Friday, February 24, 2012

How The Diffusion Of Globalization Is Impacting Urbanization

The future in the Sun Belt is looking dire. The dramatic restructuring of the global economy going on now is picking a new round of winners and losers. The dark side of globalization is taking aim at the metros of the South:

The types of manufacturing for export that grew most rapidly in China during that time included the production of textiles, clothes, shoes, leather goods, rubber products — and one notable high-tech area, computer assembly. Most of these production activities involve soft materials and hands-on finishing work. “These are labor-intensive, low-value-added [forms of] production,” Autor says. “Certainly the Chinese are moving up the value chain, but basically China has been most active in low-end goods.”

In conducting the study, the researchers found more pronounced economic problems in cities most vulnerable to the rise of low-wage Chinese manufacturing; these include San Jose, Calif.; Providence, R.I.; Manchester, N.H.; and a raft of urban areas below the Mason-Dixon line — the leading example being Raleigh, N.C. “The areas that are most exposed to China trade are not the Rust Belt industries,” Autor says. “They are places like the South, where manufacturing was rising, not falling, through the 1980s.”

The Sun Belt is the new Rust Belt. As for the old Rust Belt, globalization is now working in favor of those cities:

The Great Lakes demographic and economic turnaround does not mean that growth has occurred in the pattern of the early 20th Century. Instead we see the emergence of a new set of leadership cities. If Akron, Detroit, Cleveland and Chicago paced the region’s early 20th century ascendency, the new “winners” appear to include affordable, attractive cities, many of whom are home to major universities, state capitals and key research institutions.

These areas have done well in attracting many people from the less successful metropolitan areas of the region. Columbus, for example, evidenced strong growth from the rest of Ohio and other parts of the Midwest, notably Michigan and Illinois. But perhaps more importantly, the area enjoys strong in-migration from those parts of country -- notably the Northeast and California -- that have traditionally dominated knowledge-intensive industries.

A similar pattern can be seen in Indianapolis. In recent years, as urban analyst Aaron Renn notes, the Indiana capital has enjoyed “a profile closer to the Sun Belt than the Rust Belt.” It grew its population at a rate 50 percent greater than the national average, and also had strong net inmigration, with almost 65,000 net people deciding to pack up and move to the Indiana capital.

There is a sorting going on within the Rust Belt, changing the look of the urban economic landscape. But Joel Kotkin (see above) also highlights a rebirth of prosperity in traditional manufacturing hubs. The entire Rust Belt is benefiting from globalization. I agree with Kotkin that we will see a shift in focus from the coasts to the interior. The same thing is happening in China:

A big change is now coming. Jintang is administered by Sichuan’s capital, Chengdu, which like other inland cities is beginning to boom, thanks to a flood of government investment in recent years and the transfer of some manufacturing away from the coast in search of cheaper land and labour. In Fuxing walls and lampposts are plastered with job advertisements, not for work in distant coastal factories but for positions in and around Chengdu. Some of them offer jobs with Foxconn, a huge Taiwanese firm which makes Apple’s iPads and other computer products at a plant near the city (for pay of more than 2,000 yuan—$320—a month, says one pink poster). Foxconn’s largest factory is in Guangdong, but it opened a huge, modern operation in Chengdu in October 2010, and has talked of expanding to an astonishing 500,000 staff within five years. Chengdu officials have been scrambling to make sure that as many jobs as possible go to locals (who appear undeterred by a number of unexplained suicides at Foxconn’s huge plants in China).

I blogged about this trend back in 2010. It's greenfield urbanism, an abundance of frontier opportunities in a city environment. Talent gets the same benefits of density without the steep costs you find on the coast. The Creative Class is fleeing cool cities in droves. Globalization is diffusing.

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