Sunday, August 19th, 2012
This is both a standalone general article and part of my “State of Chicago” series.
We hear a lot of talk these days about so-called “global cities.” But what is a global city?
Saskia Sassen literally wrote the book on global cities back in 2001 (though her global cities work dates back well over a decade prior to that book). She gave a definition that has long struck with me. In short form, in the age of globalization, the activities of production are scattered on a global basis. These complex, globalized production networks require new forms of financial and producer services to manage them. These services are often complex and require highly specialized skills. Thus they are subject to agglomeration economics, and tend to cluster in a limited number of cities. Because specialized talent and firms related to different specialties can cluster in different cities, this means that there are actually a quite a few of these specialized production nodes, because they don’t necessarily directly compete with each other, having different groupings of specialties.
In this world then, a global city is a significant production point of specialized financial and producer services that make the globalized economy run. Sassen covered specifically New York, London, and Tokyo in her book, but there are many more global cities than this.
The question then becomes how to identify these cities, and perhaps to determine to what extent they function as global cities specifically, beyond all of the other things that they do simply as cities. Naturally this lends itself to our modern desire to develop league tables.
A number of studies were undertaken to produce various rankings. However, when you look at them, you see that the definition of global city used is far broader than Sassen’s core version. Wikipedia lists some of the general characteristics people tend to refer to when talking about global cities. It cites a very lengthy list, but some of them are:
- Home to major stock exchanges and indexes
- Influential in international political affairs
- Home to world-renowned cultural institutions
- Service a major media hub
- Large mass transit networks
- Home to a large international airport
- Having a prominent skyline
As you can see, this is quite a hodge-podge of items, many of which are only tangentially related to globalization per se. In effect, many of them seek to define cities only in term of global prominence rather than functionally as related to the global economy. That’s certainly a valid way to look at it, but it raises the point that we should probably clarify what we are talking about when we talk about global cities.
To clarify our thinking, let’s look at how various ranking studies have defined global city for their purposes.
One oft-cited such ranking was a 1999 research paper called A Roster of World Cities. The authors, Jon Beaverstock, Richard G. Smith and Peter J. Taylor, explicitly reference Sassen’s work, seeking to define global cities in terms of advanced producer services.
Taking our cue from Sassen (1991, 126), we treat world cities as particular ‘postindustrial production sites’ where innovations in corporate services and finance have been integral to the recent restructuring of the world-economy now widely known as globalization. Services, both directly for consumers and for firms producing other goods for consumers, are common to all cities of course, what we are dealing with here are generally referred to as advanced producer services or corporate services. The key point is that many of these services are by no means so ubiquitous; for Sassen they provide a limited number of leading cities with ‘a specific role in the current phase of the world economy’ (p. 126).
They took lists of firms in four specific service industries – accounting, advertising, banking, and law – and determined where those firms maintained branches and such around the world in order to determine the importance of various cities as production nodes of these services. This has some weaknesses in that it doesn’t necessarily distinguish whether say a particular accounting firm is doing routine type work of the sort accountants have always been doing, or performing advanced work of a type specific to globalization, but it at least tries to derive lists related to the production of services.
As the global city concept grew in popularity, various other organizations entered the fray. Most of these newer lists take a very different a much broader approach closer to the Wikipedia type lists of characteristics rather than a Sassen-like definition.
One example is AT Kearney’s list, developed in conjunction with the Chicago Council on Global Affairs. Their most recent version is the 2012 Global Cities Index. This study uses criteria across five dimensions:
- Business Activity (headquarters, services firms, capital markets value, number of international conferences, value of goods through ports and airports)
- Human Capital (size of foreign born population, quality of universities, number of international schools, international student population, number of residents with college degrees)
- Information Exchange (accessibility of major TV news channels, Internet presence (basically number of search hits), number of international news bureaus, censorship, and broadband subscriber rate)
- Cultural Experience (number of sporting event, museums, performing arts venues, culinary establishments, international visitors, and sister city relationships).
- Political Engagement (number of embassies and consulates, think tanks, international organizations, political conferences)
The Institute for Urban Strategies at The Mori Memorial Foundation in Tokyo published another study called “The Global Power City Index 2011.” This report examined cities in terms of functions demanded by several “actor” types: Manager, Researcher, Artist, Visitor, and Resident. The functional areas were:
- Economy (Market Attractiveness, Economic Vitality, Business Environment, Regulations and Risk)
- Research and Development (Research Background, Readiness for Accepting and Supporting Researchers, Research Achievement)
- Cultural Interaction (Trendsetting Potential, Accommodation Environment, Resources of Attracting Visitors, Dining and Shopping, Volume of Interaction)
- Livability (Working Environment, Cost of Living, Security and Safety, Life Support Functions)
- Environment (Ecology, Pollution, Natural Environment)
- Accessibility (International Transportation Infrastructure, Inner City Transportation Infrastructure)
Another popular ranking is the Economist Intelligence Unit’s Global City Competitiveness Index. They rank cities on a number of domains:
- Economic Strength (Nominal GDP, per capita GDP, % of households with economic consumption > $14,000/yr, real GDP growth rate, regional market integration)
- Human Capital (population growth, working age population, entrepreneurship and risk taking mindset, quality of education, quality of healthcare, hiring of foreign nationals)
- Institutional Effectiveness (electoral process and pluralism, local government fiscal autonomy, taxation, rule of law, government effectiveness)
- Financial Maturity (breadth and depth of financial cluster)
- Global Appeal (Fortune 500 companies, frequency of international flights, international conferences and conventions, leadership in higher education, renowned think tanks)
- Physical Capital (physical nfrastructure quality, public transport quality, telecom quality)
- Environment and Natural Hazards (risk of natural disaster, environmental governance)
- Social and Cultural Character (freedom of expression and human rights, openness and diversity, crime, cultural vibrancy)
Note that these were not all equal weighted. Economic strength is paramount.
Yet another ranking comes from the Knight Frank/Citibank Wealth Report. This ranking is purely subjective and was based on surveying wealth advisors as to which cities they felt would be most important to their clients today and in the future based on four areas: economic activity, political power, knowledge and influence, and quality of life.
It’s worth noting that Sassen contributed to various of these surveys.
Looking at the newer surveys versus the Roster of World Cities, it’s clear that the game has changed. Rather than attempting to look at specific global economic functions, the global city game has become effectively a balanced scorecard attempt to determine, as I like to put it, the world’s “biggest and baddest” cities.
There are quite a few differences in methodologies, which is inevitable. But a few things jump out at me. First the focus on aggregate measures in these surveys. For example: total GDP, total foreign population, number of headquarters. There is a remarkable lack of attention to dynamism variables such as growth in various metrics, though the Economist survey includes a couple.
The focus on static totals versus dynamism tends to reward large, developed world cities versus rapidly growing or emerging market cities. (The AT Kearney survey has a separate emerging cities list). In a sense, these rankings are biased in favor of important legacy cities.
It’s also interesting to see what was included vs. not included in quality of life type ratings. For example, items like censorship, media access, the rule of law, and the environment are listed. But measures of upward social-economic mobility or income inequality or not.
Lastly, a number of the rankings suggest a self-consciously elite mindset, such as shopping and dining options. As with many quality of life surveys, these seem to orient them towards expatriate executive types rather than normal folks.
Looking at these, I can’t help but think that the criteria were the product of an iterative process where the results were refined over time. Thus in a sense the outcomes were likely somewhat pre-determined. That’s not to say that the game was rigged necessarily. But I suspect if anyone were doing a global city survey and London and New York did not rank at the top, the developers would question whether they got the criteria right. In a sense, a global city is like obscenity: we know one when we see it, but we don’t necessarily have a widely agreed upon objective set of criteria to measure it by.
I sense that these rankings attempt to look at global cities in four basic ways:
1. Advanced producer services production node. This is basically Sassen’s original definition. I think this one remains particularly important. Because the skills are specialized and subject to clustering economics, the cities that concentrate in these functions have a Buffett-like “wide moat” sustainable competitive advantage in particular very high value activities. For cities with large concentrations of these, those cities can generate significantly above average economic output and incomes per worker.
2. Economic giants. Namely, this is a fairly simple but important view of that simply measures how big cities are on some metrics like GDP.
3. International Gateway. Measures of the importance of a city in the international flows of people and goods. Examples would be the airport and cargo gateway figures.
4. Political and Cultural Hub. An important distinction should perhaps be made here between hubs that may be large but of primarily national or regional importance, and those of truly international significance. For example, there are many media hubs around the world, but few of them are home to outlets like the BBC that drive the global conversation.
There may potentially be other ways to slice it as well. The fact that these various ways of viewing cities can often overlap can confuse things I think. For example, New York and London score highly on all of these. And there are surely underlying reasons why they do. Yet trying to sum it all up into one overall ranking or score, while making it easy to get press, can end up obscuring important nuance.
So when thinking about global cities, I think we need to do a couple of things:
1. Clarify what it is we are talking about at the time.
2. Relative to the definition we are using, seek to identify the specific parts of the city in question that generate real above average value at the global level.