The wealth of nations soars when societies shift from rural to urban
Per Capita GDP Has Risen in Tandem With Increases in the Urbanization Rate
Urbanization isn’t a modern phenomenon. In centuries gone by, the shift to living in cities underpinned the industrial revolutions of Europe and the United States and the rise of those regions to global economic and political power. Now urbanization is transforming the developing world. But what is different about today’s wave of mass urbanization is its unprecedented speed and scale, according to the McKinsey’s Urban World: Cities and the Rise of the Consuming Class.
Cities are economic dynamos. They attract skilled workers and productive businesses. Cities offer higher wages and better standards of living than those available in rural areas. As countries develop, urbanization and growth of per capita GDP tend to be correlated. The key reason for this relationship between cities and growing wealth is that the increased density of urban populations produces economies of scale that boost productivity, which in turn enhances growth — a virtuous cycle.
Around the world, the number of cities with a population greater than
10 million is expected to rise from 18 in 2007 to 41 in 2025, with Lagos and Jakarta joining the list of megacities. Just as the process reshaped the world in the past, urbanization is likely to redefine much of the world this century. Indeed, the world’s cities will add 65 million inhabitants a year between 2015 and 2025, creating opportunities for social and economic development, and exerting pressure on infrastructure and resources.