Tokyo: The Biggest City in World History Faces Down Its Ultimate Nemesis—Arithmetic

Is Japan's capital a model for post-growth happiness more than pro-growth dynamism?

Tokyo isn't just the biggest city in the world. It's the biggest city in the history of the world. The super-mega-troprolis is home to more than 35 million people (in other words: California). The city proper holds more like 12 million, which is closer to the size of New York.

Tokyo is so large, it makes more sense to think of it as a country. In 2008, national figures put the city's GDP between Korea and the Netherlands, and just behind Canada.Twenty years ago ago, Tokyo would have been considerably higher on the list, but two lost and half-lost decades in between -- the outcome of a massive housing bubble from which the stock market has never recovered -- have dulled Japan's growt. In 1990, the Tokyo Stock Exchange accounted for 60 percent of the world stock market value. Today, its market value is about as large as the Nasdaq.

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It is a matter of inevitability that any metropolitan area with 30+ million people living in dense proximity to one another will have one heck of an economy. The mere services required to keep the nation-sized metro humming are enough to make Tokyo rank as a global hub. Despite being one of the most expensive cities in the world, Tokyo is still the city of choice for large corporations in Japan. More Fortune Global 500 companies are based in Tokyo than any other major city.

Even though Tokyo doesn't specialize in finance to the same extent as the top two cities on our list, New York and London, (finance accounts for less than 5% of employment in Tokyo) the Global Financial Centre Index still named it one of the top five financial hubs in the world. The city's disproportionate advantages lie in wholesale and manufacturing, which together account for a third of total employment.

Although Japan is famously a manufacturing juggernaut, Tokyo is known less for the manufacturing of heavy machines, like cars, and more for light industry, such as electronics and even books. In 2009, 20 percent of Tokyo's manufacturing establishments specialized in printing and publishing, three-times the national average.

As the maxim goes, a city's greatest strength is its people. Tokyo's greatest weakness is its old people. Japan is quite possibly the oldest country in the history of the world. No developed nation has a higher share of senior citizens. No developed nation has a lower birthrate. And Tokyo's birthrate is even lower than the national average.

The grayer a country gets, the fewer workers it has to support the livelihood of its seniors. Japan must generate tremendous taxable wealth in the next decade to support its older population, otherwise the national government will have to continue to borrow from its own people to pay for its promised services (Japan's debt-to-GDP ratio is already the highest in the world, near 190%). Despite leading the world in Fortune 500 companies, the majority of Tokyo establishments are small -- with four or fewer employees -- and concentrated on local services that aren't internationally tradable. That looks more like a model for post-growth happiness than pro-growth dynamism.