Government Cities in Globalized Interurban Competition

By David Kaufmann (University of Bern, Switzerland)

What comes to mind when I tell you that I study “government cities”? Maybe you think about the cliché of Washington, D.C. as a bureaucratic swamp, about the utopian project of Brasilia, about colonial cities such as Pretoria/Tshwane, or about international government cities such as The Hague. Spot on: these are “government cities”. I study these cities under the label of secondary capital cities, defined as capitals that are not the primary economic centers of their nation states. These secondary capital cities can be found on every continent. Famous examples of SCCs exist in Africa (e.g. Pretoria/Tshwane, Abuja), Asia (e.g. Jerusalem, Islamabad), Oceania (e.g. Wellington, Canberra), Europe (e.g. Berlin, The Hague), North America (e.g. Washington, D.C., Ottawa) and South America (e.g. Brasilia, Sucre).

DC Mall

The ‘swamp’ from above: The National Mall in Washington. D.C.

Contrary to classical political science or public administration studies of capital cities, I partly detach these secondary capital cities from their capital city status and investigate how these cities strive to become “business cities”. Economic globalization contests the political and symbolic centrality of secondary capital cities and they are pressured to enter into globalized interurban competition like any other city. These secondary capital cities enter globalized interurban competition with a political economy that is configured differently than the political economies of global economic powerhouses, such as New York, London, and Tokyo, or overachievers in contemporary capitalism, such as Silicon Valley, Amsterdam, and Singapore. The political economy of these “government cities” is shaped by an intense influence of the national government, consists of specialized knowledge-intensive clusters of firms in highly regulated and knowledge-intensive sectors, lacks strong industrial sectors, and it is dependent on public procurement (Mayer et al. 2018).

Nevertheless, policy makers, business leaders and non-profit representatives seek ways to position the city in interurban competition as “business cities”, and they do this by formulating locational policies. These locational policies aim to increase the economic competitiveness of cities and they thereby rely on the identification, development, and promotion of place-specific assets that allow cities to escape from a fully competitive, and therefore level, global market (Kaufmann and Arnold 2017). Locational policies can take many forms. Examples are cluster formation strategies, start-up promotion, image-building, tax reductions, land-use zoning, firm attraction, as well as acquiring higher-tier governmental funds.

In this newly published Urban Affairs Review article, I qualitatively study the locational policies agendas of four secondary capital cities, namely Bern, Ottawa, The Hague and Washington, D.C. I find that local governments exhibit a strong functional orientation towards increasing their most important revenue sources. Locational policies are aligned to maximize the revenue of the cities’ most lucrative local tax instruments and thus the locational policy priorities are mirrored in the revenue categories of the local budgets (see Table).

Table

Table: Most important revenue categories of local budgets in four cases. See article for sources.

In Bern, personal income tax comprises 42 % of local revenue, which explains its strong focus on increasing the city’s quality of life in order to attract wealthy residents. In Ottawa, property tax comprises 47 % of local revenue, thereby explaining its focus on development projects and its efforts to maintain real estate values. In The Hague, governmental transfers account for 64 % of local revenue. This explains The Hague’s activities that attract governmental economic development funds. D.C. pursues a mix of locational policy instruments, mostly with regard to maximize the property tax base and the personal income base. In such a comparative analysis, local tax autonomy emerges as a game changer for locational policies agendas and local economic development policies more generally. Differences in local tax autonomy lead to different opportunity structures for how local governments can raise funds.

These findings suggest that locational policy agendas in SCCs do not seem to be qualitatively different from other types of cities with regard to their adherence to the rationale of being competitive and with regard to the importance of tax systems for the configuration of their locational policies. What I found to be rather specific about locational policy agendas in SCCs is that they heavily rely on the physical development of their city. For sure, physical development is a locational policy priority in many cities worldwide, but this reliance on physical development is very intense in SCCs because of capital city specific tax constraints and path-dependent urban power structures in which developers assume a powerful role. Thus, the specific political economy of SCCs triggers a development orientation of locational policy agendas in SCCs that, in turn, lead to intense segregation processes as that can be observed, for example, in Washington, D.C. (Hyra and Prince 2016).

The case studies in the article hint at strategies that may help to minimize the bad symptoms of these tax maximization strategies and the reliance on physical development. First, nation states may better support their capital cities by providing them with more financial resources or by easing some of their capital city specific local autonomy constraints. Second, local governments in SCCs may invest in economic sectors where capital cities have a competitive advantage. These include highly-regulated and knowledge-intensive sectors, such as medical technology, cyber security, or sustainable energy. Third, the case of Bern shows that direct democratic instruments provide city residents with an institutional veto to object large-scale development projects. Finally, and most radically, place-based development could be accompanied by place-based ownership models of corporations, houses, or land (Imbrosciso 2013). This would more securely anchor investments in the city and it may provide a mechanism through which to counter gentrification.

Read the article here.

Photo by Jorge Alcala on Unsplash

Author Biography

David Kaufmann is a postdoctoral researcher at the KPM Center for Public Management, University of Bern, Switzerland. He is author of the book Varieties of Capital Cities: The Competitiveness Challenge for Secondary Capital Cities (Edward Elgar Publishing, 2018) as well as co-author of the book The Political Economy of Capital Cities (Routledge, 2018). David Kaufmann is specialized in policy studies with a focus on urban policies and migration policies.

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