Middle East Cities Should Look Forward—and Back

The Middle East may well be the birthplace of cities, and maybe capitalism itself, but for the most part, it continues to lag in developing a modern, workable urbanism. Yes, the region has produced high-tech hubs (e.g., Tel Aviv) and postmodern cities (e.g., Dubai), which can be regarded as rising international business centers, but it’s also home to megacities afflicted by mismanagement, poor planning, and some of the world’s highest unemployment rates. In some countries, like Saudi Arabia, and many of the Gulf States, there is also a chronic shortage of homegrown labor willing to work.

Yet for all their underperformance, Middle Eastern cities possess some things—rich histories, large working-age populations, and, in some cases, vast resources of energy and money—that could produce successes, much as we see already in China and India, which have risen from poverty in recent decades. What these countries have, and much of the Middle East lacks, is strong engagement in the global economy and openness to diverse cultures.

In our report for Chapman University and the Civil Service College of Singapore, we placed only Tel Aviv, Abu Dhabi, Dubai, and Cairo among the top 50 global cities. In contrast, North America, led by New York, put 11 cities on the list, as did Europe (with London and Paris in the lead); the Asia-Pacific region, led by Tokyo, added 13 cities. No other Muslim Middle Eastern city—including Bagdad, Damascus, and Tehran—comes close to making the grade as a significant global city.

The Middle East doesn’t lack the trappings of global cities: by 2020, the region will boast three of the world’s five tallest towers—the Kingdom Tower in Jeddah, the Burj Khalifa in Dubai, and the Makkah Royal Clock Tower (Abraj Al-Bait Mall) in Mecca. Dubai is home to the world’s biggest airport and one of its largest port complexes. Nor does the Middle East lack for money; Qatar has the world’s highest per-capita income, while Kuwait and the United Arab Emirates also score above the United States. Per-capita incomes in Saudi Arabia and Israel exceed the European Union average.

In some senses, the Middle East’s problem has been less one of underdevelopment than of lack of vision—putting greater emphasis on the aesthetics of modernity than on the practical aspects of what we call the human city. The region’s leaders—most notably Saudi Arabian Prince Mohammed bin Salman—seek to develop great cities that would challenge Dubai as world capitals and appeal to Westerners. Yet despite their bravado and intentions, cities like Medina (home to the Prophet’s mosque), which has been targeted by the central Saudi administration for development, have only the bare-bones necessities, such as airports and a new train system, but virtually none of the amenities that would encourage outsiders to work there for any period of time.

Getting off the plane in Medina, Saudi Arabia’s fourth-largest city, one feels more like a time traveler than a visitor. New industrial and technology parks are going up, but one wonders how many skilled foreign workers would migrate to a region with virtually no good hotels or restaurants, and one not yet ready to accommodate non-Islamic residents—not to mention a political culture all too often rooted in authoritarian brutality, as the reported savage torture and murder of Saudi dissident journalist Jamal Khashoggi has once again demonstrated.

To become a center of successful urbanity, the Middle East needs to rediscover two great legacies from its past: marketplace culture and tolerance for outsiders. The earliest great cities—and empires—emerged as early as 5000 b.c. in places like Sumer and Babylon. The latter can reasonably be said to have grown by 1800 b.c. into the world’s first great city. It is in this glorious past that the roots of resurgence lie. The Middle East not only invented urbanism but also became the first place to experience capitalist innovation, notes author Nima Sanandaji in his new book, The Birthplace of Capitalism: The Middle East. He traces the world’s first capital markets, banks, artisanal industries, and long-distance traders to the region’s first great cosmopolitan cities. As Sanandaji notes, commerce led these cities to develop the world’s first accounting systems and written language, largely to keep records of trade.

In classical times, Greek and Roman aristocrats held their noses about trade while Syrian and Jewish traders played dominant roles in imperial commerce. They continued to do so even after the Roman Empire fell, and well into the Middle Ages. “Iranians, Arabs, Turks, Jews, Kurds, Armenians and the myriad of people who inhabit the Middle East have widely different cultures,” Sanandaji notes. “Yet they are all dealers and hagglers, with market exchange almost encoded into their cultural DNA.”

Sadly, this entrepreneurial orientation today is more evident outside the region than inside it. Wherever people from the Levant and North Africa settle, they shine as entrepreneurs. In the United States, Middle Easterners traditionally register among the highest start-up rates. Go anywhere the Mideast diaspora settles—Atlantic Avenue in Brooklyn, Edgware Road in London, the Detroit suburbs, Westwood, the San Fernando Valley, Anaheim and even parts of Germany—and observe how grassroots capitalism and entrepreneurship flourishes.

At a time when Christianity largely disparaged enterprise, Islam embraced commerce and attempted to build a more equitable culture within it. This should not come as a surprise, since Muhammad was himself a merchant. As Mohammad Gharipour notes in his 2012 edited volume, The Bazaar in the Islamic City, Design, Culture, and History, “His [Mohammed’s] invitation to Medina was, to a large extent, a consequence of the investment of his first wife, Khadija, who had a reputation as a very successful merchant in Mecca.” However, Muhammad “introduced regulations based on an honest trade system to revive trade and close the distance between classes.”

Rather than being hostile to the existing commercial culture, Islam built on older forms and extended them. Business connections grew in importance once the Muslim empire covered an expansive geography, extending from Western China to the Atlantic Ocean. The world of Islam, at its height, was large and connected enough to produce the first hints of globalization. As Baghdad became a knowledge center, and by 900 a.d. likely the world’s largest city, commerce fed the region’s complex political machine.

Until the financial rise of the West, global wealth was largely concentrated in the Middle East and North Africa. No Western city could come close to Cairo’s qasaba, with 360 apartments, a permanent population of 4,000, and what the great traveler Ibn Battuta described as offering an astonishing “abundance and diversity of goods.” The livelihood of such major cities relied heavily on such commercial activity.

Much of this occurred in the centuries before the Portuguese provided the world with a new commerce route around the Cape of Good Hope. Until then, Muslim merchants dominated the land routes (silk and spice roads), the key conduits of global commerce, with most traversing the Middle East. Before there ever was a London, Paris, or New York, there were Samarkand, Aleppo, and Mosul.

The other great legacy, all too often ignored today, is tolerance. At a time when European Christian cities were hostile to outsiders, including Christians with differing views, Islamic cities thrived by welcoming people from outside Islam, and from differing Islamic countries. Jews, Armenians, Copts and other minorities settled in Aleppo, Damascus, Baghdad, and Cairo. These were fundamentally cosmopolitan places.

Though non-Muslims had to pay a jizyah, or head tax—loosely understood as a residency fee—they were, for the most part, able to survive, and even thrive, under Islamic rule. Muslims played important roles in non-Islamic countries, too. For example, the great Chinese Admiral Zeng He, who came from the Hui minority, embraced the Muslim faith and led the Ming Dynasty’s bold naval expansion in the fifteenth century.

Similarly, non-Muslims occupied important posts even at the height of the caliphate and the Islamic empire. Many served as doctors, tradesmen, and even diplomats. The culture was open as well to influences, including those from classical Greece and Rome, forgotten or rejected in the Christian West. Some cities, like Cordoba in Spain, flourished as centers of diverse thought and poetry from Jewish and Christian authors, mostly written in Arabic.

This tolerance linked the Mideast to Europe and the world beyond. Syrian Christians and Jews were particularly critical in this process; they could trade in the Muslim world with freedom, and often in greater safety, than in the Christian West. “The miracle of toleration,” as historian Fernand Braudel remarked about Renaissance Venice, existed “wherever the community of trade convened.”

This culture persisted well into the last century, and exists, at least in people’s memories, to this day. Someone growing up in Iran in the 1960s, or cities like Damascus, Cairo, and Baghdad, lived in a Muslim-dominated culture but one enriched by longstanding Jewish and Christian communities. Before the establishment of the state of Israel, between 800,000 and 1 million Jews lived in Middle Eastern countries outside Palestine; Jews left these countries, mostly for Israel, France, and the United States. Today, only small residual populations, roughly one-tenth the size, with high proportions of elderly, remain. In 1910, Christians accounted for 13 percent of the Middle East’s population. Today, according to a recent study, their percentage has fallen to 4.2 percent and is slated to fall even further, to 3.2 percent, by 2025.

Some, even in the Muslim world, have thought that the key to reviving Middle Eastern cities lies in imitating Western urban development. With the changes in the global economy, many of the traditional forms of local capitalism, especially the Middle Eastern bazaar, faced competition from more modern, globally connected firms. The modernization effort in Iran manifested in the creation of streets and boulevards that interrupted the bazaar’s spatial flow, symbolically highlighting the estrangement of the new government from these areas. Over the course of the twentieth century, this process gradually lessened the economic centrality of the bazaar to the national economy.

Instead of nurturing their already-vibrant grassroots capitalism, many Middle Eastern countries put ever-greater controls on modern market forces. Starting in 1931, Iran’s government had begun to control foreign trade, regulating imports and exports and establishing exchange rates for the dollar and pound. Similarly, Egypt imposed tariffs on imported goods in 1930, with varying rates for different products. The ensuing economic progress was slow, particularly for countries without petroleum or minerals, or whose petroleum revenues were tightly controlled by Western nations, but these policies did plant the roots of modern consumption and a new class structure. A larger volume of petrodollars, particularly after 1973, fueled an economic boom that turned a handful of cities into international spectacles of consumption. In the process, though, these cities lost all the advantages of traditional cities—for example, the souk, streets that provided shade, and houses that took advantage of shade and wind to keep cooler. Instead, we’ve seen a pattern of unmitigated mimicry, with commerce and an often-incongruous architectural style, as epitomized by Dubai and other Persian Gulf States.

Awareness has grown that this imported architectural style threatens many of the values that Middle Easterners hold dear. Some Saudi planners have become more interested in building “human” cities, hoping that cities like Riyadh could become more culturally rich, more amenable to families, and environmentally friendlier. There is serious discussion of abandoning the large building/high-density model favored by Western planners and architects, in favor of something that reflects more human values.

Restoring the old entrepreneurial climate, free of state or oligarchical control, should be popular in a region whose primary religion was founded by a merchant and which boasts some of the world’s oldest business cultures. If there is such a thing as an institution in the Middle East and North Africa that has lasted across time, it is the bazaar, whose spatial manifestations persist to this day.

There are some hopeful signs in the region. Tel Aviv has a thriving tech sector that has made it, according to the Startup Genome project, the sixth-richest entrepreneurial region in the world, ahead of Berlin, Los Angeles, Shanghai, and Seattle. Large U.S. tech companies—Google, Microsoft, Intel—invest there to harvest cutting-edge technology. An estimated 300 research and development centers operate in tiny Israel. There are also signs of an emerging startup scene in Dubai, a city with an airport second to none. The city’s hotels, beaches, and conference facilities are widely patronized by visitors from Russia, India and Europe. Modern and remarkably tolerant—as long as you don’t criticize royal authority—Dubai seeks to become an enterprising society. With reforms, other cities in the Middle East could similarly invest in a growing skilled and educated population, especially in countries like Iran and Libya.

The Middle East, despite its many and seemingly endless conflicts, has a genuine opportunity to improve its urban future. It can best do so not by simply adding to its collection of modern and postmodern architectural baubles, but by returning to its commercial roots and its traditional culture of tolerance. Some loosening of social controls could make these cities more attractive to workers and investors without overwhelming the political order, as has been accomplished in Singapore and elsewhere in Asia. Mideast urban planners don’t need seminars in city-building from “experts” seeking to export the Western model. They need to embrace their own heritage first. Once they rediscover the advantages of tolerance and the power of their marketplace culture, they could create cities that will once again lure investors, workers, and visitors from around the world.

This article originally appeared in City Journal.

Joel Kotkin is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, was published in April by Agate. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He is executive director of NewGeography.com and lives in Orange County, CA.

Ali Modarres is the director and Professor of Urban Studies at University of Washington, Tacoma. He formerly served as the editor-in-chief of Cities: The International Journal of Urban Policy and Planning and has written on the role of bazaars in shaping the urban morphology of Middle Eastern cities.

Homepage photo credit: ארתור שמונק [CC BY 2.5 ], via Wikimedia Commons

Ten years After Lehman Collapsed, We’re Still Screwed

This article first appeared at The Daily Beast.

The collapse of Lehman Brothers 10 years ago today began the financial crisis that crippled and even killed for some the American dream as we had known it. Donald Trump might be starting to change that, at least for Americans who aren’t determined to remain in our bluest and priciest cities. Read more

A Generation Plans An Exodus From California

California is the great role model for America, particularly if you read the Eastern press. Yet few boosters have yet to confront the fact that the state is continuing to hemorrhage people at a higher rate, Read more

The West Is In the Midst of a Migration and Identity Crisis

Excerpted from an article that first appeared at The Orange County Register.

As the economy has improved, popular concern, both here and abroad, has shifted to issues of migration and identity. Just last year, immigration, according to Gallup, was seen as the most important issue by barely 5 percent of the population, while the economy was cited by more than four times as many. But now, immigration and undocumented aliens is now the biggest concern to 15 percent of the population, equal to that of the economy.

You can blame Donald Trump, and his focus on that issue, for some of this. But Trump did not create the long mounting migration pressures — including 200,000 unaccompanied children during President Obama’s last term. Nor is he responsible for growing opposition — almost three-to-one — to mass migration among Europeans.

Unrestricted EU migration helped drive Brexit in the U.K., upended Italian politics and sent many traditionally centrist voters elsewhere flocking to anti-immigrant parties, including some on the extreme, quasi-fascist right. The move towards what the Guardian ominously calls “fortress Europe” could even dethrone the current queen of the EU, the much praised “great humanist,” Angela Merkel.

Read the entire piece at The Orange County Register.

Joel Kotkin is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, was published in April by Agate. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He is executive director of NewGeography.com and lives in Orange County, CA.

Photo: Elekes Andor [CC BY-SA 4.0 ], from Wikimedia Commons

Patriarchy or No, it’s Good to Have Dad Around on Father’s Day

Excerpted from an article that first appeared at The Orange County Register

This Father’s Day takes place amid growing assault on what is widely called “patriarchy.” In the era of #MeToo-inspired militant feminism, it’s become increasingly fashionable to reject maleness and castigate fatherhood, as largely irrelevant and even damaging. Read more

The Fight For Our Future Belongs to the ‘Burbs

This piece first appeared on The Daily Beast.

Look away from President Trump and it’s easier to see how three long-term demographic and geographic trends are reshaping American politics. Read more

The Cities Creating The Most White-Collar Jobs, 2018

by Joel Kotkin and Dr. Michael Shires

Professional and business services have long been identified with the downtowns of cities like New York, Chicago and San Francisco, where lawyers, accountants and architects are thick on the ground. However, in recent years there’s been a clear shift in the geography of this vital sector, with some of the strongest job generation emerging far from the high-rise canyons. Read more

Where U.S. Manufacturing is Thriving, 2018

by Joel Kotkin and Dr. Michael Shires

The ‘80s futurist John Naisbitt once called manufacturing a “a declining sport,” and to be sure the share of Americans working in factories has fallen far from the 1950 peak of 30% to roughly 8.5% last year.

Yet, manufacturing’s contributions to the economy are far out of proportion to its shrinking share of employment. Read more

Growth in America is Tilting Toward Smaller Cities

Excerpted from an article that first appeared at Forbes.com

We are often told that America’s future lies in our big cities. That may no longer be entirely true. Some of the strongest job creation and population growth is now occurring in cities of 1 million people or less. Read more

Finance Flies West, and South

This article first appeared at City Journal.

The recently announced departure of New York City-based Alliance Bernstein for Nashville, taking more than 1,000 jobs with it, suggests a potential loosening of New York’s iron grip on the financial-services industry. Yet the move reflects a longer evolution that has seen financial firms leave not only New York but also other traditional centers—what one historian calls the “Yankee Empire”—that for two centuries dominated banking, insurance, and investment capital.

This process is driven, in large part, by cost considerations. The cost of living in Nashville is just 58 percent that of New York, an important differential for younger workers looking to buy houses and start families, and one likely to widen with the new federal limits on state and local tax deductions. In addition, pension-driven fiscal realities may force states like New York, Illinois, and California to keep raising revenues.

Other forces are at work, too, notably demographic shifts to Sunbelt states and the growing influence of technology companies on finance. Jobs in industries like information technology and business and professional services are fleeing the old centers outside of New York, which is holding its own better than the rest. But the stagnation, and even decline, of financial-services jobs, at a time of high profits, represents a serious threat to regions losing out on job creation in these other sectors as well.

Alliance-Bernstein notwithstanding, New York is not close to losing its hegemony over finance. With 472,000 employees in that industry, the city dwarfs all its competitors, including runner-up Chicago, where finance employs 264,000. Finance jobs in New York, according to Pepperdine University’s Michael Shires, have grown at a respectable 11 percent since 2009, though the pace has slowed more recently, last year increasing by only 1.6 percent. New York might be losing ground and market share, but the industry as a whole is not shrinking, at least for now. And New York’s traditional rivals in this sector—Chicago, Boston, and Los Angeles—have been struggling. Since 2009, Chicago’s financial job growth has been barely 5 percent, less than half of New York’s. Los Angeles, home to the fourth-largest agglomeration of finance workers, also did poorly, while Boston did even worse, actually losing finance jobs last year.

The big winners—as Alliance-Bernstein’s move demonstrated—have been overwhelmingly in the low-cost, low-density Sunbelt. With reasonable taxes, more affordable home prices, and expanding residential populations, these areas are becoming financial-industry giants, even if they lack large, locally based companies. Among the global financial firms relocating operations to these less costly locales are UBS, Deutsche Bank, Morgan Stanley, and Goldman Sachs.

The next potential financial superstar is the Dallas area, now boasting the country’s third-largest concentration of financial workers and likely to supplant Chicago from second place in the near future. Last year, the Dallas Morning News suggested that “Y’all Street” may soon replace Wall Street as the U.S. financial capital. That’s a bit of a stretch, but between 2009 and 2017, Dallas did expand financial employment by 30 percent—three times New York’s rate and more than six times that of Chicago or Los Angeles. With rapid population growth, low taxes, moderate housing prices, and a premier strategic location between the coasts, Dallas has much going for it. Last year, Texas overtook New York for the most banking and insurance jobs among the states; in 2005, New York had led by almost 100,000 jobs.

Dallas is not alone. Since 2009, Nashville, San Antonio, and Phoenix—winner of new jobs from employers like USAA, State Farm, and Charles Schwab—have experienced financial-services growth rates greater than 30 percent. Charleston, Charlotte, Durham-Chapel Hill, Raleigh, and Greenville have all seen their financial workforces expand by more than 20 percent. Florida, which shares a time zone and many cultural ties with New York, is a financial-services hotbed, with Jacksonville, Miami, Tampa, and Orlando all experiencing growth rates two times that of Gotham.

The other region clearly capitalizing on the outbound trend is the Intermountain West. The epicenter here is Utah, notably St. George, Provo, and especially Salt Lake City. All enjoyed 25 percent growth since 2009, with Salt Lake City emerging as a growing center for international banking, in large part due to the area’s language capabilities, an outgrowth of Mormon missionary activity. Salt Lake City has become Goldman Sachs’s fourth-largest global hub; the firm now employs more people there than in any U.S. location outside New York. All indications are that the financial-services presence in Utah will continue growing.

With the Internet reducing the need for close communication for many transactions, and powerful migration trends among millennials to Sunbelt and Intermountain West locales, the expensive, heavily regulated, high-tax financial bastions in New York and elsewhere can expect mounting competititon. Nor is this just a matter of low-paying back-office jobs; investment banks like Alliance-Bernstein, Morgan Stanley, and Goldman Sachs are moving well-paid professional personnel into their new outposts. In places like Charlotte, veterans of large concerns like Bank of America are setting up boutique investment banks of their own. We can expect more of this kind of activity in places like Dallas, Nashville, and Salt Lake City as well.

Another challenge for the old-line financial centers, and just as daunting, emanates from Silicon Valley. Finance appears to be yet another industry ready for “disruption”—and the primary beneficiary will not be New York but San Francisco, another financial heavy-hitter. Long a major banking hub, the city, increasingly an annex of Silicon Valley, enjoyed the fastest growth, almost 19 percent since 2009, of any of the traditional financial centers. San Jose followed closely behind, with a 16.8 percent increase.

Increasingly a business service and media hub, Silicon Valley/San Francisco is no longer just geek central. As long ago as 2015, JP Morgan Chase CEO Jamie Dimon warned that “Silicon Valley is coming” after New York’s core business. Home to many rising “fintech” companies, the Bay Area already counts established firms like Apple, Square, and Paypal that are ideally suited to the new phone-based payment system. Talent that might have headed to Wall Street or LaSalle or State Streets is instead going to San Francisco’s Montgomery Street or the dominant venture-capital region around Palo Alto and Menlo Park. Financial employment is rising in other tech centers, too, notably in Austin, where financial-sector growth topped 39 percent. California-based PIMCO, the nation’s largest bond fund, recently announced plans to site its expanding data and analytics operation in the Texas capital—not in Orange County, long a center for tech and data analysis.

The changing nature of the financial and tech industries, along with the appeal of lower-cost regions for these industries, poses a threat to long-established finance centers like Boston, Chicago, and New York. In these traditional hubs, banking and finance have long been producers of both high-paying jobs and generous revenues for overspending urban regimes. Legislators in old-guard cities should take a long look at the policies that are driving these jobs away presently—and perhaps permanently.

Joel Kotkin is the presidential fellow in urban futures at Chapman University and executive director of the Center for Opportunity Urbanism. His latest book is The Human City: Urbanism for the Rest of Us.

Homepage photo credit: Nashville Skyline by Peter Miller