GLOBAL CITY
- The “tiny” Singapore is considered as
Defining Global City
Global Cities
- Serves as engines and place where
globalization takes place where highly
globalized and competitive
metropolitan economies with the
deepest and most settled
concentrations of firms, capitals, and
talent are located.
Saskia Sassen, Sociologist
- popularized the term “global city” in
the 1990’s
- Published “The Global City: New York,
London, Tokyo (1991)
Concept of Global City
- Emphasis on the flow of information and
capital
- Cities are major nodes in the
interconnected systems of
information and money, and the wealth
that they capture is intimately related
to the specialized businesses that
facilitate those flows -- financial
institutions, consulting firms,
accounting firms, law firms, and
media organizations.
THE “BIG SIX”
- TRADITIONAL “SUPER CITIES” (London,
New York, Paris, Tokyo)
- RECENT GLOBALIZED URBANIZED CITIES
(Hongkong, Singapore)
Indicators of Global City
 ECONOMIC POWER
- The foremost characteristics of a global
city
- Economic power largely determines
which cities are global
- Economic opportunities in a global city
make it attractive to talents from across
the world
- To measure the economic
competitiveness of a city, the Economist
Intelligence Unit has added other
criteria like market size, purchasing
power of citizens, size of the middle
class, and potential for growth
Example of Economic Power
Asia’s most competitive city because of
its strong market, efficient and
incorruptible government, and
livability.
- New York has the largest stock market
in the world, Tokyo in Japan houses the
most number of its corporate
headquarters which are 613 companies
- Shanghai China playing a critical role in
the global economic supply chain
because of China being the
manufacturing center of the world
 POLITICAL POWER
- Global cities are also seats of
political power and center of
authority. Washington D. C. may not be
as wealthy as New York, but it is the seat
of American state power.
- Compared with Sydney and Melbourne,
Canberra is a sleepy town and not
attractive to tourists. But as Australia’s
political capital, it is home to the
country’s top politicians, bureaucrats,
and policy advisors
The cities that house major international
organizations may also be considered centers of
political influence.
- United Nations Headquarters – New
York, USA
- European Union Headquarters – Brussels,
Belgium
- ASEAN headquarters – Jakarta, Indonesia
- European Central Bank – Frankfurt,
Germany
 CULTURAL POWER
- Global cities are centers of higher
learning and culture. A city’s
intellectual influence is seen through
the influence of its publishing industry.
- A lot of publishing industries, well
known universities, and film industries
are found on these cities. The cultural
power of global cities today, becomes
globally diverse.
Examples:
- Los Angeles – the center of the American
Film Industry
- Copenhagen, Denmark – is now
considered as one of the culinary
capitals of the world, with its top
restaurants incommensurate with its
size
 - Manchester, England – many prominent
post-punk and new wave bands – Joy
Divisions, the Smiths, and the Happy
Mondays – hailed from this city
- Singapore houses some of the region’s
television stations and news
organization (MTV Southeast Asia and
Channel News Authority). Its various art
galleries and cinemas also show
paintings from artists and filmmakers
from Philippines and Thailand
Today, Global cities become culturally diverse
Manila is not very global because of the dearth of
foreign residents but Singapore is because it has a
foreign population of 38%
FOUR KEY FUNCTIONS OF THE GLOBAL CITY
- They are highly-concentrated command
posts in the organization of the world
economy
- They are key locations for finances and
specialized service firms providing
“producer services” (professional and
corporate services, i.e., services inputs
for TNCs), to the leading global firms
- They are sites for the production and
innovation of these producer services
and also headquarters for producer-
service firms
- They are markets for the products and
innovations produced and in these
cities.
ANALYZING GLOBAL CITY
(GLOBAL POWER CITY INDEX)
Global Power City Index (GPCI)
- Evaluates and ranks the major cities of
the world according to their
“magnetism,” or their comprehensive
power to attract people, capital, and
enterprises from around the world.
- The GPCI is able to grasp the strengths,
weaknesses, and challenges of global
cities in a continuously changing world
not only through a ranking, but also
through analyzing that ranking’s specific
components.
It does so through measuring six functions:
1. Economy
2. Livability
3. Research and Development
4. Cultural Interaction
5. Accessibility
6. Environment
In comparison with the top 3 cities of London, New
York, and Tokyo, Paris’s drop in score was minimal,
narrowing the gap once again between the French
capital and Tokyo. Although Paris experienced a
downtrend in score following the repeated terror
attacks of 2015, following the 2017 confirmation as
host-city of the 2024 Olympic Games, an upward
trend in score is building. Among the 4 new
cities added this year (Melbourne Australia,
Helsinki Finland, Dublin Ireland, Tel Aviv Israel),
Melbourne at #11 was the highest performer.
The Global City Outlook
- It is a projection of city’s potential
based on the rate of change in 13
indicators across four dimensions:
- Global Cities Outlook focuses on
bringing a forward looking
perspective to city-level policies
and practices that shape future
competitiveness. The indicators it
covers are designed to measure
characteristics of long-term success,
such as environmental performance,
safety, and innovation capacity.
CHALLENGES OF GLOBAL CITY
- The UN estimates that 55% of the global
population lives in urban areas- a figure that is
projected to rise to 68% by 2050. With few
exceptions, cities are expected to become bigger
and more numerous.
- As urbanization speeds up, particularly
in Asian and African countries , here are five of the
biggest challenges confronting the figure of cities.
1. ENVIRONMENTAL THREATS
Common environmental threats include
flooding, tropical cyclones to which coastal cities
are particularly vulnerable, heat waves and
epidemics. Owing to the physical and population
density of cities, such threats often result in both
devastating financial loss and deaths.
2. RESOURCES
- Cities need resources such as water, food
and energy to be viable. Better application of
technology can boost agricultural productivity and
ensure more efficient transmission of electricity,
many cities will continue to struggle to provide
these resources to an ever-growing urban
population. Beyond these basic requirements,
haphazard growth will see the reduction of green
spaces within cities negatively affecting livability.
As fresh water becomes scarce and fertile lands
diminish, food prices may escalate, hitting the
poorest hardest.
3. INEQUALITY
- As the number of urban super-rich grows,
many cities will also see increased numbers of
urban poor. The widening gap between the haves
and have-nots will be accentuated in the
megacities of the future. Such inequalities, when
left unchecked, will destabilize society and upend
any benefits of urban development. There is a
critical need for policy-makers to ensure that the
Fruits of progress are shared equitable
4. TECHNOLOGY
Technology will be increasingly used in the
development and running of cities of the future.
Smart mobility technology can alleviate traffic
gridlocks which plague many cities. The use of
environmental technologies which can cool
buildings more efficiently or run vehicles that are
less polluting will also lead to better future cities.
Installing sensors in the homes of ageing seniors
living alone can connect to the community and
summon help when they are unwell or hurt.
5. GOVERNANCE
To make the best out of inevitable
urbanization, good governance is imperative. Cities
will increase in size and their populations become
more diverse. Governing these cities will therefore
be progressively complex and require the most
dedicated of minds. The broad goals of urban
governance should address issues of equity,
livability and sustainability in cities in the future
BRETTON WOODS SYSTEM: 1944–1973
- In July 1944, 44 countries met in Bretton
Woods, NH
- They established the Bretton Woods
system: fixed exchange rates against the
US dollar and a fixed dollar price of gold
($35 per ounce).
- They also established other institutions:
 The International Monetary Fund
 The World Bank
 General Agreement on Trade and
Tariffs (GATT), the predecessor
to the World Trade Organization
(WTO).
INTERNATIONAL MONETARY FUND
- Add. Info: 186 countries working to
foster global monetary cooperation.
Created in July 1944, originally with 45
members
- The IMF was constructed to lend to
countries with persistent balance of
payments deficits (or current account
deficits), and to approve of
devaluations.
 Loans were made from a fund
paid for by members in gold and
currencies.
 Each country had a quota, which
determined its contribution to
the fund and the maximum
amount it could borrow.
 Large loans were made
conditional on the supervision of
domestic policies by the IMF: IMF
conditionality.
 Devaluations could occur if the
IMF determined that the
economy was experiencing a
“fundamental disequilibrium”.
- Due to borrowing and occasional
devaluations, the IMF was believed to
give countries enough flexibility to
attain an external balance, yet allow
them to maintain an internal balance
and the stability of fixed exchange rates
under the Bretton Woods system.
 The volatility of exchange rates
during 1918–1939, caused by
devaluations and a lack of a
consistent gold standard, was
viewed as causing economic
instability.
Bretton Woods System: 1944–1973
- In order to avoid sudden changes in the
financial account (possibly causing a
balance of payments crisis), countries in
the Bretton Woods system often
prevented flows of financial capital
across countries.
- Yet, they encouraged flows of goods and
services because of the view that trade
benefits all economies.
 Currencies were gradually made
convertible (exchangeable)
between member countries to
encourage trade in goods and
services valued in different
currencies.
- Under a system of fixed exchange rates,
all countries but the US had ineffective
monetary policies for internal balance.
- The principal tool for internal balance
was fiscal policy (government purchases
or taxes).
- The principal tools for external balance
were borrowing from the IMF, financial
capital restrictions and infrequent
changes in exchange rates.
EXTERNAL AND INTERNAL BALANCES OF THE US
- The collapse of the Bretton Woods
system was caused primarily by
imbalances of the US in 1960s and 1970s.
 The US current account surplus
became a deficit in 1971.
 Rapidly increasing government
purchases increased aggregate
demand and output, as well as
prices.
 A rapidly rising price level and
money supply caused the US
dollar to become over-valued in
terms of gold and in terms of
foreign currencies.
PROBLEMS OF A FIXED EXCHANGE RATE, REVISITED
- Another problem was that as foreign
economies grew, their need for official
international reserves grew.
- But this rate of growth was faster than
the growth rate of the gold reserves that
central banks held.
 Supply of gold from new
discoveries was growing slowly.
 Holding dollar denominated
assets was the alternative.
- At some point, dollar denominated
assets held by foreign central banks
would be greater than the amount of
gold held by the Federal Reserve.
- The US would eventually not have
enough gold: foreigners would lose
confidence in the ability of the Federal
Reserve to maintain the fixed price of
gold at $35/ounce, and therefore would
rush to redeem their dollar assets before
the gold ran out.
 This problem is similar to what
any central bank may face when
it tries to maintain a fixed
exchange rate.
 If markets perceive that the
central bank does not have
enough official international
reserve assets to maintain a
fixed rate, a balance of
payments crisis is inevitable.
COLLAPSE OF THE BRETTON WOODS SYSTEM
- The US was not willing to reduce
government purchases or increase taxes
significantly, nor reduce money supply
growth.
- These policies would have reduced
output and inflation, and increased
unemployment.
 The US could have attained some
semblance of external balance at
a cost of a slower economy.
- A devaluation, however, could have
avoided the costs of low output and high
unemployment and still attain external
balance (increased current account and
official international reserves).
- The imbalances of the US, in turn,
caused speculation about the value of
the US dollar, which caused imbalances
for other countries and made the system
of fixed exchange rates harder to
maintain.
 Financial markets had the
perception that the
US economy was experiencing a
“fundamental equilibrium” and
that a devaluation would
be necessary.
- First, speculation about a devaluation of
the dollar caused markets to buy large
quantities of gold.
 The Federal Reserve sold huge
quantities of gold in March 1968,
but closed markets afterwards.
 Thereafter, private investors
were no longer allowed to
redeem gold from the Federal
Reserve or other
central banks.
 The Federal Reserve would sell
only to other central banks at
$35/ounce.
 But even this arrangement did
not hold: the US devalued its
dollar in terms of gold in
December 1971 to $38/ounce.
- Second, speculation about a devaluation
of the dollar in terms of other currencies
caused markets to buy large quantities
of foreign currency assets.
 A coordinated devaluation of the
dollar against foreign currencies
of about 8% occurred in
December 1971.
 Speculation about another
devaluation occurred: European
central banks sold huge
quantities of European
currencies in early February
1973, but closed markets
afterwards.
 Central banks in Japan and
Europe stopped selling their
currencies and stopped
purchasing of dollars in March
1973, and allowed demand and
supply of currencies to push the
value of the dollar downward.
SINCE1973
- In 1975, IMF members met in
Rambouillet, France to allow flexible
exchange rates, but to prevent “erratic
fluctuations”.
- In 1976 in Kingston, Jamaica, they
amended the articles of agreement for
IMF membership to formally endorse
flexible rates,
 But prevented members from
“manipulating exchange
rates…to gain an unfair
competitive advantage”, i.e., no
expenditure switching policies
were allowed.
 The articles allowed
“surveillance” of members by
other members to be sure they
were playing fairly.
- Due to contractionary monetary policy
and expansive fiscal policy in the US, the
dollar appreciated by about 50% relative
to 15 currencies from 1980–1985.
 This contributed to a growing
current account deficit by
making imports cheaper and US
goods more expensive.
- To reduce the value of the US $, the US,
Germany, Japan, Britain and France
announced in 1985 that they would
jointly intervene in the foreign
exchange markets in order to depreciate
the value of the dollar.
 The dollar dropped sharply the
next day and continued to drop
 as the US continued a more
expansionary monetary policy,
pushing down interest rates.
 Announcement was called the
Plaza Accords, because it was
made at the Plaza Hotel in New
York. Forms of economic integration:
- After value of the dollar fell, countries 1) Free Trade Area (FTA)
were interested in stabilizing exchange -Free trade between the members
rates. 2) Custom Union (CU)
 US, Germany, Japan, Britain, -FTA + common external tariffs (CET) on
France and Canada announced trade with non-members
renewed cooperation in 1987, 3) Common Market (CM)
pledging to stabilize current - CU + free mobility of factors of production
change rates. 4) Economic Union (EU)
 They calculated zones of about - CM + common economic policy
+/- 5% around which current
exchange rates were allowed to SCHEME Free
intra-
Common
commercial
Free
factor
Common
monetary
One
government
fluctuate. scheme policy mobility and fiscal
trade policy
 Announcement was called the
Free trade YES NO NO NO NO
Louvre Accords, because it was area
made at the Louvre in Paris. Customs YES YES NO NO NO
- It is not at all apparent that the Louvre union
accord succeeded in stabilizing Common YES YES YES NO NO
exchange rates. market
Economic YES YES YES YES NO
 Stock market crash in October Union
1987 made output stability a Complete YES YES YES YES YES
primary goal for the US central economic
bank, and exchange rate and
political
stability a secondary goal.
integration
 New targets were (secretly)
made after October 1987, but by
- External economies (maximize the gains)
the early 1990s, central banks
- External diseconomies (minimize the losses)
were no longer attempting to
adhere to these or other targets.
 Price stability (low inflation) was
also a main goal of the US central
The members adopt either cooperative policies
bank, not exchange rate
(internalize the externalities- advance economic
stability.
integration) or non-cooperative policies (looser
- Many fixed exchange rate systems have
form of integration- FTA)
nonetheless developed since 1973.
 European monetary system and
euro zone (studied in chapter
THE PROCESS OF ECONOMIC INTEGRATION
20).
- Integration increases  the
 China fixes its currency.
interdependence between the members’
 ASEAN countries have considered
increases  the need for cooperation is
a fixed exchange rates and policy
intensified.
coordination.
- During the economic integration the
- No system is right for all countries at all
member states voluntarily choose to
times.
restrict/ replace their national objectives
and policies and undertake it in a common
ECONOMIC INTEGRATION
level of union.
- Countries  regional economic association
 market integration and enhanced
competition by trade liberalization
Integration is a process during which the sovereign
power of the member states is progressively
diminished.

THE OBJECTIVES OF ECONOMIC INTEGRATION  Example: East Africa Common

Market (EACM), Central
- Association between states aim at the American Common Market
realization of a benefit (CACM).
- All economic associations always have
positive and negative economic implications ECONOMIC SYSTEMS
 trade liberalization and enhanced
competition in an enlarged market.
- The objectives of the union can be reached
efficiently only with the sacrifice of
national sovereignty in order to achieve a
collective goal.

ECONOMIC INTEGRATION BETWEEN DEVELOPED

COUNTRIES
1. The essential requirements for an
increasing economic integration are:
- Comparable levels of economic
development;
- Similar but potentially complementary
structures in production and demand;
 There are static effects
(immediate general benefits)
and dynamic effects (accelerate
development and raise welfare).
 The economic integration will
stimulate research and
development, inducing
innovation and technical change
 faster economic growth.
INTEGRATION AMONG DEVELOPING COUNTRIES
- The economic integration is not based on
static benefits, it aims at the potential
dynamic effects and the expectation that
closer cooperation will foster regional
markets.
- The objective of their integration is the
acceleration of their development by:
 enlarging the market
 pooling resources essential for
economic growth
 Avoiding unnecessary and
uneconomic duplication in
capital investment
- Integration between developing countries
contains also elements of self-destruction,
for that reason the economic association
rarely survive for a long time.
How the Government influences how I
make money
Goods – commodities being sold in the market
Services – labor being sold in the market
Market – a place where you buy and sell goods and
services
Resources – may be material, physical and human,
capacity can be used to produce another goods
Scarcity – insufficient supply or limited
ECONOMIC SYSTEMS
- The method used by a society to produce
and distribute goods and services.
- Or, How the government tells us what we
can get and how to get it!
All Economic Systems Must Consider the Following
Questions:
1. What goods and services to produce?
2. How will they produce them?
3. Who will get them?
4. How much will they produce now, and how
much later?
- Each economic system answers these
questions in a DIFFERENT WAY.
TYPES OF ECONOMIC SYSTEMS
There are 4 basic types of economic systems.
1. Traditional Economy
- Economic questions are answered by
habits and customs (the way it has always
been done)
- Children work the same jobs parents
worked, often farming or hunter/gatherer
- Fear Change!
Ex. Eskimos, the Amish, Pigmies, Bush People
2. Command Economy
- The government answers the basic
economic questions
- Advantages: able to act quickly in
emergencies, provide for all people equally
- Disadvantages: Inefficient, no incentive to
work hard or be creative
Ex. Communist Countries (China, Vietnam, North
Korea, former Soviet Union, Cuba)
3. Free Market Economy
- Economic questions are answered by
individual buyers and sellers.
- Supply and demand influence economy
- People act out of self-interest; motive for
profit (money) drives the economy
- Also known as FREE ENTERPRISE or
CAPITALISM
Ex. The United States, Western Europe, Japan
4. Mixed Economy: No economy is pure
market, pure command or pure
traditional, elements of each appear in
all economies, some have more
elements of one economy than another.
AMERICAN MIXED ECONOMY
- While the United States is mostly a free
market economy, it does have elements of
a command economy.
FEATURES OF AMERICAN FREE MARKET ECONOMY
1. Economic Freedom: individuals have the
right to choose
2. Competition: more than one producer of
good/services insures choice
3. Private Property: individuals have the right
to own their own property, including
business
4. Self-Interest: individuals make decisions
based on what is best for them
5. Voluntary Exchange: individuals may freely
buy and sell goods
6. Profit Motive: individuals are driven by a
desire to profit (make money)
FEATURES OF AMERICAL COMMAND ECONOMY
1. Government regulation of some business
practices
• Ex. Wages, labor hours, safety
practice.
2. Government limits certain choices
• Ex. Cannot buy or produce certain
goods/services
3. Government provides aid to the needy
• Ex. Medicare, Medicaid, welfare
MY PIZZERIA
• How would my pizzeria function under
different economic systems?
MY PIZZERIA IN FREE MARKET
• I answer the basic economic questions!
• I determine how much cheese and
pepperoni goes on the pizza
• I determine the quality of the cheese and
pepperoni
• I set my employees’ wages
• I set my business hours
MY PIZZERIA IN A COMMAND ECONOMY
• The government answers the basic
economic questions
• The government sets the amount of cheese
and pepperoni on each pizza
• The government determines quality of
cheese and pepperoni
 • The government sets employees wages
• The government sets business hours
Problem: What does the government know about
pizza?

MY PIZZERIA IN A MIXED ECONOMY

• The Government and I both answer the
basic economic questions
• I determine the amount of cheese and
pepperoni on the pizzas; government
determines the quality of cheese and pizza
• I set employee wages; government sets
minimum wage for employees
• I determine business hours; government
determines whether I am safe to be open or
not