GaWC Research Bulletin 70

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Globalisation, the New Economy and Regionalisation

R. Sugden and J.R. Wilson*


There is a popular view that the world is moving towards a 'globalised', 'new' economy, and that this implies a strong role for regionalisation of some form. This paper provides a framework for analyzing and understanding these trends. We offer a conceptualisation of globalisation that captures three widely recognised features: it's cross disciplinary character, its roots in a changing geography, and its association with alterations in transport, information and communication technologies. From this context, it is argued that knowledge and governance are fundamental to the attainment of economic prosperity, and our analysis leads to a distinction between types of globalisation. Acknowledging the disagreement over the role of nations and regions in today's globalisation process, but also recognising the common view that territory is in some sense important, we introduce the notion of locality. The approach is fluid, allowing consideration of different layers of locality and accommodating different communities. Our discussion goes on to consider 'networking'. It focuses on networking in production governance and emphasises the possibility of networks within and across localities, including multilocational networks. This is explored in the context of the 'world cities' literature. We see the ultimate challenge as moving towards a scenario where all actors in each locality, and in the communities within and across localities, participate in the democratic governance of their development. Achieving this would imply the identification and pursuit of a new, multidisciplinary research agenda.

Keywords: Globalisation, New Economy, Regions, Production Governance, Knowledge, Networks.

JEL Codes: F02, R00, P11, I20


There is currently a popular view that the world is undergoing profound changes in the relationships through which it is organised. In particular, it is argued that a 'globalised' economy is emerging, facilitated by and associated with 'new' technologies and practices. Moreover, there is further consensus that within this 'globalised', 'new' economy, regionalisation of some form is important; indeed, the term 'glocalisation' is often used to refer to the co-existence of 'globalisation' and 'localisation'. The aim of this paper is to address these topical issues from a particular perspective. It seeks to provide a framework for analysing and understanding current trends, and to suggest an approach that highlights appropriate ways forward in the context of the opportunities and dangers presented by a 'global', 'new' economy.

Our perspective is rooted in a particular view of what it means to be prosperous. We suggest that 'prosperity' is fundamentally linked to economic 'development', defined in terms of the process by which a group of people moves towards their own aims and objectives.1 This focus signals a need for people to be involved in the planning for their prosperity, and thus in the decision-making processes affecting the societies where they live. Consequently, the governance of economic development, or of 'production', is seen as crucial. Moreover, 'production' refers to more than the production of goods and services, and hence material prosperity. It also encompasses the production of knowledge, health, and general social outcomes, leading to a broad notion of prosperity that reflects the breadth of people's aims and objectives. Our entire analysis of 'globalisation' and the 'new' economy is grounded in this concern with governance. For example, like many other commentators we see knowledge and learning as crucial. However, our focus on knowledge is not from a conventional market perspective. Instead, we emphasise the active and dynamic properties of knowledge, seeing it as contributing to (and in turn generated by) participation in governance.

This perspective sees 'locality' and 'community' as important units of analysis, as it is from here that participation in governance is built. It is therefore consistent with the popularly-held view that regionalisation of some form is important in a 'new' and 'global' economy. While many authors have debated the roles of nations, regions and cities, we introduce the notion of 'locality'. Our approach is fluid, allowing consideration of different layers of locality, and accommodating the different communities that exist within and across these layers. It thus departs from fixed notions of cities, regions or nations. Rather, it focuses on the potential for network relationships within and across localities, including multilocational networks. We see the ultimate challenge as moving towards a scenario where all actors in each locality, and in the communities within and across localities, participate in the democratic governance of their development. Significant questions remain as to how this can be achieved in a 'global' and 'new' economy. A key implication, we argue, is the need to identify and pursue a new, multidisciplinary research agenda, fusing the economic, political, cultural and social.

The paper is structured as follows. Section II analyses 'globalisation' and 'new' economy. We identify (in Section II.i) a broad approach that emphasises three widely-recognised features: globalisation's cross disciplinary character, its roots in a changing geography, and its association with altered transport, information and communication technologies. We suggest (in Section II.ii) that governance and knowledge are particularly important concepts in responding to and shaping globalisation. We distinguish between a process harnessed to further the prosperity of a few, and one harnessed to further the prosperity of all people; between elite and democratic globalisation. The link between globalisation, the new economy and a concern with urban and regional settings is pursued in Section III. We argue (in Section III.i) the appropriateness of analysing development in terms of 'localities'. Attention is then focused on the significance of networking (in Section III.ii), and our points are illustrated through a critique of the World Cities paradigm. We conclude in Section IV with comments on an agenda for multidisciplinary research, grounded in principles of inclusive governance, knowledge and networks.


Multidisciplinarity, Geography and Technology

Scholte (2000) notes that "in spite of a deluge of publications on the subject, our analyses of globalisation tend to remain conceptually inexact, empirically thin, historically and culturally illiterate, normatively shallow and politically naïve. Although globalisation is widely assumed to be crucially important, we generally have scant idea what, more precisely, it entails".2 This is associated with 'globalisation' being a truly multifaceted phenomenon, with implications that encompass not just the economic but also the social, political, cultural and geographical. Radice (2000), for example, notes that "globalisation has been a prominent topic among geographers and sociologists as well as economists and political scientists, and is studied within every paradigm, from neoclassical economics to postmodern social theory to realist international relations theory to Marxism".3 In this regard, Vellinga (2000) comments that it has the characteristics of a 'theoretical umbrella', in a similar way to dependency theory.

One approach is to follow Kudrle's (1999) suggestion that globalisation be considered with regard to the specific intent of those using the term.4 Economic definitions of globalisation, for example, are frequently rooted in market analysis; De la Dehesa (2000) refers to it as "a dynamic process of growing liberty and world integration in the markets for labour, goods, services, technology and capital".5 Others, including scholars in different disciplines, root their definitions in alternatives to the market, focusing instead on cultural, social, spatial or political factors, or indeed on non-market aspects of the economy. Waters (2001), for example, argues that the key figure in the formalisation and specification of 'globalisation' is the sociologist Robertson, who refers "both to the compression of the world and the intensification of consciousness of the world as a whole".6 From the geographer's perspective the definition differs yet again, with the focus shifting to the scale and scope of territories such as cities or regions. For example, Brenner (1999) conceives globalisation as "a reterritorialisation of both socioeconomic and political-institutional spaces that unfolds simultaneously upon multiple, superimposed, geographical scales".7

Further debates occur around the extent, impact and consequences of globalisation, the forces and causes behind globalisation, the policies to be pursued in response to globalisation, and even the chronology of globalisation.8 With regard to the latter, for example, many question whether 'globalisation' is a new phenomenon. De la Dehesa (2000) notes that a similar process, of a form almost as intense as that which we see now, was evident between 1870 and 1914. Hirst and Thompson (1999) go further and state that "in some respects, the current international economy is less open and integrated than the regime that prevailed from 1870 to 1914".9 Such arguments clearly depend on the definition of globalisation that underpin them. If the issue is 'market' globalisation then these authors may have a strong case. In contrast, if the issue encompasses wider factors, then it would be difficult to deny that those commentators claiming 'globalisation' to be a 'new' phenomenon, influenced by the likes of jet travel and computers, also have some degree of credibility to their arguments.

What is perhaps clear above all else, however, is that throughout the world there is a development towards levels and forms of global interaction that are significantly different to previous intercourse at international level. The difference is highlighted by Scholte (2000) in terms of the importance of relations that transcend borders. He argues that globalisation is a "new and distinctive" phenomenon only when it is conceptualised in terms of "deterritorialisation".10 He suggests that "the proliferation and spread of supraterritorial - or what we can alternatively term 'transworld' or 'transborder' - connections brings an end to what could be called 'territorialsism', that is, a situation where social geography is entirely territorial".11 Scholte's use of 'trans' as a prefix is based upon the notion of transcending territorial space.12 Unfortunately, perhaps, the prefix also has connotations of transversing, of merely crossing territories. The latter has very different implications to transcending, and connotations that might better describe what Scholte (2000) terms the "tens of thousands of global companies",13 the transnational corporations. Moreover, he does not explore the implications of multiterritorial activity, an example of which might be the multinationalism advocated by Cowling and Sugden (1999). This multiterritorialisation can be argued to imply 'of many territories, rooted in and growing out of many territories', and can be seen as a route to transcending territories.

The importance of transcending borders is also associated with recognition of recent advances in transport, information and communication technologies. These advances have markedly eased previous difficulties inherent in interaction over large distances. Not only have the costs (both actual and time) of long-distance transport and telecommunications fallen dramatically, but the last decade has seen the advent and evolution of email and the Internet. These new technologies herald the cheap and almost instantaneous transfer of vast amounts of information across the entire wired-up world, and create the potential (as yet only partially realised) for a new 'layer' of market and non-market activities that are detached from physical localities.14

Economic activity focused around these developments is commonly termed the 'new' economy, although there is a degree of confusion as to what, exactly, this constitutes. For some authors it refers simply to technological advances. Gordon (2000), for example, defines it as "the post-1995 acceleration in the rate of technical change in information technology together with the development of the Internet", and seeks to compare it with the great inventions that have previously transformed economies.15 For others, however, the 'new' economy is a wider phenomenon, encompassing both new technologies and the emerging global economic relationships that they help to facilitate and that in turn condition their use.16 In this sense the 'new' economy is something deeper, with roots in the capitalist organisation of economic activity. Reich (2001), for example, points to a society where "we can get exactly what we want from almost anywhere at the lowest price and highest value".17 The roots of such developments are seen to lie in modern capitalism, although advancements in technology combine in driving them to a 'new' level, primarily because it becomes increasingly easier to transfer information, and thus, it is claimed, to compare, contrast and make informed decisions.18 This has similarities to the argument by Radice (2000) that "globalisation can best be understood as an aspect of capitalism".19 Indeed, it is difficult to separate either 'globalisation' or the 'new' economy from the capitalist context in which they have evolved and are evolving, and thus also difficult to separate them from one another.20

Drawing these ideas together, a useful starting point is to conceptualise globalisation broadly, capturing its cross disciplinary character, recognising its roots in a changing geography and identifying its association with alterations in transport, information and communication technologies. In essence, we suggest that globalisation is a multidisciplinary process in which a new geography and new technologies imply changes in activity and behaviour. It is a process in which the constraints of geography on economic, political, social and cultural activity and behaviour change, becoming less territorialised and more trans- or multi- territorial.21 People are more or less aware of these changes, implying concern with how they respond to and shape the processes occurring around them. Moreover, our focus on a multidisciplinary approach is distinct from a mere cross- or inter- disciplinary concern; it is not simply that globalisation is relevant in various disciplines, rather it is that the process can only be fully understood from a perspective that fuses various disciplines together.

Knowledge and Governance

Whilst such a broad conceptualisation provides a solid foundation for analysis, it has a strength that is also a weakness; in encompassing many perspectives it fails to identify and highlight all that we see as especially crucial. This probably makes it more widely acceptable but at the same time less interesting. We return, therefore, to Kudrle (1999) and suggest a refinement, a narrowing, that accommodates the concerns of its users. More particularly, for an analysis of the implications of globalisation for economic development we suggest that the conceptualisation of globalisation needs to incorporate two key, related issues: knowledge and governance.

Knowledge (and learning) is a key driver behind the ability to respond to the changes that are occurring with globalisation. This suggests that it is a fundamental concern. Indeed, it is no co-incidence that knowledge has become acknowledged in the mainstream development agenda as perhaps the key issue at a time when the forces of 'globalisation' have accelerated in conjunction with new technologies.22 Given movement towards a 'new' economy, where knowledge is seen to be the key to realising returns,23 it has become generally accepted that education and the generation and diffusion of knowledge are vital and central components to development processes.24 While there are hints that knowledge could play a wider role in the development of economies,25 the standard premise for these arguments is essentially a market perspective. Knowledge is seen as important in terms of the value it can add to production processes, and crucially, therefore, the ability to attract investment, in particular foreign direct investment (FDI). Indeed, a primary concern from this perspective is with bridging knowledge gaps so that localities can 'compete' on a more equal footing, or extending knowledge gaps so that localities can enhance their 'competitive advantage'. In a sense, therefore, the argument is very similar to that for flexible labour markets; like flexible (cheap) labour, knowledge is seen as a route to competitive advantage.

While we recognise the so-called competitive imperative for knowledge in a 'new' and 'global' economy, our concern is primarily from an alternative perspective. We see knowledge and learning as central to development, central to each individual (and the communities that they form) realising their potential. It is important because it affords people the opportunity to engage effectively in the decision-making processes that govern development. In turn, this enables development to reflect accurately the aims and objectives of localities.

The significance of decision-making processes is argued elsewhere. Consider, for example, the governance of transnational corporations,26 of what Scholte (2000) calls "global companies". The typical modern corporation is governed by an elite, only a subset of those with an interest in its activities. To govern is to make the strategic decisions, to 'control' a corporation. It is an elite that determines a corporation's strategy and therefore its impact. The result is strategic failure: concentration of strategic decision-making power in the hands of an elite implies a failure to govern production in the interests of the community at large. To avoid such failure, the democratisation of governance is required. Achieving this would imply a shift from governance designed to yield prosperity for an elite. Rather, there would be governance in search of a prosperity that is based on the concerns of everyone interested in a corporation's activities.27

More generally, a similar argument for democratisation applies to all aspects of economies, and to economies as a whole. Take, as another example, the position of so-called 'developing' countries.28 Since the early 1980s their economic prosperity has been largely influenced by the 'Washington Consensus',29 an approach that emphasises policy measures such as fiscal discipline, financial liberalisation, trade liberalisation, privatisation, deregulation, and limited government intervention. The extent of convergence over these policies has been remarkable over the last two decades,30 as has the perceived lack of progress. The structural adjustment programmes, through which policies have been transmitted, have been widely and heavily criticised, and for large numbers of people Washington Consensus policies are associated with continuing poverty and rising inequality. This strikes at the credibility of, and hence support for, the development agenda, something that can be seen in the collapse of World Trade Organisation (WTO) talks in Seattle in November 1999, and protests wherever the forces at the core of the consensus meet.31 The dwindling support for this agenda has recently been recognised by the institutions at the heart of the consensus.32 However, while re-evaluation is clearly necessary, it is important first to reflect on why the Washington Consensus has failed to generate the necessary success and support. We suggest that the explanation is an exclusion from governance, a failure to engage people in the decisions and processes surrounding their development. Evolution of the Washington Consensus and encouragement of a certain sort of private sector economy has been associated with monopoly power and a denial of access to the 'global' economy for the vast majority of potential participants.33 This denial not only implies an absence of provision, an absence of material welfare, it even implies a failure to include the majority in the determination of the aims and objctives of economic activity, the most fundamental of strategic decisions faced by an economy. This is an exclusion from determining the aims and objectives of development, from determining what is meant by 'prosperity'.

The especial significance of knowledge is that it is vital for the democratisation of decision-making. In particular, it helps to free people to participate fully in the governance of their locality; to become involved in the (formal and informal, interrelated networks for the) governance of firms, institutions, government and other economic actors. Moreover, where effective governance does not exist, it helps to free people to ensure that it becomes established and evolves towards effectiveness.

In this sense, we view knowledge as essentially active and dynamic. The crucial issue is not one of knowledge of 'facts', rather it is far deeper. Criticising educational methods that "discourage original thinking", Fromm (1941) argues against the "pathetic superstition . that by knowing more and more facts one arrives at knowledge of reality".34 Similarly, good governance necessitates that each interested person be able to think about and therefore participate fully in the governance process. Each must be active, alert to the necessity for certain types of knowledge, able to use their voice in the pursuit of that knowledge, able to use that knowledge in influencing strategic ways forward.35 Moreover, while information and education give people the basic ability and confidence to participate actively in the governance of their development, participation itself is a learning process that generates further knowledge. In particular, it generates knowledge around practical issues of governance; it allows localities to establish what works for them, and what does not. In turn, localities learn more about economic democracy, which may enable improvements in governance that further increase the benefits and incentives for participation. The idea, then, is of a virtuous circle where localities feel their way forward; evolve towards ways in which they can govern themselves to ensure attainment of their own development aims and objectives.

This is in line with the observation by Hirschman (1971), in comparing 'exit' and 'voice', that "while exit requires nothing but a clearcut either-or decision, voice is essentially an art evolving in new directions".36 He goes on to argue that this presents an inherent bias towards exit that tends to "atrophy the development of the art of voice".37 A similar argument could be made with regard to participation in the governance of localities; development of the virtuous circle might be hindered by the difficulties and frustrations of ensuring democratic involvement.

The challenge, therefore, is to set a virtuous circle in motion, so that the active and dynamic concept of knowledge can be realised. Knowledge that contributes to (and in turn is generated by) involvement in governance is crucial to the way in which people respond to 'globalisation' and the 'new' economy. It essentially determines whether these broad processes can be harnessed to further the prosperity of a locality, as defined by the locality itself, or whether they are geared solely towards serving 'elite' or 'external' interests. Moreover, a full understanding of the art of democracy as central to economic prosperity requires multi-discipliniary analysis.

Reflecting these key issues, we suggest that globalisation can be conceptionalised as a multidisciplinary process in which a new geography and new technologies imply changes in activity and behaviour, and in which knowledge and governance are fundamental to the attainment of economic prosperity. In addition, our discussion points to a distinction between elite globalisation and democratic globalisation. The former refers to a process harnessed to further the prosperity of an elite, the latter to a process harnessed to further the prosperity of all people in a locality.


Nations, Regions and Localities

We have argued that globalisation is seen to present a new level of analysis for economic, social and political problems, or, at least, one that is changing significantly in its nature. Within this new analytical context, specific territories - whether these are 'cities', 'regions', 'nations' or something different - might be argued to play an integral part in the changes currently occurring. Likewise, the responses of territories to globalisation might be considered significant.

Unsurprisingly, given the lack of consensus surrounding all aspects of 'globalisation', there is disagreement over the role of nations in a 'global' and 'new' economy. This debate is not new, and was addressed in 1918 by Bucharin, who contrasted the dual trends of nationalisation and internationalisation, arguing that the latter was built around the former. More recently, authors such as Hirst and Thompson (1999), Wade (1996), Ruigrok and van Tulder (1995) and Gordon (1988) have presented the case for what Radice (2000) terms 'progressive nationalism'. For these authors, as with Bucharin, nations still have a key role to play in economic and social activity. This is in contrast to what some see as the vision of a truly 'global' economy; a borderless world made up of fully 'global' companies, in which nation states have little role. Kindleberger (1969) hinted at such a scenario, asserting that "the nation-state is just about through as an economic unit. containerization., airbuses, and the like will not permit sovereign independence of the nation-state in economic affairs".38 More recently, similar arguments have been associated with authors such as Ohmae (1995, 1990) and Reich (1992), although Radice (2000) warns that their work has often been caricatured.

Despite these differences, a common thread in the literature is that globalisation processes are inherently associated with 'regionalisation' of some form. For example, Ohmae (1995) argues that while traditional 'nation states' have become unnatural units in a global economy, 'region states', based on economically functional rather than political boundaries, are the right size and scale to tap into this economy. Related to this is Storper's (1997) analysis of the resurgence of regional economies, stressing the key role of regional communities and firms as the basic building blocks of an increasingly connected world. In some sense, therefore, there is a clearly acknowledged regional dimension to globalisation, presenting a strong premise for looking at 'regions' as important units of analysis. Moreover, the imperative is twofold, given our concern with knowledge, learning and communication. This is partly because formal channels of education and learning - such as schools, colleges and universities - are often regionally based. In addition, people communicate and learn by virtue of living in proximity to one another, including geographical proximity.39 This implies that knowledge, learning and communication require consideration at a regional level, contributing to the need to examine in more detail what might be meant by the concept of a region.

Vellinga (2000) argues that "regions are mostly products of history.[that] cannot always be defined in a strict geographical sense. The boundaries are often not clearly delimited and may shift with changes in the development process. The formation of these regions results from the development of material interests and related social classes and power relations in a socio-spatial context. This process will often also involve the formation of communities of belief and identity".40 Along with acknowledgement that regions are not fixed entities, there is a clear distinction made here between 'region' and 'community'. This suggests the possibility of a layered approach to the units with which we analyse development, so as to avoid rigid, fixed categorisations (see also Marshall, 1919)41 and so as to incorporate different notions of 'community'. In particular, we suggest that it is useful to refer to the concept of 'locality' as distinct from 'region' or 'nation', terms that often carry specific, fixed connotations. We define a 'locality' as a local geographical area characterised by certain common institutions, practices and identity, and by the relationships that these foster between actors. Such a definition gives fluidity, allowing us to consider different 'layers' of locality, and to accommodate the different communities that exist within and across these layers.42

To illustrate, consider a large town or city. Whilst a geographical district within the city might be considered a specific locality, so too might the city as a whole and indeed the wider area of which the city is a part. One possibility is to think of these distinct entities as part of an inter-related whole, encompassing not one but many localities. The 'first' layer comprises localities defined around local shops and firms, churches, government, media and grass roots organisations. For each such locality, however, there are likely to be strong links in terms of employment, administration and social factors with other areas in the city (defined in the same way). What happens in one locality will effect others and in this sense each cannot be isolated. In particular, some areas within a city may be focal points for a significant firm or institution - such as a university - that is important to many other parts of the city. Similarly, the centre of the city may be important to other 'localities', although this is said to be changing with the new economy.43 The idea of 'locality' can therefore be seen in terms of intertwined layers. Specific areas of a city can be 'localities', as can the city as a whole, or the geographical area encompassing nearby towns and villages that rely on the city. This is illustrated in the diagram in Appendix 1.44

Such an approach also allows us to incorporate different concepts of community into the analysis. Dewey (1916), for example, defines community in terms of common aims and beliefs, and their communication: "there is more than a verbal tie between the words common, community, and communication. Men live in a community in virtue of the things which they have in common; and communication is the way in which they come to possess things in common. What they must have in common in order to form a community or society are aims, beliefs, aspirations, knowledge - a common understanding - like-mindedness as the sociologists say".45 This can be applied to the 'first' layer of locality, existing around local shops and institutions. The people that occupy these localities are communities by nature of living together and communicating around such local institutions. A layered approach, however, also recognises that communities exist across and within these localities on work, social, religious, ethnic and other grounds. Thus there are also layered 'communities' intertwined with layered 'localities', the likelihood being that individuals are members of several different but related communities spanning different layers of locality.

The fluidity of this approach is in contrast to a more rigid analysis focused on fixed historical or administrative regions, which often do not correspond naturally to social, economic or cultural relationships. Thompson (2000), for example, notes that in Southern Africa "'national' borders were drawn by Europeans, who were quite ignorant of the family and community borders that they were partitioning". In discussing the Southern African Development Community (SADC) she goes on to argue that the "member states' approach to regionalism rejects 'separate development' of the individual countries, which were just as falsely (and forcefully) divided as the ethnic groups within South Africa".46 None of this is to deny, of course, that a conceptual analysis based fluidly on 'localities' can be translated into administrative regions (for example, nations, provinces) for the purposes of policy implementation.

Networking and Governance

Implicit in this approach is the concept of 'networking'. The 'first', most 'local', layer of locality is defined around institutions, and the relationships and communication that these facilitate between actors. Likewise, the concept of intertwined layers relies on networks of relationships between actors and communities across localities. Indeed, relationships across localities need not be confined to localities in geographical proximity. For example, in a 'global' and 'new' economy it might seem natural that localities, and actors within localities, could also form networks for co-operation, competition and exchange of experiences that are multinational in nature, transcending previous geographical borders.

These processes, both within and across localities, might be fostered by appropriate use of the Internet. For some time there have been websites that facilitate networking among people sharing common interests, views, beliefs, etc.. Theoretically this has allowed the establishment of communities that span localities, although inclusion is limited to those that have access to the Internet. New ventures in the UK are demonstrating the potential for similar networking to take place in the context of geographical localities.47 A website called, for example, separates London into distinct 'villages', and provides a forum for businesses, organisations and individuals to network and share information with others in each locality. There are concerns over the inclusiveness of an Internet forum and the editing of the site itself. However, such ventures demonstrate how people might network within localities in a 'new' economy, and also provide scope for the type of networking across localities that we have suggested. Someone living in one London 'village', for example, could bring issues to other 'village' forums where there may be a related interest, thus learning from and contributing to what happens in neighbouring 'villages'.

Following from our arguments in the previous Section, the governance of networks is a key consideration in terms of achieving prosperity that is recognised by all actors within each inter-linked 'locality'. Our concern is essentially with the governance of 'production' within and across localities, as it is 'production' that determines the 'prosperity' of communities. Moreover, 'production' is not confined to the production of goods and services, but also encompasses the production of knowledge, health, and general social well-being. In turn, these form part of the virtuous circle that can facilitate greater involvement in governance networks, and a voice for everyone in their collective prosperity. This returns the discussion to the distinction between 'elite' and 'democratic' globalisation. We advocate governance networks that are neither designed to serve elites nor hijacked by elites, be these internal to a locality or external, and that require more than mere co-operation and partnership across 'stakeholders'.48 Democratic governance is not merely about this; democracy requires more than co-operation and partnerships. Exactly what is required, however, is something that economics, or indeed other branches of social science, are not best placed to analyse alone. By nature, understanding democracy and the welfare effects of alternative democratic processes requires a multi-disciplinary approach.49 This poses a significant challenge for practitioners across the social sciences.

As for the view that localities and actors could form networks in the absence of geographical proximity, in one way these are already observed; the concept of 'global' networks of urban localities is illustrated, for example, by the growing literature on 'world cities'.50 Fundamental to the world cities literature, however, is a hierarchical structure of city relationships; one of the theses comprising Friedman's (1986) seminal 'world city hypothesis' is that "key cities throughout the world are used by global capital as 'basing points' in the spatial organization and articulation of production and markets. The resulting linkages make it possible to arrange world cities into a complex spatial hierarchy".51 Such linkages are transnational in the sense that they transverse localities, with transnational capital and transnational corporations as the driving force. They do not, however, imply a transcending of localities in a way that is truly multinational. In particular, the existence of a hierarchy serves to remove the democracy inherent in networking between equal partners. In addition, basing the relationships on transnational capital removes the fundamental rooting of networks in their constituent localities.

A key implication of the 'world cities' literature is that the hierarchy of cities is determined by the location of transnational capital. For Friedman (1986), 'world cities' are the "basing points" for transnational capital,52 implying a concentration of corporate headquarters, while for Sassen (1991) they are seen as "centers of finance and as centers for global servicing and management", implying a key role in servicing transnational capital. Both approaches result in a hierarchy of cities in which the location of global capital is seen as paramount.53 Moreover, the links between cities in such a model are also defined by flows (of information, capital and personnel) between transnational firms and institutions. Indeed, Castells (1996) focuses his analysis on flows between cities, what he terms the 'network society'. He argues that "the global city is not a place, but a process. A process by which the centers of production and consumption of advanced services, and their ancillary local societies, are connected in a global network, while simultaneously downplaying the linkages with their hinterlands, on the basis of information flows".54 This suggests a concept of networking between 'world cities' that is not fully rooted locally; it crosses above the localities comprising and surrounding cities, and is dominated by the agenda of a transnational elite. The desire to attract and maintain this transnational elite has implications for the way in which cities across the hierarchical spectrum, from 'world cities' to 'peripheral cities', are able to govern their own development.

The city of Birmingham (England) is an interesting example. It has undergone a substantial transformation over the last two decades, stimulating a debate over its alleged success. In particular, Henry and Passmore (1999) show concern that in its quest to become a 'world city', Birmingham has rejected its local roots and instead sought to create an enclave for international capital in the city centre. They argue that the flagship development projects have created "a space for the national and international business/tourist class, which is increasingly divorced from its regional and local context", and that "a city is being made to show and entertain investors rather than for local people to live in".55 This is the danger inherent in an approach to city development that essentially aims to attract an elite. Arguments that the wealth that this elite brings to the city will 'trickle-down' to benefit all of its citizens miss the point. What matters is that all citizens have the opportunity and ability to become involved in the democratic governance of their locality, not least to define the 'prosperity' that they seek from development. In turn, this principle must be reflected in relationships with other localities, whether in geographical proximity or not, so that networking is truly multilocational (rather than simply translocational in a transversing sense).

In the case of Birmingham, Henry and Passmore (1999) suggest that future development should involve an embracing of the city's multicultural heritage, "drawing on the 'rooted globalisations' of Birmingham's people".56 One specific suggestion is to establish a centre for cultural hybridity, which "could overcome the prejudices which reduce participation in the present city centre and inhibit an honest engagement with our multicultural selves".57 Hubbard (2001), while re-enforcing their concerns, takes a slightly different view of the route forward. Following Castells (1996), he argues that "for Birmingham to become plugged into the global space of flows it needs to establish connections and manipulate flows".58 A "more radical policy", he suggests, "would be to establish a series of Birmingham Centres for Cultural Hybridity in Mumbai, Islamabad, Chicago, Beijing and so on".59 Our response takes elements of both of these views. The fundamental emphasis on governance implies a solid rooting in localities, and therefore 'place'. However, the layered approach to 'locality' does not see 'place' as a rigid, fixed concept, but as a fluid arrangement of intertwined 'localities' and 'communities'. Thus there is also an emphasis on 'flows' between the layers, in the form of relationships that, crucially, maintain concern with governance for all constituents.

From this approach to 'locality', we see the ultimate challenge as moving towards a scenario where all actors in each locality, and in the communities within and across localities, participate in the democratic governance of their collective development. Thus 'prosperity' would become rooted in the inclusion of each member of each community making up the global economy. This is consistent with an embracing of the 'global' and 'new' economy that is truly democratic; concerned with the opportunity and ability for everyone to access and shape the globalisation process.


'Globalisation' is a commonly used word. Nearly as commonly, it is a loosely used word. We linked its conceptualisation to the 'new' economy and suggested a broad definition based upon a multidisciplinary process, new geography and new technologies. These three characteristics are the cornerstone of what is fresh about globalisation at the current time. They are also at the heart of our more focused conceptualisation, designed to take the analysis forward albeit at the expense of some consensus. For an analysis of the implications of globalisation for economic development, knowledge and governance are fundamental. The issue is not the so-called competitive imperative for knowledge that is so widely addressed at the current time. Rather, knowledge (and learning) is important because it is the key to people having the opportunity to engage effectively - that is, democratically - in the decision-making processes that govern development. In turn, this enables 'prosperity' to reflect accurately the aims and objectives of localities. The significance of knowledge is that it be seen in an active and dynamic sense. What matters is not knowledge of 'facts' but knowledge in terms of thinking and awareness. Equally important, knowledge is an ongoing process; participation in governance generates knowledge around practical issues, allowing localities to establish what is effective for them, and what is not. This raises the prospect of a virtuous circle, of localities evolving towards ways in which they can govern themselves to ensure attainment of their own development aims. If successful, it also implies the possibility of democratic as against elite globalisation.

Our analysis of specific territories that play an integral part in a globalised, new economy introduced the concept of 'locality'. Disagreement in the existing literature about the role, if any, of 'nations' and 'regions' cannot hide the common view that globalisation processes are inherently associated with 'regionalisation' of some form. We suggested an approach that avoids rigid categorisations, focusing instead on local areas characterised by certain common institutions, practices and identity, and by the relationships that these foster between actors. We advocated a 'layered' approach to these localities, accommodating different communities that exist within and across these layers. This identifies and structures inter-linked territories from a multidimensional and fluid perspective. Moreover, implicit in this approach is a central role for 'networking', taking analysis to the significance of the governance of production networks. We envisage the possibility of certain sorts of influential networks within and across localities, therefore within and across nations and regions; these might facilitate decision-making to move localities towards their own objectives, to achieve what they see as prosperity.

Throughout the paper concern has focussed on governance, knowledge and networks, three pillars that are central to democratic processes. Within each of these, there are significant questions that need to be addressed. With respect to governance, for example, how do we prevent the hijacking of decision-making by powerful elites, whether local, national or transnational? Moreover, what of the practical operation of communication channels and arenas? With respect to knowledge, questions remain about its very nature, and thus the nature of learning. More particularly, what are the learning processes that enable people to engage most effectively in democratic governance? The concept of networks is related to each of these issues, but specific questions exist, for example, as to the role and practicalities of multilocational interaction in democratic processes. In an increasingly complex and connected world, where the traditionally narrow concerns of politics, economics and other such disciplines are under threat, it seems natural that embracing these questions will imply a truly multidisciplinary approach. The question in essence is what form should dynamic, democratic processes take in a global, new economy. The answer is no doubt complex, and must account for the direct and indirect welfare effects of particular processes. Movement towards an answer, we suggest, necessitates a fusion of politics, geography, anthropology, history, economics, law, sociology, psychology and a variety of other fields of study.

Nearly 2,500 years ago, Socrates saw himself as "a citizen, not of Athens or Greece, but of the world".60 Since that time, the world has shrunk through technology. However, few people can meaningfully claim that they are citizens in the sense of participating fully in the governance of their economies and societies. Today's 'globalised', 'new' economy is characterised by exclusion, both at the level of the world as a whole, and that of particular territories and entities within the world. The multidisciplinary challenge is to ensure democratic globalisation, a situation where all actors in all localities participate in the democratic governance of their development. Then, each and every person would be in a position to proclaim: "I am a citizen, not only of the localities of which I am a part, but also of the world".


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* Roger Sugden and James R. Wilson, L'institute (Institute for Industrial Development Policy), The Birmingham Business School, University of Birmingham, Edgbaston, Birmingham B15 2TT, UK. We are grateful to Marco Bellandi, J. Robert Branston, Miriam Quintana Fernandez, Phil Tomlinson, Jonathan Zeitlin and participants at the L'institute-Milwaukee Workshop on Urban and Regional Prosperity in a Globalised, New Economy (Milwaukee, July 2001) for comments and suggestions around earlier material underlying this paper.

1. This follows Sugden and Wilson (2000).

2. Scholte (2000), p. 1.

3. Radice (2000), p. 6.

4. He makes a distinction between 'market', 'direct', and 'communications' globalisation. Other authors, however, make different distinctions. Scholte (2000), for example, identifies at least five broad definitions, associated with the concepts of 'internationalisation', 'liberalisation', 'universalisation', 'modernisation', and 'deterritorialisation'.

5.De la Dehesa (2000), p. 17. He also notes that one of the first to use to the term 'globalisation' was Levitt (1983), who used it to refer to the globalisation of markets.

6. Robertson (1992), p. 8.

7. Brenner (1999), p. 432.

8.Indeed, Scholte (2001, p. 39) notes that "the only consensus about globalisation is that it is contested".

9. Hirst and Thompson (1999), p. 2.

10. Scholte (2000), p. 3.

11. Ibid, p. 46, emphasis added. His point is that "although . territory still matters very much in our globalising world, it no longer constitutes the whole of our geography" (p. 46).

12. This is clearly a topic where semantics can intrude. For Scholte (2000), "whereas international relations are interterritorial relations, global relations are supraterritorial relations. International relations are cross-border exchanges over distance, while global relations are transborder exchanges without distance. Thus global economics is different from international economics, global politics is different from international politics, and so on. Internationality is embedded in territorial space; globality transcends that geography" (p. 49).

13. Scholte (2000), p. 53.

14. The Internet has already made it possible, for example, to order goods from CDs through to cars directly from suppliers in other parts of the world, creating a market that leaves behind (further than previous forms of international trade) the necessity of being fixed to a physical locality. On the Internet as a tool for global linking in academic and academic-related activities, see Sugden (2000).

15. Gordon (2000), p. 71-72.

16. See, for example, Reich (2001) and Atkinson and Gottlieb (2001).

17. Reich (2001), p. 1.

18. The problems of inequality and de-fragmentation of society that Reich sees as the opposite side of the 'new economy' coin are also essentially an enhancement of the problems inherent in Anglo-US capitalism, and identified as central in the Marxist-influenced dependency literature. Frank (1967, p. 9), for example, argues that "economic development and underdevelopment are the opposite faces of the same coin. Both are the necessary result and contemporary manifestation of internal contradictions in the world capitalist system".

19. Radice (2000), p. 13.

20. See also Scholte (2000), arguing that "globalisation has not put the structure of capitalism itself under threat. If anything, the current situation is one of hypercapitalism" (p. 4). He goes on to argue "that capitalism has been not only a primary cause, but also a chief consequence of globalisation" (p. 130).

21. This borrows heavily from Waters (2001), defining globalisation as "a social process in which the constraints of geography on economic, political, social and cultural arrangements recede, in which people become increasingly aware that they are receding and in which people act accordingly" (p. 5).

22. The 1998/99 "World Development Report" (World Bank, 1998), for example, is dedicated to knowledge. Moreover, Joseph Stiglitz, former Chief Economist at the World Bank, has suggested that the World Bank should evolve towards a 'knowledge bank'. See Stiglitz (1998b), and Standing (2000) for a critique of his suggestions. The recent concern with knowledge is also mirrored in other fields, with knowledge creation and knowledge management currently fashionable topics in the areas of organisational behaviour and management, see for example Inkpen (1998).

23. Putting these developments in deeper historical perspective, Dunning (2000, p. 8) argues that "over the last three centuries, the main source of wealth in market economies has switched from natural assets (notably land and relatively unskilled labour), through tangible assets (notably buildings, machinery and equipment, and finance) to intangible created assets (notably knowledge and information of all kinds)".

24. See, for example, Nichols (2000), Florida (1994).

25. Stiglitz (1998a, p.31), for example, states that "education - especially education that emphasizes critical, scientific thinking - can also help train citizens to participate more effectively and more intelligently in public decisions".

26. See, for example, Cowling and Sugden (1999) and Branston et al (2001).

27. The importance of corporations in a globalisation context is recognised by Stallings and Peres (2000, p. 17), who note that globalisation can be viewed "as a microeconomic phenomenon led by the strategies and behaviour of corporations."

28. See especially Sugden and Wilson (2000).

29. On the Washington Consensus, see Williamson (1990).

30. Rodrik (1996, p. 9) argues that "faith in the desirability and efficacy of these policies unites the vast majority of professional economists in the developed world who are concerned with issues of development".

31. Following Seattle, the annual meetings of the IMF and World Bank in Prague during November 2000 were targeted by protesters. Likewise, the World Economic Forum in Davos during December 2000, the European Union summit in Gothenburg during June 2001, and the G8 Summit in Genoa, July 2001.

32. Joseph Stiglitz has been a particularly key figure in this regard. See, for example, Stiglitz (1998a, 1998b), Standing (2000).

33. Indeed, Ruigrok and van Tulder (1995, p. 151) suggest that "what is often referred to as 'globalisation' is perhaps better described as 'Triadisation'. The 1980s internationalisation of trade and investments was largely limited to the United States, the European Community and Japan as well as East and South East Asia.other regions on the globe have been excluded from this supposedly 'global' restructuring process".

34. Fromm (1941), p. 247. He continues: "Hundreds of scattered and unrelated facts are dumped into the heads of students; their time and energy are taken up by learning more and more facts so that there is little left for thinking. To be sure, thinking without a knowledge of facts remains empty and fictitious; but 'information' alone can be just as much of an obstacle to thinking as the lack of it".

35. See Branston et al (2001) on citizen-focused or citizen-determined governance. The relevance of different disciplines to this approach is highlighted by Escudé's (1997) citizen-centric analysis of foreign policy.

36. Hirschman (1970), p. 43. Dewey (1916) appears to make a similar point in his discussion of democracy and education, arguing that "all communication is like art. It may be fairly said, therefore, that any social arrangement that remains vitally social, or vitally shared, is educative to those who participate in it" (p. 7).

37. Ibid., p. 43, emphasis removed.

38. Kindleberger (1969), p. 207.

39. Dewey (1916, p. 7), for example, notes that "not only does social life demand teaching and learning for its own permanence, but the very process of living together educates". We suggest that 'living together' need not be confined to geographical proximity; mental proximity is important in a 'new' economy and this might be achieved over large distances. On mental proximity, see Sacchetti and Sugden (2001).

40. Vellinga (2000), p. 7.

41. See Bellandi (2000). Marshall (1919, p. 13-14) writes: "If the local spirit of any place ran high: if those born in it would rather stay there than migrate to another place: if most of the capital employed in the industries of the place were accumulated from those industries, and nearly all the income enjoyed in it were derived from its own resources: - if all these conditions were satisfied, then the people of such a place would be a nation within a nation in a degree sufficient to render propositions, which relate to international trade, applicable to their case from an abstract point of view".

42. The analysis also accommodates the possibility of different societies within and across localities.

43. Atkinson and Gottlieb (2001) argue in the context of the US that the 'new' economy is leading to a decline in the importance of city centres. However, while these shifts may be an important phenomenon in terms of the changing of geography cities, it is likely that there will remain centres, whether 'city centres' or otherwise, that are especially important from an economic and social perspective.

44. While the diagram is drawn for a city, a similar diagram could be drawn to represent the relationships between village and town localities in a rural area.

45. Dewey (1916), p. 5.

46. Thompson (2000), p. 44.

47. See The Independent, 2nd July 2001.

48. Atkinson and Gottlieb (2001) argue, for example, that the 'new' economy requires new governance, more specifically co-operation and partnerships across actors and geographical areas.

49. See, for example, Fromm (1941) on the welfare effects of introducing a democratic process. He argues the danger of market economies leading people to escape from freedom. A parallel argument can be made about escape from governance, see Branston et. al. (2001).

50. On 'world cities' see, for example, Friedman and Wolff (1982), Friedman (1986), Sassen (1991, 1994), Beaverstock et. al. (2000) and Taylor (2000).

51. Friedman (1986), p. 71, emphasis removed.

52. Sassen (1991), p. 324.

53. For a related analysis in a broader context of development, see Hymer (1972).

54. Castells (1996), p. 386.

55. Henry and Passmore (1999), p. 61 and p. 62.

56. Ibid., p. 66.

57. Ibid., p. 64.

58. Hubbard (2001), p. 5.

59. Ibid., p. 5.

60. Quoted in Plutarch, De Exilio, v.


Appendix 1: Localities and Linkages within a City: Intertwined Layers

** "Localities" might also exist beyond a city.


Edited and posted on the web on 6th December 2001