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The World Is Spiky

Globalization has changed the economic
playing field, but hasn't leveled it

Urban areas house half uf all the
worlds people, and continue to grow
in both rich and poor countries.


T lie world, according to the title

of the New York Times co\uTi\-
nist Thomas Friedman's book., is flat.
When looked at through the lens of economic production, many cities
with large populations are diminished and some nearly vonish. Three
sorts of places make up the modern economic landscape. First are
Thanks to advances in technology, the the cities that generate innovations. These are the tallest peaks; they
have the capacity to attract global talent and create new products and
global playing Held has been leveled, industries. They are few in number, and difficult to topple. Second are
tbe prizes are there for the taking, and the economic "hills"—places that monufacture the world's established
everyone's a player—no matter where goods, take its calls, ond support its innovation engines. These hills
can rise and fall quickly; they are prosperous but insecure. Some, like
on the surface of the earth he or she
Dublin and Seoul, are growing into innovative, wealthy peaks; others
may reside. "In a flat world," Friedman are declining, eroded by high labor costs and a lack of enduring com-
writes, "you can innovate without hav- petitive advantage. Finally there are the vast valleys—places with little
connection to the global economy and few immediate prospects.
ing to emigrate."
Friedman is not alone in this belief:
for the better part of the past century
economists have been writing about
the leveling effects of technology. surprisingly few regions truly mat- of the world's population. Five mega-
P'rom the invention of the telephone, ter in today's global economy. What's cities currently have more than 20
the automobile, and the airplane to the more, the tallest peaks—the cities and million inhabitants each. Twenty-four
rise of the personal computer and the regions that drive the world econ- cities have more than 10 million inhab-
Internet, technological progress has omy—are growing ever higher., while itants, sixty more than 5 million, and
steadily eroded the economic impor- the valleys mostly languish. 150 more than 2.5 million. Population
tance of geographic place—or so the density is of course a crude indicator
argument goes. of human and economic activity. But it
But in partnership with colleagues
at George Mason University and the
T he most obvious challenge to
the flat-world hypothesis is the
explosive growth of cities worldwide.
does suggest that at least some of the
tectonie forces of economics are concen-
geographer Tim Gulden, of the Center More and more people are cluster- trating people and resources, and push-
for International and Security Stud- ing in urban areas—the world's demo- ing up some places more than others.
ies, at the University of Maryland, I've graphic mountain ranges, so to speak. Still, differences in population den-
begun to chart a very different eco- The share of the world's population sity vastly understate tbe spikiness of
nomic topography. By almost any living in urban areas, jnst three per- the global economy; the continuing
cent in 1800, was nearly 30 percent z<
measure the international economic dominance of the world's most produc-
landscape is not at al! flat. On the con- by 1950. Today it stands at abont .50 tive urban areas is astounding. When
trary, our world is amazingly "'spiky." percent; in advanced countries three it comes to actual economic output,
In terms of both sheer economic horse- out of four people live in urban areas. the ten largest U.S. metropolitan areas
power and cutting-edge innovation. Map A shows the uneven distribution combined are behind only the United


Economic activity—roughly estimated here
using light-emissions data—is remarkably
concentrated. Many cities, despite their
large populations, barely register.

broad, flat world accounted for just five
percent of all innovations patented in
the United States. In 2003 India gen-
erated 341 U.S. patents and China 297.
The University of California alone gen-
erated more than either country. IBM
Population and economic activity accounted forfivetimes as many as the
are both spiky, but it's innovation—the two combined.
engine of economic growth—that is This is not to say tiiat Indians and
most concentrated. The World Intellec- Chinese arc not innovative. On the
tual Property Organization recorded contrary, AnnaLee Saxenian, of the
about ;iO0,000 patents from resident University of California at Berkeley,
States as a whole and Japan. New York's inventors in more than a hundred has shown that Indian and Chinese
economy alone is about the size of Rus- nations in 2002 (the most recent year entrepreneurs founded or co-founded
sia's or Brazil's, and Chicago's is on a for which statistics are available). Nearly roughly 30 percent of all Silicon Val-
par witb Sweden's. Together New York, two thirds of thetn went to American ley startups in the late 1990s. But
Los Angeles, Chicago, and Boston have and Japanese inventors. Eighty-five per- these fundamentally creative people
a bigger economy than all of China. If cent went to the residents of just five had to travel to Silicon Valley and be
U.S. metropolitan areas were countries, countries (Japan, the United States, absorbed into its innovative ecosystem
they'd make up forty-seven of the big- South Korea, Germany, and Russia). before their ideas became economi-
gest 100 economies in the world. Worldwide patent statistics can be cally viable. Such ecosystems matter,
Unfortunately, no single, compre- somewhat misleading, since different and there aren't many of them.
hensive information source exists for countries follow different standards for Map C—which makes use of data
the economic production of all the granting patents. But patents granted frotn both the World Intellectual Prop-
world's cities. A rough proxy is available, in the United States—which receives erty Organization and the U.S. Patent
though. Map B shows a variation on patent applications for nearly all major and Trademark Office—shows a world
the widely circulated view of the world innovations worldwide, and holds them composed of innovation peaks and val-
at night, with higher concentrations of to the satne strict standards—tell a simi- leys. Tokyo, Seoul, New York, and San
light—indicating higher energy use and, lar story. Nearly 90,000 of the 170,000 Francisco remain the front-runners in
presumably, stronger economic produc- patents granted in the United States in the patenting competition. Boston, Seat-
tion—appearing in greater relief U.S. 2002 went to Americans. Some 35,000 tle, Austin, Toronto, Vancouver, Berlin,
regions appear almost Himalayan on went to Japanese inventors, and lLOOO Stockholm, Helsinki, Lotidon.. Osaka,
this map. From their summits one might to Cermans. The next ten most inno- Taipei, and Sydney also stand out.
look out on a smaller mountain ratige vative countries—including the usual Map D shows the residence of the
stretching across Europe, some isolated suspects in Europe plus Taiwan, South 1,200 most heavily cited scientists in
peaks in Asia, and a few scattered hills Korea, Israel, and Canada—produced leadingfields.Scientific advance is
throughout the rest of the world. roughly 25.,000 more. The rest of the even more concentrated than patent


Just a feiu places produce most ofthe world's
innovations. Innovation remains difficult with-
out a critical mass of financiers, entrepreneurs,
and scientists, often nourished by world-class
universities and flexible corporatiom.


Commercial innovation and scientific advance are both highly
concentrated—hut not always in the some places. Several cities
better part ofthe twentieth century
in East Asia-—particularly in Japan—are home to prolific busi- the United States claimed the lion's
ness innovation but still depend disproportionately on scientific share ofthe global economy's innova-
breakthroughs made elsewhere. Likewise, some cities excel
tion peaks, leaving a few outposts in
in scientific research but not in commercial adaptation. The
few places that do both well are very strongly positioned in the Europe and Japan. But America has
global economy. These regions hove little to fear, and much fo since lost some of those peaks, as such
gain, from continuing globalization.
industrial-age powerhouses as Pitts-
burgh, St. Louis, and Cleveland have
eroded. At the same time, a number of
production. Most occurs not just in a ductivity advantages, economies of regions in Europe. Scandinavia, Canada,
handful of countries but in a handful scale, and knowledge spillovers such and the Pacific Rim have moved up.
of cities—primarily in the United States density brings. The world today looks flat to some
and Europe. Chinese and Indian cit- So although one might not have because the economic and social dis-
ies do not even register. As far as global to emigrate to innovate, it certainly tances between peaks worldwide have
innovation is concerned, perhaps a few appears that innovation., economic gotten smaller. Connection between
dozen places worldwide really compete growth, and prosperity occur in those peaks has been strengthened by the
at the cutting edge. places that attract a critical mass of top easy mobility of the global creative
creative talent. Because globalization class—about 150 million people world-
has increased the returns to innovation, wide. They participate in a global
C oncentrations of creative and tal-
ented people are particularly
important for innovation, according to
by allowing innovative products and
services to qtiickly reach consumers
technology system and a global labor
market that allow them to migrate
the Nobel Prize-winning economist worldwide, it has strengthened the lure freely among the world's leading cities.
Robert Lucas. Ideas flow more freely, that innovation centers hold for our In a Brookings Institution study the
are honed more sharply, and can be planet's best and brightest, reinforcing demographer Robert Lang and the
put into practice more quickly when the spikiness of wealth and economic world-cities expert Peter Taylor iden-
large numbers of innovators, imple- production. tify a relatively small group of leading
menters, and financial backers are city-regions—London, New York, Paris,
The main difference between now
in constant contact with one another, Tokyo, Hong Kong, Singapore, Chi-
and even a couple of decades ago is not
both in and out ofthe office. Creative cago, Los Angeles, and San Francisco
that the world has become flatter but
people cluster not simply because they among them—that are strongly con-
that the world's peaks have become
like to be around one another or they nected to one another.
slightly more dispersed—and that the
prefer cosmopohtan centers with lots world's hills, the industrial and ser- But Lang and Taylor also identify a
of amenities, though both those things vice centers that produce mature prod- much larger group of city-regions that
count. They and their companies also ucts and support innovation centers, are far more locally oriented. People in
cluster because of the powerful pro- have proliferated and shifted. For the spiky places are often more connected


The worlds mast prolific and influential
scientific researchers overwhelmingly
reside in U.S. and European cities.

impoverished rural areas. According

to detailed polling by Richard Burk-
holder, of Gallup, average household
incomes in urban China are now tri-
ple those in rural regions, and they've
But the flat-world theory blinds us grown more than three times as fast
to far more insidious tensions among since 1999: perhaps as a result, urban
to one another, even from half a world the world's growing peaks, sinking val- and rural Chinese now have very dif-
away, tban they are to people and leys, and shiftitig hills. The innovative, ferent, often conflicting political and
places in their veritable back yards. talent-attracting "have" regions seem lifestyle values. India is growing even
increasingly remote from the talent- more divided, as Bangalore, Hyder-

T he flat-world theory is not com-

pletely misguided. Il is a welcome
supplemetit to the widely accepted view
exporting "have-not" regions. Second-
tier cities, from Detroit and Wolfsburg
to Nagoya and Mexico City, are enter-
abad, and parts of New Delhi and
Bombay pull away from the rest of that
enormous country, creating destabi-
(illustrated by the Live 8 concerts and ing an escalating and potentially devas- lizing political tensiotis. Economic and
Bono's forays into Africa, by the writ- tating competition for jobs, talent, and demographic forces are sorting people
ings of Jeffrey Sachs and the UN Mil- investment. And inequality is growing around the world into geographically
lennium project) that the growing across the world and within countries. clustered "tribes" so different (and
divide between rich and poor countries This is far more harrowing than often mutually antagonistic) as to cre-
is the fundamental feature of the world the flat world Friedman describes, and ate a somewhat Hohbesian vision.
economy. Friedmati's theory more accu- a good deal more treacherous than the We are thus confronted with a dif-
rately depicts a developing world with old rich-poor divide, We see its effects ficult predicament. Economic progress
capabilities that translate into economic in the political backlash against glo- requires that the peaks grow stronger
development. In his view., for exam- balization in the advanced world. The and taller. But such growth will exac-
ple, the emerging economies of India recent rejection of the EU constittition erbate economic and social dispari-
and China combitie cost advantages, by the French, for example, resulted in ties., fomenting political reactions that
a < high-tech skills, and etitrepreneur- large part from high rates of "no" votes could threaten further irniovation and
ial energy, enabling those countries to in suburban and rural quarters., which economic progress. Managing the dis-
compete effectively for indnstries and understandably fear globalization and parities between peaks and valleys
jobs. The tensions set in motion as the integration. worldwide—raising the valleys without
playing field is leveled affect mainly tbe shearing off the peaks—will be among
But spiky globalization also wreaks
advanced countries, which see not only the top political challenges of the com-
havoc on poorer places. China is see-
manttfacturing work but also higher- ing decades. —RiCHAHD FLORIDA
ing enormous concentrations of tal-
end jobs, infieldssuch as software
ent and innovation in centers such as
development and financial services, Richard Florida, the author of The Flighl of the
Shanghai, Shenzhen, and Beijing, all
increasingly threatened by offshoring. Creative ClasiS, is the Hirsr Professor of Public Miiy
of which are a world apart from its vast, at George Mason University.