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Urban diversity

Urban diversity
Is there such a thing as an urban "diversity dividend"? asks Mike Raco, professor of urban governance and development at University College London.

There is a deep ambiguity in the attitudes of policymakers to the growing presence of ethnic diversity in Western cities. For some, it is celebrated as a core element in the creation of vibrant, progressive and economically successful cities. For others, it represents a threat to long-term economic prospects and social cohesion. So what we can learn from the existing evidence?

Some research indicates that greater ethnic diversity boosts the competitiveness of cities. World business leaders in Davos recently lauded the "diversity dividends" that accrue from varied labor markets and the wider pool of skills and talent that these provide.

It is claimed by some that firms with more diverse employees and managers often possess more outward-looking approaches. They have a better awareness of the cultural variations found in markets and are able to tap into broader sources of finance.

There are, for example, growing trans-national sources of Islamic funding made available for Muslim entrepreneurs and businesses. The global distribution of investments from international sovereign wealth funds is also influenced by the presence of diasporic communities, who are more likely to be found in diverse cities.

Research in European cities also indicates a high degree of entrepreneurialism among migrant communities. Their presence can act as a platform for creativity and business growth, particularly in poorer neighborhoods.

City marketing campaigns increasingly reflect this optimistic ethos. The bid for the 2012 London Olympic Games represented a watershed moment in showing how the promotion of diversity can act as a springboard for "boosterist" agendas. It has been copied by cities across the world.

And yet, these positive representations are also contested. Much of the focus has been on "creative" individuals and firms. Yet the reality in many cities is that migrants face multiple forms of discrimination and labor market exploitation. In some instances, their presence also has a negative impact on the working conditions of existing lower-skilled workers. Moreover, despite the rhetoric, many ethnic businesses face significant barriers when seeking to expand beyond their immediate, local markets, thus limiting their wider economic potential.

There are also political dangers. The presence of migrants can act as a lightning rod for broader discontent. The marketing of diversity by cities can all too easily descend into crude caricatures and stereotypes. While pro-diversity policies appear to embrace ethnic differences, they can also amplify them by encouraging communities and citizens to think of themselves as separated by cultural barriers.

So what of the future? There is much to be positive about. There is evidence that the attitude of city authorities to diversity tends to be pragmatic and positive. Diversity is commonly seen as an asset. It is a part of what makes cities attractive places in which to live, work and invest. There are numerous examples of how social and economic policies are being combined in innovative ways to meet changing demands. However, some of the biggest threats come from wider economic changes. There are growing inequalities in cities across the world and this is leading to a polarization of opportunities for all, not just those defined as ethnically diverse. Policy interventions that are tailored to the needs of diverse groups have an important role to play, but they are not a substitute for a fairer distribution of economic risks and rewards.

This blog is part of a series managed by The Economist Intelligence Unit for AkzoNobel.