Competition, Supercharged:

Cities, Economic Development and Globalization

Talent, investment, and a high quality of life.

No pressure, local leaders, but if your city falls short on any of the above, your economy is doomed. Good luck juggling all three things simultaneously—talented people won’t move to your city unless it offers them good employment prospects. Companies won’t invest in your city unless it provides them with access to new markets and skilled workers. Nobody will stick around if you don’t have the money to make the city a nice place to live.

Managing? Meet globalization. Individuals and capital are more mobile than ever before. As soon as people or firms see a new advantage on the horizon, they can get up and leave. Cities across the world are breathing down your neck, competing for the same talent and resources as you.

OK, I’m being a little hyperbolic. But it’s true—urban economic development is incredibly difficult to pull off, and competition between cities has never been more intense. How do cities deal with this?

At the Amsterdam Economic Board, I’ve gotten a glimpse into how this city interacts with competitiveness and its position in the global economy. It’s been fascinating comparing things here to what I’m familiar with in the United States.

The first major difference that I’ve noticed: domestic competition between cities feels less vicious in the Netherlands than it does in the United States. Public leaders in Amsterdam don’t seem to worry much about losing their edge to another Dutch city.

This might be partially explained by specialization—the major cities of this country have come to focus on very different industries. Amsterdam is the undisputed cultural, financial, and media hub; Rotterdam dominates the manufacturing, engineering, and logistics trades; Eindhoven is the technology powerhouse. Because they naturally attract different kinds of workers and firms, there is less reason for Dutch cities to go after each other. Most American cities are less specialized, so they more frequently compete over the same territory.

Another potential explanation for this lower intensity—Dutch cities are limited in their ability to influence private sector behavior. Cities here depend on the national government for most of their funding, and their discretion over financial decisions is restricted. Compare this to the United States, where local governments rely heavily on local taxes and have substantial fiscal power. Desperate for the revenue that economic growth brings, cities often try to lure companies with enormous tax breaks, land deals, or other forms of favorable treatment. Large companies are quick to exploit this dynamic, leveraging offers from one city to gain additional concessions from others.

Another major difference: Amsterdam is much more focused on attracting international talent than any city I’ve seen in the United States. It’s a testament to the success of the Dutch private sector that there is a fairly serious high-skill labor shortage here.

Perhaps this shouldn’t be a surprise, given the fact that only 17 million people live in the Netherlands. Still, it’s striking to see the extent to which Amsterdam has built an entire infrastructure around attracting and accommodating high-skill foreigners. It’s an approach that builds upon a huge societal advantage—Amsterdammers tend to speak English extremely well, so for the international set, it’s easy to come here and conduct business immediately.

In the United States, companies often speak of the importance of foreign talent, but as far as I know, municipalities themselves are less involved in the recruitment and accommodation process. Rather it is universities who seem to be the primary entry point and launch pad for internationals.

A third major difference: the politics of economic development and gentrification have an interesting international twist to them here. Amsterdam has long balanced a deep international cosmopolitanism with an unusually strong sense of local identity. But many locals are now concerned that the push for talent from abroad—driven by pressure from the business community—has gone overboard. This fear of an internationally-driven cultural sanitization is exacerbated by the fact that property values have skyrocketed in recent years.

Obviously, there are many other differences in the ways that Amsterdam and American cities experience global competition and economic development. But one thing is clear—for cities to survive in this hyper-connected era, they’d better have a plan.

Ross Tilchin is a visiting fellow at the Amsterdam Institute for Social Science Research and a member of the strategy team at the Amsterdam Economic Board. Before arriving in Amsterdam, Ross worked as a researcher at the Brookings Institution, a nonprofit research organization in Washington, D.C., where he specialized in urban economic development and a wide range of issues related to cities. You can read his previous blog here.