It is a well-known fact that urbanisation and poverty levels are linked. This summer, The World Bank and the International Monetary Fund (IMF) have published the annual Global Monitoring Report, which shows that the advantages of urbanisation set in only after it has reached a critical level.
According to the report, countries with urbanisation rates of 40 or less have distinctly lower income levels and higher poverty rates. They also have the largest rural-urban differentials, especially in access to basic services
Urbanization has through history helped to reduce poverty by creation of new income opportunities, and it has increased both access to and quality of services. However, the number of people living in urban slums is also rising, and cities often contribute to environmental degradation.
At the same time, three quarters of the worlds poor people still live in rural areas, and better provision of basic services in those areas is essential to open up opportunities for the rural population. See the heatmap in the graph below for an illustration of the level of urbanisation in 1990 compared with 2010.
The best predictor of income in the world today is not what or whom you know, but where you work. According to the report, economic history shows that this has always been true.
Before the Industrial Revolution, the world was a rural place, where the differences in living standards between countries were minimal. England’s Industrial Revolution unleashed a wave of industrialisation that was necessarily grounded in cities or urban spaces.
The mechanisation of production was powered by economies of scale and a concentration of population available only in cities. Rapid industrialization was accompanied by increasing urbanization, which, in turn, nurtured agglomeration economies.
In the illustration below is a snapshot from the report, on key statistics today.