the comeback of post-socialist cities

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PLEASE SCROLL DOWN FOR ARTICLE This article was downloaded by: [Tsenkova, Sasha] On: 9 January 2009 Access details: Access Details: [subscription number 907463812] Publisher Routledge Informa Ltd Registered in England and Wales Registered Number: 1072954 Registered office: Mortimer House, 37-41 Mortimer Street, London W1T 3JH, UK Urban Research & Practice Publication details, including instructions for authors and subscription information: http://www.informaworld.com/smpp/title~content=t777186834 Managing change: the comeback of post-socialist cities Sasha Tsenkova a a Faculty of Environmental Design, University of Calgary, Alberta, Canada Online Publication Date: 01 November 2008 To cite this Article Tsenkova, Sasha(2008)'Managing change: the comeback of post-socialist cities',Urban Research & Practice,1:3,291 — 310 To link to this Article: DOI: 10.1080/17535060802476525 URL: http://dx.doi.org/10.1080/17535060802476525 Full terms and conditions of use: http://www.informaworld.com/terms-and-conditions-of-access.pdf This article may be used for research, teaching and private study purposes. Any substantial or systematic reproduction, re-distribution, re-selling, loan or sub-licensing, systematic supply or distribution in any form to anyone is expressly forbidden. The publisher does not give any warranty express or implied or make any representation that the contents will be complete or accurate or up to date. The accuracy of any instructions, formulae and drug doses should be independently verified with primary sources. The publisher shall not be liable for any loss, actions, claims, proceedings, demand or costs or damages whatsoever or howsoever caused arising directly or indirectly in connection with or arising out of the use of this material.

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PLEASE SCROLL DOWN FOR ARTICLE

This article was downloaded by: [Tsenkova, Sasha]On: 9 January 2009Access details: Access Details: [subscription number 907463812]Publisher RoutledgeInforma Ltd Registered in England and Wales Registered Number: 1072954 Registered office: Mortimer House,37-41 Mortimer Street, London W1T 3JH, UK

Urban Research & PracticePublication details, including instructions for authors and subscription information:http://www.informaworld.com/smpp/title~content=t777186834

Managing change: the comeback of post-socialist citiesSasha Tsenkova a

a Faculty of Environmental Design, University of Calgary, Alberta, Canada

Online Publication Date: 01 November 2008

To cite this Article Tsenkova, Sasha(2008)'Managing change: the comeback of post-socialist cities',Urban Research & Practice,1:3,291— 310

To link to this Article: DOI: 10.1080/17535060802476525

URL: http://dx.doi.org/10.1080/17535060802476525

Full terms and conditions of use: http://www.informaworld.com/terms-and-conditions-of-access.pdf

This article may be used for research, teaching and private study purposes. Any substantial orsystematic reproduction, re-distribution, re-selling, loan or sub-licensing, systematic supply ordistribution in any form to anyone is expressly forbidden.

The publisher does not give any warranty express or implied or make any representation that the contentswill be complete or accurate or up to date. The accuracy of any instructions, formulae and drug dosesshould be independently verified with primary sources. The publisher shall not be liable for any loss,actions, claims, proceedings, demand or costs or damages whatsoever or howsoever caused arising directlyor indirectly in connection with or arising out of the use of this material.

Urban Research & PracticeVol. 1, No. 3, November 2008, 291–310

ISSN 1753-5069 print/ISSN 1753-5077 online© 2008 Taylor & FrancisDOI: 10.1080/17535060802476525http://www.informaworld.com

RURP1753-50691753-5077Urban Research & Practice, Vol. 1, No. 3, October 2008: pp. 1–18Urban Research & PracticeManaging change: the comeback of post-socialist citiesUrban Research and PracticeS. TsenkovaSasha Tsenkova*

Faculty of Environmental Design, University of Calgary, Alberta, Canada

The paper explores major trends and patterns of change embedded in the overall process ofeconomic, social and political transformation that profoundly influence the spatial adaptationand repositioning of post-socialist cities. It reflects on important issues such as the efforts tocreate competitive, socially inclusive and well-governed cities in the post-socialist world. Theresearch draws much-needed attention to an important set of urban policy issues with wideimplications for the success of the transition process in the region. It explores the linksbetween the transition to democracy, markets and decentralized governance, and highlightsthe most salient characteristics of these multilayered processes on the spatial transformationin post-socialist cities. The main argument is that the impact of these processes of urbanchange has created a mosaic of diverse urban experiences. Despite this diversity, the spatialtransformation has several principal dimensions: (1) new spaces of production/consumptionreflecting globalization and economic restructuring within the hierarchy of cities; (2) socialdifferentiation in residential spaces associated with growing inequality and the emergence ofnew forms of urban poverty; and (3) conflicts and selective urban development associatedwith new models of governance and institutional transformation. The exploration of these‘transitions’ through the urban lens emphasizes the importance of strategic urban manage-ment to address the unique challenges of post-socialist cities and their dynamic realities.

Keywords: post-socialist cities; urban management; economic change; social differentiation;democratic governance; suburbanization

Framework for analysis: dimensions of urban changePost-socialist cities and societies have experienced a dramatic economic, social and politicalchange. Fifteen years after the start of the transition to markets and democracy, most post-socialistcountries have become functioning market economies, have come close to or exceeded the levelof economic output of the early 1990s, and have moved to decentralized political and adminis-trative power. Progress in economic terms has been uneven, and the pursuit of private sector-driven growth as well as macroeconomic and social reforms has delivered mixed results withrespect to economic performance, provision of basic services, and the effectiveness of socialsafety nets. In all countries of the region, inequality and poverty have increased, with significantimplications for cities where most people live and work.

This paper explores some of these trends and patterns of change embedded in the overallprocess of economic, social and political transformation that profoundly influence the spatialadaptation and repositioning of post-socialist cities. It reflects on important issues such as theefforts to create competitive, socially inclusive and well-governed cities in the post-socialistworld. The paper draws much-needed attention to an important set of urban policy issues withwide implications for the success of the transition process in the region. It explores the links

*Email: [email protected]

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between the transition to democracy, markets and decentralized governance, and highlights themost salient characteristics of these multilayered processes on spatial transformation in post-socialist cities.

It is important to position the post-socialist urban experience in the framework of overallinstitutional transformation on the one hand, and in the context of rapid economic and politicalsystem change on the other. This undeniable complexity creates unique challenges for planningand urban policy. The analytical framework of the paper draws on approaches in the urbanliterature that use the country’s urban system as the analytical construct to measure and interprettrends. It is argued that the urban system serves as the primary channel linking the nationaleconomy to the system of global cities (Beaverstock et al. 2000, Yates and Cheng 2002). Viewingdevelopment through the urban lens, the approach explicitly links the changes in the externalenvironment (national and global), which are much more dramatic and revolutionary, to changesin the internal environment (the urban system and the city itself), by emphasizing the nature ofthe ongoing transformation, reciprocity and diversity. The transformations are associated withthree aspects of the transition process that are particularly important for post-socialist cities: thetransition to democracy (systemic political change), to markets (systemic economic change),and to democratic governance (Buckley and Mini 2000, World Bank 2000, van Kempen et al.2005). While these interrelated aspects of the post-socialist transition have been explored at thenational level in a number of studies, very few (Adair et al. 1999, Hamilton et al. 2005, Tsenkova2006) have acknowledged their impact on the world of post-socialist cities.

The analytical framework advances the notion that the triple transition is a major driver ofurban change. Further, the local responses to global pressures (competition for markets, trade)and policy reforms at the national level (privatization of industry, deregulation of real estatemarkets, and social policy reforms) set the framework for specific changes in the economic,social, institutional and spatial structure of the city. Finally, since post-socialist cities areincreasingly drawn into a system of global relations, the positioning of their respective nation-states within the global economic system also exercises considerable influence. Therefore theanalytical framework in the paper highlights the important differences in the performance ofnation-states with respect to the three major transitions: to democracy, markets and decentralizedgovernance. It then relates these transitions to processes of spatial change in three interrelateddomains: (1) economic change (globalization, de-industrialization, growth vs. decline); (2)social change (demographic transition, income polarization, poverty); and (3) changes in urbangovernance (new central–local relationships, provision of services, urban planning). The lastaspect of the transition, labeled ‘the quiet revolution’ of decentralization and devolution ofpower to local governments, significantly affects the performance of post-socialist cities.

In spatial terms, other forces behind the dynamics of urban change are land and housingreforms, property market differentiation and fragmentation, and the increased flow of domesticand foreign investment (UNECE 1997, Tsenkova 2005). The impact of those factors should beconsidered against the background of rapidly changing roles of traditional institutions, actorsand relationships in the urban development process. Within the new market reality, urban devel-opment has become associated with a wave of investment in land uses offering opportunities forhigher return, selective inner-city redevelopment by the private sector and gentrification of theinner city neighbourhoods (Hamilton et al. 2005). The sequence and rhythm of these changesreshapes existing urban systems and urban forms, transforms the social and demographiccomposition of neighbourhoods and leads to new urban life styles (Knox 1995). In this context ofdynamic change, globalization and economic restructuring, social differentiation, and changes inthe institutional landscape are powerful contextual determinants of the transformations in thebuilt environment and in urban policy development and implementation (Hall 1993, Marcuseand van Kempen 2000, Giddens 2001).

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The impact of these general trends and processes of urban change, however, has created amosaic of diverse urban experiences. Despite this diversity, it can be argued that the urbanspatial change in post-socialist cities has several principal dimensions: (1) new spaces ofproduction/consumption reflecting globalization and economic restructuring within the hierarchyof cities; (2) social differentiation in residential spaces associated with growing inequality andthe emergence of urban poverty; and (3) conflicts and selective urban development associatedwith new models of governance and institutional transformation. These processes of spatialtransformation are reviewed below.

Globalization, economic restructuring and new spaces of production and consumptionNational economies in the post-socialist world have become increasingly integrated within aglobal system of production, distribution and exchange. The liberalization of trade, internationalflow of capital, the growing influence of transnational corporations, are well-known developmentsthat have led to fundamental economic restructuring, particularly visible in the post-socialist cities(Giddens 1990, Castells 1992). The transition from a centrally planned industrialized system ofmass production to a system of flexible accumulation has been accompanied by restructuring ofthe welfare state and a transition to pluralist, democratic governance. Globalization has a deepimpact on the restructuring of cities and localities involved in the process. The performance ofcities and regions is increasingly affected by processes and forces external to their geographicalareas, and even to boundaries of their national states (Sassen-Knoob 1994).

Urban restructuring in the post-socialist world is marked by the following trends: increasinginternationalization of metropolitan areas in terms of both capital and labour; de-industrializationand growth of command and control functions in capital cities; increasing social and economicpolarization within cities; changing power relations between the public and the private sector,mirrored in deregulation of planning and the emerging competition to attract foreign investment;and a new emphasis on place promotion and city marketing in the context of growing competitionfor investment and jobs (Andrusz et al. 1996, Tsenkova and Budic-Nedovic 2006). Anotherimportant factor affecting economic change in cities is the level of foreign direct investment,which has advanced steadily over the past decade in line with the countries’ progress in transi-tion and macroeconomic stabilization. Foreign investment has provided a major boost to marketeconomies, particularly in the Czech Republic, Estonia and Hungary, where more liberal andstable environments have attracted strategic investors to enterprise restructuring and technologytransfer.

New challenges have emerged from the profound structural changes in the economy as aresult of transition from planning to markets. The pressure of national and internationaleconomic forces, and the opening-up of previously sheltered sectors to the growing competitionin the global marketplace, has required the urgent adjustment of industries, services and othereconomic activities (Adair et al. 1999, World Bank 2000). With the advances of privatization instrategic sectors – energy production, telecommunications, manufacturing – the dominance ofthe private sector in economic development, as well as the emerging new industrial mix, havegenerated new demand for new production spaces. The post-socialist urban economies haveresponded differently to the changes in macroeconomic conditions. The consequent rapid adjust-ment of industries, services and other economic activities has crucial effects on the direction ofgrowth and change, on future specialization in cities’ economic bases, on their mix of traditionalmanufacturing industries and advanced services. Empirical evidence suggests that in most citiesthe economic diversification associated with the transition from industrial to service-oriented,information-based urban economies has increased.1 During the transition, individual urban areashave undergone differentiated development, with some losing and others gaining economic

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attractiveness. Capital cities and large urban centres have been privileged in that respect, attract-ing a large share of the regional investment in banking, retail and information-based technolo-gies. Their economies have managed to sustain a more stable labour market sheltered from highunemployment, with unemployment rates half to one-third of the national average (van Kempenet al. 2005, Hamilton et al. 2005).

The economic transition to market-oriented forms of economic development, industrial pro-duction and technological advancement is reflected in a series of changes in the urban fabric.The existing industrial zones have experienced some intensification to accommodate the grow-ing number of new private firms, warehouses and offices. The continued growth of service sec-tor industries has made areas with good exposure and transportation accessibility more attractiveto private sector investors. Some of the industrial zones, however, particularly associated withmanufacturing and heavy industries, have declined. In some cities, the large state enterprises, alegacy of the socialist past, have gone bankrupt and the industrial landscape has become domi-nated by abandoned complexes of industrial and administrative buildings. New industrial activi-ties, driven by foreign investment, have generated demand for suburban industrial warehouses,often beyond the urban edge.

Paralleled by de-industrialization and the shift to service-based urban economies, new indus-trial development has been directed to secondary cities (CBRE 2005). Cities like Brno, Plzen,and Ostrava in the Czech Republic; Katowice, Wroclaw, and Lodz in Poland; and Debrecen andSzeged in Hungary have developed as major industrial hubs, further fuelling the process ofindustrial decentralization away from the capital cities (Stanilov 2007). Bratislava has the high-est share of industrial stock per 1000 residents, well above the level in Budapest, Prague andMoscow (Figure 1). The data also indicate a positive relationship between lower vacancy ratesand higher yields, with yields in Moscow exceeding 20%.

But the most dramatic spatial change driven by economic transformations is perhaps mani-fested in the commercial property markets, which have attracted the largest share of institutional

Figure 1. Industrial stock in post-socialist capital cities.Source: Author’s estimates based on data from CBRE, 2005.

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foreign investment. Shifts in technology and communications have established new office func-tions, particularly in banking and finance, as a significant component in the economic base ofcapital cities. These trends have resulted in dynamic property development of office space innew suburban office parks and top prices in buoyant office markets (e.g. in Moscow, Budapest,Prague, and Warsaw). The available office space per capita in several cities in the region is pre-sented in Figure 2. As the data indicate, Bratislava tends to be the leader in terms of office sup-ply, followed by Warsaw and Prague with 1500 sq. m. per 1000 residents. More recently,institutional investors have shifted their attention to Bucharest and Moscow, where higher yieldsand lower vacancy rates have generated better prospects. Overall, less risk-averse investors havebeen rewarded by higher returns in the emerging markets of the post-socialist capitals, comparedwith those in more mature markets (DTZ 2005).2

The retail sector has also experienced dynamic growth. While the early years of the transitionwere marked by a high level of small-scale retail activity, often run out of ground level apart-ments, garages, basements and other ad-hoc premises, a more recent consolidation of retail profitswas channelled into the construction of new high-end retail spaces in the city centre and denselypopulated housing estates (Weclawowicz 1992, Sykora 1994, Tosics 2005). Existing retail spaceshave been restructured to accommodate a diverse and entrepreneurial retail sector, and stripretailing has established itself as the principal retail activity in pedestrian zones, usually withexclusive shops and boutiques that cater to the affluent consumer. The increased interest in thedevelopment of shopping malls in the post-socialist cities has created new landscapes of retail,entertainment, restaurants and hotels, associated with a new urban culture of consumerism andrising purchasing power. The shopping malls, often in suburban locations, have provided a new,more sophisticated retail experience compared with the old bazaars, retail strips and open mar-kets. Foreign capital, which presents the majority of investments in the retail market, has beendirected primarily to large-scale projects in the urban periphery (Keivani et al. 2001). Warsaw,

Figure 2. Office supply in post-socialist capital cities.Source: Author’s estimates based on data from CBRE, 2005.

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Budapest and Bratislava have over 500 sq. m. of shopping-centre space per 1000 residents, two tothree times higher than Paris and London (see Figure 3).3 This segment of the market offers anaverage yield of 8% in the central European capital cities, while the prospects in Moscow, Sofiaand Bucharest tend to be higher, as might be expected in cases of substantially lower supply.

Growing inequality, urban poverty and social differentiation in residential environmentsThe legacy of centrally directed urbanization driven by industrial growth during socialism hashad powerful consequences for post-socialist cities. This highly urbanised economic systemacross the region is much more vulnerable to external shocks and, given the relatively low percapita income, is difficult to maintain. Over-industrialized cities were hit badly by the massiveclosures of unproductive state enterprises. Unemployment and poverty escalated. On the otherhand, some countries in the region have economies much more dependent on agriculture, withlow levels of urbanization, as the data in Table 1 indicate.

Two aspects of these observations have particular significance for the urban future: (1) countriesin the region that have been ‘over-industrialized’ and ‘over-urbanized’ may have more severeeconomic shifts affecting their urban areas; and (2) countries with less urbanization and lesseconomic development may face migration to urban areas and rapidly rising urban poverty.The economic difficulties and social stress have affected patterns of urban growth across theregion. Data indicate that annual urban population growth in most countries will be lower than1% until 2015, with Estonia and Latvia expected to have negative population growth, in therange of 0.7–0.8% per year. Some countries in the Balkans with lower levels of urbanization,however, are projected to have annual growth rates almost three times the regional average.Concentration of the population in large urban agglomerations is another characteristic feature

Figure 3. Shopping centres in post-socialist capital cities.Source: Author’s estimates based on data from CBRE, 2005.

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of the region, particularly in the Russian Federation (UN-HABITAT 2001). Capital cities havebecome the champions of transition, attracting investment, people and jobs (European Commission2007). The concentrations of urban population in the capital cities are higher in Latvia, Estonia,Macedonia and Albania, exceeding 40%.

These demographic developments should be evaluated against the background of risingincome inequality, social distress and growing insecurity across post-socialist cities. The social-ist system had a more egalitarian income distribution than the new market-based economic sys-tem (Milanovic 1992). It also tolerated lower economic growth for the sake of avoiding incomeinequality. Not surprisingly, an attribute of the economic transition was income polarization,which – measured by the Gini coefficient – has increased rapidly, with important implicationsfor social safety nets and access to housing and urban services (Buckley and Mini 2000).

Post-socialist urban economies have experienced rapid economic and social differentiationresulting in escalating unemployment, degradation in living standards, and growing social prob-lems in the last 15 years. The social cost of the transition from planning to markets has beenhigh, particularly in the industrialized cities dominated by large state-owned industries wherethe socialist legacy has left a much more powerful imprint on the cities’ economies, societiesand spatial structure. The social problems in post-socialist cities are related to prolonged reces-sions and to the growth of long-term unemployment (Buckley and Mini 2000). Groups at riskare the long-term unemployed, large or one-parent families, people with low education, and,increasingly, ethnic minorities. There are particularly deep poverty pockets among Romacommunities.4 Several trends have emerged (Tsenkova 2006):

• The decline of manufacturing industries, the loss of skilled manual middle-income jobs;• The growth of highly skilled and well-paid professionals managing the new post-industrial,

service-driven urban economy;• Parallel development of low-skilled and low-paid service jobs often part of city’s informal

sector.

Table 1. Major urban indicators in selected post-socialist countries.

Level of Urbanization

(% Population) 2000

Urban Population,

Millions 2000

Projected Annual

Growth (%) 2000–2015a Capital City

Capital City Share of Urban Population (%)

Albania 41.2 1.2 2.1 Tirana 43b

Bosnia & Herzegovina 43 1.7 1.8 Sarajevo 24b

Bulgaria 69.6 5.7 −0.1 Sofia 21Croatia 57.7 2.5 0.5 Zagreb 16Czech Republic 74.7 7.6 0.0 Prague 16Estonia 68.6 0.9 −0.8 Tallinn 44b

Hungary 64 6.4 0.0 Budapest 28Latvia 69 1.6 −0.7 Riga 47b

Lithuania 68.4 2.5 0.0 Vilnius 22b

FYRMacedonia 62 1.2 . . . Skopje 47b

Poland 65.6 25.4 0.5 Warsaw 9Russian Federation 77.7 114.1 0.2 Moscow 8Slovakia 57.4 3.0 0.6 Bratislava 15b

Slovenia 50.4 1.0 0.5 Ljubljana 28b

Serbia & Montenegro 52.2 5.5 0.8 Belgrade 27

Sources: UN-HABITAT, 2001.Notes: a. Estimates of UN Population Division; b. Author’s estimates based on data from National Statistical Offices.

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These economic changes, leading to a two-speed urban economy with low paid service jobs and aprivileged sector of highly paid professionals, coupled with recessions, cut-backs in social wel-fare and reduced spending on social programs, have contributed to the growing income and socialinequalities. Lack of political commitment to address problems such as structural unemploymentor rising homelessness in a comprehensive manner have aggravated the situation even further,particularly in countries experiencing economic difficulties and civil war. In the capital cities, thetwo-speed economy has major implications for the growing social differentiation in the residentialfabric and the formation of a two-speed housing market. The results are mixed, with problematicconcentrations of the urban poor in run-down inner-city neighbourhoods and/or peripheral publichousing estates and the spatial segregation of the elites in gated communities.

Post-socialist cities have a very distinct residential environment dominated by a high shareof high-density prefabricated multifamily housing built in the urban periphery (Bertaud andRenaud 1997). It makes up 70% of all housing in Bucharest, 45% in Sofia and 20% in Ljubljana.By comparison, in Western European cities, fewer than 7% of the people live in housing estates(EAUE 2003). This was the flagship of socialist housing policies of state-funded, highly subsi-dized provision of public housing for rent or for sale. Standardized methods of construction,economies of scale and higher density characterize these uniform urban environments, as shownin Figure 4. These areas also lack retail and employment opportunities, so residents make longcommuting trips to centres of employment.

At the same time, another characteristic feature of post-socialist cities is the high proportionof home ownership. Available data are presented in Figure 5. In most of the capital cities in theregion, home ownership exceeds 75%; cities such as Tirana have reached 98%. While Riga and

Figure 4. Multifamily prefabricated housing in Riga.

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Prague have been the exceptions, privatization in the last five years has transferred another 50%of Riga’s stock into private hands. Given the nature of the housing stock and its dependence oncollective forms of management, in the context of rising utility costs, social differentiation andpoverty, post-socialist cities face a serious challenge to sustain the value of their existing hous-ing assets (see Tsenkova 2003, 2005). Growing social polarization and the elimination of state-funded housing programs underline the pattern of poverty concentration in run-down inner-cityneighbourhoods as well as in peri-urban areas with illegal settlements. These manifestations ofsocial change, equally dramatic in Budapest, Moscow, Belgrade, Sofia and Tirana, call for arenewed emphasis on public intervention to reverse the spiral of urban decline (Tsenkova andBudic-Nedovic 2006).

While the trends outlined here define the least desirable direction of change in residentialenvironments, the overall transformation of housing areas, both inner city and suburban, is lessuniform across post-socialist cities. Typically, new housing construction has gentrified attractiveinner-city neighbourhoods or has transformed the urban fringe with single family developments.Just like new office and retail development, new housing has added subsequent rings to theexisting compact urban structure. A number of studies document a pattern of extensive growthand even urban sprawl driven by higher mobility of urban residents and preferences for singlefamily living. However, these trends have been more moderate due to limited mortgage lendingand the fragmented nature of the house-building industry. So far, post-socialist cities do nothave the typical master-planned communities, and new suburban developments often lackadequate infrastructure and services. Some post-socialist cities are characterized by a high levelof informal housing in the peri-urban areas of large cities (e.g. Belgrade, Skopje, Podgorica,Tirana), which is home to one-third of the residents. Informal developments have become asocially acceptable response to an urban crisis in the provision of affordable housing, whereillegal connections to existing infrastructure ensure much-needed electricity and water. Thesecould be squatter settlements on public land or illegal subdivisions outside urban/municipalboundaries. The quality of housing is generally better, and residents are relatively effective in

Figure 5. Home ownership in selected capital cities.Source: Based on data from UN-HABITAT, 2000.

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resisting attempts to relocate them. In some cases, as in the city of Piteshti (Romania), they havenegotiated inclusion in the urban boundaries relatively quickly, and leverage investment in roadsand infrastructure. The illegal subdivision emerged following the restitution of agricultural landon the outskirts to a housing estate. The new owners, mostly residents from the multifamilyhousing in the estate, took possession of over 300 plots of land and started to build their dreamhome (see Figure 6). Today, close to 105 new houses at various stages of construction boast amix of urban and rural lifestyle, and the municipality has hastily approved new plans for annex-ation of the area (Soaita 2007).

The new institutional context of urban development and governanceThe hallmark of the political transition has been the move to democracy and multiparty elections.The transition to democracy has resulted in the break-up of two federations and the creation of28 independent states. Many regional urban centres – Riga, Tallinn, Vilnius, Zagreb, Ljubljana,Bratislava, Sarajevo, to name a few – were reinvented as national capitals, which signalledmajor transformations in their economies and urban structure. Within cities, some of the mostvisible manifestations of the transition to democracy appear in the local politics surroundingmunicipal elections. The post-socialist cities have created a variety of political structures rangingfrom single-tier to multi-tier governments. Most countries lack national urban policies, and thefrequent changes in political regimes no doubt lead to a lack of consistency in party politics atthe national and city levels (see van Kempen et al. 2005 for a discussion of these issues in theEuropean Union accession countries). These changes have made urban politics less predictable,and socially and economically more conservative compared to those during socialist times.

Even without explicit urban policies, social redistribution policies, investment strategies,privatization and economic restructuring increasingly affect localities and influence private sectorinvestment in cities. Local governments have an important role in shaping these outcomesthrough strategic planning, land use planning and city marketing (Adair et al. 1999, Stanilov2007). In addition, the behaviour of local institutions helps to explain the variety of localresponses in the post-socialist world of cities and the new sources of difference depending ontheir locality, competitiveness and ability to manage change.

Within the framework of institutional change, central governments have enhanced localautonomy by decentralizing power and responsibilities. Local governments have becomeprincipally responsible for urban planning and management. They also have retained statutory

Figure 6. Illegal subdivision in suburban Pitesti.Source: Soaita, 2007.

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responsibility for providing and maintaining technical infrastructure and urban social services.In most cases, municipalities have acquired ownership of the fixed assets of water and seweragecompanies, district central heating systems and public housing (Mitric 1999, Tosics 2005). Atthe same time, however, inflation, subsidy restructuring and significant budget cuts have raisedthe cost of urban services dramatically. Running schools, hospitals, social care homes and othersocial facilities has raised the local governments’ expenditure and has increased the dependencyon intergovernmental transfers, since the scale of resources needed far exceeds the potential ofany local tax base. Overall, fiscal decentralization in post-socialist Europe has not enhanced theability of local governments to raise resources locally and to achieve a sustainable tax base(UNECE 1997, European Commission 2007). Rather, it has led to a growing number ofunfunded mandates, particularly in the realm of social responsibilities, with long-term implica-tions for urban residents.

The decentralization of governance has devolved critical tasks to the local level, creating atriple challenge for the provision of adequate infrastructure, management of public transport,and land use planning (Tsenkova 2005). Limited progress has been made in upgrading the urbaninfrastructure, often with increasing private sector involvement and foreign participation. Thelack of adequate funding has eroded the quality of urban services and transportation. Cash-constrained local governments have often resorted to privatizing land, buildings and othermunicipal assets. Privatization of infrastructure is underway in many countries, mostly throughconcessions and/or competitive contracting of services, however, tariff reforms continue to beundermined by weak enforcement of payments (Mitric 1999). French companies today providedistrict heating in Vilnius, German companies manage the waste management services in anumber of Bulgarian cities, and Austrian firms have concessions for the water supply in Polishand Slovak towns.

Rates of car ownership have demonstrated explosive growth across the region, with significantconsequences for higher levels of commuting by private car and major implications for intra-citytravel patterns and behaviour. It is interesting to note that despite rapidly rising car ownershipacross the region, data from recent transportation surveys indicate that in most capital cities inpost-socialist Europe almost 70% of the trips to work use buses, trams, or trolleys (EAUE 2003,European Commission 2007). Public transit is still very important in post-socialist cities, butfiscal constraints have made it particularly challenging for local governments to provideadequate and affordable services. In some cases (Prague, Sofia), local governments have gone tothe capital markets and issued bonds to secure funding; responses to the fiscal crisis have variedwidely among countries, cities and public transport companies, but were based on subsidy cutsand passenger fee adjustments. Warsaw has adopted a ‘shock-therapy’ approach that achieved70% cost recovery; Budapest raised fares in the metro and suburban rail systems substantially,which achieved a 35% cost recovery and maintained service levels (World Bank 2000).

With respect to changes in land use planning in the region, studies have found that the new,market-oriented regimes have adopted a laissez-faire approach to planning, resulting in unevenurban development. The changed institutional structures in post-socialist cities have given riseto market-friendly organizations and the promotion of the ‘entrepreneurial city’ (Tsenkova andBudic-Nedovic 2006). The new institutional actors often confront old planning rules, legislationand policies. However, the powerful socialist legacy in land use planning and in financial man-agement has remained embedded in the planning legislation and planning practice (Maier 1994,Bertaud and Renaud 1997). Planning institutions have struggled to redefine their mandate in thenew and more economically and politically diverse institutional mosaic, and to respond to theforces reshaping post-socialist cities.

In the aftermath of the economic and political crisis of socialism, followed by the erosion ofnation-states and the welfare state, powerful urban effects have been generated. These urban

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effects have occurred in the context of rapid institutional transformation, where many new urbandevelopment institutions have been established but tend to be immature and in a state of flux.This institutional incompleteness characterizes local entrepreneurialism and city image-buildingin post-socialist cities. The institutional transformation is path-dependent, and does influence thesuccess and speed of the transition in urban governance. Within the new realities, regional andurban planning has been transformed into a more democratic participatory process and thelegacy of socialist top-down approach has been abolished. The necessary democratic institutionsand organizations in civil society to support the practical realization of democratic participatoryprocesses are still under development, with varying degrees of success in different cities. Theideological shifts in urban planning and urban policy have marked new relationships betweenthe ‘private sector’ city and the ‘public sector’ city. Public–private partnerships have emerged asleading instruments in urban development.

In spatial terms, the transition to democratic, decentralized governance has facilitated twodistinct patterns of spatial restructuring: decentralization and revitalization. Decentralizationtrends have been more pronounced for new retail and industrial development. Suburbanlocations have offered cheaper land, access to major transport networks, and ample parking towholesale and retail businesses, as well as recognized economies of scale for new office parks(see Stanilov 2007). Cities expand into low-density areas, while some inner-city areas experiencedecline. A considerable growth in the construction of single family dwellings and other low-risehousing provided by decentralized suppliers, often in the urban periphery, has created a newresidential landscape.

Notwithstanding suburbanization pressures, the new market-based economy is the drivingforce behind the reorganization of city centres. The development pressure on traditional centralareas has continued with the cluster of service, financial and highly profitable urban functionsreplacing economically less viable activities such as housing and public open spaces. The vitalityof the central city core in most capital cities has been re-emphasized; themes such as quality ofurban living (gentrification, new retail and sophisticated entertainment) and enhanced socialcontrol over both public and private spaces within the city have become significant. This post-socialist restructuring of urban spaces is often associated with speculative private sector devel-opment for affluent consumers, corporations and multinational companies.

Urban governments have become more innovative in their efforts to mobilize investmentand make their cities more attractive as business and cultural centres, and in most cities oldpedestrian zones and historic towns have received a major facelift. The rebuilding of historicplazas, buildings and architectural monuments often leverages foreign investment, but alsochampions new partnerships for cultural developments used to reinforce the national identity.One of the many examples is the old town of Vilnius, designated as a UNESCO heritage site,carefully managed by a special urban development agency (Figure 7).

Other forces driving the changes in spatial structure are land reforms, property market differen-tiation, and fragmentation of investment flows (Strong et al. 1996). With the new marketorientation, urban development has ridden a wave of investment in land uses offering the highestreturns, and selective redevelopment by the private sector (Tsenkova 2001). Studies indicate thatthe region’s investment and wealth accumulation through housing and other real estate assets hasbeen concentrated in cities (Adair et al. 1999, Ghanbari-Parsa and Moatazed-Keivani 1999). How-ever, private development, exclusively profit-motivated, often leads to conflicts – displacement ofold residents in gentrified neighbourhoods, exclusion of the urban poor in run-down unservicedurban areas, or a simple take-over of public urban land and its illegal use for retails, business andeven resource extraction purposes, as the extreme example in Albania indicates (Figure 8).

The new urban planning institutions are not necessarily equipped to deal with theseconflicts. Recent urban planning initiatives in post-socialist cities are characterized by their

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neo-liberal orientation, inspired by the desire to streamline and deregulate the excessivelybureaucratized, slow and complicated process of urban planning approval. The comprehen-sive planning of the socialist era has been subject to a devastating critique on the basis thatcomprehensive plans were neither practically feasible under market conditions, nor politi-cally viable. However, new master plans – or urban general plans, approved to guide urbandevelopment – have seen multiple revisions to accommodate strategic investors or on thebasis of short-term bargaining rather than long-term goals and objectives. The whole proc-ess has become ridden with conflicts, particularly in areas with competing developmentneeds (Simpson and Chapman 1999).

Figure 7. Vilnius Old Town transformed into a prestigious historical centre.

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The comeback of post-socialist cities: reshaping urban hierarchyThe transition from planning to markets is a process of economic adjustment in which economicfunctions are specializing and concentrating. Internationalization is leading to a hierarchy offunctions and a hierarchy of location environments. A number of functions such as commandand control functions of multinational corporations, the top management of services, media, andculture are grouped in capital cities. Other functions, mostly large-scale industry and services,are looking for specialized environments. This trend towards concentration is also occurring inthe international trade and transportation sectors, so that flows are bundled in main ports anddestinations.

Figure 8. Oil well in the public spaces of a housing estate in Albania.

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Accommodating those trends in the urban environment through optimal locations for allthese functions and through preserving and developing the existing capacity is a major challengeduring the transition. The overall level, size, and significance of this spatial transformation willdepend on differences in the position of post-socialist cities and the differences in their supportbase. A distinct hierarchy of cities will be the unavoidable result of these developments. Post-socialist cities and specialized regions will be increasingly competing with each other on aEuropean and global level. Cities with an insufficient support base of retail and services,obsolete industrial capacity, will become of secondary importance in the new urban network.

Future urban policies might selectively focus on strengthening the existing capacity of urbancentres and on identifying their competitive edge. This spatial approach promotes the efficientuse of resources and investments in a specific location, its labour force, benefits from economic,social and environmental diversity, and connections. A new spatial hierarchy has emerged in thepost-socialist world of cities – with centres of new development and peripheries (Tsenkova2006). The globalization of urban economies, reinforced by the political and institutional inte-gration in Europe, has created an atmosphere of growing competition among cities (Hall 1993).The capital cities have attracted human resources, driven the growth of employment, mainly inthe tertiary sector, and reorganized production and residential activities into new metropolitanmodels of urban space.

The first category is that of capital cities and large metropolitan centres. The largest citieshave a leading edge in the competition for top functions. These activities are already concentrat-ing there and related requirements – labour market, production services, and communications –are adjusting very quickly to this process. In addition, the metropolitan environment – with itsbanking and financial institutions, government bodies, business climate and a variety of culturaland recreation facilities – has distinctive advantages. Differences among metropolis and capitalcities are decisive in the competition among cities for top functions and economic activities.5The urban structure, with its inadequacies – backlogs in the supply of office and retail space,transport problems, congestion, environmental pollution, deteriorating neighbourhoods, etc. –affects the location choices and investment decisions.

The second group is that of cities with a population over 300,000. This category includes arange of cities with a different size of population, strong industrial and manufacturing capacity,trade, education and research facilities. They will be struggling to attract new businesses, inter-national companies’ head offices, important financial institutions, trade fairs, cultural events,etc. Some of these attempts will be successful, depending on the quality of urban environment,the location advantages and economic/tax incentives to make investments viable. In the future,some of those cities may lose the position of relatively independent urban centres due to ineffi-ciencies in urban management, overall economic decline in the support base and considerablelack of resources to address growing needs for infrastructure investment and social inequalities.Some functions – banking, retail, office development – in these cities are lagging behind, thuscontributing to the inadequacy of the urban support base.

Large cities often have a particular specialization as old industrial cities, cultural and touristcentres, distribution centres, ports, traffic and transportation intersections, and centres withgovernment functions. Since this group of cities is very diverse, future urban policies mightfocus on enhancing the competitiveness of existing functions. In addition, attention to the urbanliving environment and its general attractiveness is very important. This is particularly true forthe old industrial and port cities.

The third category includes a large number of smaller cities that can be divided into citiesexperiencing economic growth, and declining cities. The first group of cities scores high in thearea of economic structural adjustment and new business development. The latter will needconsiderable efforts and resources to improve their urban quality. For both groups, economic

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developments and local economic strategies to stimulate modern industry, retail, and servicesare necessary, together with an emphasis on improvement of the living environment andinfrastructure. In some cases, those cities will continue to depend on existing capacities forlarge-scale industry – steel, basic chemical industries, oil refineries, power production, andwaste processing. Port locations and other intersections of heavy infrastructure also fall into thiscategory. Questions of environmental protection will be of paramount importance.

An alternative urban hierarchy in the European context is likely to emerge. The underlyingvalues include economic and social cohesion and balanced competitiveness. A fair number ofpost-socialist cities, particularly in the new accession states, have joined the trans-European eco-nomic space, and have become a springboard for international investment in their local andnational economies (Faludi 2002). While it is difficult to predict the competitive position ofpost-socialist cities in the future European urban hierarchy, some winners have emerged:Prague, Budapest, Warsaw, Tallinn and Bratislava (European Commission 2007).6 It is reasona-ble to expect that EU policies embedded in the European Spatial Development Perspective willtranslate into local opportunities and activities generating new development trajectories in thepost-socialist cities, which would be as diverse and unique as those characterizing the transitionfrom socialism to markets and democracy.

Managing urban changeLocal government efforts in directing and facilitating the process of economic, social and spatialrestructuring in post-socialist cities have been relatively weak due to constraints in resources,jurisdiction and powers. While various policy initiatives have been introduced to overcomeexisting urban conflicts – overdevelopment in the central business district, decay in other parts ofthe city, lack of adequate provision of transport and social infrastructure, rapid suburbanizationand illegal housing – the effect so far has been marginal and the commitment inadequate. Urbanreforms have taken a back seat in the overall process of economic and social transition (WorldBank 2000, van Kempen et al. 2005). Further, the cooperation and participation of a variety ofinstitutions and actors is limited; in fact, socialist urban management has been replaced by entre-preneurial rather than participatory governance. The flexible and largely neoliberal approach ofthe local governments is far from neutral. In the context of rapid economic, social and politicaltransition, local and regional administrations compete to attract economic activities and foreigninvestment, and frequently change their land use plans to become the winners in this competi-tion (Dear 2000, Soja 2000). Inscribed within the frame of urban and territorial marketing strat-egies, place promotion in the post-socialist world of cities has acquired a new significance(Buck et al. 2005, Tsenkova and Budic-Nedovic 2006).

Despite significant constraints with respect to resources and powers, there is considerablescope for locally designed and implemented policies to manage the process of urban restruc-turing (Marcuse and van Kempen 2000, Thorns 2002). Investment in key urban componentsmight include infrastructure development, selective urban renewal, and management ofurban growth (e.g. the strategic planning efforts in Riga, Prague, Sofia and Budapest). Theapproach offers a lot of advantages under fiscal austerity. The non-interventionist approachis based on the notion that markets would automatically provide solutions to the growingnumber of unresolved urban problems and crises. This policy alternative is becoming thechoice for some local governments due to budget constraints, lack of capital and inability tofacilitate the adjustment process and to pursue local economic development strategies (e.g.Bucharest and Tirana). Some local authorities, however, resort to this approach due to generalopposition to economic restructuring and the difficulties imposed on traditional industries andlabour markets.

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In reviewing these trends together, what stands out is that transformation and change havebeen central to the post-socialist urban experience in the past 15 years. Questions that focus onthe speed and complexity of that change are central to the future of these cities, as are the ques-tions about the multiplicity of interrelated economic, social, institutional and spatial outcomes ofthe transition. Exploring and reflecting on these ‘transitions’ through the urban lens necessitatesthe development of theoretical frameworks that adequately capture the dynamics and the diver-sity of urban phenomena in post-socialist cities (Bater 2001, Thorns 2002). Urban analysis needsto recognize change and continuity, acknowledge the importance of particular places and locali-ties, and understand the complexity of everyday life in post-socialist cities, as well as to capturethe institutional and policy mechanisms that are evolving. While urban analysis of past trendsmight be helpful in predicting the future, the nature of transformations in post-socialist cities andtheir constant adjustment to dynamic realities creates unique challenges for urban management.Two clusters of issues seem particularly important.

The first cluster of issues relates to economic competitiveness and growth. As the post-socialist countries and cities are emerging from prolonged economic recessions, and insome cases economic shocks, the need for appropriate policies and strategies to foster eco-nomic revival and growth is likely to benefit from research on the determinants of success-ful economic development. In the context of increasing regional and global competition,urban management approaches might be able to explore a variety of opportunities that aresuitable for cities of various sizes, local resources and capacities. This requires the rethink-ing of policies that promote urban competitiveness, social cohesion and better governance(Buck et al. 2005). A related set of urban policies that enhance the competitiveness of citiesand ensure adequate quality of life pertain to the provision of urban services. While theseservices in post-socialist cities have been rapidly privatized due to fiscal austerity, theshort- and long-term effects of privatization are not well known. Local governments are notcapable of securing such services, given their limited revenues; the privatization is likely tolead to differentiated access and increased disparities between affluent and poor residents(Buckley and Mini 2000, Tsenkova 2005). Better insight into the fiscal impacts of urbandevelopment and its relationship to the supply of urban services may support hybrid solu-tions that would be more appropriate in the future.

The second cluster of issues relates to urban change caused by decline – economic, demo-graphic, and social – as well as poverty. What will be the implications for the provision ofsocial services, urban infrastructure, public transport and the creation of wealth-generatingopportunities in post-socialist cites where people have to face the consequences of rapid eco-nomic adjustment, closure of state industries, escalating unemployment and deprivation? Forthose left behind, the new welfare state provides less generous social safety net and supportsystems. The effects of urban poverty are visible, but not well documented and measured intheir multidimensionality (i.e., homelessness, erosion of social capital, crime). More impor-tantly, urban management approaches need to consider policies and programs to alleviate pov-erty, place poverty on the political agenda and mobilize more adequate public and fiscalsupport for new social policies (Jones and Ravenga 2000, Mehlbye 2000). In particular,exploring and evaluating the viability of various policy instruments to assist the urban poorwith access to affordable housing is of great immediate value in the context of increasedeconomic and social polarization.

In conclusion, post-socialist cities offer a world of complexity and increasing uncertaintywith respect to future urban management. Research and critical reflection upon the directionof that change, its diversity and appropriateness, requires urgent attention to ensure eco-nomic viability, improve built environment and enhance social conditions and cohesion inthese cities.

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AcknowledgmentsThe author acknowledges the support of the Social Sciences and Humanities Research Council of Canadafor this research, and the constructive comments of Dr Nedovic-Budic from University of Illinois atUrbana Champaign on an earlier version of the paper.

Notes1. In the case of Sofia, 80% of the city’s GDP in 2002 was generated by services; in Vilnius, this share is

close to 70%.2. The regional dynamics of foreign investments in the property markets of Central and Eastern Europe

show a continuing pattern of capital concentration in the top three performers of the region – Hungary,Poland, and the Czech Republic. In 2005, these countries accounted for over 90% of the total invest-ment accumulated since 1998 (CBRE 2005).

3. Shopping centre space in London is 210 sq. m. per 1000, and in Paris 350 sq. m. per 1000 (JL Lasalle 2005).4. Capital cities, however, have poverty rates below the national average. For example, the 1998 survey

data in 14 large cities in the region showed poverty rates lower than 5%. Vilnius and Belgrade hadhigher concentrations of poor people, exceeding 15% (UN-HABITAT 2000).

5. The State of European Cities Report (European Commission 2007) identified that the capital cities inthe Baltic States, Romania and Poland were among the fastest-growing cities in Europe. For instance,Tallinn’s growth (almost 10% per year) is strongly related to the Estonian growth rate of close to 8%over the same period.

6. When using a broader measurement basis for economic competitiveness (the Lisbon Benchmark),Estonia ranks highly, while several capitals such as Prague and Budapest also perform well. Theweakest cities on the Lisbon benchmark were found in Poland, Romania, and Bulgaria (EuropeanCommission 2007).

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