The Economics of Enough_ How to Run the Economy as if the Future Matters - Diane Coyle [80]
To do justice to those involved in the international organizations, there is a lot of discussion of reform. The rise of the BRICs, and the need to give them a role in the various fora such as the IMF and “G” discussions, is one reason. There have been international commissions to discuss change, such as the Warwick Commission on International Financial Reform.25 The financial crisis has also provided some impetus to this debate. But, thank goodness, there has not been anything like the crisis of the Depression and the Second World War, which created the conditions for international political agreement to a brand new institutional framework. There is no natural shape for new institutions of global governance to take and insufficient sense of crisis for this to occur. However, they will need to change further to reflect the globalized nature of the changing structure of the economy, a thread I’ll pick up again later when returning to questions of governance.
CITIES
Globalization is only one way in which the ICT-driven, weightless economy has become more dependent on trust. A second aspect of the structural changes is the increased importance of face-to-face contact, which seems a paradox given that the technologies have made electronic contact at a distance easier and cheaper than ever. Face-to-face contact occurs in cities: cities have always been hot spots of the economy, but their relative importance has increased.
Many observers of the new technologies in the 1990s assumed that because it was now so easy and cheap to communicate at a distance, longer-distance work contacts would supplant face-to-face interaction. The phenomenon was labeled “the death of distance.”26 Some pundits predicted that there would be a shift toward working at home, and that companies would become more dispersed if they were not tied to specific places by the cost of communicating. Globalization has certainly spread production all over the world, which seems to confirm the theory.
Yet paradoxically, the reverse has happened too. Economic activity has always been unevenly spread, concentrated in towns and cities. Sometimes that was simply due to the presence of a resource such as coal or a geographical feature such as a good harbor. But there are also good intrinsic reasons for locating in a city. Firms can find suitable workers more easily. Workers with a particular skill can find a variety of jobs. When a specialization develops, people also can meet and exchange ideas or industry gossip. Simple historical accident can trigger the kind of virtuous circle that makes an industry thrive in a particular place. And size matters too. A big city is an attractive market and therefore a magnet for many industries.27 The arrival of ICTs appears to have reinforced the tendency to concentrate in towns and cities, and especially in certain large global cities such as New York, San Francisco, London, Tokyo—and also Shanghai, Mumbai, Mexico City, and Sao Paolo. In 2008 a significant milestone was reached: for the first time more than half the world’s population was living in a town or city.
A particularly clear example of what drives this urban clustering phenomenon is seen in Silicon Valley. Of all industries, software is most able to locate anywhere; in fact, it has clustered in a few specific places.28 The explanation seems to be that face-to-face contact is more important the more sophisticated, complicated, and subtle is the industry in question. The sectors of the economy with the highest “value added,” or productivity (that is, with the highest ratio of output sold to input used), are the most geographically concentrated. As well as software, the creative industries such as advertising, biotech, and financial services are good examples.
People who work in companies of this kind need the intellectual and creative stimulus