Policy Update 017 Pre-event Interview No.3

Global Cities: Strategic Roles and Socio-Political Implications

Professor, Department of Sociology, The University of Chicago / Centennial Visiting Professor, London School of Economics

Ahead of the RIETI Policy Symposium, "Rise and Fall of World Cities - Implications for Greater Tokyo, Japan and Asia," to be held on Friday, March 18, RIETI has been conducting interviews with some of the keynote speakers to learn about the relationship between the global and the local in the world economy, the changing social structures of cities, and the political implications of these developments.

Dr. Sassen is the Ralph Lewis Professor of Sociology at the University of Chicago and has just completed a five-year project on sustainable human settlement for UNESCO for which she set up a network of researchers and activists in over 50 countries. She has written many books, which have been translated into 15 languages. She serves on several editorial boards and is an adviser to a number of international bodies. She is a Member of the Council on Foreign Relations, a member of the National Academy of Sciences Panel on Cities, and chair of the Information Technology and International Cooperation Committee of the Social Science Research Council (USA). She obtained a Ph.D. from the University of Notre Dame in 1974 and an M.A. from Universite de Poitiers in 1973. Dr. Sassen's major works include "Denationalization: Territory, Authority and Rights in a Global Digital Age," Princeton University Press, 2005; "Socio-Digital Formations: New Architectures for Global Order" (co-ed.), Princeton University Press, 2005; "Global Networks/Linked Cities" (ed.), Routledge, 2002; and "The Global City" (updated edition), Princeton University Press, 2001.

RIETI: In your book, The Global City: New York, London, Tokyo (2001), you state, "The global city is a function of cross-border networks of strategic sites." Could you elaborate on the strategic role that global cities play in the world economy?

Sassen: The global city model is one type of answer to the question of why cities matter at all in a global economic system operating in good part through electronic markets and global communications that facilitate geographic dispersal. My effort with this model was to qualify what was emerging in the 1980s as a dominant discourse on globalization and technology, as well as a new discussion of cities: the end of cities as important economic units or scales. One of my first points of departure in developing that model was the tendency in that dominant discourse to take the existence of a global economic system as a given - a function of the power of transnational corporations and global communications.

My counterargument was that the capabilities for global operation, coordination and control contained in the new information technologies and in the power of transnational corporations need to be produced. By focusing on the "production" of these capabilities, we recover the city because it is one of the strategic spaces for the production of complex capabilities. These operations require intensely networked, specialized service sectors to address high levels of uncertainty and speculation that characterize globalized economic sectors. Further, this type of analysis adds a neglected dimension to the prevalent notion that the global economy is a result of the power of large corporations and the capacity of new technologies to neutralize distance and place. We bring into the picture the importance of specialized services (accounting, legal, advertising, financial, communications et cetera) as key inputs for the global operations of any enterprise. Cities remain ideal places for the production of these services, especially when they are complex and interwoven and meant to serve global markets. But these dynamics are increasingly also evident, though in less pronounced ways, for cities that service national markets.

I developed the proposition that the spatial dispersal of economic activity made possible by telecommunications contributes to the growth of central functions if such dispersal takes place under the continuing concentration in control, ownership and profit appropriation that characterizes corporations. What matters here for the analysis of the role of cities in the global economy is that, to a very large extent, these central functions originate and are produced in cities. Further, the growing complexity of these functions has meant that large corporate headquarters outsource the production of these central functions to specialized services. We thus have a situation where a corporation can locate its headquarters anywhere so long as it has access to some concentrated, state-of-the-art, specialized services sector.

From this proposition we can derive a series of analytic pathways into questions of place and work processes, and thereby into the place-boundedness of various aspects of economic globalization. To a large extent, the organizational architecture of the global economy materializes in concrete processes situated in specific places. Today, after a decade and a half of deregulation and privatization around the world, this organizational architecture is located in a network of some 40 cities - some global and some only with particular sets of global city functions. At the heart of the specialized production capability that characterizes a global city is a mix of unique service functions. In major global cities these capabilities can handle multiple global economic sectors and circuits. In minor global cities, these are likely to be abilities geared to a more limited number of global sectors. It is this sector of services which, in our analysis, specifies the global city model. It is not, as is so often assumed, the number of large "Fortune 500" headquarters a city might have, even though in most global cities these headquarters are a key presence.

Insofar as a growing range of sectors in national economies is becoming integrated into the global economy, global city production capabilities can involve multiple sectors. Finance, though the major sector typically, is but one. There are global media, high tech, trade and certain types of manufacturing production that have been internationalized. A city like New York combines the capabilities to handle the global operations in many different sectors, not just finance. The same is true for London, Tokyo and Paris and, to some extent, Frankfurt. Cities such as Mexico City, Sao Paulo and Seoul handle all the major globalized sectors of their economies and are in that regard full-blown global cities.

In the 1980s the upper stratum in this system (New York, London and Tokyo) accounted for an enormous share of all major financial markets, reaching 60% to 70% of world share. In the mid-1990s, this top level was joined by Frankfurt and Paris, as I examine in the second edition of The Global City (2001), and together these five cities now account for disproportionate shares of all major markets and represent gigantic concentrations of strategic resources. What has become clear, however, is the fact that expansion of finance is centered in the growth of the network of financial centers, so that a second tier of about a dozen global cities is crucial. The global financial system has evolved markedly since the mid-1980s. There is today an organizational architecture to global finance and to the support capabilities so important to worldwide market operations, regardless of the sector. This organizational architecture centers on a network of about 40 global cities, with a sharp tendency toward concentration in the top 20.

It is perhaps one of the great ironies of our current international system that its master industry, finance, is the one most subject to a combined pattern of geographic spread and simultaneous disproportionate concentration of resources and critical operations. We have long argued that trade can be far more "democratic" than finance: A small country can become articulated with global trade markets for its benefit. In terms of finance, a small, weak country will be either completely ignored or destroyed by the system.

To a large extent, the major business centers in the world today draw their importance from transnational networks. There is no such entity as a single global city - and in this sense there is a sharp contrast with the erstwhile capitals of empires.1 These networks of major international business centers constitute new geographies of centrality. The most powerful of these new geographies of centrality at the global level bind the major international financial and business centers: New York, London, Tokyo, Paris, Frankfurt, Zurich, Amsterdam, Los Angeles, Sydney, and Hong Kong, among others. But this geography now also includes cities such as Bangkok, Seoul, Taipei, Shanghai, Sao Paulo, and Mexico City. The intensity of transactions among these cities, particularly through the financial markets, trade in services and investment, has increased sharply and so have the orders of magnitude involved. There has been a sharpening inequality in the concentration of strategic resources and activities between each of these cities and others within the same country. This has consequences for the role of urban systems in national territorial integration. Although the latter has never quite been what its model signals, the last decade has seen a further acceleration in the fragmentation of national territory. National urban systems are being partly unbundled as their major cities become part of a new or strengthened transnational urban system.

Interview conducted by Takako Kimura, online editor, on March 15, 2005.

  1. The data are still inadequate; one of the most promising data sets at this time is that organized by Taylor and his colleagues (GaWC); see also Meyer 2002; Smith and Timberlake 2002). But much remains to be done in this field.

March 15, 2005