For megacities, it’s time to start planning for a disrupted future.
Today, megacities have become synonymous with economic growth. In both developing and developed countries, cities with populations of 10 million or more account for one-third to one-half of their gross domestic product.
Many analysts and policymakers think this trend is here to stay. The rise of big data analytics and mobile technology should spur development, they assert, transforming metropolises like Shanghai, Nairobi and Mexico City into so-called “smart cities” that can leverage their huge populations to power their economies and change the power balance in the world.
The exact formula differs from region to region, but all megacities are designed to maximize the productivity of their massive populations. Today, these cities lean heavily on economies of scale, by which increased production brings cost advantages, and on the savings and benefits of co-locating people and firms in neighborhoods and industrial clusters.
But technological advances are now upending these old business models, threatening future of megacities as we know them.
Manufacturing on the fritz
One classic example of a disruptive new technology is 3-D printing, which enables individuals to “print” everything from ice cream to machine parts.
As this streamlined technique spreads, it will eliminate some of the many links in the global production process. By taking out the “middle men,” 3-D printing may ultimately reduce the supply chain to just a designer on one end and a manufacturer on the other, significantly reducing the production costs of manufactured goods.
Decline of the shopping mall
The retail sector is experiencing a similar transformation. Shopping malls, for example, which once thrived in megacities, are now suffering from the advent of e-commerce.
The value proposition of shopping malls was always that their economies of scale were location-dependent. That is, for malls to be profitable, they had to be sited near a large consumer base. Densely populated megacities were perfect.
Crisis in the making
At some point, all this change may end up meaning that economies of scale matter much, much less. If that happens, population size – currently the motor of the modern metropolis – will become a liability.
Megacities have long struggled with the downsides of density and rapid urbanization, including communicable disease, critical infrastructure shortages, rising inequality, crime and social instability. As their economic base erodes, such challenges are likely to grow more pressing.