Why New Sources of Capital Matter for Cites

Prior to the rise of the car and the trucking industry, cities were the best places for investment. They provided access to markets through ports, rivers, and railroads. They had large pools of unskilled labor living near factories, and they were relatively dense making business easier for firms. Significantly, capital, the cultural sociologist Zygmunt Bauman claims, was “heavy” and enmeshed in place: "Routinized time tied labor to the ground, while the massiveness of the factory buildings, the heaviness of the machinery and, last but not least, the permanently tied labor ‘bonded’ the capital. Neither capital nor labor was eager, or able, to move."

Urban centers were hubs of industry, fostering, in the words of political scientist Douglas Rae, a “civic fauna.” The rich and the poor lived close together and intermingled by participating in common civic projects. Although hardly utopias—cities struggled with public health problems, pollution, and ethnic and racial antagonism—the flow of capital through cities created jobs and a rich cultural infrastructure. But as transportation and communication technology advanced, urban investment slowed, moving away from the expensive real estate and high taxes of the city toward greener pastures in the county. As a result, many cities over the last century experienced massive unemployment and high crime as populations followed the flow of capital to middle-class enclaves in the suburbs.

Yet, today, our cities again are seeing fresh investment due to new emerging economic sectors in knowledge and technology. Instead of building factories, investments in the burgeoning knowledge economy focus on human capital, innovation, and lighter technologies. These new sectors have resulted in job growth in software and pharmaceutical development, biotech, digital entertainment, and financial innovation, among other fields.