Urban Studies Paper 2 pages (double space)

One

Overview

FOR CENTURIES, the world economy has shaped the life of cities. This book is about that relationship today. Beginning in the 1960s, the orga- nization of economic activity entered a period of pronounced transfor- mation. The changes were expressed in the altered structure of the world economy, and also assumed forms specific to particular places. Certain of these changes are by now familiar: the dismantling of once-powerful in- dustrial centers in the United States, the United Kingdom, and more recently in Japan; the accelerated industrialization of several Third World countries; the rapid internationalization of the financial industry into a worldwide network of transactions. Each of these changes altered the re- lation of cities to the international economy.

In the decades after World War II, there was an international regime based on United States dominance in the world economy and the rules for global trade contained in the 1945 Bretton Woods agreement. By the early 1970s, the conditions supporting that regime were disintegrating. The breakdown created a void into which stepped, perhaps in a last burst of national dominance, the large U. S. transnational industrial firms and banks. In this period of transition, the management of the international economic order was to an inordinate extent run from the headquarters of these firms. By the early 1980s, however, the large U. S. transnational banks faced the massive Third World debt crisis, and U. S. industrial firms experienced sharp market share losses from foreign competition. Yet the international economy did not simply break into fragments. The geography and composition of the global economy changed so as to pro- duce a complex duality: a spatially dispersed, yet globally integrated or- ganization of economic activity.

The point of departure for the present study is that the combination of spatial dispersal and global integration has created a new strategic role for major cities. Beyond their long history as centers for international trade and banking, these cities now function in four new ways: first, as highly concentrated command points in the organization of the world economy; second, as key locations for finance and for specialized service firms, which have replaced manufacturing as the leading economic sec- tors; third, as sites of production, including the production of innova- tions, in these leading industries; and fourth, as markets for the products

OVERVIEW

4

and innovations produced. These changes in the functioning of cities have had a massive impact upon both international economic activity and urban form: Cities concentrate control over vast resources, while finance and specialized service industries have restructured th~Q~n social~ and economic order. Thus a new type of city has appeared. It IS the global -;;ity:-teadiI1gex.amples now are New York, London, and Tokyo. These

three cities are the focus of this book. As I shall show, these three cities have undergone massive and parallel

changes in their economic base, spatial organization, and ~~cial s~ructur~. But this parallel development is a puzzle. How could CltWS wIth as dI- verse a history, culture, politicS, and economy as New York, London, and Tokyo experience similar transformations concentrated i~ so brief a p.e- riod of time? Not examined at length in my study, but Important to ItS theoretical framework, is how transformations in cities ranging from Paris to Frankfurt to Hong Kong and Sao Paulo have responded to the same dynamic. To understand the puzzle of parallel change in diverse cities requires not simply a point-by-point comparison of New York, London, and Tokyo, but a situating of these cities in .ll:!.et of global pr.~~~~ses. In order to understand why major cities with differenfnistories'and cUltures have undergone parallel economic and social changes, we need to exam- ine transformations in the world economy. Yet the term global city may be reductive and misleading if it suggests that cities are mere outcomes of a global economic machine. They are specific places whose spaces, internal dynamics, and social structure matter; indeed, we may be able to understand the global order only by analyzing wlly_key-.str.urW!'.~s of the world economyare.necessadly·situated in citie.s. . How does the position of these cities in the world economy today differ from that which they have historically held as centers of banking and trade? When Max Weber analyzed the medieval cities woven together in the Hanseatic League, he conceived their trade as the exchange of sur- plus production; it was his view that a medieval city could withdraw from external trade and continue to support itself, albeit on a reduced scale. The modern molecule of global cities is nothing like the trade among self- sufficient places in the Hanseatic League, as Weber understood it. The first thesis advanced in this book is that th~_~~rritorial dispersal ()rC:Ol!!r~!lt economic activity creates a need for expanded central control and m~n­ agement. In other words, while in principle the territorial decentrah~a­ tion of economic activity in recent years could have been accompamed by a corresponding decentralization in ownership and ~ence in. the. ap~ propriation of profits, there has been little movement m that dIrectIOn. Though large firms have increased their subcontracting to smaller firms, and many national firms in the newly industrializing countr.ies have grown rapidly, this form of growth is ultimately part of a cham. Even

OVERVIEW 5

industrial homeworkers in remote rural areas are now part of that chain. The transnational corporations continue to control much of the end prod- uct a~d to reap the profits associated with selling in the world market. The 1I1~~rnationalizati0!1, and, expansion, of t:he._Hnanci~l.il)q.ustry has ~ht g!~.~!~!9. a large number gf smallerfiQ[lIlcial.markets, a growth whIch has fed the expansion of the global industry. But top-level control and management of the industry has become concentrated in a few lead- ing financial centers, notably New York, London, and Tokyo. These ac- count for a disproportionate share of all financial transactions and one that ~as grown. rapidly since the early 1980s. The fundamental dynamic pos- Ited here IS th~t the more globalized the economy becomes, the higher the agglomeratIOn of central functions in a relatively few sites that is the global cities. ' ,

The extremely high densities evident in the business districts of these cities are .one spatial expression of this logic. The widely accepted notion that den~Ity .and agglomeration will become obsolete because global tele- commumcatIOns advances allow for maximum population and resource dispersal is poorly conceived. It is, I argue, precisely because of the ter- E~_o.:!~l dispers~~acilitated by telecommunication'that aggrorI1e~~ti~~'~f certam centralizing activities has sharply increased.' This is not a mere continuati~n of old patterns of agglomeration; there is a new logic for c?nc~ntratIOn. In Weberian terms, there is a new system of "coordina- tIon, . on~ whic~ focuse: on the development of specific geographic con- trol SItes m the mternatIOnal economic order.

A sec~nd major theme of this book concerns the impact of this type of economIC growth on the economic order within these cities. It is neces- sar~ to go beyond the Weberian notion of coordination and Bell's (1973) notIOn of the postindustrial society to understand this new urban order. Bell, like Weber, assumes that the further society evolves from nine- teenth-century industrial capitalism, the more the apex of the social or- der is involved in pure managerial process, with the content of what is to be managed becoming of secondary importance. Global cities are how- ever, not only ~_~a!J?,~~~!.~J2!:_!!1.~s()()rQin_~tio.n.of.Qr99e.~ses (Friedmann 1986); they ~re also pa~tic1,ll~!:..-~t§~_of PLQQ1!£tion. They are sites for (1) the productIOn of specialized services needed by complex organizations for running a spatially dispersed network of factories, offices, and service outlets; and (2) the production of financial innovations and the making of markets, both central to the internationalization and expansion of the fi- nancial indu.stry. To understand the structure of a global city, we have to understand It as a place where certain kinds of work can get done, which ~s to say that we have to get beyond the dichotomy between manufactur- mg and services. The "things" a global city makes are services and finan- cial goods.

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6

It is true that high-level business services, from accounting to eco- nomic consulting, are not usually analyzed as a .production .process. Such services are usually seen as a type of output denved from h~gh-Ievel tech- nical knowledge. I shall challenge this view. Moreover, usmg n~w schol- arship on producer services, I shall examine the extent to whl~h a ~ey trait of global cities is that they are the most advanced productlOn SItes

for creating these services. ... .. A second way this analysis goes beyond the eXlstmg hterature on cIties

concerns the financial industry. I shall explore how the char~cte.r of a global city is shaped by the emergi~g orga~ization of the fina~clal mdus- try. The accelerated production of mnovatlO~s ~nd :he. new Importance of a large number of relatively small financIal mstItutlOns l~d to a r~­ newed or expanded role for the marketplace in the financial mdus.try m the decade of the 1980s. The marketplace has assumed new strategIc and routine economic functions, in comparison to the prior phase, when the large transnational banks domina,~ed the n~:ional and inte~nationa: finan- cial market. Insofar as financial products can be used mternatlOnally, the market has reappeared in a new form in the global economy .. N~w Y

k London and Tokyo play roles as production sites for financial m- or , , " d "

novations and centralized marketplaces for these pro ucts. . . A key dynamic running through these various activities and org~nIzm.g

my analysis of the place of global cities in the world economy IS then capability for producing global control. By fo~using o~ the production of services and financial innovations, I am seekmg to dIsplace the focus of attention from the familiar issues of the power of large corporations over governments and economies, or supracorp?rat.e concentration of power through interlocking directorates or organIZatlOns, suc~ as th~ IMF. I want to focus on an aspect that has received less attention, whiCh could be referred to as the practice of global control: the work of produc~ng and reproducing the organization and management of a global productlOn sys- tem and a global marketplace for finance. My focus is not on power, b~t on production: the production of those inputs t~at c~nstitute ~he c~pabII­ ity for global control and the infrastructure of Jobs mvolved m thIS pro-

duction. The power of large corporations is insufficient to expl~in the. capability

for global control. Obviously, governments also face an .mcr.easmgly com- plex environment in which highly sophisticated machmenes of central- ized management and control are necessary. Moreove~, ~he ~igh level of specialization and the growing demand for these specIahzed mputs have created the conditions for a freestanding industry. Now small firms can buycQmponents of global capability, such as management consulting or international legal advice. And so can firms and governments anywhere in the world. While the large corporation is undoubtedly a key agent

OVERVIEW 7

inducing the development of this capability and is a prime beneficiary, it is not the sole user.

Equally misleading would be an exclusive focus on transnational banks. Up to the end of the 1982 Third World debt crisis, the large transnational banks dominated the financial markets in terms of both volume and the nature of firm transactions. After 1982, this dominance was increasingly challenged by other financial institutions and the innovations they pro- duced. This led to a transformation in the leading components of the fi- nancial industry, a proliferation of financial institutions, and the rapid internationalization of financial markets rather than just a few banks. The incorporation of a multiplicity of markets all over the world into a global system fed the growth of the industry after the 1982 debt crisis, while also creating new forms of concentration in a few leading financial cen- ters. Hence, in the case of the financial industry, a focus on the large transnational banks would exclude precisely those sectors of the industry where much of the new growth and production of innovations has oc- curred; it would leave out an examination of the wide range of activities, firms, and markets that constitute the financial industry in the 1980s.

Thus, there are a number of reasons to focus a study on marketplaces and production sites rather than on the large corporations and banks. Most scholarship on the internationalization of the economy has already focused on the large corporations and transnational banks. To continue to focus on the corporations and banks would mean to limit attention to their formal power, rather than examining the wide array of economic activities, many outside the corporation, needed to produce and repro- duce that power. And, in the case of finance, a focus on the large trans- national banks would leave out precisely that institutional sector of the industry where the key components of the new growth have been in- vented and put into circulation. Finally, exclusive focus on corporations and banks leaves out a number of issues about the social, economic, and spatial impact of these activities on the cities that contain them, a major concern in this book and one I return to below.

A third major theme explored in this book concerns the consequences of these developments for the national urban system in each of these countries and for the relationship of the global city to its nation-state. While a few major cities are the sites of production for the new global control capability, a large number of other major cities have lost their

~"!:<:JJe as leading export centers for industrial manufacturing, as a result"ot the decentralization of this form of production. Cities such as Detroit Liverpool, Manchester, and now increasingly Nagoya and Osaka hav~ been affected by the decentralization of their key industries at the do- mestic and international levels. According to the first hypothesis pre- sented above, this same process has contributed to the growth of service

OVERVIEW

8

industries that produce the specialized inputs to run global production processes and global markets for inputs and outputs. These industries- international legal and accounting services, management consulting, fi- nancial services-are heavily concentrated in cities such as New York, London, and Tokyo. We need to know how this growth alters the rela- tions between the global cities and what were once the leading industrial centers in their nations. Does globalization bring about a triangulation so that New York, for example, now plays a role in the fortunes of Detroit that it did not play when that city was home to one of the leading indus- tries, auto manufacturing? Or, in the case ofJapan, we need to ask, for example, if there is a connection between the increasing shift of produc- tion out of Toyota City (Nagoya) to offshore locations (Thailand, South Korea, and the United States) and the development for the first time of

a new headquarters for Toyota in Tokyo. Similarly, there is a question about the relation between such major

cities as Chicago, Osaka, and Manchester, once leading industrial centers in the world, and global markets generally. Both Chicago and Osaka were and continue to be important financial centers on the basis of their man- ufacturing industries. We would want to know if they have lost ground, relatively, in these functions as a result of their decline in the global industrial market, or instead have undergone parallel transformation toward strengthening of service functions. Chicago, for example, was at the heart of a massive agroindustrial complex, a vast regional economy. How has the decline of that regional economic system affected Chicago?

In all these questions, it is a matter of understanding what growth em- bedded in the international system of producer services and finance has entailed for different levels in the national urban hierarchy. The broader trends---decentralization of plants, offices, and service outlets, along with the expansion of central functions as a consequence of the need to man~ age such decentralized organization of firms-may well have created con- ditions contributing to the growth of regional subcenters, minor versions of what New York, London, and Tokyo do on a global and national scale. The extent to' which the developments posited for New York, London, and Tokyo are also replicated, perhaps in less accentuated form, in smaller cities, at lower levels of the urban hierarchy, is an open, but

important, question. The new international forms of economic activity raise a problem about

the relationship between nation-states and global cities. The relation be- tween city and nation is a theme that keeps returning throughout this book; it is the political dimension of the economic changes I explore. I posit the possibility of a systemic discontinuity between what used to be thought of as national growth and the forms of growth evident in global cities in the 1980s. These cities constitute a system rather than merely

9

c~mf~i~g .~ith each other. What contributes to growth in the network o g 0 ~ cIties may well not contribute to growth in natio sF' stance, IS there a systemic relation between on the h d n. or m- in global cities and, on the other hand th d fi . onef an. ' the growth d h d . ' e e CItS 0 natIOnal govern-

OVERVIEW

m~nt?s an t e eclme of major industrial centers in each of these c tnes. oun-

The fourth and final theme in the book concerns the .

~;~~~ ;;,C;,: ~: :n~",;,~~~~o::; le;':;~~:~h~h~~o~i~ ~'dr~~C~: !~~ growth manufacturing sector in the highl d ) c ~ a yna~mc, high- shows that it . d . y eve ope countnes, which formation of a r::~dl:;l:::' ::~~eld m.eqkuality, abnd contributed to the

. . ess IS nown a out the sociolog f serVIce economy. Daniel Bell's (1973) Th C . yo a Society posits that such an '1 e ~mmg of Post-Industrial of highly educated k econdomy WI 1 res~lt m growth in the number

wor ers an a more ratIOnal reI t' f k ~ssues of social equity. One could argue that an . a IOn 0 ,:or ers to mdustrial economy would surely be like th 1 ~ ~Ity representmg a post- London, and increasingly Tokyo. e ea mg sectors of New York,

I will examine to what extent the new structure of .. . ~as brought about chan~es in the org~i~i~~··;T~~;k···:!QnQmlc.aQ.t!YI:.Y- m the Job supply and polarlzatio-;;'f;:;:-the'''{;;~~~~dis~ 'b fl;.cted m a shIft ~at~onal distribution of workers. Major growth indust~l u ~on and occu- mCIdence of jobs at the high- a d l' es s ow a greater h Id" n ow-paymg ends of the scale th d

t e ~ er mdustnes now in decline. Almost half the 'obs in h an 0 serVIces are lower-income J'obs and h If . h J t e producer , a are m t e two h' h t . classes. In contrast, a large share of manufact' k Ig es ea~nmgs ~iddle-earnings jobs during the postwar peri:~I~; h~or ers wer: m the mdustries in the United States and U 't d K' d gh growth m these

ill e mg om. T,:o ot~e~ de.velopments in global cities have also contributed to eco

n~mI~ po anzatIOn. One is the vast supply of low-wa e 'ob . - hIgh-mcome gentrification in both it . . g J s reqUIred by tin Th" s reSIdential and commercial set-

intiuxu:;n~:~:;: I;o~::;~~~;s~~e:Jt~~~i:se r;::~:~~:, ;xury h~us- and special cleaners that ornament the new ' bid n l.aundnes, th.is trend. Furthermore, there is a continUin;~::d ;: rape Illu~tr~tes tnal sdervices, even in such sectors as finance and spec:ali::dwage.m uAs- secon development that h h serVICes. call the downgrading of the :a~:~: :d .significant proportions is what I share ofu' . d h c unng sector, a process in which the

momze sops declo d d' and indust . 1 h k m:s an wages etenorate while sweatshops . ~Ia omewor prolIferate. This process includes the d

gradmg of Jobs within existing industries and the' b 1 own- some of the new industries, notably electronics ass~:b~~~ft ~s ~:~~~n~o~~

OVERVIEW

10 . t r has been d d anufacturmg sec 0 rowth of a downgra e m

ing that the g Y k and London. . 1" strongest in ci~ies such as N:~ob~r as a function of grow~h ~r~n~s I:;t~::

The expansIon of low-wa~ J elation. To see thIs, It IS Imp . a reorganization of the caPI.ta~-lab~~:bs from their sectorallocationilsmce to distinguish the character~stlCS 0 vanced growth sectors may we con-

h · hI dynamic, technologICally ad

th e the distinction between sec-

Ig y d d· bs Fur ermor, . 1 B kward t· low-wage dea -en JO . th patterns is crUCIa: ac t:~l characteristics and sectoral 1:~::ring or low-wage service occupa-

ch as downgraded manu d· h·ghly developed economy· sectors, su . wth tren sma 1 d S· . tions, can be part of~aJo~ gr~ward sectors express decline tren sh Im~­ It is often assumed t at ac that advanced sectors, suc as -

1 1 there is a tendency to assumlle . b In fact they contain a good

ar y, d white-co ar JO s. , nance, have mostly go~ , m cleaner to stock clerk. number of low-paying Jobs: fr\ es and implications of my study.

Th ese then, are the major t em

, h d cer . t sketch the reasons w y pro u

A a further word of introductIOn I mus .dly since the 1970s and why they s . s and finance have grown so ra

pi h

New York London, and To- serVIce d· ·res suc as ' b t

highly concentrate m CI 1 h d de of the 1980s was u a are so 1 fon is that t e eca d th ·m Ie kyo. The familiar exp an~ 1 d the shift to services. An e. s~ ~ _

t of a larger economIC tren, . ·n ma·or cities is that thIs IS e par . f their high concentratIon 1 . J. . the services com- explanatIOn 0 r r t face communICatIOn m

h d lOr lace- 0- 1 cause of t e. nee t these cliches are incomp ete·

l h ot ended

munity. WhIle correc , modern techno ogy as n We need to understand first h~;ather, technology has shifted a n.um-

nineteenth-century forms of work'rt of manufacturing into the d~maI~l of ber of activities that were ~nce pa workers to machines once epitomI~ed

. The transfer of skIlls from .. the transfer of a vanety serVIces. bl line has a present-day versIOn m ·th their attendant by the assem y floor into computers, WI .. ·on

f activities from the shop 1 Also functional specIal~zati ~echnical and professional perso~: ~rary ~ounterpart in t~da~ s pro- within early factories finfds

h a con~ pr~cess spatially and orgamzah on;ll y .

d fragmentation 0 t e wor bl 1· e" the production an as-nounce h "lobal aSsem Y m , Id her- This has been called t e g. d de ots throughout the wor . '. v:

bl f g oods from factones an p k international dIVISIOn of

sem yo. of scale rna e an 1· "th t ever labor costs and ec?nOmies this very "global assembly me a labor cost-effective. It IS, hO\~ever'tralization and complexity of manage-

t the need for increase . cen nt of the modern corpora-

~::t~S control, and plan~i~g. !:ei::;::~l::rkets and foreign countries tion and its massive ~arhcIPt~~ministratiOn, product dev~lopmfent, :n~ has made planning, mterna lex DiversificatIOn 0 pro uc research increasingly impor~ant l~n~i~:r:~ ec~nomic activities all require

and transnatIOna Iza lines, mergers,

OVERVIEW 11

highly specialized skills in top-level management (Chandler 1977). These have also "increased the dependence of the corporation on producer ser- vices, which in turn has fostered growth and development of higher lev- els of expertise among producer service firms" (Stanback and Noyelle 1982: 15). What were once support resources for major corporations have become crucial inputs in corporate decisionmaking. A firm with a multi- plicity of geographically dispersed manufacturing plants contributes to the development of new types of planning in production and distribution surrounding the firm.

The growth of international banks and the more recent diversification of the financial industry have also expanded the demand for highly spe- cialized service inputs. In the 1960s and 1970s, there was considerable geographic dispersal in the banking industry, with many regional centers and offshore locations mostly involved in fairly traditional banking. The diversification and internationalization of finance over the last decade re- sulted in a strong trend toward concentrating the "management" of the global industry and the production of financial innovations in a more lim- ited number of major locations. This dynamic is not unlike that of multi- site manufacturing or service firms.

Major trends toward the development of multisite manufacturing, ser- vice, and banking have created an expanded demand for a wide range of specialized service activities to manage and control global networks of factories, service outlets, and branch offices. While to some extent these activities can be carried out in house, a large share of them cannot. High levels of specialization, the possibility of externalizing the production of some of these services, and the growing demand by large and small firms and by governments are all conditions that have both resulted from and made possible the development of a market for freestanding service firms that produce components for what I refer to as global control capability.

The growth of advanced services for firms, here referred to as producer services, along with their particular characteristics of production, helps to explain the centralization of management and servicing functions that has fueled the economic boom of the early and mid-1980s in New York, London, and Tokyo. The face-to-face explanation needs to be refined in several ways.· Advanced services are mostly producer services; unlike other types of services, they are not dependent on proximity to the con- sumers served. Rather, such specialized firms benefit from and need to locate close to other firms who produce key inputs or whose proximity makes possible joint production of certain service offerings. The account- ing firm can service its clients at a distance but the nature of its service depends on proximity to other specialists, from lawyers to programmers. Major corporate transactions today typically require simultaneous partic- ipation of several specialized firms providing legal, accounting, financial,

12 OVERVIEW

public relations, management consulting, and other such services. More- over, concentration arises out of the needs and expectations of the high- income workers employed in these firms. They are attracted to the amen- ities and lifestyles that large urban centers can offer and are likely to live in central areas rather than in suburbs.

The importance of this concentration of economic activity in New York, London, and Tokyo is heightened by the fact that advanced services and finance were the fastest-growing sectors in the economies of their coun- tries in the 1980s. It is a common mistake to attribute high growth to the service sector as a whole. In fact, other major services, such as public and consumer services, have leveled off since the middle or late 1960s in the United States and since the 1970s in the United Kingdom and Japan. In other words, the concentration of advanced services and finance in major urban centers represents a disproportionate share of the nation- wide growth in employment and GNP in all these countries.

The combination of high levels of speculation and a multiplicity of small firms as core elements of the financial and producer services com- plex raises a question about the durability of this model of growth. At what point do the larger banks assume once again a more central role in the financial industry? And at what point do competition and the advan- tages of scale lead to mergers and acquisitions of small firms? Finally, and perhaps most important, at what point do the sources of profits generated by this form of economic growth become exhausted?

Over the last ten years, major economic growth trends have produced spatial and social arrangements conSiderably divergent from the configu- ration that characterized the preceding decades. The economic sectors, localities, and occupations that account for a large share of economic growth today differ from those central to the immediate post-World War II period. Most commonly, this process has been interpreted as the de- cline of old and the emergence of new industries, typically seen as two somewhat unconnected events necessary for the renewal of all economy. I shall challenge this disconnecting view, which means asserting that new growth rests, to a significant extent, on deep structural processes of de- cline. The question of the long-term durability of the global city that I have just posed turns on not seeing decline and growth as distinct. The "high-flying" 1980s might emerge as a passing phenomenon, even as manufacturing of the old sort continues to decline.

This systemic connection, I will argue, plays itself out in several eco- nomic arenas. I propose to examine this through several working hypoth- eses. They are the following: First, the geographic dispersal of manufac- turing, which contributed to the decline of old industrial centers, created a demand for expanded central management and planning and the nec- essary specialized services, key components of growth in global cities.

OVERVIEW 13

The move of large corporations into consumer services and the growing complexity of governmental activity further fed the demand for special- ized services and expanded central management and planning, though they did not necessarily feed the decline of certain localities, as in the case of the dispersal of manufacturing. Second, the growth of the finan- cial industry, and especially of key sectors of that industry, benefited from policies and conditions often harmful to other industrial sectors, no- t~b~y manuf~cturing. The overall effect again was to feed growth of spe- CIalIzed serVIces located in major cities and to undermine the economic base of other types of localities. Third, the conditions and patterns sub- ~umed under the first two working hypotheses suggest a transformation m the economic relationships among global cities, the nation-states where they are located, and the world economy. Prior to the current phase, there was high correspondence between major growth sectors and o.verall national growth. Today we see increased asymmetry: The condi- tIons pr~moting growth in global cities contain as sigriiRC:mt components the declme of other areas of the United States, the United Kingdom, and Japan and the accumulation of government debt and corporate debt. Fourth, the new conditions of growth have contributed to elements of a new cla~s align~nent in global cities. The occupational structure of major growth mdustn.es characterized by the locational concentration of major growth sectors m global cities in combination with the polarized occupa- tio~al s.tructure of these sectors has created and contributed to growth of a hIgh-mcome stratum and a low-income stratum of workers. It has done so dir~ctly through the organization of work and occupational structure of major growt~ sectors. And it has done so indirectly through the jobs needed to serVICe the new high-income workers, both at work and at home, as well as the needs of the expanded low-wage work force.

This brief i~troductory chapter presents the main issues and arguments ~e_ bo~k WIll develop. Part One discusses the major trends in the spatial dIsperSIOn of pr~duction and the reorganization of the financial industry. The focus here IS on the geography, composition, and institutions that constitute the globalization of economic activity in the 1980s. This aims to be a straightforward empirical description of the composition and di- rection of international investment, service transactions, and financial ~ows. It entailed dealing with a vast amount of eVidence, dis aggregating m order to capture dimensions of interest to the analysis in this book and reaggregating in order to facilitate comprehension. The many tables in these chapters serve to ~ummarize the details. The purpose is ultimately to understand how vanous forms of globalization in economic activity generated new forms of centralization, speCifically, the rapidly growing a,gglomeration of specialized services and finance evident in major cities.

14 OVERVIEW

Part Two examines the industries that form the core in these cities and the national and transnational space economy of these industries. The purpose is to arrive at an understanding of the place of global cities in the organization of these industries, and to do so through an examination of the characteristics of the industries-rather than a detailed analysis of the economic base of the cities-in the context of f!i!:.ti2!!-al urban systems as well as an e~l11gIQl>al bie!a!~hy_()fcities. Chapte-iFive exa.mines the characteristics of the new components of centralization. They amount to a new basic industry: the production of management and control op- erations, of the highly specialized services needed to run the world econ- omy, of new financial instruments. Chapters Six and Seven discuss the role of global cities in the new organization of the world economy, ex- amining the development of these cities into sites of production for the new basic industry.

Part Three discusses some of the key aspects in the distribution of ben- efits and burdens of this particular form of growth. What is the range of jobs directly and indirectly sustaining the operation of this type of eco- nomic sector? And to what extent does the occupational and income dis- tribution of these cities' resident work forces reflect the existence of a thriving profitmaking economic core? Chapter Eight examines how these transformations in economic activity generate a new labor demand and a new income structure in these cities. Chapter Nine examines the char- acteristics of the backward economic sectors that appear to thrive in these cities and seeks to understand what, if any, is the articulation between these two types of growth.

The concluding chapter discusses the political implications of these de- velopments, addressing the following three questions. What are the po- litical implications of concentration of the benefits of economic growth in global cities and in a stratum of high-income workers alongside the de- cline of what were once thriving localities and sectors of the work force? How does the consolidation of the world economy and of global centers for its control and management affect the relationship between nation and city, particularly between global cities and the nation-states they supposedly belong to? The final question concerns the durability of these arrangements: What are the conditions for the reproduction of this mode of growth?

The three central questions organizing this book can be simply put as follows. What is the role of major cities in the organization and manage- ment of the world economy? In what ways has the consolidation of a world economy affected the economic base and associated social and po- litical order in major cities? What happens to the relationship between state and city under conditions of a strong articulation between a city and the world economy? These represent only a few of all the questions one

y

OVERVIEW

15 could raise in a study about major contem or .. tions are strategic for understanding such ~iti:;fr~tIe~h But these .ques- the world economy-what moment in the m e ~erspechve of contained by or located in major cities? An~l~~al accumulatI~n process is standing the interaction of local and global proceeyssare sthrategdIc for under- t . I I" I es- ow oes the his f~:;l~: ~ po ltlca., economic, and s~cial specificity of a particular city resist -

~ e, remam untouched by Incorporation into the world econo ~ In thIS context, the contrasts among New Yo k L d my. shoulddbe illuminating, given their roles as lea:i~g ;;ldonfi'naand. 1:1 okyo ters an thei d'rr h' nCla cen-

r very lllerent Istories, economies, and cultures.