ABSTRACT
The basic principles of economic geography seem to hold true across space and time. The emerging countries today are apparently subject to a form of spatial development akin to that of the industrialized countries in the nineteenth century. The lessons of economic history should therefore be useful to policymakers. In particular, there is little doubt that cities where people are connected and learn from each other are the main engine of innovation and economic growth. We have also seen that the geography of economic development involves trade-offs of various types. By applying the tools of economic theory, we can gain deep insights into the way these trade-offs work to shape the space-economy. However, without a more precise understanding of how they interact within cities and between regions, it is difficult to predict the future pattern of economic activities and to pinpoint the policies that can boost economic growth. The experience of even the most dynamic emerging countries is different from what the industrialized countries went through before them, despite a number of strong similarities. While the growth of London since the early nineteenth century probably shares several features with that of megalopolises in developing countries, it would be a serious mistake to forget that the capital city of the former British Empire had long been a major hub, attracting resources from all over the world-something that cannot be said of today’s agglomerations with even larger populations, such as Mexico City, São Paulo, Lagos, and even Beijing. Moreover, while the urban infrastructure required at the time of the Industrial Revolution was fairly rudimentary, this is no longer true. Developing countries must make proportionately greater efforts to build infrastructure than their European predecessors. This difference becomes especially acute when it is recognized that metropolises of developing countries have far bigger populations than London had in the nineteenth century. The size of some cities in developing countries is staggering-on a wholly different scale from what Western Europe and the United States faced at the time of their urbanizationand urban growth is a not a scale-free phenomenon. Furthermore, conclusions that are valid for the tangible goods economy-for example, for the large-scale production of durable goods in the aftermath of World War II-must be applied with caution to the intangible economy. The growth of intangible trade will change our way of thinking about the spatial
distribution of the value chain as well as the factors influencing the competitiveness of cities, regions, and countries. Producers of intangible goods are big consumers of knowledge, but much remains to be learned about the transfer of knowledge across locations. Knowledge producers benefit from various types of spillovers that in many cases are still local in scope. However, the idea of physical proximity, which is crucial to economic geography, takes on a broader meaning in the intangible economy, encompassing cultural and social dimensions as well as physical closeness. As a result, we must focus not only on the tendency for activities to concentrate in geographical clusters, but also on another, complementary tendency: the development of global knowledge networks. In this new context, the basic question is whether economic agents belonging to a network integrated into the global economy will not soon be operating in a world that looks flat to them. The central and growing role of highlevel services, as well as that of knowledge-producing and research centers as drivers of local or regional growth, might not be apparent when viewed through the lens of an analytical framework that remains largely marked by industrial geography and the economics of trade/transport costs. At the same time, spatial diffusion effects are limited in space and hampered by great inequalities in knowledge absorption capacity, which are likely to give rise to lasting sociocultural and economic gaps. To benefit from technological spillover effects, it is not enough to be geographically close to development clusters. Growth does not spread through market mechanisms alone; it needs to be nurtured and organized. This observation is even more valid for developing countries than for advanced countries. The question therefore arises whether all spatial entities will be able to absorb technological and social changes within a reasonable timeframe. In a nutshell, we concur with Leamer (2007) when he says that “physically, culturally, and economically, the world is not flat.” Regional disparities are likely to be lasting. One of the major challenges for development policy is thus how to bring about the political, social, and cultural conditions that can render these disparities socially and politically acceptable. The state of the art offers no assurance that these questions have answers that are valid in all places and under all circumstances. Various approaches, both complementary and competing, may be used to understand the drivers of and factors affecting regional economic growth. The principles of economic geography are-or should be-a matter of consensus, providing policymakers with a new frame of reference and new concepts. For example, it is crucial to recognize the importance of increasing returns to scale in the formation of economic spaces. Increasing returns appear either at the level of specific activities or in the aggregate, when cities act as “economic multipliers.” The question of how to apply these principles remains unsettled, however, especially when it comes to formulating specific recommendations for developing countries. Proposing new foundations for development policy based on the most recent contributions made in economic geography and urban economics is a worthy ambition, but we must avoid the pitfall of applying these theories too hastily. Institutions play a central role, but this point alone does not constitute sufficient
grounds for a one-size-fits-all portfolio of recommendations. Moreover, spatial neutrality of public policies is a principle applied neither in advanced nor in emerging countries: most policy decisions are implemented in a manner that varies across locations. Well-grounded general guidelines are needed to avoid serious errors, but they are only a first step in the policy formulation process. When making specific recommendations, one must avoid using simple rules of thumb. On the contrary, the approach must be tailored to the specific circumstances. This involves assessing the strengths and weaknesses of the economy, viewed as a set of socioeconomic and political systems, and identifying the types of policy that are best suited to each country or region, its history, and its economic and social situation. The success of economic reforms and development programs depends on a largely endogenous process that requires human and financial resources. As such resources are very limited, it is important not to disperse the reform effort by trying to act on too many fronts. It is now well established that piecemeal actions and blind interventionism are the pervasive ills of public development policies (and not only in the least advanced countries). These pitfalls are all the more treacherous because of our patchy empirical knowledge concerning the effectiveness of development strategies in developing countries or lagging regions. To help populations hard-hit by underdevelopment and poverty, it is necessary not only to make robust decisions that are managed with an eye to the long term and suited to specific situations, but also firmly to turn one’s back on the caricatures offered by many ideological discourses.
