The historical geography of global capitalism is an
interesting topic because of its implications for neoclassical (among others)
growth theory. Growth theory seems to point to the conclusion that the heart of
economic growth should not shift. Infrastructure should create a set of fixed
equilibrium centres for development and cities will be uniformly distributed
across space (and states).
First it’s important to outline the reasoning behind
why different regions have different levels of development and rates of growth.
Economic development is caused by the formation of productive industries which
are created via the spatial development of capitalism. This development occurs
by the actions firms and individuals in market exchanges which are driven by
competition. The system encourages technological change, leading to innovation
in products and production method and hence the expansion of industry. Competition
and accumulation generate disequilibria in growth across space (the most
productive firms dominate and provide rich returns for their shareholders).
This accumulation unhinges economic equity as wealth accumulates in regions
with productive firms, leading to uneven growth patterns and uneven levels of
development across space.
Two factors appear to influence the productivity of
these firms, sorting and interaction. Sorting arises because simply not all
activities are located everywhere. Each city is not a self-contained cell
producing all the goods and services it requires, the diverse range of economic
activities are “sorted” into different locations. Goods which are sorted are
tradable, so where they are located does not intrinsically matter as they can
export the good to the locations where it is required. Interaction (or
development) on the other hand creates differing productivity levels by the
specialised interactions within industries that occur as tacit transfers,
creating more productive industries in agglomerations. It is estimated that
between countries ‘interaction’ is responsible for 2/3 of income differentials,
but within countries it is only responsible for 1/3. [1] [2]
The above allows us to understand why different
levels of development occur, but the neoclassical theory predicts fixed centres
in equilibrium. Merchant capitalism of the last 500 years has defined the
landscape in terms of economic geography; it brought a wave of urbanisation to
the previously fragmented feudal society of Europe. There has always been an
emerging city or region as a motor for capitalist development throughout the
ages. Improved shipping technology led Northern Europeans to strike out across
the world in search of wealth. By 1750 Venice emerged as the focus of global
capitalism was created, shifting influence from the Sophisticated Eastern
empires to Venice and then to Antwerp, then Genoa, London, Germany and in the
mid-19th century across the Atlantic to New York, LA and pacific to
Osaka and Tokyo. Even in the 21st Century eyes turn to China and South
East Asia to drive capitalism on. In the depths of the global recession countries
look to Asia to provide the kick-start to global growth. This diverse and
unpredictable movement across countries highlights the changeable nature of
development. In short the empirical evidence contradicts directly the
conclusion that neoclassical theory points us to.
Two key concepts outline the way in which this
occurs. Geographical industrialisation outlines how industries grow and decline
over time. It is a cycle (which is perhaps linked to both the business cycle or
product lifecycle). It’s 4 stages are:
-
Localisation, in which industries
locates and extend their market from a central location.
-
Clustering, in which associated industry
moves into the area creating an efficient cluster of related firms.
-
Dispersion, in which some parts of
production are outsourced from the area to avoid high costs (eg rent and
congestion) in the productive location.
-
Shifts, in which new or restructured
industries with different (more relevant or useful) products or significantly
different method of production locate elsewhere creating a new localised area,
restarting the cycle.
The other concept is
territorial development. It outlines how some places develop via a series of
successful industrialisations and others fade. Each shift in the global centre
of capitalism has been associated with an industry, E.g. Textiles in early 19th
century England, hi tech in Silicon Valley in the late 90’s. These Industries
are often characterised by either: lots of workers, absorb lots of investment,
high output and growth rates and either have critical effects on product or
process of upstream production or wildly used consumption goods. These new
industries change employment relations and create structural change in the
economy, altering both interregional and international relations and these
create new ‘regions of capitalist accumulation.’
The implication of
these two concepts leads us to the 3 main characteristics that the theories of
growth cannot explain.
Expansion
The Capitalist geography began in just one area of a
country. In this case the industrial revolution in the UK. It quickly however
expanded over the channel and eventually the Atlantic
è In
this era of expansion we observe extreme changes in the location of commercial
and financial centres around the world.
è The
world’s principles countries and meta regions have all followed the pattern of
high octane industrial growth.
è Industrial
pockets leapfrog in space with growth centres and peripheries to facilitate
them. Overtaking previous centres.
è If
the expansion continues within one nation it tends to be via a second city e.g.
LA Aerospace or San Fran in Silicon.
è New
engines of growth and development tend not to be in leading national economies.
è No
current spatial development theory explained this rapid growth at the
periphery. Neoclassical theory does therefore not encompass technical change
within the limits of its modelling.
Differentiation
Regions are always economically differentiated from
each other, they have highly specialised economic bases
è Some
industries are so specialised they are only seen in a handful of places
è Specialization
was traditionally explained by transport costs, but these have fallen with no
real reduction in localisation
è We
observe the concentration of economic activity in developed nations in cities,
as countries develop we expect this concentration (perhaps no longer)
è Production
becomes decentralised for a number of reasons (air and truck transport, costs
of density, lower wages in the periphery etc)
è Persistent
urbanisation reinforces uneven development
è Academia
presents the rank size rule (cities in a country follow a pareto distribution,
small number of large cities and a large number of small cities. We can use
this with some constant of variability, K, to predict the size and distribution
of cities), but the evidence does not support this.
è RSR
only seems to apply in US and Canada (with k=1), everywhere else the constant
representing variability varies. The model of city growth does not explain why
this should occur.
Instability
We observe changeable centres of development. For
example the UK has declined as a centre and Chicago is no longer the second
city in the USA.
è Theory
anticipates that large cities should stay that way by strong self-reinforcing
effects, hence they fail empirically.
è Cities
that stay at the top tend to do so by producing new or alternative industries.
In summary the current theory doesn’t explain these
characteristics, the decline observed should not have happened within the
neoclassical equilibrium model. As a result further examination over the next
few weeks into contemporary economic geographical theory.
[1]The difference between these numbers can be used to show the degree of openness in a country, if there is a large difference then borders are obviously a large barrier to specialisation transfers.
[2] At neighbourhood level sorting is maybe 90% Rich people move to Kensington for example. Social mobility limited in cities despite close proximity. While physically close they are often residentially segregated.
