More and more each year, we live in an urban world. Half the global population already lives in cities and generates more than 80 percent of global GDP. And each week, the urban population increases by more than 1 million people, an amount equivalent to adding seven Chicagos to the face of the planet each year.
Futhermore, the center of gravity of the urban landscape is moving south and east, and growth is increasingly coming from second-tier cities. Companies looking for growth and governments engaged in diplomacy, need to build their efforts on an understanding of this urban world at a more granular level. Country-specific thinking may no longer be specific enough.
The New Urban Leaders
On the face of it, the urban world might seem static. Today, 600 cities generate 60 percent of global GDP, and our research suggests that 600 cities will also account for about 60 percent of world GDP in 2025. Fifteen years from now, however, they will be a dramatically different set of cities.
The developed world boasts 380 cities in the current list of the top 600 cities, ranked by GDP. These cities account for half the world's total economic output; one-fifth of global GDP comes from the 190 cities in North American alone. Meanwhile, the 220 largest cities in developing regions contribute a mere 10 percent.
But the balance of urban economic power will be transformed over the next 15 years. One out of every three developed cities will drop off the top 600 cities list by 2025, while just one out of every 20 cities in emerging markets will lose their place in this ranking. By 2025, 136 new cities will have entered the top 600, all of them from the developing world.
Asia's Urban Rise
China will be in the vanguard of this new generation of economic dynamos, with 100 new cities in the top 600 including Harbin, Shantou, and Guiyang. India will contribute 13 newcomers, including Hyderabad and Surat. Latin America will be the source of eight dynamic cities that include Cancún, Mexico, and Barranquilla, Colombia.
Growing Up Fast
The population living in cities will rise faster than the population of the world as a whole over the next 15 years -- by 1.6 times faster. Yet this is not the major reason that cities are increasingly important to the world economy. Rising prosperity, measured by GDP per capita, is the key indicator to watch. In the developing world, cities will be enormously important new markets as they become home to new armies of middle classes with considerable purchasing power.
In addition, basic services such as education and clean water cost around 30 to 50 percent less to deliver in cities than in rural areas, and delivery is also more effective in urban areas. For this reason, the next generation of urbanites should grow up better educated and healthier, adding to growing prosperity.
Focusing on economic growth throws up yet another set of cities. The 600 with the largest contributions to global GDP growth -- we call this list the "City 600" -- will account for about 60 percent of global growth over the next 15 years. These 600 cities will increase their GDP by an estimated $34 trillion.
By 2025, the emerging-market cities of this City 600 will be home to an estimated 235 million households earning more than $20,000 a year -- markedly more than the just over 210 million such households expected in the cities of developed regions. In other words, there will be more higher middle income households in emerging-market cities than in developed-world ones.
It is a common misconception that megacities (with populations of 10 million or more) have driven this growth. In fact, many of these huge metropolises are already growing more slowly than the economies of their host countries. Today's megacities account for 14 percent of global GDP, but we expect them to contribute only about 10 percent of global growth from now until 2025. Meanwhile, they will lose share to their up-and-coming smaller cousins.
By contrast, half of worldwide growth over the next 15 years is likely to come from 577 middleweights -- cities with populations today of between 150,000 and 10 million. And 12 out of 13 new megacities will be in emerging regions -- seven in China alone. Across the world, we see 407 emerging-market middleweights contributing nearly 40 percent of global growth, more than the whole developed world and developing region megacities put together. The City 600, for example, will include around 230 cities that do not make it into today's top 600. All of these newcomers will be middleweights in emerging regions.
Many of these growth cities are not on companies' or policymakers' radar screens today. How many businesses are including Ahmedabad, Huambo, Fushun, and Viña del Mar in their strategies? How many consuls or trade-focused diplomats are based in these cities?
Despite these coming changes, many companies, and diplomatic efforts in support of business, tend to focus only on developed economies and emerging-market megacities. Up until now, this has made sense because this combination generates more than 70 percent of global GDP. However, those same markets will generate only one-third of global growth to 2025. Take the comparison between Wuhan in China and Auckland in New Zealand as illustration: Wuhan is likely to deliver more than 10 times the GDP growth of Auckland over the next 15 years, yet most countries have an order of magnitude more diplomats in Auckland than they have in Wuhan -- if they have any at all. India's Hyderabad will likely post five times the GDP growth of Krakow in Poland, but countries such as the United States have about the same number of diplomats in each.
Taking a city-level perspective is important not only for trade, but also for understanding potential future political flashpoints. Revolutions start in cities, not in the countryside. In North Africa, the flames of political unrest have been fed by the stress caused by high unemployment in large cities, especially when combined with food price inflation. Rapid urbanization, without a commensurate growth in jobs, has the potential to create multiple potential flashpoints over the next 10 to 20 years. Foreign-policy strategists will need to understand which cities could enter the danger zone. Traditionally countries have been the unit of analysis for much of foreign policy; looking ahead, cities should receive a much greater level of attention.ANTONY DICKSON/AFP/Getty Images