The Economic Challenges and Opportunities of Shrinking Cities and the Concept of Smart Shrinkage

This episode delves into the phenomenon of shrinking cities, using Detroit as a primary case study to illustrate the severe economic and social consequences of urban depopulation. It highlights how Detroit's decline from an automotive powerhouse to a city with high poverty rates was driven by de-industrialization and an inability to pivot to new high-value industries, leading to a significant population exodus. The podcast reveals that this trend is not isolated, with a quarter of global cities experiencing population decline between 2013 and 2018, and predictions suggesting this number will grow to 37% by 2050. The core problem for shrinking cities is the 'shrinking trap,' where declining populations lead to reduced property tax revenues and government funding, making it difficult to maintain infrastructure and public services over a fixed land area, further deterring investment and exacerbating social problems.

The historical context of urban shrinkage is explored, noting that depopulation has occurred throughout history due to calamities like war, natural disasters, and plagues, sometimes temporarily (e.g., London, Paris) and sometimes permanently (e.g., Carthage). The Industrial Revolution initially drew populations to large metropolises, but by the late 20th century, these industrial centers became de-industrialization hubs, leading to new waves of shrinkage in places like Detroit, Manchester, and post-Soviet cities. Early urban planning concepts like Ebenezer Howard's 'Garden City' movement, which advocated for smaller, low-density communities, are contrasted with the later growth-oriented mindset that emerged as cities competed for residents and revenue. The episode meticulously explains how revenue shrinkage (due to fewer taxable homes and lower property values) and employment shrinkage (due to a dwindling and less skilled workforce) create a vicious cycle of decline.

While many cities attempt to reverse shrinkage through incentives like tax breaks, free homes, or rental assistance (e.g., Detroit's Live Midtown program, rural Japan), the podcast questions their long-term efficacy, especially when national populations are declining due to low fertility and immigration rates. A crucial distinction is made: population decline does not inherently equate to economic ruin. Citing a 2019 paper, the episode reveals that a significant portion of shrinking U.S. cities between 1980 and 2010 actually had higher median incomes and more educated residents than their regional averages. These 'prosperous shrinking cities' leverage advantages like less road congestion and more affordable housing, challenging the traditional negative perception of urban decline.

This leads to the introduction of 'smart shrinkage,' a paradigm shift in urban planning that advocates for building for less rather than constantly striving for growth. Smart shrinkage involves repurposing empty residential areas into green spaces or parks, reducing the overall infrastructure burden, and channeling funds into maintaining existing, neglected infrastructure. While not every shrinking city can become an economic miracle, the success stories often involve proximity to large metropolitan 'anchor cities' and robust support from higher levels of government. The episode concludes by suggesting that as global population growth stabilizes, shrinkage or slow growth will become the norm, making smart shrinkage a necessary and sustainable approach that re-evaluates urban spaces for environmental and social goals, echoing earlier urban planning ideals of low-density living.

Detroit's population today is about 1/3 of its population at its peak.

Scientists estimate that 25% of cities across the world saw their populations decline between 2013 and 2018.

When a population shrinks the property taxes that the city government receives shrink also for two reasons.

It is much easier for San Francisco to service its 46 square miles than it is for Detroit to service their 139 square miles.

The residents remaining in a shrinking City are also usually older and less educated than the ones with the means to leave.

Population decline doesn't have to parallel economic decline.

27% of the 886 shrinking cities in the United States between 1980 and 2010 had median incomes higher than their Regional average.

In a nutshell smart shrinkage is the idea that policy makers should build for less instead of building more homes in the hopes of attracting people.