Competitiveness, economization and regions

Kaj ZimmerbauerEconomic geography and its

applications2017

Structure of this lecture

• Ecenomic geography, economy

• New regionalism & neoliberalism

• Globalization, competition and competitiveness

• State and geoeconomization

• New ”soft” (economic) regions

What is economic geography?

• “Economic geography is the study of how people earn their living, how livelihood systems vary by area, and how economic activities are spatially interrelated and linked”– Getis, Getis and Fellman, p. 355

• ”Economic geography should seek to understand the principalprocesses involved in the continual oppressions of capitalism… to expose economic injustices… contribute to mitigating the forcesassociated with hegemonic neoliberalism… Research by economicgeographers should not just be stimulating but also painful, disturbing, surprising, confusing, and difficult… it should makesomebody angry.” (Samers 2001)

• Geographical approach to economy: to understand patterns and processes in space and the particularities of places (e.g. some people starve because they are poor, but why they are poor in the first place?)

Research themes in economic geogarphy

• Economic development in different regions/countries• Capitalism, Marxism, feminist approach• Production• Consumption• Clustering, proximity, networks• Technological transformation• Resources (agriculture, raw materials, knowledge, human capital)• Interaction between politics and economics• Globalization, global trade• Economic networks• Transportation, logistics• Sustainable development• Alternative (non-fiscal/non-monetary) economies…

What is ’the economy’?

• History of ’the economy’– At the early 18th century, economy referred to

households (=kotitalous)– Industrial revolution – division of labour– Economy as an integrated whole (nation) (A. Smith

(1776) The Wealth of Nations) – Scientific, technological and intellectual changes in

the late 19th century – birth of modern economics• Individual economic decisions, international systems

– The economy (usually) as a separate system– Emergence of econometrics in 1930s, ’the

economy’ as a subject of analysis

What is ’the economy’?

• Taken-for-granted assumptions about the economy:

– An economic act is a fiscal/monetary one

– Economy as a collective mechanism outside of ourindividual control

• Economy lies outside of other dimensions of our lives

– Mechanisms that keep the economy functioning areordered and rational

– Growth is good

˃ narrow accounts on the economy and economic processes

Geography and economy

More assumptions to be challenged by the economicgeography:

1. Universalism (economic processes work similarly everywhere)

2. Rationality (extension of the idea of universalism, people willrespond in predictable and rational way to ’market signals’)

3. Competition and equilibrium (=tasapainotila) (market mechanism will always find the greatest efficiency)

4. Economic processes are based on certain laws and principles(processes often reduced to formal statistical models in whichonly quantifiable processes can be accommodated, cf. positivistgeography)

The economy beyond the economic

• Many economic processes take place outside of the

formal, quantifiable economy (unpaid work,

cooperatives, lending etc.)

• Different economic cultures, different views of poverty

(the rights to own/use resources)

• Economy not a separate/distinct sphere (in reality, the

economic and the political are inseparable, states

make the required pre-conditions

• The distinctions between the economic, the cultural,

the political etc. are quite arbitrary (example: buying a

car)

Geographical perspectives on the Economy

• Space– Physical distance and area

- territoriality, location, flows across space…

• Place– The specificity of of places– Somewhere in particular

• Scale– Differently sized units– Global, macrorecion, national, regional, local etc.– Variety of scales interact & overlap, scales are

constructed

Major theoretical perspectives in economicgeography since the 1960s

• Location theory and the neoclassical approach

– Emulating the scientific methods and philosophiesof the natural sciences (and economics)

– Alfred Weber, August Lösch, Peter Haggett

– Explaining patterns order in the distribution of economic activities across space

– Mathematical forms, geometrical modelling

– 50s, 60s, early 70s

• Behavioural approach

– The role of cognitive information and humanchoices in determining decision-making

– Away from the mathematical modelling

– Surveys to study the economic decision-making of human actors in various situations

– Between late 60s and the early 80s

• Marxist political economy

– Social and spatial inequities in economicdevelopment and wealth

– David Harvey (1973, Social justice and the city)

– Social relations of production and the geographyof capitalist accumulation, structures of socialrelations that underpin capitalism

– Struggles between capital and labour

– Post-Fordism

• New economic geography– Social, cultural and political (institutional) factors key

factors in understanding economic dynamics

– No particular theoretical perspective or methodologicalpractice

– Instead, collection of philosophical standpoints and socialtheories from poststructuralism and postmodernism to institutional and feminism

• Emphasis in Finland: studying and analyzing economicprocesses and regional economic development– Innovation systems, clusters, regional competitiveness,

ICT… (policy-oriented focus), economic (city)regions

New regionalism and new economicgeography

• Focus on regions as central locations for economic and political activities

• Dissatisfaction with (nation-)states

• Not a theory but a (politically popular) perspective

• Focus on: ’regional innovation systems’, ’mega-regions’, ’innovative milieus’, ’networks’, ’place-based development’

• Cf. new economic geography

New economic geographyand new regionalism

• ”New” regionalism:• Declining role of the state (”hollowing out”) the

nation-state and local scale (as the city regionsare the engines of growth instead of states)

• Strengthening role of the supranational and sub-national/regional scale (crossborderregions, city-regions, sub-regions)

• Increasing institutionalization and deinstitutionalization of regions

• The role of the state? – Proactive agent or reactive onlooker?

Why new regionalism?

• Changing regional structure both becauseof and as a result of new regionalism:

1. Increasing competition between regions

- About inhabitants, tourists, investments etc.

2. Restructuring the production of statutory services

- Due to demographic changes, to save costs

3. Regional policy of the European Union

- Europe of the regions, European competitiveness, Pan-European identity

Competition

The ideology behind

• Neo-liberalism

• Richard Florida, Michael Porter

• Emphasis on competitiveness, ’tuning’ the state

• From geopolitics to geoeconomics

• Economization of all scales and agents (state, politics, citizens)

• State as an enterprise, citizens as enterpreneurs (homo economicus, the entrepreneur of himself)

• Modes: competitive state, centralized metropolis-drivenstate, state with decentralized regional centres

• (City)regions as engines of growth (new regionalism)

• From government to governance

Globalization and competition

• Places can create competitive advantage

• Promotion of competitive advantage can create a desirabledevelopment ’paths’ for places

• Competition between places cannot be reduced to competition between firms– Cities have different histories & characteristics, regions are embedded

in different national and regional institutions, regulatory systems etc.

• Good and bad competition (good is the dominant discourse) winning at the expense of others (cf. core-periphery and the spatial division of labor)

Development & globalization

• Growth is good?

-Growing economy is considered ’healthy’

• Not all growth is good, however (environment, health and social consequences can be negative)

• Globalization and uneven development– Modernization theory: all economies can develop if they adopt

appropriate policies and strategies

→Underdevelopment as a ’problem’ that can be fixed if thedeveloping countries become ’like us’

• However, globalization has led to constantly changing ’spatialdivisions of labour’, affected by historical and geographicalbackground. (→Same path not possible for all)

• Some regions win, some lose? Winners and losers change?

Competitiveness

The elements of competitiveness (Sotarauta & Mustikkamäki)

• Structural elements: the spaces of interaction

• Dynamic elemets: interaction and the transfer of know-how

• Infrastructure, businesses, human resources, quality of theenvironment, institutions and belonging to (efficient) networks, image

Competitiveness

• Alternatively: three main aspects of recognized regional competitiveness: regional productivity, employment and standard of living

• Social capital also important: its reduction eventually leads to a weakening regional competitiveness

• Firm level fairly uncontested; on a national orregional level complex and far from consensus(see e.g. Krugman 1994, 27; Kitson et al. 2004)– Image, standard of living etc. contested

Social cohesion• Opposes uneven development where regions on a diverging

course in e.g. growth of production or employment

• Five interlinked dimensions 1) common values; 2) social orderand social control; 3) social solidarity and reductions in wealthdisparities; 4) social networks and social capital; and 5) territorial belonging and identity (Kearns & Forrest 2000)

• Balance needed between competitiveness and cohesion on a long term (competitiveness/competition often weakens cohesion on a larger scale, but cohesion within a region can be an element of competitiveness)→Competition and cohesion intertwined, yet partly opposing ’demands’ (reduction of wealth disparities vs. winners and losers in competition)

→Paradox: to compete and co-operate at the same time

Competition and regional transformation

• Competition creates growing caps between regions

• New ’competitive’ regions are institutionalized, some of which as loosely bounded ”soft spaces”

• Regional spaces/spaces of regionalism

– Regional spaces emphasize the production and constitution of regional economic spaces, innovation systems and institutional thickness, spaces of regionalism emphasize ‘locally rooted regionalism’.

• Regions inevitably embedded in competition, they mustbe made competitive (?)

States, regions and the processes of geoeconomization

Relevance and irrelevance of the state

• Ultra-globalist approach: The nation state has becomeirrelevant in today’s global ’quicksilver’ economy (Ohmae1995, Friedmann 1999) (cf. New regionalism)

• Globalization creates a single global market and gigantic ’global village’ not controllable by nation states

• Global corporations play one nation state off againsteach other to gain maximum benefits

• Nation state becomes powerless in its capacity to controlits national economic affairs

• End of the nation state as institutions of political-economic governance/government?

State and globalization• Globalization as ’scapegoat’ to explain the failure of (staes’)

economic policies

– Uncritical view, easy explanantion

• TINA (there is no alternative) explanations are common(globalization and multinats to blame?)

• Nation state and global firm should not be polarized

– Firms and markets are engaged with the nation state in a mutually dependent relationship

• There are different varieties of nation states, not all are’powerless’

• States remake themselves

– Geographical diversity, different (dynamic) power relations

The role of the state (5 importantfunctions)

1. Regulator- Market regulation (monopolies), regulating

economic flows (borders)

2. Ultimate guarantor- Institution of ’last resort’ if markets fail- Financial crisis, securing international economic

treaties, rule of law)

3. Architect of the national economy- Strategic industrial & trade policies, attracting

foreign investment, regional innovation policies)

4. Owner of public enterprises- Directly owned by nation state / state has

a direct or indirect stake, management yetleft to professional managers

5. Provider of public goods and services- Transport services (VR), health and

education services, infrastructure services(roads, airports, ports, communicationnetworks)

Reconfiguring the state

• Reconfiguration due to globalization• Institutional change that nevertheless

enables nation states to continue to excercise control over national economies

• Nation state delegates some of its control to authorities at higher or lower geographical scales

• From government to governance (economicregulation through public-private partnershipand private actors)

Supranational (soft) spaces

• Situation:

• In Europe, the first ‘Euroregions’ date back to 1950s

• First to reduce tensions, now increasingly to boost the economy

• Now over 70 Euroregions, over 140 “unusual regions” (Deas and Lord 2006)

• Typical for many is:

– Top-down constructs by “regional elites”

– Lack of identity no interest in region as a whole (old regions more important)

The economization of European supranational space

Non-standard regionsof Europe (Deas &

Lord 2006), Regionalmess (Frisvoll & Rye

2009)

New competitive soft spaces?

Barents euro Arctic Region

• 13 sub-national regions (Finland: Lapland, Oulu, Kainuu, Sweden: Norrbotten & Västerbotten, Noway: Finnmark, Troms & Nordland, Russia: Komi, Karjala, Murmansk, Nenets & Arkangel

• Population 5 300 000 in total (of which in Russia 3 900 000, density of popul. 3,4 inhabitants/km2

• The Kirkenes Declaration from the Conference of Foreign Ministers (1993)

• Peripheral location, sparse population over a large area, harsh climate, many ethnic minorities (for example, the Saami)

• Vast contrast between its western and eastern parts

Origins and transformation

• The creation of the Barents Region was an example of using a political strategy to handle both the opportunities and the problems related to sensitive east-west relationships in the 90s

• Origins deep in geopolitics

• Target is now to also improve economic networking and business opportunities

“I think that some of the original key purposes [of co-operation] have been well lasting and originate from the early 90s, but I think that kind of economics, like promoting business and trade, I think it has gained more importance. More and more”.

“Then little by little the focus of the co-operation was broadened, and I think it was the diminishing of the political emphasis and strengthening of the economic co-operation that created the need to include new regions from Finland and Sweden. To make them stronger members. So the geographical criteria, the proximity to Arctic Circle, was put aside”.

Geoeconomization of Barents

• From geopolitics to geoeconomics

• Institutionalization much through institutions that manage the co-operation

• Top-down by origin (=remained as soft space?)

”Well, Barents-consciousness is created by the structures of co-operation, I suppose. There are regional council and committee and instruments that can fund the co-operation, there is the whole co-operation that takes place in the region. We have often talked that this Barents is, like, unfamiliar for great deal of people. Those who are not directly engaged with these issues do not necessarily consider themselves to be persons from the Barents region... And we have been thinking about that, that it would be good to do something, but what would it be, the marketing or providing the information. It is a difficult question. And I don’t know for what it’s worth in everyday life to be aware that one belongs to Barents region”.

Problems of new (economic) regions

1. The arbitrariness of borders, which reflects their immaturity

2. Little relation to functional integrity in terms of culture and identity (merely economic regions?)

3. Their ‘imaginary’ character, which has been envisaged by politicians and elites (in the forms of growth corridors etc.)

4. Subjective delimitation involving ‘the map and the pencil’ without regard for functional geographies

5. The difficulties to see the supposed commonality6. Expected to be engines of growth + many other things

(reduce tensions, foster common identity…)

’Spheres’ of geoeconomization(cf. Sack 1997, Entrikin 1999, Terlouw 2009)

- Cf. old/new regionalism

Thick place making (old

regionalism?)

Thin place making (new

regionalism?)

Spatial form Accurately bounded, stable

Territory

Loosely bounded, fluid

Network

Organization ’Bottom up’ ’Top down’

Participants General population,

activists

Administrators &

stakeholders

Purpose Culture, identity

Devolution of power

Competitiveness,

Economy

Time and scale Old, history, local New, future, supranational

Thanks!