Besides labour and skill, the sheer physical space people occupy in their day-to-day lives is a resource that has not got its full due. The ability of transforming immediate environments into productive spaces, keeps millions of people going, especially those who otherwise do not have access to a place they technically “own”.
Place and its specificities have only occasionally been recognised as a touchstone for development. In 1995, Harvard economist Michael Porter published an influential article in which he argued that impoverished American inner cities could lift their economies by focusing on their unique attributes, for instance: strategic location, local demand, the potential integration with regional clusters, and human resources.
What was enlightening about his work is that it considered location and local specificities as critical dimensions of economic development. Too often we forget that space is the most essential dimension of all economic activity. There is no economy that is not territorialised in one way or the other. Even when we speak of the “global” economy we spatialise it.
Unfortunately, 20 years after Porter’s contribution, American inner cities have not yet been able to leverage their “competitive advantages”. This is mainly because external investment hardly comes into poor neighbourhoods. Wealth keeps irrigating the same resource-rich neighbourhoods repeatedly while bypassing historically marginal areas, deepening the socio-economic fault lines that run through most cities. The result is well known; the poor get relatively poorer, while the rich get richer.
Remaining poor
Something similar is currently happening at an accelerated pace in India, where according to Thomas Picketty, income inequality is at its highest in 100 years. According to an Oxfam report, the top percentile of the population owned 73% of the nation’s wealth in 2017, while the wealth of the bottom half barely increased.
Such concentration of wealth has some tangible impact on cities. The lucky few who own space are becoming richer, thanks to a hyper-speculative real estate market that has for long lost touch with the economy.
From an investor’s point of view, a flat in Mumbai or Chennai is worth more when it is vacant than occupied, simply because it can be resold more easily. Urban space is a tradable commodity, no different from shares on the stock market. But when speculation reduces the use value of space to zero, we have an economic, social and urban problem. It represents a loss of potential for cities.
While space may be underused in American inner cities, in dense Indian ones, it is a precious and much used resource.
A street corner represents several lifelines as a food stand or a hawking lot. A tiny plot is enough to build a home for a large family while also hosting a business. In contrast, every unused flat or office space adds to the general scarcity and increases the cost of accommodation or running a business.
This is not a small issue: 12% of the urban housing stock is vacant and office space vacancy stands even higher at 15%. Isn’t it time we start discussing what is the social cost of unused space? Aren’t we depriving our neighbourhoods of their principal economic resource — space — when we let speculation takeover?
Rewarding people
Localities can create considerable wealth and livelihood opportunities when they are not caught in space-locked investment.
If human engagement with space can indeed generate wealth and livelihood — as we see even in relatively poor urban neighbourhoods in India, lined with shops and buzzing with productive activity — then should we not encourage the kind of growth that rewards people who generate value through use and penalise those who keep land vacant? This would be a great first step towards a more inclusive urban economy.
The second would be to start defining value even beyond economic productivity — healthy cities need spaces for recreation and socialisation, along with affordable housing and working spaces.
The writers are co-founders of urbz.net, an urban network that’s active in Mumbai, Goa and beyond.
