In 2016, Nations May Govern But Cities Rule

In this series, professionals predict the ideas and trends that will shape 2016. Read the posts here, then write your own (use #BigIdeas2016 in your piece).

The world will have no shortage of urgent challenges in 2016 — income inequality, demographic transformation, international migration, and climate change, just to name a few. At the same time, the locus of problem-solving is devolving downward. Cities have become the engines of national economies and the vanguard of economic and social innovation. In 2016, devolution will accelerate, and the solutions to our toughest problems will increasingly come from local leaders, acting in close concert with institutional investors, global corporations, and higher levels of government.

Traditionally, devolution consists of national governments formally bestowing greater powers and responsibilities upon local areas. Indeed, this traditional form of devolution is on the rise—in the United States with the recent repudiation of No Child Left Behind; in the United Kingdom with the unprecedented devolution of powers to Manchester and Sheffield; in France with the creation of the grande metropole, a set of regional governance structures around Paris; and in Italy, where constitutional changes have given nine metropolitan areas greater autonomy.

But these formal power transfers are being outpaced by a tide of informal devolution. As the effectiveness of central governments has diminished, responsibility has increasingly fallen upon cities and metropolitan areas.

This transition has occurred partially because of crippling partisanship and preexisting budgetary commitments at the national level. But in many ways, the floundering of national governments and the resulting rise of cities was inevitable. Centralized, hyper-specialized, one-size-fits-all approaches are fundamentally ill-suited for today’s challenges. Twenty-first-century problems demand rapid, locally-tailored solutions that take a holistic approach to problem-solving — approaches that deploy the expertise, capacity, and resources of the public, private, and civic sectors in collaboration.

These collaborative networks are inventing a wide array of innovative approaches to problem-solving. They are quietly modernizing and creating new instruments, intermediaries, and institutions to enable the investments necessary to overcoming our greatest challenges — investments in human capital, sustainable infrastructure, transformative redevelopment, clean energy and energy efficiency, and innovative urban technologies. This process is gradually but fundamentally transforming our notions of city governance.

First, new financial instruments and practices are channeling capital toward sustainable and inclusive activities. Much attention has been paid to impact investing and the rise of Pay for Success Bonds, recently used in Salt Lake County to expand pre-kindergarten to economically disadvantaged children. But new instruments are springing up in many other areas of policy. Green Bonds have emerged as a means of funding clean energy and energy efficiency projects. And consensus is building around treating large urban redevelopment projects as a single asset class, lowering the barriers to investing in massive, economy-shaping projects such as London’s Kings Cross.

Second, new intermediary organizations are emerging to bring disparate sectors of society together, a process essential in creating opportunity and economic growth. Incubators such as the Cambridge Innovation Center are matching startups to experts and seed capital. Hubs such as Chicago's 1871 are pairing large companies like United Airlines and State Farm with entrepreneurial firms and talent. Social innovators such as LaunchCode in St. Louis are linking new coders to good jobs in mature companies.  Other intermediaries such as the Texas Medical Center in Houston are acting as the connective tissue between large anchor institutions (like hospitals and universities) to achieve greater innovation through collaboration.

Finally, cities are modernizing and creating new special-purpose public, quasi-public and civic institutions that are unlocking the value of underutilized public assets and financing a wide range of transformative projects. HafenCity Hamburg GmbH, a company owned by the City of Hamburg, is overseeing the largest inner city regeneration effort in Europe through the redevelopment of former port and industrial sites. In Copenhagen, CPH City and Port Development, a company jointly owned by the municipal and national governments, is developing areas along the waterfront. In the United States and elsewhere, community land trusts have provided stable foundations for affordable housing. And CORTEX in St. Louis and 22@ in Barcelona have governed the build out of innovation districts in those two cities.

 These new instruments, intermediaries, and institutions point to a new cycle of problem-solving. Rather than waiting for national or state programs to deliver solutions to their doorsteps, cities are inventing and improving new kinds of market-oriented responses that, once proven and standardized, can be adapted to multiple communities.

It’s ironic that the benefits of devolution are surfacing just as the American presidential election is heating up. It’s not that the election isn’t important — the federal government plays an irreplaceable role across many areas of policy, like guaranteeing the social safety net, conducting our foreign affairs, and providing funding for basic research. But centralized policymaking and implementation cannot keep up with many of the rapidly evolving challenges of the 21st century. So when the presidential horserace gets exhausting, remember this: The world is transforming from the bottom up, driven by the innovative actions of networks in our cities and metropolitan areas.