each region has its own specific circumstances, but the bottom line remains the same – it is easier to find a source of income in large cities and provide a nicer life for your kids. If you can’t have it, perhaps your kids can. That is why geography as such has nothing to do with it, especially when there are no efficient market and government policies balancing off the shortcomings, similar to what is in place in Germany.

What does Germany do to balance off the market?

The principle behind it is simple: the country adopted a holistic approach to developing its ‘lands’ by providing infrastructure support to the areas that are ‘lagging behind.’ At the same time, we should bear in mind that the Germans manufacture competitive products with great added value, and this production is not a prerogative of larger cities. Take a relatively small city like Stuttgart – it is home to Porsche, Mercedes Benz, and Bosch production facilities. The city’s industrial output is 3-5 times greater than that of an average Russian city with 1 million inhabitants. High labor productivity and high value added lead to a fair distribution of high taxes across the city, creating a good social environment and quality of life, both of which are sustainable. If a city offers conditions like these, the highly qualified workforce finds it attractive. It is a closed circle really; wherever you have low taxes and low labor productivity, you have low social infrastructure investments, which by extension brings down the quality of human capital. Quite conversely, where things are going well, positive effects are replicated. Where there is profit, businesses tend to invest – people live their lives comfortably and raise their families in places like that. In Russia, we often see federal regions or municipalities that live on donations, and the old Soviet infrastructure is deteriorating – those who have the brains and a chance to run away simply bail, and those who stay behind are much worse off.

Another aspect of the market economy is cross-border cooperation. If we take China, for example, how does one go about planning spatial development?

In terms of their powers, our federal constituents are at the state level. The municipal level enjoys a vastly inferior set of rights. By extension, the development of any trans-border cooperation would require an initiative from the governor – at the very least, the governor should not get in the way of proactive and progressive mayors. Border crossings and customs formalities remain within the federal purview. Everything that has to do with taxes and preferential treatment also remains on the federal level. By and large, this represents a regional federal policy, and as a system it barely exists today. There is a notion of a ‘Euro region’ in Europe. The Europeans identify points of intense cooperation and growth and countries begin to cooperate. There are more than 60 such regions in place already. We have a long border with China, but barely five points of cooperation ranging from Suifenhe (the farthest point in the Far East) to Zabaykalsk, which borders on Mongolia. The border town of Suifenhe, which started out with a population of 10,000, has now grown to 100,000. Manchuria has grown from 10,000 to 350,000 and its population will soon reach 1 million. Our towns with 10,000 inhabitants are still very much that. This gradient cannot last forever, because you have no choice but to work with cross-border territories. In our country, many people are afraid of the Chinese, afraid of making bold decisions. But the Chinese show a great interest in Russia. They want to maintain contacts with Europe, which gives us a tremendous competitive advantage. Five million tourists come to Manchuria every year to see Russia without even crossing the border. The Chinese built orthodox churches and monuments to Gagarin and the Worker and the Peasant, and they have the Motherland statue and a replica of Moscow State University on their side of the border. Their seven-storey, matryoshka-shaped restaurant is in the Guinness World Records.

The Chinese tell us: “If you open the border, we will immediately send 2 million tourists your way, which we can later grow to 10 million.” We have been talking about this situation for about 20 years. We have prepared a project for a private company that wanted to build a tourist cluster in Zabaykalsk – a city of 100,000 inhabitants. We could also get Japanese and Korean investors on board in addition to those from China to diversify risks.

Who will live in this town?

A Russian population. There are over 1 million people living in the Zabaykalsk region, and two-thirds of them have nothing to do and nowhere to go. We can get the population of Buryatia on board where they have 2 million more people. We are merely talking about a city with a population of 100,000, which services 5 million tourists from China. The Chinese come and go – they do not stay behind, assimilate, or seek jobs. They are simply nice guests. The longer they stay, the more money they spend.

If everything is that great, why is it that no decision has been made?

The former governor, Ravil Geniatulin, supported the initiative, but then came the new governor who stopped everything and replaced the local government. Who said that personalities do not play a major role in history? At this stage, the project is still just on paper, even though a land allotment has already been reserved. But nothing will get off the ground without the personal involvement of the local leader. Apparently, there isn’t anyone in the country who can lobby the development of border territories proactively enough to get things moving. If a project is viable in terms of its economics and investment potential, one simply needs to tweak the border crossing process and set up a special economic zone. I am positive that everything would work out. Objectively, the idea itself calls for action, and it would be easy to attract foreign investments because the concept is so straightforward. There are four or five locations like that along the border. Some time ago I was in Hong Kong, where I spoke to the President of Shimao Group. They created five special economic development zones on the Russian-Chinese border. They said: “Forget about the money. Your task is to get the government to change its attitude about developing border territories.” By the way, there are plenty of Russian tourists as well. More than 1 million people from our country travel to Manchuria.

Does China understand how apprehensive Russia feels on their account?

Naturally, some do. But they are in no hurry. On the other hand, they do not understand why anyone would feel apprehensive about business. Nobody is saying that we should build Chinese cities in Russia with 1 million Chinese inhabitants. I would be strongly against this. But business spells jobs, taxes, competitiveness, and import substitution. Many interesting things are going on because of the dropping ruble exchange rate. I think a number of products made in Russia with a low degree of manual labor would be competitive in China.

So what is the problem?

If a governor does not find this interesting, he or she does not lobby for it. Public officials see that the governor takes no interest in it, and they follow suit. On top of that, they tend to put spokes in the wheels of those who came to work under the previous governor. There needs to be a shift in mentality. There needs to be continuity in decision-making and state planning instead of transient political considerations. There is a deficit of thinking not only when it comes to urban development, but also on the strategic level. You can ask virtually any mayor what his core strategy is for the next 15 to 20 years, and 90% of them won’t be able to say anything. Alternately, during their meetings with the President, governors proudly say that 80% to 90% of their budgets are earmarked for social needs. What does this mean? Pensions, doctors, teachers. And what about investments or production infrastructure? Where are the jobs and who will pay taxes and keep the region afloat? Social budgets spell deterioration for federal regions, a charity establishment of sorts. But as they say, we are stuck with this trend and it looks like it’s going to last a while.

What is the difference between a statesman and a politician? Politicians think in terms of election cycles. What does a governor need to do to get re-elected? Execute presidential orders. Why do we have a social budget? Because all of our regions took too many loans to execute orders and now nobody is giving any new loans and their budgets are falling apart. In this situation, pensions and salaries of public officials are frozen, and many processes are stopped in their tracks. One cannot take on more liabilities than your economy can afford. A statesman, on the other hand, should have a vision spanning decades whereas a typical public servant in our country has only the next election in sight and is guided by initiatives from the top. To be honest, the typical Russian mayor is not to blame – there is nowhere he or she can turn with their budget. That is why there is a vertical power system that is good for elections but not for the economy. It is time we finally introduced the notion of municipal policies and came down to earth to realize that three-fourths of all Russians live in cities. The country has no other choice but to make them self-sufficient, and comfortable to live and do business. Urban development offers a powerful tool to develop these areas, but it requires minimum funds and state regulation. I would like to conclude by quoting de Gaulle: “France suffered more losses from urban development mistakes than it did during the Second World War.”

Official partners

Logo nkibrics en Logo dm arct Logo fond gh Logo palata Logo palatarb Logo rc Logo mkr Logo mp Logo rdb