Guggenheim, Bilbao, and the ‘hot banana’

They call it the "Guggenheim effect": the power of a well known brand and spectacular architecture to give a moribund city such as Bilbao a new lease of life.

Bilbao's economic renaissance, following the opening of the Guggenheim Modern Art Museum in late 1997, has been so dramatic that it has become a case study for the regeneration of other centres struggling with dying industries and inner-city blight.

In only three years almost 4m tourists have come to visit the titanium-clad masterpiece of the architect Frank Gehry, helping to generate about E500m ($455m) in economic activity. The regional council estimates that the money visitors have spent on hotels, restaurants, shops and transport have allowed it to collect E100m in taxes, which has more than paid for the E84m investment in bringing the Guggenheim to this northern Basque city.

But how much of Bilbao's revival can be attributed to the Guggenheim? And are museums, and culture generally, the answer to industrial decay?

The debate has become all the more pressing with the migration of policymaking and economic initiatives from central to regional or city governments. These days, the Organisation for Economic Co-operation and Development is paying a lot more attention to regional development, and Junichiro Koizumi, the Japanese prime minister, has set up an urban renewal taskforce to report directly to him.

From Milwaukee to Marseilles, mayors and business leaders are searching for policies that will propel their cities towards a more prosperous future. The question is whether such a magic formula exists and whether Bilbao's success can be replicated elsewhere.

No one doubts that the Guggenheim put Bilbao on the world map. A decade ago, before the project was conceived, the port city was dying. Its shipyards and steel mills had been closed, one in five workers was unemployed and the violence of Eta, the Basque separatist group, was terrorising the region. The city's budget was modest and there were many competing priorities: worker retraining programmes; and tax incentives to attract new businesses, hospitals and schools. How could the regional council justify spending E84m on a modern art museum?

Juan Ignacio Vidarte, a former tax inspector who is now director of the Bilbao Guggenheim, says the project was controversial from the start. "There was a lot of debate on whether a museum alone could spearhead the city's revival," he recalls. "There were no precedents. But I also knew that this was an opportunity Bilbao could not afford to lose."

According to Mr Vidarte, the psychological impact of the Guggenheim on Bilbao's inhabitants has been just as important as its new tourist industry. "We recovered our self-esteem," Mr Vidarte says. "Suddenly Bilbainos feel it is possible to reverse our trajectory of industrial decline."

But even enthusiasts such as Mr Vidarte realise that the Guggenheim effect will wear off and that Bilbao must search for new ideas to keep up the momentum of economic growth. The city recently invited architects, urban planners, economists and business leaders to discuss the way forward. The debate was surprising, not least because the "Guggenheim effect" was turned on its head.

"The danger is that these buildings are seen in isolation," says Ricky Burdett, an architect who directs the London School of Economics cities programme. "The Guggenheim did not fall from the sky. Bilbao's city authorities fought hard for it. It was part of a plan - and the result of a lot of thinking about the future of their city."

What stands out in Bilbao, he says, is the determination of a provincial city of only 700,000 inhabitants to attract the world's best architects to re-create its infrastructure. Sir Norman Foster designed Bilbao's metro; Santiago Calatrava, a Spanish architect who has transformed much of his native Valencia, designed Bilbao's new airport and a graceful footbridge over the river Nervion. Mr Burdett believes these projects have lent character and improved the quality of city life in Bilbao, which now enjoys one of the highest standards of living in Spain.

Architecture, says Mr Burdett, is returning to its urban roots. "It has less to do with aesthetics and design than with the functionality of buildings and how they integrate with their surroundings," he says.

Yet this description hardly fits the Bilbao Guggenheim. Mr Gehry's creation sits like a spaceship on a bend of the Nervion, a dizzying contrast with the 19th-century apartments that give the centre of Bilbao so much of its bourgeois solidity. Mr Gehry's museum is dramatic and graceful but it does not blend with its surroundings.

Mr Burdett is nonetheless a strong advocate of the role of architecture and cultural institutions in the regeneration of inner cities.

The "Guggenheim effect", he says, is "absolutely duplicable". Shanghai, Vitoria in Brazil and Rosario in Argentina are competing to host the next Guggenheim. Rome, not short of cultural offerings, is building a new centre for the arts, designed by Zaha Hadid.

"Look at the impact of Tate Modern on London's South Bank," Mr Burdett says. "We have more time for leisure and education. The trick is to integrate these buildings. A lot of thinking went into how the Tate could create local jobs that were not just for cleaners."

Economic geographers are more sceptical. Paul Cheshire, of the London School of Economics, says that grand projects such as the Bilbao Guggenheim, or Barcelona's marketing efforts, change the overall position of a city and the welfare of its inhabitants only on the margin. "Look at the performance of Valencia and Barcelona. Both have improved greatly over the past 15 years with Barcelona improving only slightly more than Valencia, despite the expenditure of much greater resources and tremendous hype."

Prof Cheshire suspects that the main net impact of the Bilbao Guggenheim has been to "move things about". The centre has been upgraded at the expense of Bilbao's poorer areas, he says. "The net resources spent are great and there is an opportunity cost."

Glasgow provides a longer-established parallel. "There was a substantial policy effort to revitalise Glasgow from the mid-1970s and the centre is vastly improved," Prof Cheshire says. "A lot of effort went into making the environment more business-friendly and attracting skilled residents. And while it is true that the Glasgow city region is more prosperous than it would have been, one problem is that the poor areas that were formerly in the centre of Glasgow have been pushed out to the edge of the city."

Bilbao's authorities admit this is a problem they have yet to tackle. Josu Bergara, chairman of the regional council, says there are plans to extend the metro along the unlovely left bank of the Nervion, home to Bilbao's dead industrial suburbs. Mr Bergara says that the rusting steel mills and empty shipyards will be dismantled and a new conference centre will be built.

Prof Cheshire believes that most of what happens to a city's economy is determined by more fundamental factors. The problem is to disentangle the effect of policy from what would have happened anyway.

Economic geographers who play down the impact of policy initiatives tend to be advocates of the "hot banana" theory of urban development. Loosely translated, the theory looks at cities that have been magnets for economic activity in Europe and traces a banana-shaped curve, starting in London, passing through Paris and Frankfurt and ending in Milan. The closer satellite cities are to this "hot banana", the greater their chance of profiting from its economic activity.

"Hot banana" advocates stress the importance of fast rail and air links, which have brought Lille and Marseilles, for example, within the zone of influence of Paris.

According to economic geographers, cities such as Bilbao and Barcelona, which are close to the French border, are already part of the "hot banana" hinterland. This would explain why Barcelona is keen to build a high-speed train link to Marseilles and why the Basque regional government has placed such importance upgrading Bilbao's transport network, with Calatrava's new airport the latest example.

So where does this leave the promotional efforts of city planners? Joseph Konvitz, head of territorial development at the OECD, believes that local authorities are right to identify and promote new or undervalued assets. But he warns that culture, like any other economic activity, can be a victim of short-term thinking and that dozens of Guggenheims sprouting across the rust-belts of Europe and the US will not solve the problems of inner-city blight.

"Tourism is the world's biggest industry but it is also fickle - sensitive to good or bad news and to trends in the world economy," Mr Konvitz says. The impact of coping with tourism can also be tough on urban management. If cities decide to promote culture, he says, they should think of it not only as a magnet for tourism but also as something that stretches the creative capacity of urban dwellers and improves their lives.