A series of familiar images unfolds on the screen: a wall of glass towers, a Brazilian favela, the Shibuya pedestrian crossing in Tokyo. Visual shorthand for a crowded planet, they are accompanied by an equally familiar sequence of statistics: half of humanity – or 3.5 billion people – now live in cities, and urbanisation is so rampant that by 2050 this figure is projected to be 75%. So begins Urbanized, a new film about the challenge that cities pose in the 21st century, which had its London debut this weekend, playing to a packed house at the London School of Economics. It is directed by Gary Hustwit, who made the cult hit Helvetica in 2007 (an unlikely film about a Swiss typeface) before taking on the much broader topic of industrial design in 2009's Objectified. With Urbanized, he zooms out even further to complete his trilogy, a cinematic story about design moving from the micro to the macro.

With each leap in scale, Hustwit risks pointing his camera at a topic so big he ends up saying nothing at all. Yet Urbanized is a brave and timely movie that manages to strike almost exactly the right tone. For a sense of the scale of the urban problem, simply look at Mumbai, a city of 12 million people that is set to be the world's biggest by 2050. Already, 60% of its population lives in slums with such poor sanitation that there is only one toilet seat for every 600 people. The municipality is reluctant to build toilets for fear that it will encourage more migrants to come. "As if people come to shit," retorts the activist Sheela Patel in the movie. Quite. Most people come to work. Cities are basins of opportunity, and their citizens drive national economies. It is peculiar, then, how poorly cities reward their citizens for that contribution.

Empty spaces ... the view from the Detroit People Mover railway

The film takes a clear line on what makes a city habitable. Why is Brasilia, for all its drama, inhospitable? Because it was designed with a bird's-eye view that left the poor mugs on the ground hiking across town beside a highway. The movie illustrates the catastrophe of designing cities for cars rather than people with the battle between Jane Jacobs and Robert Moses – the saintly advocate of Greenwich Village's street life and the panto-villain masterplanner who scarred New York with his highways. These days the Big Apple is starting to atone for Moses's sins with public spaces such as the High Line. This new elevated promenade doesn't make up for the growing inequality that is turning Manhattan into an island for the rich, but it is a noble case of the city giving something back to its citizens.

People power ... Paris city residents protest against bad urban planning

Even more impressive is the way the former mayor of Bogotá, Enrique Peñalosa, changed the dynamic of the Colombian capital by creating a network of cycle lanes and a public bus service. In a city known for its crippling traffic, it is now the poorest – those without cars – who move the fastest. As Peñalosa points out, showboating on a mountain bike as he overtakes a car squishing through the mud: this is democracy in action. Only by prioritising pedestrians have cities rediscovered their vibrant centres. In the 1980s, by contrast, cities were hollowing out as the middle classes fled to the suburbs. Here the camera pans the suburban sprawl of Phoenix, all identical houses and driveways, as land use attorney Grady Gammage epitomises the selfishness of the American dream with the words "I like the way I live". Nowhere has that dream gone more wrong than in Detroit. The most powerful scene in the movie is an eerie train ride through the deserted city, now depopulated thanks to its dying car industry.

There we have the full spectrum of the problem: some cities are bursting at the seams while others are becoming ghost towns. Who has the answer? Is it Norman Foster with his Masdar eco-city in Abu Dhabi? Is it Rem Koolhaas with his behemoth of a headquarters for Chinese state television in Beijing? To its credit, the film is unequivocal that architects – especially starchitects – are not the solution. What happened when Brad Pitt rallied a group of well-meaning architect friends to help rebuild New Orleans after Hurricane Katrina? The city got an odd assortment of houses that look like they were parachuted in from Malibu sitting amid a sea of devastation. Not all that effective.

If there is a new orthodoxy in urban design, it is citizen participation. And Urbanized revels in this so-called "bottom up" approach. It depicts several cases of community engagement, from an energy measurement scheme in Brighton to a new pedestrian area in the South African township of Khayelitsha. It devotes a good chunk of time to the Chilean architect Alejandro Aravena, whose system of half-houses that residents complete themselves is often cited as a paragon of "participatory design". The idea is that citizens, not god-like architects and planners, are the solution to the urban question. And Hustwit knows just how effective people power can be: his movie was partly paid for through the crowd-funding site Kickstarter.

This aspect of the movie is very much in tune with the zeitgeist. 2011 is the year of people power after all, the year when across the world, from Tahrir Square to the streets of Santiago to Wall Street, citizens have been making themselves heard. Indeed, there are several protests featured in the film. The message is undoubtedly a positive one, and the focus on small-scale, tangible solutions is at pains to be uplifting. The only caveat is that at times this borders on the naive. Watching people plant community gardens in the abandoned lots of Detroit, or plaster New Orleans with stickers that let citizens have their say, creates a cosy feel-good factor, but the problem is scale. On one hand, favelas and shanty towns are emblematic of the tremendous capacity of people to look after themselves. But no amount of self-organisation is going to introduce running water and sewage to the favelas. That kind of infrastructure requires politicians, not just residents.

Perhaps that's where a film such as Urbanized can be useful. Undoubtedly there are limits to what can be said about cities in a one-and-a-half-hour documentary – for instance, maybe this notion that 75% of us will live in cities by 2050 is bogus, and that as the global economy falters so will urbanisation. But this is not the purview of films like Urbanized. Whatever the drawbacks of a mass medium when it comes to nuance, it is redeemed by its ability to reach a mass audience. The more people who see this movie the better. And the more politicians who see it – and are persuaded to look beyond the vested interests in front of them – the more powerful a tool Urbanized will be.