Take Three: New Geography Of Globalization

I didn't intend to do a series of posts on this topic and I've got two thematic reports to publish, but I dug up a few more links that seem to fit. Pittsburgh is actively seeking to position itself as a big player in the global supply chain universe. The region is late to the globalization game:

With US domestic air cargo traffic down for 10 months in a row, year-on-year, the industry is scrabbling harder to get more business from Asia, especially China. Regions that until a few years ago were comfortably feeding off local and coast-to-coast traffic, have had to wake up to a new era.

One of these is Pittsburgh, which for nearly a century was the centre of steel and related industries. Those days are gone and the city is the centre of the Rust Belt. The regional airport authority recently visited China to promote the airport to 11 airlines and officials said they would be returning for a more detailed and aggressive sales pitch.

Given the trends I've written about over the last few days, is this a wise strategy for Pittsburgh to pursue? The "new era" may have come to a close thanks to the Great Recession. Another concern is the peak oil problem, which has some people "Betting on the Rust Belt":

Sussing out the geography of the future in advance is no easy task, but the constraints bearing down on what’s left of the American economy offer a few hints worth noting. Now that we’re on the downslope of Hubbert’s peak – world production of conventional petroleum peaked in 2005 – energy costs will, on average, take a larger bite out of economies around the world with each passing year. One of the implications is that transport costs will no longer be a negligible part of the cost of goods shipped over long distances. More energy-efficient transport modalities will tend to replace less efficient ones because they, and thus the goods they ship, will be more affordable; equally, diseconomies of distance will tend to outweigh economies of scale and foster the reemergence of regional economies. Among the likely beneficiaries of these changes are the towns that thrived best in an earlier, more regional economy -- those that are well served by rail and water transport, surrounded by farming regions that don’t depend on irrigation, not too far from major markets, and provided with ample and inexpensive real estate for the factories and warehouses of a downscaled and relocalizing industrial economy.

Welcome to the Rust Belt – and, among many other towns, to Cumberland.

I'm not suggesting we take such apocolytic visions seriously. However, the geographic rationale is strikingly similar to that of the Financial Times article that launched my series. The risk mitigation is different, concern about access to natural resources. But the proximity proposition dovetails nicely with fears about the vulnerabilities to global supply chains. Obviously, rising oil prices are a big part of that picture.

The point is that the next round of globalization may favor the Rust Belt, as opposed to ravaging it. I'm less worried about rising oil prices because of how quickly energy markets respond to demand slack. And the glut of natural gas suggests a much more complicated picture than the one doomsayers are promoting. Offering my own vision of the future, technologies of trust will drive the new geography of globalization. As a result, I'm still bullish on the Rust Belt and Pittsburgh.