Strengthen cities to prepare the Netherlands for the future

A well-educated labour force will determine economic success in the future even more strongly than it currently does. More freedom for cities and appropriate education for all will prepare the Netherlands for the future.

The answer to the question how the Netherlands will earn its living in 2040 is: with well-educated people in strong cities. This is the main conclusion drawn by the CPB in the Special Publication 'The Netherlands of 2040'. In this scenario study, researchers Bas ter Weel, Albert van der Horst and George Gelauff sketch the most important challenges for the Netherlands to remain an attractive place of business, with high-quality production and a flexible labour market. The publication and background information are available at www.nl2040.nl.

Scenarios about people and cities
The scenarios in this study offer students, employees, companies and government guidance in preparing for the future. All scenarios are equally probable, they show how divergent future worlds might be. By definition, the future is uncertain and becomes more uncertain the further we look ahead. The scenarios for 2040 sketch four possible worlds, based on two fundamental uncertainties: the size of cities and the division of labour among workers.

Cities are a breeding ground for innovation …
Strong cities offering an attractive business environment are able to attract and hold on to a high-quality cluster of companies and employees. Companies settle themselves in these cities in order to benefit from knowledge spillovers, short distances to suppliers and customers, and large markets. It is not a coincidence that many corporate headquarters of Dutch multinationals have moved to Amsterdam towards the end of the 20st century.

… and are large or small
Strong cities are not always large cities. After World War II, many cities were struggling with social problems and people moving to the suburbs. In that period, both Amsterdam and Rotterdam lost some 25% of their population. More recently, however, this trend has reversed as especially the highly educated started to settle in cities.

Large cities will be successful in the next thirty years if a new general-purpose technology (such as bio- or nanotechnology) will develop and intensive collaboration between researchers, designers, producers and professionals is essential. However, the reverse might also happen. Small cities with strong global ties are attractive if further developments of ICT dominate technological advancement. In that case geographical proximity will become less relevant and production processes depending less on human interactions will move away from expensive locations.

Talented people innovate more …
Changing production processes ensure that Dutch employees will have to compete with workers worldwide, but at same time they will have to cooperate with them as well. Knowledge and innovation are and will remain key for the success of the Dutch economy. This demands a well-educated workforce.

… and are either specialist or generalist
Specialisation will become more important if communication technology develops further. Employees are able to focus on a single task and excel. For example, the production of a Boeing 787 is currently coordinated from Chicago, involving 43 foreign companies at 135 different locations. Toyota has recently experienced the downside of this setup, as quality control turned out to be insufficient for some parts.

At the same time, future technological change could demand employees who combine many tasks. This is the case when information technology makes all necessary knowledge instantly available. Insurers, for example, try to have a single person handle all customer questions. Fewer links mean fewer opportunities for mistakes.

Four scenario's
This study charts uncertainty about the size of cities and the division of labour between employees by means of four scenarios:

• Talent Towns are small, highly specialised cities with a global network of connections. This offers opportunities for specialised employees, but is also characterised by a large degree of uncertainty and competition.
• Cosmopolitan Centres are large specialised cities that excel at developing new technologies. Employees benefit fully from interactions and travel from anywhere to the city of their specialisation.
• Egalitarian Ecologies are small cities that produce a wide range of goods and services, adapted to local preferences. Employees operate independently, utilising globally available knowledge and information.
• Metropolitan Markets is a scenario characterised by a couple of mega-cities. These cities have a large gravitational force on companies and employees, which harms the periphery.

Policy for the future
The scenarios offer guidance for long-term strategic policymaking. Regardless of how the future unfolds, it is necessary that cities are able to develop more freely. Cities need more possibilities to pursue their own policies. In most areas good policy varies by scenario:

• Strengthen cities and infrastructure. Large cities should be able to grow, with a local network of public transportation and roads, combined with excellent knowledge institutes. Small cities require excellent connections in the form of highways and ICT-networks.
• Education in worlds with specialised knowledge asks for early selection and excellence. Generic knowledge puts more emphasis on accessibility and a broad basic training.
• Targeted innovation policies are only effective in the scenario with specialised and large cities.
• The role for the welfare state is limited in all scenarios. Opportunities are especially scarce in scenarios with much specialisation and much need for collective protection of vulnerable employees. The least of it is demanded in scenarios in which the government is most capable of providing protection.
• That is why renting a house is to be preferred relative to buying one in scenarios that emphasise specialisation. Workers renting a house are able to prevent a large drop in their wealth when their specialisation becomes obsolete because of economic circumstances, as happened in the past in the textile industry in Tilburg and Enschede.
• Specialised workers benefit from policies that stimulate retraining. Employees with generic skills benefit from policies aimed at job mobility.

Special Publication 88, The Netherlands of 2040, ISBN 978-90-5833-461-9, can be (freely) downloaded as PDF-file. It is also available on www.nl2040.nl. Earlier scenario studies can also be found here.

This publication is also available in print and can be ordered from:
Library CPB Netherlands Bureau for Economic Policy Analysis

P.O. Box 80510
2508 GM Den Haag
Telefax: 070-3383350
E-mail: bibliotheek@cpb.nl
Price: 20,- euro (excluding postage and packing)