Trip to Shanghai

I was in Shanghai the first week in June to participate in IBM’s third global Smarter Cities Forum.  The first Smarter Cities forum was held in Berlin about a year ago, and the second was held in New York City this past October.

Around 800 government, business and academic leaders from 180 cities in 38 countries participated in the Shanghai Forum.  The two day agenda included a number of main-tent talks and panels, as well as six breakout sessions. 

As in New York, I helped organize and moderated the healthcare breakout session.  I will comment on the healthcare session in a future blog, but let me first offer some personal impressions on the overall Forum.

In his welcoming remarks, IBM Chairman and CEO Sam Palmisano explained the reason for hosting this forum in Shanghai and focusing on the unique challenges that face leaders in emerging markets:  “Forecasts out to 2020 say that 97 of the 100 fastest growing cities in the world are in growth markets.  Eight are in China, 11 are in India. . . . Every minute, 30 people move from a rural area of India to a city -  and that will continue through the year 2025.”

He later added:

“We should be proud of this unprecedented urbanization.  It is an emblem of our economic and societal progress - especially here in China and in other emerging markets.  But it is also a huge strain on the planet's infrastructure.  And no one feels that more urgently than you and your peers around the world.  That urgency has increased over the past decade, and I believe we can identify its source.”

“The start of the 21st century has constituted a series of wake-up calls on a single subject: the reality of global integration.  In the last few years, our eyes have been opened to global climate change, and to the environmental and geopolitical issues surrounding energy; we have been made aware of the vulnerabilities of global supply chains for food and medicine; we entered the new century with the shock to our sense of security delivered by the attacks on 9/11; and much of the world is still recovering from a global financial crisis.”

“These collective realizations have reminded us that we are all now connected - economically, technically and socially . . . The key, as always is not technology, but leadership.”

Renowned journalist and author Fareed Zakaria gave an excellent keynote address on the second day of the conference.  He explained that over the last twenty years, the world’s economy has exhibited a remarkable ability to recover from major shocks, ranging from Black Monday in October of 1987, when the Dow Jones Average dropped 22 percent in one day, to our ongoing financial crisis.  While all these crises have caused considerable pain, the economy has been much more resilient than what many experts had predicted.  He attributes this resilience to three fundamental pillars of our global economy.

The first is political stability, the fact that for the first time in several hundred years, there is no military competition among the great global powers.  The richest countries in the world are not fighting each other.

The second pillar is economic stability as a result of low inflation.  In 1979, 35 countries had hyperinflation.  Today, that number is zero. 

And the third is the technological connectivity of the world.

“These three forces  political stability, economic stability and technological connectivity are bringing the world together.  And what they have allowed to happen is the big story of our age.  When people write the history of these times, Al-Qaeda and terrorism will get two paragraphs, maybe three.  The big story is that countries around the world took advantage of these three forces, these three pillars, and have been able to grow their economies for the first time in hundreds of years.  The number of countries that were growing at three percent a year in 1979 was about 32, 33.  The number of countries that grew at three percent a year in 2005, 2006, 2007, was 120.  So that is the change in the world that we are witnessing, and of course, nowhere do you see it more clearly than in China.”

Dr. Zakaria observed that developing countries handled the recent financial crisis much more sensibly than the advanced industrial economies. 

“You look at the debt to GDP ratios of the developing countries, - the 12 emerging market countries have a debt to GDP ratio that is 40 percent.  The eight richest countries in the world have a debt to GDP ratio that is 120 percent, three times that of the emerging markets.  Now, this is the first time in history that this has happened.  It was always true that it was the advanced industrial world that had lower debt to GDP ratios, and it was the developing world that had higher debt to GDP ratios.  That was, again, why you paid more money to invest in those countries.  It is a world turned upside down . . .  This is happening because of two very powerful sources, which are in a sense the same: learning and discipline.”

“The first one is just that knowledge has spread.  So many of the people in the developing world who are involved in macroeconomic policy have Ph.D.s from Harvard, and Stanford, and M.I.T. and Northwestern, or they have visited and spent some time, or they have read the books and assimilated the information. . . .That kind of learning has spread very powerfully, and it has changed the way in which one has to think about these countries . . .  These are part of a club of people who understand economics and are managing it quite effectively and efficiently.  This is very new . . . This spread, this diffusion of knowledge is very recent and very powerful.”

“But there's a second part to this, which is discipline.  It's not that we in the United States didn't know what the right thing to do was.  I think that if you asked any American economist, does it make sense to have a five percent structural budget deficit, they would have said, no.  If you asked them, do you think it makes sense to be providing this much consumer credit so fast, they would have said no. . . . The problem is, it is very hard to do that in a modern populous democracy.  Everyone wants to be popular.  Everyone wants just to be doing the easy stuff, so that Alan Greenspan, Chairman of the Federal Reserve, a brilliant man, was surely partly motivated by the fact that it is easier to solve the problems of the American economy by easing up on credit than by raising interest rates, slowing growth. . . . People want to be popular.  And so you lose discipline.”

Dr. Zakaria then led a panel on the challenges of urbanization and globalization.  One of his panelists was Siegfried Zhiqiang Wu, Professor in the College of Architecture and Planning and Assistant President at Shanghai’s Tongji University.
 
Professor Wu told us that thirty years ago, less than twenty percent of the population in China lived in cities.  Then, over the last 30 years, 30 percent of China’s population migrated from the countryside to cities.  So, close to fifty percent of the population now lives in urban environments.  The migration to cities continues, - roughly one percent of the populations moves to cities each year.  In another 20 to 25 years, it is expected that about 70 percent of the population of  China will live in cities.  There is a huge change underway, from a rural, agricultural China to an urban China.

The other major trend that goes hand in hand with urbanization is globalization.  Shanghai, for example, has 300,000 foreigners, and another 300,000 Taiwanese.  A Smart City must be able to simultaneously absorb the people coming in from the countryside, as well as the people coming in from all over the world.  That means that the new residents need to be able to easily navigate the city, which is totally new to them, but the city also needs to know about its new residents, what their needs are and what they are doing.

The combination of urbanization and globalization creates some very interesting challenges for city officials.  On the one hand, you want to open up to the world, embrace the best practices and technologies, and attract investment and above all, talent.  But, at the same time, you have to take care of the people at home and those coming in from rural areas and villages.  These different city residents will likely have quite different requirements. 
 
Professor Wu talked about the need to emphasize innovation and creativity in a city.  While he is all for disciplined urban planning, he felt that it is important that a certain percentage of the city should be given freedom to innovate organically.  Shanghai has over 80 creative parks aimed at attract different kinds of designers, software architects and similar such innovative entrepreneurs who have freedom to mold their environment to their needs.

He had the opportunity to put into practice his ideas on innovation and creativity in his role as Chief Planner of the 2010 Shanghai World Expo, which opened on May 1 and will run through October 31, 2010.  With more than 190 countries and international organizations participating, this is the largest world expo ever.  Its overall theme is  “Better City, Better Life”, signifying Shanghai’s aspiration to be the next great world city.

I spent several hours at the Shanghai Expo, barely enough time to properly see a couple of exhibits, including the beautiful China Pavilion  and the Urbanian Pavilion, with its focus on human development and sustainability.  The themes of “Better City, Better Life”  and of Shanghai as a “City of Harmony” could be sensed  throughout.  The  Expo website explains the philosophy underlying its themes:

“The quest for a better life has run through the urban history of mankind.  Through different sub-themes, Expo 2010 will create blueprints for future cities and harmonious urban life styles, providing an extraordinary educational and entertaining platform for visitors of all nations:

• Blending of diverse cultures in the city
• 
Economic prosperity in the city 

• Innovations of science and technology in the city
• 
Remodelling of communities in the city

• Interactions between urban and rural areas”

These are truly grand objectives.  But, I came away from the IBM Forum, Expo 2010 and my general impressions of Shanghai, - with a sense of hope and optimism that we are stepping up to these very complex urban problems, and that over time, we will be able to make significant progress.