Why the SDGs need Institutional Political Economy for Inclusive, Resilient Cities

The conventional and mainstream approaches for studying and understanding cities are ill-suited for the post-2015 urban context and the alternatives that the international community seeks. Institutional political economy, or institutionalism, on the other hand, regards the urban as part of, not apart from, wider socio-economic and political processes. This think piece outlines how this approach can better frame and support the SDGs.

Franklin Obeng-Odoom is Senior Lecturer in Property Economics at the School of Built Environment at the University of Technology, Sydney, and was an UNRISD Visiting Fellow in 2015.

Social Crisis of Space

The majority of the world’s population now lives in cities, which are growing particularly fast in developing countries. Most of the new arrivals are poor and vulnerable. Typically it is the poor from the countryside who migrate, but even when relatively well-off people do, they often have few resources left by the time they arrive in cities. Such new urban entrants will have sold most of their assets or taken heavy loans to make the journey to the city. The conditions of some of these people improve over time, of course, but too often they end up in difficult circumstances such as living in the streets in cities which, in turn, leads to the birth of street children who get caught up in a “street children trap”.

The reproduction of poverty in cities is a complex problem often associated with, or triggered by, socio-spatial inequality and the uneven dynamics of urban development, among other issues, rather than being a problem exclusively imported from the countryside. Cities under capitalism are typically centres of inequality, although the levels of inequality vary across regions. Inequality is rising in Africa and Asia, while it is narrowing in Latin America (UN-Habitat 2008; 2010; 2014).

In response to increasing urban challenges, the Sustainable Development Goals (SDGs) envision making “cities and human settlements inclusive, safe, resilient and sustainable” (SDG 11). However, this vision is not accompanied by policies on how it can be achieved, nor is there a compatible research agenda which will keep the focus of urban research on this goal. Such a research agenda will have to centre on planet, people, and places rather than property and profit for the few and poverty and privation for the many, if it is to reflect the spirit of the SDGs and flesh out the relatively sparse research on uneven urban and regional development. It is this gap that this think piece seeks to fill by offering a suitable framework for understanding cities.

Misunderstanding cities

The conventional and mainstream approaches for studying and understanding cities are ill-suited for the post-2015 urban context and the alternatives that the international community seeks. The two main analytical frameworks, one focused on urban planning and the other on mainstream economics, suffer from two critical tumours (Gore, 2011; Obeng-Odoom, 2013): spatial separatism and methodological individualism. Cities are contributors to and reflections of their wider social environment, but the conventional and mainstream approaches to studying cities do not systematically acknowledge these dynamics. Instead, they separate spatial problems from their wider social context. In turn, slums and informal economies are seen as analytically different from each other even though they are interlinked by socio-spatial processes. Methodological individualism on the other hand refers to a related but quite distinct feature of mainstream urban economics in particular. It assumes that cities are made of free-standing individuals, households or firms without any social bonds. Consequently, it is inattentive to the complexities of urban society, including its history, the role of institutions, and the evolutionary nature of society.

Getting the context right

Institutional political economy, or institutionalism, can help to address these problems. This approach regards the urban as part of, not apart from, wider socio-economic and political processes. It is attentive to socio-political and economic processes at different scales within and between nations and continents; it is historical and relational in its understanding of space. Consequently, it is able to escape the orientalist and Western-centric bias in theorizing about cities evident in conventional urban studies and mainstream urban economics. It is sensitive to context not in the simplistic sense of finding differences between cities in different regions, but rather in looking at the world system and its many “compartmentalized” parts that contribute to and are moulded by the whole. So, institutionalism is both postcolonial and political economic. It is attentive to institutions, regarded broadly as collective action and rules that shape and are, in turn, shaped by socio-economic, political, and environmental activities and processes (see Bromley, 1989). Among such institutions are the market, state, community, church, family and trade union, and the approach considers how they mediate and are transformed by diverse social relations over time. As Bernard Chavance’s book Institutional Economics (2009) shows, institutionalism comes in a wide variety of methodological genres, but the version I advocate in this think piece (institutional political economy) sees cities as the product and outcome of many interacting institutional processes.

By using a framework that stresses equity and ecology, the institutional political economy offers a much better framework for studying cities post-2015. If making “cities and human settlements inclusive, safe, resilient and sustainable” is the goal, then the efficiency-centric and hence market-heavy analytical framework of neoclassical economics will not do.

Multiple scales of analysis

Indeed, if cities are to be judged by their resilience and contribution to sustainability as the SDGs suggest, their relationships with other settlements at different scales will have to be understood. Again, institutional political economy is better attuned to doing so because it directs attention to multiple scales of analysis. Institutional analysis may emphasize the local, but it does not neglect national, regional and international avenues of enquiry. In this sense, the institutionalist framework is able to comprehend, for example, that informal economies in cities are not simply local or national spaces but also regional and international spaces.

Being historical, an institutional political economy framework can help us to better understand not only what the informal economy is now, but how and why it came to be and in what ways it has been transforming. Unlike the economists who calculate causation, the institutionalists consider context and embrace competing explanations using contextual tests of probability, when appropriate, to determine causation or multiple causations. Institutionalism can encompass the short, medium and long term, making it possible to study the changing nature of socio-economic phenomena. While the conventional economic approach to cities emphasizes a tendency towards stable general equilibrium, institutionalism shows the tendency towards crisis and evolution. Institutionalism, then, is the antithesis of mainstream mechanistic, general equilibrium economics and other spatial separatist approaches.

Vicious and virtuous cycles of development

Unlike the monodisciplinary conventional and mainstream approaches, institutionalism is transdisciplinary. It draws from both within and without formal disciplines. The social sciences generally serve as a key repository of ideas, while real world insights from non-disciplinary sources such as trade unions constitute an organic part of its repertoire. One of its founding ideas is the notion of circular and cumulative causation developed by the prominent institutionalist, Gunnar Myrdal (see, for example, Myrdal, 1974). This is the view that in the real world, change is more likely to take the form of circular causation and cumulative change than convergence to equilibrium. Circular causation connotes a small change which, in turn, causes further changes. These changes are cumulative because they tend to compound themselves over time as they trigger off other changes more fundamental than the initial changes. The causation can be either positive or negative and hence the cumulative change could be vicious or virtuous. A vicious circle commences when one negative change (one of Myrdal’s examples is a company that employs local people burning down) causes other changes (in that example, job losses and hence low demand, low tax payments, and consequently poor public services). A virtuous circle, on the other hand, develops when one positive change generates advantages across generations. Myrdal applied this idea to the analysis of inequality within and between regions and across races. In the within-region analysis, regions that get off to a good start end up doing very well over time, while disadvantage compounds in regions that experience an unfavourable beginning. In the inter-regional analysis Myrdal showed how, without careful and inclusive state intervention, vicious circles are stronger in the global South whereas the advantages in the global North tend to compound over time.

Alternatives to neoliberalism

Institutionalists offer clear alternatives to the dominant neoliberal agenda both in its formative and fully developed forms. In The Coming City (1902), one of the founding texts of the application of institutionalism to the study of cities, Richard Theodore Ely provided a sustained and comprehensive alternative to the fin de siècle urban elite whose main demands were first to bring about a “municipal administration on purely business principles”, as “business men are the natural and inevitable directors of local affairs”. He was especially dismissive of businessmen taking up public office as he feared that they would have “the habit of looking at public questions from the private point of view” (pp.43-44).

Ely argued instead that cities should be democratically governed because they are public places, for everyone, in which citizens and non-office-holders should cooperate with office-holders to have “control over municipal affairs” (p.48). Without democratic governance, Ely contended, the city would be an arena for the wealthy to further accumulate and pocket socially generated wealth.

Conversely, the public and common management of the urban commons holds much promise for even the poor in society. Indeed, where institutions such as state, community and civil society have managed urban commons like parks, farms and transport, cities have proved to be generators of more inclusive social change. This is the case in Switzerland, according to the UN Habitat report The State of the World’s Cities 2010/2011, which shows how direct democracy coupled with the public management and guarantee of social protection programmes drive and keep down levels of inequality in Swiss cities.

Consistent with the Sustainable Development Goals

The principles of democratization of municipal management advocated by Ely can, therefore, be embraced, and indeed be extended to municipal production and inclusive democratic governance. Doing so will be consistent with the SDGs and an effective counter-position to the spread of entrepreneurial urban governance not only as a policy ideal but also as a research agenda.

By all indications, the human world is becoming more and more urbanized, and indeed in many cases more turbulent. The SDG of making “cities and human settlements inclusive, safe, resilient and sustainable” is in part a global expression of the cities we want. However, without an accompanying framework to support research, policy and implementation the goal will remain just a goal. Applying the features and arguments of institutionalism to the 2030 Agenda for Sustainable Development can resolve the weaknesses in existing frameworks (arising from spatial separatism and methodological individualism), and provide a much needed leitmotif. This will help propel SDG 11 into action: for socio-spatial justice and equitable urban and regional development.

REFERENCES
Bromley D.W. 1989. Economic Interests and Institutions The Conceptual Foundations of Public Policy. Blackwell, Oxford.

Chavance B. 2009. Institutional Economics. Routledge, London.

Gore C. 2012. Regions in Question: Space, Development Theory and Regional Policy. Routledge, London.

Myrdal G. 1974. "What is development?" Journal of Economic Issues, 8(4):729-736.

Obeng-Odoom F. 2013. Governance for Pro-Poor Urban Development: Lessons from Ghana. Routledge, London.

UN-HABITAT. 2008. State of African Cities Report. UN-HABITAT, Nairobi.

UN-HABITAT. 2010. State of African Cities Report. UN-HABITAT, Nairobi.

UN-HABITAT. 2012. Prosperity of Cities: State of the World’s Cities 2012/2013. UN-HABITAT, Nairobi.

UN-HABITAT. 2014. State of African Cities Report. UN-HABITAT, Nairobi.

ACKNOWLEDGEMENTS
I am grateful to UNRISD for hosting me as visiting fellow in 2015 and to UNRISD colleagues for very helpful feedback on earlier drafts of this piece. I would like to thank the University of Technology, Sydney for funding my fellowship at UNRISD under the International Researcher Development Fund.

ABOUT THE AUTHOR

Franklin Obeng-Odoom teaches urban economics and property and political economy at the School of Built Environment, University of Technology Sydney in Australia. He was also Research Fellow at UNRISD in 2015. His books include "Reconstructing Urban Economics: Towards a Political Economy of the Built Environment" (Zed, London). Franklin is the substantive editor of the journal "African Review of Economics and Finance" (UNISA Press). He is the recipient of the 2015 Patrick J. Welch Award given by the Association for Social Economics for the best paper published in the Forum for Social Economics.