Reflecting on COVID and its legacy for urban policy, particularly in Melbourne, takes me back to two seminal ideas in my professional practice.
The first is embedded in Fritz Lange’s 1927 science fiction epic “Metropolis”. It features a shining modernist city with an exhilarating, if somewhat debauched, cultural life. But below ground a population of enslaved workers, who never see the sun, toil away in misery to keep the city functioning.
Still from Metropolis 1927
The second idea comes from Robert Reich, a key economics adviser in the Clinton administration. As a labour market specialist he unpacked the rise of ‘knowledge work’ as the accelerating driver of business growth.
Reich coined the term ‘Symbolic Analyst’ to characterise those workers who do not produce consumer goods and services themselves but, rather, deal exclusively in abstract ideas and conceptual problem solving to improve the productivity of others.
Symbolic Analysts include the elite end of the professional classes – lawyers, finance brokers, strategists and management consultants, architects and designers and engineers. Their work is sharply differentiated from, and typically much better paid than, those whom Reich called ‘In Person Service Workers’ – shop staff, hairdressers, travel agents, health care workers, hospitality staff and delivery people – and ‘Routine Production Workers’ – who, once at least, performed secure if soul destroying jobs in factories and warehouses.
You get the picture. By highlighting the rise of precarious employment, geographic stratification amongst workers of different Reichian types and the unequal distribution of choices across the community, the COVID experience reveals a glittering, self-congratulatory city built on the back of excluded, marginalised and exploited workers. We got a sense, at the height of the second Melbourne lock down in particular, that the social architecture which had emerged over the past three decades was unsustainable. Are we about to snap back to business as usual?
Perhaps more than any other advanced western city, central Melbourne reflects the benefits of harnessing ‘knowledge-based’ growth as promised in Reich’s conceptualisation of the changing labour market. The Victorian metropolis went from losing around 1,000 people per week in the early 90s as its once powerful manufacturing sector evaporated, to global poster child for urban prosperity underpinned by professional services, education, innovation and culture.
Those who helped construct this transformation should take satisfaction from this spectacular remaking of Melbourne. But COVID causes us to look at the city from a different perspective – from Lange’s underground world. And this should prompt some emphatic corrective action if we are to avoid the devastating societal implosion depicted in the 1927 parable of a divided metropolis.
Put plainly, knowledge wealth must be enjoyed broadly across the community – and seen to be so – if Melbourne and cities like it are to pick up where they left off prior to COVID.
From its late 90s revival, central Melbourne has witnessed a continuing transformation of its urban form and life not seen since the days of the Gold Rush. Melbourne City Council’s Census of Land Use and Employment (CLUE) data shows that between 2009 and 2019, the municipality added 39,000 dwellings and around 3.3 million square metres of retail, commercial, hospitality and other employment floorspace.
In round terms, the developers who delivered this housing and employment floorspace garnered profits of around $12 billion over the 10 years in question. To put this level of profit into perspective, the Fortesque Metals Group – one of WA’s junior iron ore miners, chaired by Andrew ‘Twiggy’ Forrest – generated an after tax profit of around $6.0 billion for the 2020 financial year alone.
The developers in the City of Melbourne deserved their profits. They took on commercial risk, they battled a creaking and sometimes mystifyingly complex planning system and they generated the urban fabric needed by a rapidly transforming economy and society.
Meanwhile, those who sold land to developers for these essential projects pocketed something of the order of $6 billion in the 10 years to 2019. In these transactions, the land sellers took no risks and they added no value for the community. They simply profited from the community sponsored apparatus that gives land its value: land use regulation, investment in public transport, roads, parks and other essential infrastructure, investment in civic institutions and culture and simply, the provision of good urban governance to keep the city clean, vibrant and inviting.
Indeed, these land holders profited from assets which were not theirs. Under planning law in Victoria, ownership of development rights does not attach to ownership of land. Like iron ore extraction rights in WA, development rights are reserved by the State and are granted on terms exclusively determined by the State.
The iron ore miners in WA, including Fortesque, paid some $7 billion in royalties to the State Government in 2019 alone. Land sellers in the City of Melbourne who harvested land value crystallised by the travails of bona fide developers paid next nothing in royalties.
Borrowing from the images of Lange’s Metropolis, one might say that our beautiful Melbourne is premised on a form of enslavement, if enslavement means precarity and expropriation.
City building is but one facet of public policy to deal with the structural inequities posed by the rise of the knowledge economy. Nevertheless, it has a vital part to play. In the context of the City of Melbourne, three strategic directions suggest themselves.
Firstly, the community – including the traditional owners of the land – must reassert ownership of development rights. A development royalty payment or licence fee set at just 50% of the value enabled through the planning system would generate around $300 million per year for the City of Melbourne area. By way of comparison, the Council’s annual operating spend is less than $500 million.
Secondly, funds generated from these development royalties can be deployed in genuine community assets – more and better parks, a higher quality public realm and more civic and cultural assets which are free and accessible to all.
Thirdly, the unhealthy imbalance in the social profile of the City must be corrected through a strong and sustained investment in social housing. Despite a then 20 year social housing investment drought, almost 8% of all dwellings in the City of Melbourne in 2009 comprised permanently affordable accommodation owned by the State or registered not for profits. By 2019, this percentage had shrunk to 4.5%.
Over the past 30 years Melbourne has navigated a truly remarkable transformation, skilfully tapping the currents of the knowledge economy. Post COVID, the city must look to equally transformative ways of sharing the wealth that knowledge brings.