3.1. The Need For a New Economic Framework

• COVID-19: the worst pandemic since the Spanish flu in 1918, the virus and its accompanying lockdowns have so far cost trillions of dollars and left millions of people without a source of livelihood.

The four shocks are inextricably connected. Inequality is closely interlinked with previous pandemics: during the influenza outbreak of 2009 in the UK, the death rate was three times larger in the poorest fifth of the population than among the wealthy.4 The 2014-16 Ebola epidemic killed more than 10,000 mostly poor and vulnerable people in Liberia, Ghana and Sierra Leone.5 The negative impacts of climate change on the interface of the natural and human habitations is linked to zoonotic diseases, such as COVID-19, Ebola, bird flu, H1N1 flu, MERS, SARS, and Zika that pass from animals to humans. This has led to a situation where one new infectious disease appears in humans every four months.6 Lastly, frontier technologies are now a central shaping force to the economies and societies worldwide. While bringing prosperity to some in certain locations, new technologies also increase inequality to others elsewhere and can provoke social unrest due to mass unemployment and job losses in sectors such as manufacturing.

Through urban planning, local governments need to be further empowered by the state to provide their cities with an adequate legal and regulatory framework

A new normal urban economy is needed to fight pandemics and achieve sustainable growth and prosperity for all, leaving no one and no place behind. In the last two decades, through the liberal policies linked to the so-called “Washington Consensus”, markets have been privileged in economic policy, leaving large numbers of communities without proper access to housing and basic services. In developing countries, communities engaged in the informal sector are not even included in decision-making. Counteracting the damage wrought by the COVID-19 pandemic requires a new economic model that not only responds to immediate concerns but also addresses these long-term challenges. This can be done by properly integrating the three pillars of a sustainable local settlement — markets, states and communities — in a balanced way, with the necessary financial resources to fulfill basic rights, societal and economic needs, including public health in cities. The proposed urban economy framework allows each of the pillars to operate and interact in a balanced way (Figure 3.1).

The state, represented by the central and local governments, needs to improve governance to allow subnational entities, such as metropolitan governments and cities, to develop sustainable financial frameworks and a clear functional and territorial demarcation of activities. Through urban planning, local governments need to be further empowered by the state to provide their cities with an adequate legal and regulatory framework so that the private sector — the market — can operate within clear parameters and policies that encourage social participation and shared prosperity. In parallel, local governments have a duty to incorporate communities, especially those without formal representation, into a more inclusive urban management approach.

Food hall in Central World Shopping Center with marks on tables to ensure social distancing as a mesure to curb the spread of the COVID-19 virus. Bangkok, Thailand © Shutterstock

Figure 3.1: A framework for a new urban economy

Tensions: More/less state social voice, representation

The State:

A Political governance structure of a country, the central government, regional and local governments. Central government, regional government, municipalities, villages

Cities and Communities:

A social group whose members reside in a specific locality and often have a common cultural and historical heritage. Neigbourhood, migrants, informal settlements, grassroots etc

Spatial Urban Setting: SDGs and the New Urban Aganda

1. Urban Planning 2. Municipal Finance 3. Legal Framework 4. National Urban Policies

Tensions: More/less state intervention, or private sector activity Tensions: Vulnerabilities, market forces, decision making

The Markets

All private economic structures facilitating production and exchange in the economy. Labour markets, housing, basic services, business environment, SMEs etc.

Source: Prepared by the authors

The framework underpins the critical role of cities and communities, maintaining the role of the state, and providing the proper space for the markets.7 These three categories coexist with permanent tensions. Communities in cities claim more voice and representation in the state through participation. The markets impose their force over the state and sometimes try to replace it, resulting in frictions about participation in the economy. The state is tempted to intervene and replace the markets in times of crisis. The strength of each pillar changes depending on the context, historical setting and political economy of the place.

When these three categories are examined in the urban spatial setting, the Sustainable Development Goals and the New Urban Agenda are at the centre. The need for a well functioning state, markets and communities is imperative for cities. The state — in this case, the local government — is responsible for providing urban planning, municipal finance and legal regulations. Technical capacities are essential to perform these functions, and resources from the central or regional governments must be provided to strengthen the functions of local governments as necessary.

As mentioned earlier, markets have dominated in recent decades while communities, especially those living and working in the informal spheres of the city and the economy, have enjoyed limited participation despite being most often the main victims of crises. Calls for a fundamental restructuring of the economic system have intensified as the crisis has unfolded, with inspiring proposals on mandates and financing gaining increasing attention. These are discussed in more detail in the sections that follow. The strength of each pillar changes depending on the context, historical setting and political economy of the place.