2 dynamics-london

Dynamics/London

MPPA-DL 452Session 2

Course Themes

• Dynamics: Globalization, Urbanization• Circuits: Transnationals, Diasporas• Centers: Agglomeration, Sprawl• Margins: New Inequalities• Ecologies: Sustainability• Architectures: A Sense of Place• Crises: Globalization in Reverse• Frontiers: Looking Ahead

Why do some cities grow faster than others?

Braudel: “world-economies”

1. The boundaries change only slowly: “confinable”.

2. A single central city directs it (Venice, Antwerp,

Genoa, Amsterdam, London).

3. It consists of a hierarchy of zones in different stages of

development (core, middle, periphery); the tenseness

from differential development insures the dynamics

of the system.

Source: Fernand Braudel, “Divisions of Space and Time in Europe,” from The Perspective of the World (1984).

Europe 1300

Impermanence of global hegemony

• Venice (14th century)

• Antwerp (15th century)

• Genoa (16th century)

• Amsterdam (17th century)

• London (“long 19th century”)

• New York (“short 20th century”)

Impermanence of global hegemony: will London/NYC retain their status as strategic centers for global finance?

Historical theories of economic growth

Adam Smith:

The Wealth of Nations

(1776)

•Economic scarcity (caused by increasing population vs. limited productivity of land) drives progression.•Age of commerce is defined by:

specialized productionvoluntary exchange

•Which leads to:division of laborprices set by supply and demandmore leisure time

•Stages of growth: hunting/gathering, shepherding, agriculture, commerce

Thomas Robert Malthus:

An Essay on the Principle of Population

(1798)

Inputs

Out

put

Arithmetic rise in population

Diminishing returnsto production

A rise in living standards causes a rise in the birth rate and/or a fall in the death rate which increases the population which causes living standards and population to fall back down again to the original level

David Ricardo:

On the Principles of Political Economy and Taxation

(1817)

•As the economy grows, profits are squeezed out by rents and wages. In the limit, a "stationary state" is reached where capitalists are making near-zero profits and no further accumulation occurs.•=Law of diminishing returns•Two exceptions:

•Technical progress: requires the introduction of labor-saving machinery (cost will reduce $ available for wages)•Foreign trade: each nation specializes in the production of the good in which it has a "comparative" cost advantage, then trades with other nations for other goods (theory of comparative advantage)

Source: cepa.newschool.edu

John Maynard Keynes:

The General Theory of Employment, Interest and Money

(1936)

•Permanently changed the way the world looked at the economy and the role of government in society: macroeconomic theory•Income-expenditure multiplier•Aggregate demand determines aggregate output - and as a consequence, employment (demand-determined equilibrium)•Ineffectiveness of price flexibility to cure unemployment•Marginal efficiency of investment schedule breaking Say's Law•Theory of money based on “liquidity preference”•Introduction of radical uncertainty and expectations•Possibility of using government fiscal and monetary policy to help eliminate recessions and control economic booms

Robert Solow:

A Contribution to the Theory of Economic Growth

(1956)

•Solow model shows how savings, population growth and technological progress affect the growth of output over time.•Dynamic model (as opposed to prior static models).•Identifies some reasons countries differ widely in living standards.•Change in savings ratio leads to change in “steady state”.•Increase in population growth reduces GDP per person.•Sustained growth in per capita GDP can only come from technological progress.

W. W. Rostow:

The Stages of Economic Growth

(1971)

1. Traditional society2. Preconditions for take-off

Change in effective attitudesIncrease in investment rate to 10-12%Improvement in agricultural productivityOne or more substantial manufacturing sectorsEmergence of a new eliteProper political, social and economic framework

3. Take-off 4. Drive to maturity 5. Age of high mass consumption

Source: Ian Little, Economic Development

Jane Jacobs:

The Economy of Cities

(1970)

•Nations aren’t the proper unit of macro analysis—cities are.•The world consists of dynamic and poor regions; regions are centered around cities.•All economic progress originates in cities (even agricultural progress).•The engine of economic life is import replacement.•Five forces at work (and in balance) in cities: thirst for supplies, wealth of jobs, productivity improvements, transplants of city work, outflows of capital.•Impediments to growth: national currencies, tariffs, prolonged military production, subsidies to poor regions, advanced-backward trade, restriction of enterprise, overspecialization, focus on big firms.

1972

Club of Rome forecast

“Since the 1980s, major transformations in the composition of the world economy, including the sharp growth of specialized services for firms and finance, have renewed the importance of major cities as sites for producing strategic global inputs.”Saskia Sassen, Cities in a World Economy, p.7

“Global cities are strategic sites for the management of the global economy and the production of the most advanced services and financial operations that have become key inputs for the work of managing global economic operations.”Saskia Sassen, Cities in a World Economy, p.32

• Headquarters of transnational corporations

• Export processing zones

• Offshore banking centers

• Business services production sites

“Recognized global spaces”

Source: Saskia Sassen, Cities in a World Economy

• Command posts• Key locations and marketplaces for finance and

specialized services• Major sites of production, including the production of

innovations• High-end shopping, hotel, entertainment sites

(“consumer cities” – Ed Glaeser)• “Thick places”• Sites for the outsourcing of domestic work

Today’s global cities are:

Source: Saskia Sassen, Cities in a World Economy

Source: World City Network: A New Metageography?, Beaverstock, Smith and Taylor (2000). Solid lines join city pairs with > 35 firms with offices in both cities. Dotted lines join pairs with between 30 and 35 shared presences.

Shared presences among alpha world cities

World city links to London

Source: World City Network: A New Metageography?, Beaverstock, Smith and Taylor (2000)

“The great migration”1. Pioneers establish permanent residence in

regional towns; towns become cities. (The UN estimates African and Asian cities of less than 500,000 will grow by 273 million people by 2015.)

2. Migrant families begin a second stage of migration to the larger cities of their home country. (By 2015, 162 more cities will grow to between 500,000 and 1 million population.)

3. Second- and third-generation migrant families emigrate from their home countries and extend their reach to a network of cities around the world.

Source: Jeb Brugmann, Welcome to the Urban Revolution, p.41-42

“…wherever talent goes”“The global talent pool and the high-end, high margin creative industries that

used to be the sole province of the U.S., and a critical source of its

prosperity, have begun to disperse around the globe.

“A host of countries—Ireland, Finland, Canada, Australia, New Zealand,

among them—are investing in higher education, cultivating creative

people, and churning out stellar products…

“To stay innovative, America must continue to attract the world’s sharpest

minds. And to do that, it needs to invest in the further development of its

creative sector. Because wherever creativity goes—and, by extension,

wherever talent goes—innovation and economic growth are sure to

follow.”

Source: Richard Florida, “America’s Looming Creativity Crisis”, Harvard Business Review, October 2004

“The rise of cities on the scale seen in the contemporary world is a phenomenon directly linked to the exploitation of fossil fuels and the emergence of high-energy-use societies with complex commercial and financial linkages.“Not only are they responsible for most of the energy consumption within society, they are also a focus for a range of environmental problems.“In addition to crowded and often poor living conditions they are characterized by high levels of air pollution and noise, long commuting distances, either on overcrowded public transport systems or by car on congested roads, and a multitude of social problems.”Clive Ponting, A New Green History of the World, p.313