Has rising urbanisation around the world increased poverty rates?

It is striking that the number of urban slum dwellers is now nearly a sixth of the world’s population — approximately 1 billion people – and that number could double by 2030. Most of all future population growth is set to take place in rapidly expanding megacities, in Asia, Africa and Latin America. The questions is does urbanisation actually increase poverty or decrease it in the long term?

Urbanisation is generally perceived as a step forward, for humanity and for developing countries. If urbanization really helps drive economic development, why do so many global cities remain filled with poor slum dwellers? In the long term does urbanization lead to poverty alleviation, or will it merely displace rural poverty for one of its own?

Considering the increasing trend of urban poverty, we have seen different theories surface about urbanisation and its effect on economic development. Rural areas were usually considered by most policy makers and governments to be the centre of poverty and hardship for the population. The popular theory especially in developing countries became to concentrate on development of rural areas in order to reduce poverty rates, because the poor population of these countries is primarily concentrated there.

Until recent changes in thinking, urbanisation has generally always been looked as a positive factor in overall poverty reduction. Research shows that overall, urbanisation has been a force for good on the poverty headcount, as urbanising countries tend to have lower their poverty rates. As noted by the International Monetary Fund, “the process of urbanization has affected rural poverty more than urban poverty”. The fastest urbanization of poverty has occurred in Latin America, where the majority of the poor now live in urban areas.

For the first time in history, over half of the world’s population lives in cities because of these long held beliefs in the positive relation between urbanization and economic growth.

Proponents of urbanisation who claim that it plays a key role in mitigating poverty say that rapid urban growth does not necessarily lead to faster urbanisation, if it can be offset by equally rapid rural growth. Rural prosperity is linked with the process of urbanisation by arguing that the two processes can and should occur simultaneously.

The Risks of Urbanisation in Developing Countries

However, the benefits of life in the city are not evenly distributed. Only a small percentage of any fast growing urban population really gets access to urban opportunities and this number tends to be shrinking further. Organized and affluent neighbourhoods of cities, receive all the benefits of urban living. The other part – the world’s one billion mostly African, Asian and Latin American slum dwellers, are more likely to die earlier, experience more hunger and disease, attain less education and have fewer chances of employment than those urban residents that do not reside in a slum.

Urban cities thrived on the labour, food and surplus resources that rural regions provided, leading to their rapid growth of mega-cities with booming industries and affluence. World trade markets are today hugely interconnected in a global food supply chain, meaning that cities no longer dependent on the their neighbouring rural population for food and resources. Resource-exporting countries are thus urbanising without acquiring the industrial sectors that we typically associate with development.

Ultimately, urbanization creates opportunities but also increases risks, and the speed at which it is happening challenges our capacity to plan and adapt. This is particularly true in developing economies. Urbanization can also create cascading effects such as high population density fuelling property bubbles. One consequence of increasing urban poverty is unplanned urban expansion, caused by lack of affordable housing, planning and infrastructure.

A shortage of affordable housing contributes to social exclusion and destabilization the wider economy and increase social instability. Countries like India and Indonesia are seeing widespread urbanisation in areas where the traditional village houses or kampung is being replaced with affordable vertical housing and apartments.

Lessons to be Learned from Urbanisation of Poverty

The most important lesson from studying the effect of urbanization is that it is a necessary but not sufficient on it’s own for global poverty alleviation. Billions of people will migrate to the same global megacities where devastating poverty is already widespread and endemic. Countries will spend trillions of dollars on these booming megacities which are so vital to each country’s economy, making it crucial for governments get city planning right.

Therefore, while it is true that urbanization has substantial poverty-reduction effects on populations, governments need to be more acutely aware of the risks of urban poverty, and the need for urban investment to complement rural investments in poverty-reduction. Urban growth must be paired with appropriate policies, institutions, and strategies to mitigate the risks of rising urban poverty.

For rapid urbanization to provide opportunities to all, carefully attention to urban planning with effective regulatory frameworks are required. Good governance combined with innovative approaches to urban poverty reduction are needed to ensure that urbanisation fulfills the promise of ending global poverty.

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