Scott e Storper - 2003 - Regions, Globalization, Development

Regional Studies
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Regions, Globalization, Development
Allen Scott & Michael Storper
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Regional Studies, 37:6-7, 579-593, DOI: 10.1080/0034340032000108697a
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Regional Studies, Vol. 37.6&7, pp. 579–593, August/October 2003
Regions, Globalization, Development

ALLEN J. SCOTT* and MICHAEL STORPER†
*Departments of Geography and Policy Studies, University of California Los Angeles, Los Angeles, CA 90095–1656,
USA. Email: ajscott@geog.ucla.edu
†Department of Urban Planning, University of California Los Angeles/Institut d’Etudes Politiques de Paris/London School
of Economics, UCLA, Los Angeles, CA 90095–1656, USA. Email: storper@ucla.edu
(Received October 2002; in revised form February 2003)
S COTT A. J. and S TO RPER M. (2003) Regions, globalization, development, Reg. Studies 37, 579–593. Regional economies
Downloaded by [Regional Studies Association] at 11:36 28 December 2017
are synergy-laden systems of physical and relational assets, and intensifying globalization is making this situation more and not
less the case. As such, regions are an essential dimension of the development process, not just in the more advanced countries
but also in less-developed parts of the world. Development theorists have hitherto largely tended to overlook this critical issue
in favour of an emphasis on macroeconomic considerations. At the same time, conventional theories of the relationship between
urbanization and economic development have favoured the view that the former is simply an effect of the latter. To be fully
general, the theory of development must incorporate the role of cities and regions as active and causal elements in the economic
growth process. This argument has consequences for development policy, especially in regard to the promotion of positive
agglomeration economies and the initiation of growth in poorer regions. A related policy problem concerns ways of dealing
with the increase in interregional inequalities associated with contemporary globalization. Issues of economic geography are
thus of major significance to development theory and practice.
Economic development Agglomeration World economy Development policy Income inequalities

Regional dynamics
S COTT A. J. et S TO RPER M. (2003) Les régions, la mon- S C O T T A. J. und S TORPER M. (2003) Regionen, Globali-
dialisation, le développement, Reg. Studies 37, 579–593. Les sation, Entwicklung, Reg. Studies 37, 579–593. Regional-
économies régionales sont des systèmes d’atouts physiques et wirtschaften sind Synergie–geladene Systeme mit physischen
relationnels bourrés de synergies, et l’intensification de la und relationalen Vermögenswerten, welche die immer inten-
mondialisation renforce cet état des choses. En tant que siver werdende Globalisierung nicht entlastet, sondern weiter
telles, les régions constituent un élément clé du processus de verstärkt. Regionen als solche stellen eine wesentliche Dimen-
développement, non seulement dans les pays plus avancés, sion des Entwicklungsprozesses dar, in den höher entwickelten
mais aussi dans les zones moins développées du monde. Ländern wie auch in den weniger entwickelten Teilen der
Jusqu’ici, les théoriciens du développement ont eu tendance à Welt. Entwicklungstheoretiker haben dies kritische Problem
ignorer en grande partie cette question primordiale, favorisant meist übersehen, und stattdessen makro-ökonomische Über-
plutôt des considérations macroéconomiques. En même legungen betont. Gleichzeitig haben konventionelle Theorien
temps, des théories traditionnelles du rapport entre l’urbanis- die Beziehung zwischen Verstädterung und wirtschaftlicher
ation et le développement économique ont affirmé que Entwicklung die Ansicht vertreten, daß erstere einfach eine
celle-là s’explique par celui-ci. En principe, la théorie du Auswirkung der letzteren ist. Um allumfassend zu sein, muß
développement doit embrasser le rôle des grandes villes et die Theorie der Entwicklung die Rolle der Städte und
des régions comme éléments essentiels et causaux dans le Regionen als aktive und kausale Elemente in den wirt-
processus de croissance économique. Cette affirmation a de schaftlichen Wachstumsprozeß einbinden. Dieses Argument
l’importance pour la politique de développement, surtout hat Folgen für die Entwicklungspolitik, besonders im Hinblick
pour ce qui est de la promotion des économies d’agglomér- auf die Förderung der positiven Ballungswirtschaften und der
ation positives et de l’amorçage de la croissance dans les Einleitung eines Wachstumsprozesses in minder bemittelten
régions défavorisées. Un problème de politique connexe Regionen. Ein damit verbundenes Problem der Bestrebungen
concerne les façons d’aborder la question du creusement des betrifft Arten der Handhabung der zunehmenden inter-
inégalités interrégionales liées à la mondialisation con- regionalen Ungleichheiten in Verbindung mit der derzeitigen
temporaine. Par la suite, les questions de géographie écono- Globalisierung. Fragen der Wirtschaftsgeographie sind damit
mique sont d’une importance majeure pour ce qui concerne von großer Bedeutung für Theorie und Praxis der
la théorie du développement, en principe et en pratique. Entwicklung.
Développement économqiue Agglomération Wirtschaftliche Entwicklung Ballung

Economie mondiale Politique du développement Weltwirtschaft Entwicklungspolitik
Inégalités des revenus Dynamique régionale Einkommensungleichheiten Regionale Dynamik
0034-3404 print/1360-0591 online/03/06&70579-15 ©2003 Regional Studies Association DOI: 10.1080/0034340032000108697

http://www.regional-studies-assoc.ac.uk
580 Allen J. Scott and Michael Storper
INTRODUCTION: THE MISSING alone but is also strongly shaped by processes that occur
ELEMENT IN DEVELOPMENT on the ground, in specific regions of the type we have
THEORY just defined. As a result, development in any given
country is always characterized by significant variations
The theory of economic development has had a long in the intensity and character of economic order from
and tangled history extending from the classics of one place to another. Here, we are not simply calling
eighteenth and nineteenth century political economy, attention to an obvious empirical state of affairs; we
through the German historical school of the early are also putting forward a significant clue about a
twentieth century (above all, S C HU MP ETE R , 1912), to complex theoretical question focused on the geograph-
the many different streams of developmental ideas that ical foundations of economic growth. Any answer to
were in circulation in the immediate post-war decades. this question, we argue, must consider the locational
Analysts in this latter period focused above all on what interdependencies that underpin the persistence of
were then called Third World countries, and posed the efficiency and innovation enhancing clusters of capital
development question largely in terms of the vicious and labour in economic development. Cities and
circles of poverty and economic backwardness that regions, in other words, are critical foundations of the
seemed to afflict so many parts of Africa, Asia and Latin development process as a whole.
America (P R EB IS C H , 1982; UNCTAD, 1986). As Mainstream theorists have often and correctly
selected parts in the Third World advanced in the observed that economic development has major
1970s and 1980s, development theorists began to recog- impacts on urbanization in both rich and poor coun-
nize that at least some of these areas were susceptible tries, though they have less frequently acknowledged
to significant industrialization, and they duly added the causalities running in the other direction (K U ZN ET S ,
notion of ‘newly industrializing countries’ (NICs) to 1955; H E ND ER S ON , 1988). One widely-accepted
their theoretical repertoire. More recently, the develop- view in this regard is that as development occurs, popu-
ment question has shifted in ways that reincorporate lation and economic activity first become intensely
the most advanced economies into its purview. This polarized in any given national space, with polarization
trend is evinced most especially in the writings of the reversal then setting in as development proceeds further
new growth theorists, with their emphasis on positive (R I CH AR D SO N , 1980; T OW NROE and K E EN , 1984).
externalities as a major source of economic develop- An associated idea is that developing countries urbanize
ment (R O ME R , 1986, 1990; L UC AS , 1988). too much and too fast, generating ‘macrocephalic’
Notwithstanding the complexity and diversity of urban systems consisting of a few abnormally large
existing approaches to development, the vast majority cities in each country. These cities are said to have
of them tend to concentrate on macroeconomic vari- excessively high urban densities, and their size and
ables and processes. Among more orthodox theorists, rapid growth result in a panoply of economic, social
in particular, strongly recurrent themes are the virtues and environmental problems (L I PTON , 1977). Many
of economy-wide fiscal and monetary responsibility, analysts therefore hold that successful development
market-opening measures, secure property rights, poli- involves the sharing out of economic activity among a
tical stability, investments in education, and nominally greater number of smaller and more manageable urban
democratic principles of government (see B AUE R and centres (E L S HA KS , 1972), though this notion was
Y A MEY, 1957; B A LAS SA , 1981; L I TT LE , 1982; more commonly asserted a decade or two ago than it
K RUE GE R , 1993). A currently prominent version of is today. By the same token, the more dispersed pattern
the latter approach is represented by the neoliberal of urbanization typical of North America and Western
Washington Consensus which has decisively shaped Europe is often taken as an essential index of the higher
the policies of the principal international economic stages of economic development – a view, as implied
institutions for the last two decades (S T IG LI T Z , 2002). by our later discussion, that is unduly restrictive in its
Macroeconomic considerations are, of course, implications.
critical in any real economic development process, More heterodox forms of development theory, by
and we have no intention of suggesting otherwise. contrast, have long claimed that processes of develop-
Nevertheless, our purpose in this paper is to point out ment are invariably associated with uneven spatial
and to deal with a silence that – with just a few patterns, and that this condition is actually part and
exceptions – has characterized much of the develop- parcel of the mechanism of growth. The most promi-
ment literature from the beginning. This concerns nent version of this approach, represented by H I RS CH -
the role of selected regions as springboards of the M AN , 1958, and M YR DAL 1959, and their disciples, is
development process in general, and as sites of the based on the concept of circular and cumulative causa-
most advanced forms of economic development and tion in geographic space. Extensions of this theory led
innovation in particular, where by the term ‘region’ we to early path-breaking work on growth poles and
mean any area of subnational extent that is functionally their geographical expression as regional growth centres
organized around some internal central pole. Develop- (B O UD EV I LL E and A N TOI NE , 1968; P E RROU X ,
ment does not depend on macroeconomic phenomena 1961). Growth poles and growth centres were in turn
Regions, Globalization, Development 581
widely invoked in the formulation of development stage of development today, as suggested by the
policies in the post-war period. In less-developed parts worldwide expansion and spread of industrial clusters
of the world, the same policies were often used to Thus, for example, 40% of US employment is cur-
underpin import-substitution strategies. rently located in counties constituting just 1·5% of its
In spite of the initial influence of these early hetero- land area. Equally, the geographical density of employ-
dox claims about a positive relationship between ment in many sectors has been on the increase of late
agglomeration and development, they have tended to years (K I M , 2002). It has been suggested, as well, that
be relegated to the background by subsequent develop- 380 separate clusters of firms in the US employ 57%
ment theorists and the large international agencies that of the total workforce and generate 61% of the nation’s
promote their ideas. One possible reason for this state output and fully 78% of its exports (R O SE NF E LD ,
of affairs is the justifiable recognition that urbanization 1996; OECD, 1999). Other researchers, using more
in developing countries is associated with severe social conservative measures, still find that 30% of the US
costs and many kinds of technical diseconomies. A workforce is accounted for by globally-oriented local
second reason is that in the past the theoretical founda- employment clusters (P O RT ER , 2001). The OECD,
tions of agglomeration economies were only very par- for its part, concludes that local industrial districts
tially worked out, so that their overall role in pushing account for 30% of total employment in Italy (and 43%
development forward was widely under appreciated. A of that country’s exports) and 30% of total employment
wealth of new scholarship in economic geography over in Holland.
the 1980s and 1990s, however, has helped to revitalize The most striking forms of agglomeration in evi-
and improve upon the older heterodox approach by dence today are the super-agglomerations or city-
means of a thorough-going reconstruction of the regions that have come into being all over the world
theory of regional economic growth. This recent work in the last few decades, with their complex internal
makes it possible to claim effectively that agglomeration structures comprising multiple urban cores, extended
is a fundamental and ubiquitous constituent of success- suburban appendages and widely-ranging hinterland
ful development in economic systems at many different areas, themselves often sites of scattered urban settle-
levels of GNP per capita (B A IROC H , 1988; H EN DE R - ments (C O URCH E NE , 2001; H AL L , 2001; S COTT
S ON , 1988; R IV E RA - B AT IZ , 1988; K RU G MA N , et al., 2001). These city-regions are locomotives of the
1991; N A DV I and S C H MI TZ , 1994; E ATO N and national economies within which they are situated, in
E C KSTE I N , 1997; F U JI TA et al., 1999; S COT T , 2002; that they are the sites of dense masses of interrelated
S TOR PE R and V ENAB L ES , 2002; F AN and S COT T , economic activities that also typically have high levels
2003). Accordingly, the theory that we shall seek to of productivity by reason of their jointly-generated
elabourate here puts considerable emphasis on the role agglomeration economies and their innovative poten-
of the region as a source of critical developmental assets tials. In many advanced countries, evidence shows that
in the form of increasing returns effects and positive major metropolitan areas are growing faster than other
externalities. In addition, we aver that because agglom- areas of the national territory, even in those countries
eration is a principal source of these productivity- where, for a time in the 1970s, there appeared to be a
enhancing outcomes, urbanization is less to be regarded turn toward a dominant pattern of non-metropolitan
as a problem to be reversed than as an essential condi- growth (F R EY and S PE A RE , 1988; F OR STA LL , 1993;
tion of durable development. S U MM ER et al., 1993). In less-developed countries,
too, such as Brazil, China, India and South Korea, the
effects of agglomeration on productivity are strongly
apparent, and economic growth typically proceeds at
REGIONS IN TODAY’S WORLD
an especially rapid rate in the large metropolitan regions
ECONOMY
of those countries. The same metropolitan regions are
These questions about the geographic foundations of at once the most important foci of national growth and
development and growth are made yet more urgent the places where export-oriented industrialization is
by the current empirical realities of globalization. It is most apt to occur (S COT T , 1998, 2002).
fundamentally mistaken to equate globalization with These findings fit well with the observation that
the notion that development today involves a simple previous rounds of market opening and technological
spreading out of economy activity, or the transformation progress have tended to reinforce urbanization, not
of the economic order into a liquefied space of flows. weaken it (K I M , 1995; E ATO N and E CK ST E IN , 1997;
On the contrary, globalization has been accompanied B LAC K and H E N DE RS O N , 1998; G LAE S ER , 1998;
by the assertion and reassertion of agglomerative tend- P U GA and V ENA BL ES , 1998). Recent accounts of the
encies in many different areas of the world, in part formation of an Atlantic economy in the late nine-
because of the very openness and competitiveness that it teenth and early twentieth centuries argue that it
ushers in (S COT T , 1998; P U GA and V E NA B LE S , 1999). emerged on the basis of strong agglomeration processes
Dense regional agglomerations of economic activity are in Europe and America, with the main centres of
major sources of growth in economies at virtually every production maintaining their dominant positions
through strong increasing returns to scale (W I LL IA M - theory. This theory seeks to accommodate the cases of
S ON , 1998; C RA F T S and V ENA BL ES , 2003). Today’s both poor and rich countries, and to shed some new
wave of globalization appears to be similarly anchored light on the phenomenon of uneven spatial and eco-
in (and is also partially responsible for) an expanding nomic development on a world scale.
intercontinental patchwork of urban and regional
economic systems. In sum, large-scale agglomeration –
and its counterpart, regional economic specialization –
is a worldwide and historically persistent phenomenon THE FUNDAMENTALS OF
that is intensifying greatly at the present time as a AGGLOMERATION
consequence of the forces unleashed by globalization.
The analytical decomposition of agglomeration processes
This leads us to claim that national economic develop-
ment today is likely not to be less but rather more Cities always appear as privileged sites for economic
tied up with processes of geographical concentration growth because they economize on capital-intensive
compared with the past. infrastructure (which is particularly scarce in developing
Moreover, as globalization and international eco- areas), thus permitting significant economies of scale
nomic integration have moved forward, older concep- to be reaped at selected locations. But to this obvious
tions of the broad structure of world economic basic factor underlying agglomeration, we must add
geography as comprising separate blocs (First, Second three further sets of phenomena that complement and
and Third Worlds), each with its own developmental intensify its effects, namely: (1) the dynamics of back-
dynamic, appear to be giving way to another vision. ward and forward inter-linkage of firms in industrial
This alternative perspective seeks to build a common systems; (2) the formation of dense local labour markets
theoretical language about the development of regions around multiple workplaces; and (3) the emergence
and countries in all parts of the world, as well as about of localized relational assets promoting learning and
the broad architecture of the emerging world system innovation effects. Some brief commentary on these
of production and exchange. At the same time, it points is now in order.
recognizes that territories are arrayed at different points Even though transport and communications costs
along a vast spectrum of developmental characteristics. tend to decline over time, the friction of distance in
These are strong claims, and they call for extended general continues to have powerful effects on locational
justification, which we proceed to elaborate in the next outcomes. Improvements in transport and communi-
section. Meanwhile, it is worth pointing out that a cations processes (e.g. the development of canal systems,
long tradition of econometric analysis dating back railroads, the interstate highway network, the postal
to K AWA SH I MA , 1975; S VE I KAUS KAS , 1975; and service, or the telegraph and the telephone) have rarely if
C A RL IN O, 1979; provides prima facie evidence in favour ever slowed down the urbanizing tendencies of modern
of our assertions. This line of work has demonstrated capitalism, even as they have encouraged its spatial
time and again that in the more economically-advanced extension. Rather, improvements of these sorts have
countries, urban centres persistently exhibit signs of almost always tended to reinforce the clustering of eco-
significant and positive productivity effects as a function nomic activity both by widening the market range of
of their size. A branch of this literature has more any given centre and by helping to spark off new rounds
recently focused on less developed parts of the world, of specialization in established urban areas. This state of
and draws broadly similar conclusions (see H E ND ER - affairs also seems to be the case in the present period in
S ON , 1988; S UEYOS HI , 1992; C H EN , 1996; S HU K LA , which internet-based broadband communications tech-
1996; L E E and Z A NG , 1998; M I TRA , 2000). This nologies have made possible instantaneous transmission
literature as a whole tends to adopt traditional of complex messages across the globe at extremely low
conceptualizations of the problem in terms of so- cost. More accurately, we should say that many inter-
called urbanization and localization economies, but we firm transactions can be executed cheaply over long dis-
consider these concepts to be internally chaotic, and tances, while others resist being stretched out by reason
instead we shall seek in the following to replace them of the high linkage costs that they involve, even in a
with more analytically sustainable categories. There is world of rapidly improving transport and communi-
also a tendency in this literature to understate the cations technologies. Small-scale, non-routine flows
impacts of urbanization on productivity because the with ambiguous information content are notably averse
parameters of the econometric models on which it is to extension over long distances. This resistance is
based are never calibrated over counterfactual cases of intensified where firms compete with one another by
economic systems in which dense agglomerations of means of product differentiation, and where markets
capital and labour are absent. are characterized by much uncertainty. In circumstances
We now consider how the empirical realities we like these, firms find it difficult to stabilize their output
have alluded to can be accounted for by contemporary profiles, thus necessitating external transactional rela-
concepts of agglomeration, which we employ in turn tions that are constantly shifting in size, form, and origin
as essential components of an updated development or destination, and that are therefore expensive per unit
of distance and time. Dense agglomerations containing 1999; F E LD MA N , 2000). Silicon Valley, of course, is
large numbers of firms allow both suppliers and buyers the classic reference here, though the phenomenon of
to compensate for variability and uncertainty by provid- localized innovation has been observed in many other
ing ready access to needed resources on short notice. industrial clusters. The spatial proximity of large num-
Considerable gains in productivity typically flow to bers of firms locked into dense networks of interaction
firms from this localized concentration of many different provides the essential conditions for many-sided
suppliers and buyers. Among the more important of exchanges of information to occur, and out of which
these gains is the ability to maintain low overheads while new understandings about process and product possi-
achieving high flexibility in both internal and external bilities are constantly generated. Specialized regional
operations. One especially powerful phenomenon is the economies are the locus of intense knowledge spill-
continuing importance of face-to-face contacts for the overs, thereby helping to raise the rate of innovation,
transmission of complex and uncertain messages and to promote long-term growth ( J A FF E et al., 1993;
(L E AM ER and S TOR PE R , 2001) and for the establish- A N TO NE L LI , 1994; A UD R ET SC H and F EL DM A N ,
ment of mutual confidence and accurate evaluation of 1996; N OOT EB OOM , 1999).
potential partners in constantly changing business rela- Each of these factors underlying geographic concen-
tionships (S TOR PE R and V ENAB L ES , 2002). tration has the effect of creating positive externalities
Comparable dynamics of matching differentiated for both firms and workers. Our account thus far
demands and supplies apply to labour markets. When actually understates the power of agglomeration in
firms need specialized workers, but are subject to rapid certain ways, for geographical concentrations of the
shifts in their product and process designs (as in the sort we are describing also constitute living human
case of fashion-oriented or technologically-innovative communities with many additional effects on economic
industries), they usually strive as far as possible to performance (S TOR PE R , 1997; T EM PL E and J OH N-
achieve flexibility in their use of labour. At the same S ON , 1998; W OO LCOCK , 1998). Oftentimes, clusters
time, they seek to avoid the risk of costly delays in of firms operate as powerful socialization mechanisms,
finding the various skills on which they depend. To becoming veritable engines for turning out new talent
overcome this problem, they need direct access to large through workers’ on-the-job experiences and partici-
and variegated pools of specialized talent. In the same pation in work-related networks (G RAB HE R , 1993).
way, if workers are to invest in building up their Firms come together, too, in both formal and informal
competencies, but are unable to secure long-term organizations that help to streamline their interactions,
employment contracts, they will prefer to locate where to accelerate information transfers, to build trust and
there are many potential employers. In turn, rapid reputation effects, and to promote their joint interests
search and rehire processes will compensate them for (B E CATT I NI , 1990; A SH E IM , 2000). Relationships like
high turnover. In all of these circumstances, geograph- these contribute to the stock of collective assets in any
ical concentration has major productivity-raising effects given agglomeration. Their effects are thus frequently
for firms, and income-raising effects for workers. Firms positive, though they may also on occasions be negative
benefit from the possibility of adjusting their capacity when local conditions and institutional environments
levels as needed, while minimizing the risks of not induce problems such as rent-seeking behaviour or
finding the workers they require for expansion and inter-organizational rivalries.
change. Workers gain by having strong incentives to
invest in their own talents and becoming more special-
The agglomeration-development nexus
ized, but are able to offset the associated risks by being
in a place where the existence of multiple employment Cities are a necessary corollary of industrialization
opportunities raises their chances of finding a job because they allow for complex agglomerations of
( J AYET , 1983). These search-and-match processes in specialized activities to emerge while economizing on
the local environment are carried out by means of infrastructure under conditions of national scarcity. In
relatively complex transactions, often operating through many developing countries, urban growth is pushed
dense social networks (G RAN OV ETT ER , 1986). Geo- further forward by modernization of the agricultural
graphical concentration lowers the costs of these trans- sector, displacing labour, and generating large-scale
actions and raises the probability of successful matching migration from countryside to city (T O DA RO, 1969;
for all parties. A LON SO, 1980; K E LL EY and W I LL IA M SO N , 1984).
Regional concentrations of economic activity have This, however, is at best a partial view of the dynamic
another advantage, which is purely dynamic in nature. properties of the relationship between urbanization and
There is mounting evidence that creativity and learn- economic development. To begin with, the emphasis
ing have a distinctive geography, with regions playing on infrastructure (a common theme in many discussions
active roles as sites of continuous and informal but of development) is only one among many reasons for
cumulatively significant improvements in industrial agglomeration. As we saw above, actual agglomerations
products and processes (R U SS O, 1985; J A F FE et al., are characterized by many additional sources of produc-
1993; S AXE NI A N , 1994; D U NN I NG , 1998; S COT T , tivity gain through their transactional structures, local
labour markets, learning effects, and so on. These Thus, a few places begin to move ahead as their self-
phenomena can sustain the advantages of agglomeration reinforcing concentrations of capital and labour make
even in the face of rapidly rising costs of urban concen- them progressively more efficient, in both static and
tration due to congestion, pollution, escalating land dynamic terms. Success breeds success (up to some
prices, crime, family breakdown, etc. Such costs are point of diminishing returns, at least), and the advan-
especially high in developing countries, but still they tages of these places then become locked in, marginaliz-
fail to arrest urban growth (A Z ZO NI , 1986; S TOR PE R , ing competitor locations and effectively crowding them
1991). Another way in which many older arguments out of the field (K RUG MA N and O BSTF E LD , 1991).
underestimate the force of geographical concentration In this manner, what begins initially as a relatively
is that they often take large-scale, capital-intensive open window of locational opportunity for an industry
manufacturing industries to be the privileged motors eventually closes around a small number of core
of development and growth in developing countries. agglomerations.
As activities like these relocate outward to other The frequency and scope of windows of locational
regions, so – it is held – geographical polarization opportunity are controlled by many factors, of which
reversal will occur (T OWN RO E and K EE N , 1984). We internal economies of scale (in production, R&D,
now know, however, that developing countries also transacting, and so on) are especially important. In
move ahead on the basis of many different kinds of industries where this feature results in oligopolistic
sectors, some of which generate strong systems of supply structures (e.g. sectors producing commercial
externalities, and tend to be marked by forceful agglom- aircraft or nuclear-power generators) only a few regions
eration and urbanization tendencies wherever they will be able to attract relevant investments and to
appear on the landscape. These sectors include small- acquire production capacity. Major shifts in the core
scale indigenous manufacturing, low-technology indus- locations of these industries can generally occur only
tries, craft-based industries, and a wide array of services when there are important technological changes in
(N A DV I and S C H MI TZ , 1994; S COT T , 2002). Polar- products and processes, thereby undermining the
ization reversal is far from being a universal character- advantages of existing producers and, by extension, the
istic of the development process. regions in which they are concentrated. By contrast,
The particular patterns of agglomeration that make in sectors where optimal scale is achieved at low rates
their appearance in any given instance vary widely of output (e.g. clothing, shoes, jewellery, and many
depending on local circumstances and the local mix of kinds of electronics industries or business services)
sectors, and this diversity is further augmented by the there are numerous potential windows of locational
role that historical path dependencies play in the evolu- opportunity. Sectors of this sort are able to engage in
tion of regional economies (F U JI TA et al., 1999). This significant forms of product differentiation from one
is an important reason why, in fact, there are many vari- place to another, thus making it possible for latecomers
ations in the character of urban systems in both the to enter the market and to create distinctive niches for
developing and developed countries as a whole, rather themselves. This point is exemplified by the recent
than convergence toward any single type. What is com- history of the global shoe industry (G E RE FF I , 1995;
mon to all is the underlying functional link between S C HM IT Z , 2001). Once agglomeration occurs, (and
agglomeration, urbanization and development. depending on the nature of further major technological
This link, moreover, is susceptible to self- shifts), the locational pattern of these sectors becomes
reinforcement over time by the locational dynamics of locked in, and local developmental effects intensify.
expanding industrial systems. When a sector first comes We have argued that urbanization is one of the
into being in a given part of the world (a country, a major drivers of the process of development in the
continent), the firms involved in it are often located in contemporary world. This argument, to be sure, is by
a wide variety of places. This is because young, or no means novel. However, we have sought to re-
emerging, or recently-implanted industries tend to be express the older Hirschman-Myrdal-Perroux approach
relatively independent of (or have no opportunity to in terms of recent advances in the theory of agglomera-
tap into) pre-existing place-dependent positive exter- tion and economic geography, and on this basis to
nalities, especially where these have developed in rela- redress some of the imbalance that currently appears
tion to older sectors and hence have little specific to exist between macroeconomic approaches to the
utility for new industries. However, this first stage of development question and what we earlier alluded to as
development, characterized as it is by an open ‘window development ‘on the ground’. This attempt to achieve a
of locational opportunity’, is almost always followed by more balanced perspective is not only significant in
a second where the large initial number of locations is conceptual terms but also as a practical matter, for it
whittled down as the industry’s local external environ- reveals important instruments (as we shall indicate) by
ment responds to growing demands for inputs of mate- means of which policy makers can approach critical
rials, services, labour, and so on, and as geographically- tasks of economic development from a bottom-up
focused increasing returns effects come into being at and hence locally nuanced perspective. One important
selected locations (S COT T and S TO RP ER , 1987). corollary of our argument is that increasingly uneven
densities of spatial development can actually enhance over- proliferation of complex trade flows, between different
all rates of economic growth and are hence not neces- agglomerations and between agglomerations and peri-
sarily or always undesirable, though we shall argue that pheral areas, at national and international scales, and
this also sometimes gives rise to an increasingly uneven these flows are expanding with globalization.
spatial distribution of income, and hence to social and Neoclassical theories of development hold that the
political predicaments that can undermine develop- spatial integration of economic activity in these ways
mental programmes that fail to pay adequate attention tends progressively to eliminate interregional differ-
to this circumstance. We have further suggested that ences in living standards, by promoting some combina-
the complex nexus of relationships linking urbanization tion of structural and compositional convergence
and development operates in countries at every plane among participating economies. In fact, the actual
of GDP per capita and that economic development record is quite wayward, with convergence occurring
can be achieved on the basis of a wide variety of in some places at some times, and divergence occurring
manufacturing and service sectors. These sectors on other occasions. At the present moment, the play
include even simple craft- or small firm-based indus- of regional and global economic forces involves many
tries, which were once thought of as the very antithesis complex cross-currents in which some parts of the
of any kind of durable development (P I OR E and world (East Asia and a few metropolitan regions of
S A BE L , 1984; W A D E , 1990). It is especially urgent to Latin America) are doing relatively well, while other
refocus attention on the developmental potential of parts (Africa between the tropics, much of the former
cities and regions in the context of globalization, Soviet Union, and certain peripheral regions in more
because they are the loci of intense positive externalities developed countries) are falling steadily behind.
in the increasingly borderless global system of economic The predicaments of uneven spatial development
relationships. In less-developed countries, in particular, are most dramatically expressed in the observation that
agglomeration is critical to development not only 50% of global GDP today is produced by only 15%
because it is a source of enhanced economic produc- of the world’s people, most of them concentrated in
tivity, but also because it is a basic condition of special- the Triad nations of the North. Conversely, the poorer
ization within the global division of labour and an half of the world’s population produces just 14% of
essential foundation of export-oriented growth. global GDP. Moreover, world trade has become more
concentrated among the Triad nations, to the relative
detriment of North–South commercial relations. Most
of the developing world has been a relative loser in
DEVELOPMENTAL DISPARITIES IN this process, again with the exception of East Asia. At
THE CONTEMPORARY WORLD the same time, much of the world’s most important
SYSTEM trading activities (increasingly in the form of intra-
firm trade) occur between a relatively limited number
Regional divergence or convergence?
of subnational regions or agglomerations (B A RN ES
The increasing liberalization of economic exchange as and L E DE BU R , 1998; US D EPART ME NT O F C O M-
globalization has proceeded, combined with steady M ERCE , 1998; F U JI TA et al., 1999; A N DE RS S ON and
improvements in technologies of transportation and A N DE RS S ON , 2000; B EAV ER STOCK et al., 2000).
communication has encouraged the world-wide spread This process accentuates the growth of selected
of dense productive agglomerations (see K RUG MA N regions, and helps to generate the contemporary phe-
and V E NA BL E S , 1993). This effect is complemented nomenon of large city-regions (as previously defined)
by two others. First, agglomerations in different parts scattered across the continents in an integrated world-
of the world find themselves increasingly caught up in wide mosaic. Many different parts of the developing
relations of competition and complementarity with one world are deeply involved in relationships like these,
another. Inter-agglomeration competition occurs when as exemplified by city-regions such as Mexico, São
producers in different places operate on the same Paulo, Cairo, Bombay, Kuala Lumpur, Jakarta, and so
markets; complementarity is present when differentially on. One consequence of this trend, however, is that
specialized agglomerations are linked together via long- interregional income inequalities within many develop-
distance commodity chains (F E EN ST RA and H A NS O N , ing countries are increasing. Indeed, even in many
1996). Second, agglomerations are also often deeply developed countries, the recent period of intensive
connected to more peripheral, less densely developed globalization combined with a turn to neoliberal
areas, especially where certain types of production units policy measures has been accompanied by widening
within wider commodity chains find it advantageous gaps in per capita incomes between sub-national
to locate at decentralized sites. This phenomenon is regions. The problem is further accentuated where
especially characteristic of branch plant operations with labour mobility is relatively low, as it is in the UK
relatively standardized production activities and hence and most of continental Europe compared to the US
with low-cost procurement and distribution structures. (D U RA NTO N and M O NA S TI RI OTI S , 2002).
The net result of the two tendencies noted here is the Per capita income differences between countries
diverged over much of the nineteenth and twentieth of economic behaviour that potentiate and shape activi-
centuries, but showed signs of convergence from the ties such as production, entrepreneurship and innova-
1960s to the 1980s. Over the last decade or so, this tion (H AGGAR D , 1990; R OD RI K , 1999). These
tendency toward income convergence between coun- routines are, in effect, untraded forms of inter-
tries has been reversed,2 notwithstanding the dramatic dependency between economic agents, and hence they
improvements in technologies of spatial interaction that collectively constitute the relational assets of the
have been occurring (C LAR K and F E E NSTRA , 2003; regional economy (S TOR PE R , 1997). Standard theories
D OWR IC K and D E L O NG , 2003). Similarly, as of economic development do not probe adequately
P O ME RA N TZ , 2000, points out, the ‘great divergence’ into these processes (U Z ZI , 1996; P UT NAM , 2000).
of income levels in the nineteenth century occurred Neoclassical theories, including newer augmented
even though communications and transportation costs versions, assume that successful behaviour will emerge
were declining rapidly. more or less spontaneously out of the wider economic
or social context (M A NK IW et al., 1992). Others,
like the new growth theory, put their faith in the
accumulation of stocks of knowledge leading to gener-
The dynamics of differential regional development alized positive externality effects throughout the econ-
Considerable light can be shed on these issues by omy (L UCA S , 1988; R O M ER , 1990). The latter idea,
though it may be useful as a starting point, says little
further analysis of the ways that regional development
about the concrete habits and relationships through
processes contribute to durable structural and composi-
which knowledge and savoir faire are created and
tional differences between economies. In particular,
deployed in economic action (R O SE NB E RG , 1982;
why do some regions succeed in establishing high-
S T IG LI T Z , 1987; L U NDVAL L and J O H NS ON , 1992;
performing economic systems while others remain
N E LS ON , 1992). Relational assets of this sort are not
stillborn, stagnate or decline even as spatial interaction
freely reproducible from one place to another, and
costs fall?
access to them is determined at least in part through
We have already shown in our earlier discussion
network membership (S TOR PE R and V ENAB L ES ,
of windows of locational opportunity how increasing
2002). This is why untraded interdependencies tend
returns effects reinforce growth opportunities for
to have a strongly place-bound and culturally-rooted
regions that begin (even accidentally) to move ahead as character and often cannot be transferred easily –
production foci in any given sector, while progressively if at all – from successful to less successful regions
closing off opportunities for others. Certain endogen- (B E CATT I NI , 1990; P UT NAM et al., 1993). Because
ous features of agglomerations also have great impacts access to these assets is spatially and organizationally
on local developmental prospects. Economic historians limited, they enhance the economic advantages of their
and geographers have shown, for example, that even home regions (as well as local business enterprises and
in industries where best practices diffuse rapidly from network members) and enable them to engage in
country to country (as in the case of cotton mills and monopolistic forms of competition à la C H AM BE R LI N ,
railroads in the nineteenth century), factor productivity 1933 (see also G R EE NWA LD and S TI G LI TZ , 1991).
is often quite uneven over space (G E RT LE R and These observations indicate that regional economic
D I GI OVA NNA , 1997; C LA RK and F EE N ST RA , 2003). development involves a mixture of exogenous con-
What is additionally puzzling is that such differences straints, the reorganization and build-up of local asset
emerge not only in cases where technologies and systems, and political mobilization focused on institu-
managerial practices are similar, but also in industries tions, socialization and social capital. More generally,
that tend uniformly to locate in large urban centres (as the extent to which any region succeeds in creating
with much of the electronics industry today). All this localized increasing returns effects – which depend
implies that there are significant endogenous determi- importantly on these cultural and institutional founda-
nants – local and national – of how well agglomerations tions – is critical to the entire development process. A
function, and hence how much they contribute to direct extension of this point is the claim that the
economic development in their local and national success of national economies (as indicated above all
contexts. By the same token, increasing trade, foreign by accession to membership in the global high-income
investment and the international diffusion of technol- convergence club) is, in significant ways, related to
ogy do not automatically bring about convergence the rise of dynamic and creative agglomerations, as
in productivity and development levels (N O RT H and illustrated by the case of the high-performance Asian
T H OM AS , 1973; M O KY R , 1985; W A D E , 1990; economies. If this claim is correct, it follows that for
L A ND ES , 1998; C LAR K and F E E NSTRA , 2003). countries to join the high-income convergence club
Many of the endogenous conditions underlying local in today’s world, they will have to sustain successful
economic development and facilitating entry into the agglomerated development processes (though this
world economy are cultural or institutional, in the remark in no way implies that balanced and sustainable
specific sense that they entail the formation of routines rural development is not also an essential ingredient of
any pathway to national development). Agglomeration Concomitantly, new kinds of policy interventions
is a central concern that can neither be equated to based on the concept of regional economies as aggre-
urbanization as a simple demographic phenomenon, gates of physical and relational assets need to be identi-
nor dissolved away into the realm of macroeconomics. fied and refined. This is because the development-
enhancing synergies of these assets are subject to two
main problems. First, positive externalities tend to be
undersupplied where market relations alone prevail
THE REGIONAL DIMENSIONS OF
(B ATO R , 1958; M I S HA N , 1981). For example, skills
DEVELOPMENT POLICY
training, labour market information, technological
In view of these remarks, one of the important tasks research, and so on are often severely undersupplied
of any viable development policy must be to cultivate because producers are tempted to engage in free-
those multiple and important benefits that flow from rider behaviour by poaching these resources from
regionalized production systems as they encounter the the regional resource pool (B RAC ZY K et al., 1998;
complex intraregional and interregional conditions that M A SK EL L , 1999; J OH AN S SE N et al., 2001). The net
govern the logic of agglomeration. A number of nega- result is that overall investment in critical social assets is
tive aspects of interregional competition must also be less than optimal, and it is hence essential to devise
brought under control if development is to proceed forms of policy intervention to rectify this problem.
with any degree of smoothness. Second, significant moral hazards appear (especially in
Over the last half century, regional development the core network operations of the regional economy)
policy has in practice tended to assume the guise of that can generate severe negative externalities if left
stimulus packages applied to given localities in the unattended. These include the emergence of low trust
attempt to initiate take-off or to counter stagnation. relations between manufacturers and subcontractors, or
The types of packages selected for these purposes vary threats to the reputation of regional product quality
greatly from country to country, but they generally due to unscrupulous operators. In addition, regional
comprise programmes such as subsidies to industry, tax economies are susceptible to variable developmental
breaks, infrastructure provision, governmental schemes pathways, and policy can often help to steer any given
to direct new capital investments to lagging areas, system away from undesirable low-level outcomes (such
labour retraining programmes, and so on (H A RR IS O N as deteriorating working relationships between manu-
et al., 1996; D O NA HU E , 1997a). Approaches like these facturers and their subcontractors) and toward lock in
are not necessarily always devoid of positive effects, but at a higher-level equilibrium.
in the light of our earlier discussion, they are certainly The many-sided regional economic commons that
problematical when they occur in a vacuum, by which develops within and around dense industrial agglomera-
we mean a failure to attend to the critical organizational tions, then, represents a critical domain of beneficial
and institutional foundations of regional growth and policy intervention. There are many different frame-
competitiveness, as discussed above. works within which such intervention can be under-
Since the 1980s, a burgeoning body of literature and taken. These include governmental agencies, civic
practical experiments has accumulated in which these associations, private–public partnerships, or a host of
foundations have indeed been shown to be essential other possible institutional arrangements, depending
bulwarks of the regional development process (see on local traditions and political sensibilities. Although
B I AN CH I , 1992; S COTT , 2001; S C HM IT Z , 2001). the need for such intervention exists in regions at every
More specifically, as we have noted, regional economies degree of poverty or prosperity, it is probably most
are internally tied together through human and organ- difficult to achieve in localities that have high deficits
izational interdependencies – often untraded – that of basic physical and relational assets to begin with.
have a strong quasi-public goods character, meaning This sort of intervention, in any of its institutional
that they are the source of positive externalities that are guises, has little resemblance to traditional urban policy,
more or less freely available to local firms but are with its emphasis on infrastructure, housing, transporta-
the property of none. Such positive externalities are tion and urban public finance; it is instead oriented
observable in diverse domains of regional economic toward the problem of coordination of urban produc-
activity, including dense information flows, learning tion systems. Moreover, since it depends so greatly on
processes, the emergence of craft or design traditions, the active consent of many different individuals and
business network formation, and so on (S TOR PE R , groups, it also calls for a high degree of social and
1997; S COT T , 2002). In this regard, we can refer to a political engagement, in which firms, workers and
‘regional economic commons’ representing the ele- other stakeholders in the local economy are brought
ments of economic advantage that emerge out of the into meaningful public debate about what is at issue
collective order of agglomeration, but that by their and about the preferred shape of collective outcomes.
nature cannot be reduced to individual ownership and A confirmed anti-dirigiste such as L A L , 1983, would
control. These elements are crucial for overall regional certainly raise objections at this point to the effect that
success, especially in a globalizing economy. it is always better to live with market failures than with
the ‘inevitable’ gaffes of public agencies and their many countries are also concentrating their public
encouragement of rent-seeking behaviour. No matter expenditures on their most dynamic, globally-linked
how salutary this warning may be, it is tempered to agglomerations at the expense of basic equity issues
the extent that the notion of a regional economic both within these agglomerations and between them
commons – offering compensating returns to coordina- and other areas of the national territory (A C S , 2000;
tion – can be sustained, and accordingly, that the P H IL LI P S , 2002). The concomitant tensions built into
operation of the local economy can enhanced by the contemporary development process – at all geo-
suitable policy intervention. Our discussion of this graphical scales, whether intrametropolitan, inter-
matter suggests that there is indeed a role for collective regional or international – can lead to political backlash
action in promoting regional increasing-returns effects in which even the potentially positive aspects of devel-
and raising the long-term rate of economic growth, opment and globalization may not be recognized
and this claim is entirely consistent with the same point because of a failure to deal with their more egregiously
made for the economy as a whole by the new growth negative effects, including the exacerbation of social
theory (L UCA S , 1988; R O M ER , 1990), as well as by and interregional inequalities.
the large theoretical and empirical literatures on the All of this suggests that the regional components of
social and institutional foundations of successful economic development policy under contemporary
markets. conditions pose a knife-edge dilemma. On the one

Rising levels of local activism in the matter of hand, policy needs to be designed in ways that
regional economic development, however, do create strengthen agglomeration economies. On the other
some additional risks. These take many different forms hand, isolated attempts to strengthen agglomeration
ranging from irrational development races, through economies may intensify disparities in per capita
fiscal wars over subsidies and investments, to the poach- incomes along many different lines of cleavage
ing of one region’s talent and resources by another, to (W AGN ER , 2001a, 2001b). These two aspects of the
locational tournaments for large inward investments question are in constant tension with one another in
(D O NA HU E , 1997a; B ARTI K , 1991). Interregional today’s world, as exemplified by current debates in
competition in pursuit of first-mover advantages is a which some analysts hold that development policy is
striking instance of this problem. It is perhaps most best focused on productivity improvements in dynamic
clearly evident where several different regions are all agglomerations, (thereby maximizing national growth
striving to become incubators of some critical infant rates but increasing social tensions), while other analysts
industry, and hence to emerge eventually as the leading suggest that limiting inequality through appropriate
centres of that industry as it matures. But in the forms of income redistribution (social and/or inte-
presence of agglomeration economies, only one or a regional) can lead to more viable long-run development
few champion regions are likely to be successful in any programmes (A M SD EN , 1989; A G HI ON , 1998). In any
given production niche over the long run, implying case, for virtually every country, there is today a serious
that in the absence of informed coordination from the and much neglected policy issue involving the achieve-
beginning, considerable misallocation of resources will ment of more effective forms of central/regional co-
in all likelihood have occurred. In general, securing ordination and a more appropriate spatial distribution
positive-sum returns to development at the inter- of political power (B O LTON et al., 1996; D O NA HU E ,
regional scale – and in a world where many individual 1997b; I N MA N and R U B IN FE L D , 1997; C H ES H IR E
regions are actively striving to build internal develop- and G O RDON , 1998; W AGN ER , 2001b)
mental competencies – appears to demand some addi- Analogous tensions over development disparities
tional layer of regulatory oversight. Certain European recur at every level of geographic scale in the world
Union injunctions against ‘social dumping’ are attempts economy (H E LD et al., 1999), and especially at the
to establish interregional coordination of this type, global scale itself. In the current regime of intensified
though they remain insufficiently specific to be fully globalization in which market imperatives consistently
operational. outrun existing institutional capacities for effective
At the same time, the formerly widespread policies regulation, the balance appears to be strongly tilted to
of central governments to promote regional income increasing inequalities. The discussion laid out here
equalization have been considerably diluted in recent presents the case for an explicit consideration of the
years in both developed and developing countries,3 economic geography of globalization in relation to its
thereby helping to accentuate the processes of interregional foundations, and this issue needs henceforth
regional income divergence already noted. Globaliza- to figure prominently in any reorganization of the
tion as it is being moulded by the ideology of the institutions comprising a new multi-scalar system of
Washington Consensus may encourage further water- governance. The competing claims of growth and
ing down of these policies, especially where this is equity remain firmly on the agenda, even if the current
accompanied by the enforcement of contractionary pressures of spatial economic reorganization make it
monetary policies and fiscal austerity programmes in necessary to re-think the ways in which we can best
developing countries (S T IG LI T Z , 2002). As a corollary, achieve balanced responses to them.
CONCLUSION: DEVELOPMENT tended to focus on the problem of hyperurbanization
THEORY THROUGH THE LENS OF and its negative social repercussions, rather than on the
ECONOMIC GEOGRAPHY region as a locus of high-productivity outcomes. Our
point is that one of the most fundamental issues for
Conventional economic theories of development and developing countries today is how to create and sustain
trade have by and large ignored questions of economic the kinds of agglomerations without which they can
geography. Today some of this neglect is being rectified never hope for entry into the highest ranks of the
by economists with an interest in agglomeration econo- global economy, while ensuring that income disparities
mies and regional dynamics (see, for example, F U JI TA remain well within the limits of the socially just and
et al., 1999). In our view, however, this perspective can politically tolerable.
be taken further. The existence of pervasive agglomera- This state of affairs poses many new questions for
tion economies based on externalities and increasing development theory and policy at the regional, national
returns effects calls for a full recognition of the region and international scales. We have sought in the present
as an organic unit of economic reality. This is because paper to move beyond elements of development theory
agglomeration economies represent a potent, immobile that impede a fuller recognition of the geographical
and – given their status as quasi-public goods – a realities of the globalization process and to sketch out
highly-problematical element of the entire develop-
the beginnings of some broad responses to the questions

ment process. As such, regions exist as keystones of raised by this exercise.
economic organization just as firms, sectors and nations
do. Development theory needs now to recognize this
point and take it into account. NOTES
As we indicated at the beginning of this paper,
1. This paper was originally written as a position document
economists have tended to privilege macroeconomic
for the working group on Globalization, Regions, and
variables as the best possible line of attack on the Economic Development, sponsored by the Center for
problem of development. But this level of observation, Comparative and Global Research, International Institute,
though obviously important, is no longer (if it ever University of California Los Angeles.
was) the uniquely privileged point of entry to an 2. Some analysts suggest that this claim is less tenable where
understanding of development, and all the more so calculations are based on population-weighted measures
today given that the barriers between national econo- of per capita income by country. When these measures
mies are in certain respects breaking down, thus are unweighted, however, the results show that post-war
trends toward greater convergence have been decisively
enhancing tendencies to agglomeration at selected loca-
reversed in recent years (S ALA-I- M ARTIN , 2002).
tions all over the world. Moreover, while development 3. As D AVEZIE S , 2000, notes, this dilution concerns mostly
theories directed at poorer countries have at times wage-based income equalization policies in the European
recognized the fundamental two-way connection countries. Certain kinds of transfer payments compensate
between industrialization and urbanization, they have in part for this dilution.
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Regional Studies

ISSN: 0034-3404 (Print) 1360-0591 (Online) Journal homepage: http://rsa.tandfonline.com/loi/cres20

Regions, Globalization, Development

Allen Scott & Michael Storper

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Regions, Globalization, Development

(Received October 2002; in revised form February 2003)

Economic development Agglomeration World economy Development policy Income inequalities

Développement économqiue Agglomération Wirtschaftliche Entwicklung Ballung

0034-3404 print/1360-0591 online/03/06&70579-15 ©2003 Regional Studies Association DOI: 10.1080/0034340032000108697

markets. conditions pose a knife-edge dilemma. On the one

the beginnings of some broad responses to the questions

structure, 1860–1987, Quart. J. Econ. 110, 881–908.

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