Connectivity: a Barometer of Economic Health

'Cities generate local economic growth by replacing imports from other cities in a process that, rather than being a zero-sum game, stimulates new growth in the city losing the exports'

by / March 17, 2005
Blake Harris

Over the years, in the pages of Government Technology and its associated publications, I've written quite a lot about the new network economy and economic development, usually with special attention to the role that IT and the Internet are playing in these. Much of this was in the form of interviews with some of the brightest minds writing and studying economic and social transformation as a result of new technologies.

However, by far the most original thinker amongst all these interviews was Jane Jacobs -- the person who challenged single-handedly everything the world's leading experts "knew" or "understood" about the economy of both nations and cities.

While many policymakers as well as the mainstream news media continue to frame issues like "outsourcing of American jobs" -- in the traditional context of competition with other nations -- it is encouraging that Jacob's insights continue to drive at least some serious study of new economic realities.

Last month, the Brookings Institution published one such study entitled U.S. Cities in the 'World City Network' by Peter J. Taylor and Robert E. Lang.

In the study Taylor and Lang wrote, "World cities studies suffer from a theoretical legacy that assumes all inter-city relations are necessarily hierarchical. A product of the national urban systems school of research that flourished in the 1960s and 1970s, this theory of inter-city hierarchical relations views cities as rivals, struggling against each other to 'reach the top.' With the advent of globalization, the competition is now thought to be even more cut-throat ..."

However, rather than use this traditional competitive framework, the authors adopted the Jacobs model of synergistic inter-city relations. They go on to note, "In a rare exception to the near ubiquitous hierarchical premise, Jane Jacobs, in her classic Cities and the Wealth of Nations, developed an economic growth theory based upon "dynamic cities" whose relations with other cities are primarily mutual rather than competitive. Cities generate local economic growth by replacing imports from other cities in a process that, rather than being a zero-sum game, stimulates new growth in the city losing the exports."

In other words, when someone else starts producing the things that your past prosperity was based upon, you continue your prosperity by innovating and producing new things or services that people will suddenly discover they need or want. Historically this is how many of the great cities progressed -- the cities that were the real economic engines of their nations. The result of this process, Jacobs argued, was a complex and interdependent network of cities cooperating in economic development, not just competing for a share of the spoils.

So starting with the notion of a world network of cities as the real foundation of globalization, Taylor and Lang set out to map the relative connectivity of cities in the world economy by analyzing data on a large number of global service firms in cities from all regions of the world.

"The importance of these relationships is becoming increasingly apparent," they explained in the study. "The conditions of contemporary globalization have, in fact, spurred a renaissance of major cities across the world, and a new economic configuration is emerging based upon cities. This is not to say that states are no longer significant in their international relations, but the rise of transnational interactions has produced a new economic globalization in which cities and their regions are the prime nodes of a nascent network society."

And they add, "In this new context U.S. domination can no longer be taken for granted. Yes, New York can claim to be 'capital

city of the world,' but in reality it shares its economic dominance with other global cities, notably London and possibly Tokyo and Paris. And other 'global' U.S. cities are still far more locally oriented than their European counterparts. Put simply, the clear supremacy of the U.S. in international relations and military power does not translate into a similar position for American world cities within the world city network."

The findings of this report offer serious food for thought about how any municipality or region might better approach its economic development initiatives as well as the underlying IT policies to support these.

As Taylor and Lang point out, "How a city plugs into the world economy of advanced producer services could impact local growth patterns, for example, and offer opportunity for development of its downtown. It could influence a city's economic prospects by determining how many high-paying service jobs are locally created. And it could help shape what types of households a city attracts and retains. In short, global connectivity has become another urban barometer -- a new statistic that helps reveal the health and strength of cities and regions."

Of course, if we continue to insist on viewing the world's economy purely as a near zero-sum competition between nations, then using connectivity as a barometer of economic health doesn't make a whole lot of sense. However, if Jacobs is right about the actual evolutionary patterns of city growth and prosperity, then we really need to change our thinking about how best to succeed long-term in a global networked economy -- an economy where competitive dynamics are intertwined with network-based cooperative processes. And from that perspective, Taylor and Lang may actually be on to something quite significant.

After all, the power of a node in any network lies in its connections.

Other GT Articles on Jane Jacobs
Interview With Jane Jacobs Nov. 1998
The 70 Percent Place May 2000
Jane Jacobs: Unraveling the True Nature of Economics Aug. 2000
Blake Harris Contributing Editor