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Friday, February 27th, 2009

GaWC Issues New Global City List

The folks at the Globalization and World City Research Network recently issued their 2008 list of world cities. This is exactly the sort of ranking that is great for getting people arguing. Here is the chart:

Click for higher resolution. Here is how the Midwestern cities I cover in this blog sorted out:

City Classification
Chicago Alpha-
Minneapolis Gamma+
Detroit Gamma
Columbus High Sufficiency
Cleveland High Sufficiency
Kansas City High Sufficiency
Indianapolis High Sufficiency
St. Louis High Sufficiency
Milwaukee High Sufficiency
Cincinnati Sufficiency

Keep in mind the methodology is based on some sort of a network model based on office locations of producer services firms or something. I saw a lot of debate on this list on the internet critiquing the results, but if you are confident in your model and confident in your data, then you can’t just reject the results because you don’t like them.

This is the sort of league table that likes to get people arguing, but as has been noted previously, world cities aren’t all in direct competition. They specialize in various things. And the real key is whether a city is overall successful and produces the kind of life its citizens want. But this is certainly one interesting dimension of the world.

On a related note, I saw a column on Mead Johnson’s IPO and its impending headquarters relocation to Chicago from Evansville . I found this Indiana based column highly revealing. The various Indiana people quoted dismissed this move as about the “ego of the executives” access to “rich and prestigious” people or being close to the CFO’s house rather than any real business imperative.

While there is no denying that the residential preference of executives matters in where companies locate, the line of thinking in this column expresses a dangerous naiveté about the way the world works today. What’s more, it illustrates the way Midwesterners too often think about economic setbacks, namely that they are the result of someone wrongheaded or malicious decisions as opposed to macroeconomic trends and forces. Kudos to the Mayor of Evansville for not falling into this trap.

I previously documented this case in my posting “Corporate Headquarters and the Global City“. To summarize, globalization generates far flung networks of firms, which require new producer and financial services to organize and manage. These are increasingly concentrated in global cities. That is what allowed those cities to grow and prosper, even as their traditional corporate HQ count declined. The growth was coming from new producer services firms.

Today we are seeing that access to those firms is drawing back headquarters to the city, albeit not the traditional headquarters with thousands of employees. Rather, it is a thin executive headquarters of just those people who need close contact with these other firms. Mead Johnson falls into that category. So does SABMiller, which recently said it was moving a small headquarters function to Chicago from Milwaukee.

Since these service firms are concentrated in fields like law, accountancy, and consulting, you would think most cities could supply them since most cities have law firms and such. But the nature of the services is different. It isn’t just a difference in scale, it’s a difference in kind. As I said before, Columbus’ law firms serve that city and Ohio. Chicago’s serve the world for certain types of practice areas.

This brings us back to what I said previously about trying to re-establish the hierarchical subdivision of labor. First I should stress that this is not about abandoning anything anyone is doing today. I’m not saying any city out there can’t compete in the sectors they are pursuing. Rather, it’s about an additional ability to tap into that global service firm network in a way that you couldn’t do before.

Whatever the case, dismissing the impact of globalization as merely about executive ego is not healthy for creating economy strategies to prosper in the new environment. We’ve got to figure out how to play and win with the new rules of the game, not sit on the sidelines and sulk.

13 Comments
Topics: Globalization

13 Responses to “GaWC Issues New Global City List”

  1. Alon Levy says:

    The problem with these algorithms is that there’s no a priori way of evaluating them. It’s not like with a form of data analysis or statistical test, where we can use math to figure out the correct algorithm before looking at data. So it’s legitimate to point out that an algorithm that places the wrong cities ahead of the right ones is probably flawed.

  2. El Hoosier says:

    No huge complaints with the cities list… but it put Detroit over San Diego… I find that interesting.

  3. Jason says:

    That would be an interesting move if MeadJohnson relocated its corporate hq to Chicago. That’s the same town of the hq of its direct competitor: Abbott Labs.

    Abbott bought out Ross Products in the 60’s. Ross was founded in Columbus,OH around the same time as MJ. Their products Similac and Ensure have the corresponding products of Enfamil and Boost for MeadJohnson (cradle. to. grave.)

    In parallel to the BigPharma Parent company of Abbott there is BristolMeyersSquibb (hq in the tri-state) for MJ.

    Only in the past couple of years have they changed the branding and discontinued the Ross name. I see this when I go past one of their plants.

    Although they have locations around the city, they still have this plant which is prominent right in downtown Columbus on a main thoroughfare (Cleveland Ave).

    When you consider all the smokestack factories that must’ve been in downtown cols once upon a time, it’s amazing that they maintain that site.

    The Indystar article mentioned that Mead Johnson was founded in New Jersey which was then and still is a large chemical/pharmaceutical area of the U.S. But they “moved to Evansville in 1915 to have better access to raw materials for its pioneering Dextri-Maltose formula.”

    This process can also happen in the reverse. The Manischewitz company was founded in Cincinnati back when that city and Louisville were frontier towns with large Jewish populations. As Jewish populations increased during the great waves of immigration towards the end of the 1800’s, the company relocated to the east coast to be closer to where those immigrants settled.

  4. thundermutt says:

    El Hoosier, there are (or were) lots of companies with offices in Detroit to serve the former Big 3, and the Big 3 (used to) control vast international networks of plants and suppliers from Detroit.

    It would be interesting to see a trend on each city, too: rising, stable, or falling.

  5. The Urbanophile says:

    Thanks for the comments, everyone. Jason, especially thanks for giving us more context on the Chicago situation and some interesting history.

  6. Alon Levy says:

    El Hoosier: your mileage may vary, but I think putting Tel Aviv and LA in the same category is an automatic disqualifier.

  7. fleur de gris says:

    of course i don’t like that louisville’s not included but, as you note, it has to do with the methods.

    louisville is no longer a ‘producer’ city, but has large service corporations like ups and yum (whether or not you think of yum as a svc, it’s still a huge int’l business).

    so, because of the TYPE of company, we don’t get a spot on a list that includes so many cities of a similar size, cost- and quality-of-life?

  8. thundermutt says:

    The rankings seem to be heavily biased in favor of cities (as Urbanophile pointed out) at or near the center of worldwide networks in some field of endeavor.

    In other words, being the “control center” for an international empire of some kind counts big. Hence Detroit, whose native auto companies control production on a world scale.

    This isn’t a “best places to live” or quality-of-life list. It isn’t a list of cities where you can buy the NY Times on every streetcorner, cities that have streetcars and subways and trains, cities that have history, cities that have diverse populations, or cities with the highest per-capita concentration of coffee shops with WiFi.

    It’s a list of cities that draw people to them IN SPITE OF their shortcomings (weather, congestion, lack of diversity, etc.) because they are network control hubs for a new age.

    However, it is unclear to me just how the centers of the three largest and most powerful worldwide networks (Washington, Beijing, and Moscow) are not in the highest class of world cities. They are not just centers of military and political power. They are centers of worldwide fiscal and monetary policy. Really: how does Washington belong in the same class of city as Atlanta or Hamburg?

    But then again, I’m an economist and my mantra is “follow the money”. Clearly New York and London are “money centers” in the pre-meltdown meaning of that term. But today, if you follow the money back to the figurative printing presses, I think there’s a pretty compelling case for “alpha” status there.

    Maybe “network” thinkers don’t follow the money.

  9. Jim Russell says:

    I think I can shed some light on the GaWC project. The original idea was to figure out a way to rigorously test the hypothesis that state sovereignty was waning and global cities were picking up that slack. As I’m sure most people can appreciate, data were (still are) state-centric. How might you separate urban impact from state impact?

    While far from perfect, the connectivity data are a great surrogate. We’re starting to see more urban data (e.g. migration, economic growth, and trade), but those numbers are still patchy at best and others are simply unreliable. Also, I don’t recommend policy that tries to move a region up the hierarchy ladder given the data shortcomings.

    I wish GaWC would update the Atlas of the Hinterworlds. A city’s urban connectivity profile is quite useful if you take it in the context of other data (I like cross-referencing the migration connectivity profile with the GaWC maps). The goal, I think, is to better appreciate the relationship your city has with other cities. On that score, GaWC delivers some useful data points.

  10. The Urbanophile says:

    fleur, it could be that the Louisville metro area was simply too small to be included in the study. I don’t know.

    Again, you all should go read the methodology for yourself, but IIRC from previous versions it is not actually based on being a hub or location of an industry cluster. So having the film industry in LA or tech in SF counts for nothing. Rather, it was based on having branch locations of international service firms such as accountancies, consultancies, law firms, ad agencies, etc. One can see how this punishes interior cities in large countries like the US versus being a smallish national capital elsewhere. Nevertheless, while it might not be the ultimate all time ranking, it probably tells us something about a city, namely whether it is the type of place these businesses feel compelled to plant their flag.

  11. thundermutt says:

    Urbanophile, service businesses have to service a control node. A city never became important because the lawyers, accountants and IT guys set up there.

    Presence of those consultancies and service firms seems to me a very good indicator that a key industry (or a key segment of an industry) is controlled from a particular city. So the method indirectly does measure a particular city’s span of control.

    The highest ranking cities do seem to be the centers of international finance and trade: merchantile cities.

    However, the methodology may indeed suffer from confirmation bias if it completely ignores any measure of state power: Of course state power will seem to be on the wane if it isn’t measured!

  12. Anonymous says:

    “could be that the Louisville metro area was simply too small to be included in the study”

    …if that were the case then why is Omaha, Memphis, Birmingham, Rochester, Richmond, Tulsa, New Orleans, etc included. (that is just US)…not to mention cities I have never heard of

    This list must have been written by the same folks who think HSR is a good idea.

  13. wkdewey says:

    Detroit is declining, but declining doesn’t mean dead. It’s still bigger, and possibily still more influential, than some of the “up and coming” cities.

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