John Quiggin: Cities, Connections, and Cronyism:
Recent developments in the global system of cities present a curious paradox. With the cost of communications declining almost to zero and substantial, though less dramatic reductions in transport costs, there is now little technical requirement for most kinds of production to be undertaken in any particular location, or for elements of production chains to be located close to each other. This fact has had dramatic consequences for the organisation of manufacturing industry. Simple production chains involving the import of raw materials, usually from developing countries, for processing in a specialised centre, have been replaced by far more complex structures.
Yet, in important respects, the dominance of a small number of ‘global cities’ has never been greater. In this paper, it is argued that the dominance of global cities reflects a desire for clustering on the part of finance sector professionals and corporate executives. It seems likely that such clustering provides private benefits by enhancing the value of personal contacts, but reduces the efficiency and profitability of the corporate sector.