Cities have always been at the forefront of economic and cultural progress: they are laboratories of innovation, hotbeds of enterprise, and forums of mutual exchange. The close proximity of a large variety of other people lies at the heart of their success. Dynamic cities attract go-getting people from far and wide who together come up with new ideas, start new businesses and create new forms of cultural expression that enrich lives. It is that combination of individual self-selection and collective interaction that makes cities great, especially when those who are attracted to a city are becoming incredibly diverse. Nearly half of New Yorkers, who come from over 180 different countries, speak a language other than English at home. In the London Olympics of 2012, as in the Sydney Games of 2000, there will be a local community cheering for nearly every national team competing. In our increasingly globalised world, a growing number of cosmopolitan cities capture the whole world in one place.
NODES OF NEW IDEAS
Cities are often analysed through the lens of trade, where their role as marketplaces for products from near and far is emphasised. While the role of cities as trading entrepôts is vital—think of London or Singapore—it can be misconceived that cities live off the profits of other lands. In fact, cities do not just create value through mutual exchange; they also foster high-productivity activities. While cities do not produce food, and are not necessarily central to manufacturing, they are the birthplace of most new ideas and creative services. Thus cities are both production centres and trading hubs, and their outputs, specifically knowledge and its application, are particularly valuable. Contrary to the notion that cities remove value from rural areas, they are nodes that spread new ideas and prosperity.
The richness of cities does not derive solely from their location, but also grows from the interaction of the diverse people who live there. Cities are central to economic growth in the way they attract and breed success. This is fuelled by migration to cities, and in turn stimulates further migration. In effect, prosperity in the 21st century derives from the convergence of a diversity of talented people in cities. Creative people are drawn to cities like London and New York because they are exciting and cosmopolitan. According to Richard Florida in The Rise of the Creative Class, “Regional economic growth is powered by creative people, who prefer places that are diverse, tolerant and open to new ideas”.1
The richness of cities does not derive solely from their location, but also grows from the interaction of the diverse people who live there.
Conventional economics makes little allowance for this. Many economic models take no account of location; most derive collective outcomes from aggregating individual attributes which in effect ignore the huge gains from dynamic interactions among diverse people. Mainstream economists attribute the vast majority of productivity growth to a black box called technological change, which they do little to explain. As a result, policymakers underestimate the economic value of diversity, and focus instead on its cultural benefits, or on second-order effects, such as how to foster increased trade with countries with which the diverse population have cultural ties. The main economic impact of spurring productivity-enhancing innovation is often ignored.
VALUE OF DIVERSITY
Migrants are a ready source of brilliant new ideas. Instead of following conventional wisdom, they tend to see things differently, and as outsiders, are more determined to succeed. A third of the US’ recent Nobel laureates in physics are foreign-born. The contribution of migrants is vast, yet inherently unpredictable. When Sergey Brin arrived in the US as a refugee from the Soviet Union at age six, nobody could have guessed that he would go on to co-found Google. Had he been denied entry, Google would not exist today; and America and the world would not have realised the opportunity that had been missed. Through strict immigration policies, governments have doubtlessly turned away many potential Brins, not to mention deter ambitious individuals from moving at all.
The collective diversity of migrants is also vital. Most innovation comes from groups of talented people sparking off each other—and foreigners with different ideas, perspectives and experiences add something extra to the mix. A growing volume of research has shown that collective wisdom is a source of new ideas. If there are 10 people trying to come up with a solution to a problem and they all think alike, those 10 heads are no better than one. But if they all think differently, then by bouncing ideas off one another, they can solve problems better and faster. Just look at Silicon Valley: Google, Yahoo! and eBay were all co-founded by migrants who arrived in America not as graduates, but as children. Nearly half of America’s venture-capital-funded start-ups have migrant co-founders.
The value of diversity does not apply only in high-tech industries; an ever-increasing share of our prosperity comes from solving problems, such as developing new medicines, computer games and environmentally-friendly technologies, designing innovative products and policies, and providing innovative management advice. In fact, Scott Page explains in The Difference: How the Power of Diversity Creates Better Groups, Firms, and Schools2 that a diverse team of talented individuals is actually better at solving problems than a group of like-minded geniuses.
As John Stuart Mill rightly wrote this in 1848 in Principles of Political Economy: “It is hardly possible to overrate the value, for the improvement of human beings, of things which bring them into contact with persons dissimilar to themselves, and with modes of thought and action unlike those with which they are familiar… it is indispensable to be perpetually comparing [one’s] own notions and customs with the experience and example of persons in different circumstances… there is no nation which does not need to borrow from others.”3
Most innovation comes from groups of talented people sparking off each other—and foreigners with different ideas, perspectives and experiences add something extra to the mix.
The value of diversity comes into its own in societies that are at the forefront of rapid change. When countries are technologically backward, they can make huge leaps forward simply by copying what more advanced economies are doing. They may benefit from being culturally uniform, since this makes it easier for everyone to move forward in unison. Likewise, in periods when economic change is slow, more homogeneous companies and countries may find it easier to organise themselves efficiently than more heterogeneous ones.
But in advanced economies during periods of rapid economic change such as we are experiencing now, diversity is vital because of the creativity that is generated—and the benefits of the creativity that it stimulates are mostly generated in cosmopolitan cities where different people interact everyday. The benefits of migration and diversity are significant. Ultimately, they are key factors of why cities are a catalyst for innovation and are so economically successful. Thus, countries—and cities—that do not attract newcomers increasingly risk falling behind. Their priority should be nurturing diversity, not trying to stifle it.
ABOUT THE AUTHOR
Philippe Legrain is a visiting fellow at the London School of Economics’ European Institute. His research interests are globalisation, migration and European issues. Previously special adviser to World Trade Organisation’s director-general Mike Moore and trade and economics correspondent for The Economist, Mr Legrain has written for publications, such as the Financial Times, the Guardian, the Wall Street Journal Europe and Foreign Policy. His latest book, Immigrants: Your Country Needs Them, was shortlisted for the 2007 Financial Times Goldman Sachs Business Book of the Year Award.
- Florida, Richard, The Rise of the Creative Class (New York: Basic Books, 2002).
- Page, Scott E., The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies (New Jersey: Princeton University Press, 2007).
- Mill, John Stuart, Principles of Political Economy (New York: Prometheus Books, 2004).
- Legrain, Philippe, Immigrants: Your Country Needs Them (London, UK: Little, Brown, 2007).