Cities in a transnational world Alok Kothari – Housing &Urbanism – 2012/13 Architectural Association School of Architecture, London
Information Technology : Recomposing the structure of the city in a globalising world Introduction: We are living in an era of Globalisation in which the cities acting as regional nodes are playing a very important role. Cities are where the highest concentration of the common resources essential for the functioning of a global economy is found. This has brought about a lot of changes in the traditional city, restructuring it spatially, economically and socially, etc. Historically, cities have experienced internationalisation of goods, products through trade and manufacturing. What has changed today is the increase in the scale and complexity of these transactions1 achieved through the deregulation of the economy, opening up of the markets by the states and the fractured production of goods and services by the firms. The main component that has been instrumental in achieving this is the revolution in telecommunications and information technology. It facilitated the super mobility of capital and goods across the national borders, which is at the very core of the global economy. What made information technology so central to the entire process of globalisation is that it made digitalisation a reality. Digitalisation had a huge impact on the way production was done; financial transactions were carried out, etc. For instance, today just by punching a few keys on the computer, it is possible to make financial transactions worth millions within a few seconds which was impossible a few decades ago. This boosted the growth of the service industry, especially finance and knowledge & information based service industry. The growth of the service industry affected the economic structure created by the manufacturing industry which had established itself post World War II. The difference in the profit generating capacity of both these economies reorganised the structure of the cities in a long way. Through this paper, I have tried to analyse the various impacts advancement in information technology has had on the city in general. Analysing the transformation of the cities into territorial nodes, shift from manufacturing based economy to service based economy, restructuring of the employment pattern and the resultant polarisation leading to inequality. Cities and Information technology: During the 1800s to the early twentieth century, the main driving force of the world economy was manufacturing and trade. Cities developed around harbours, factories, mines, etc.2 Large space required by the factories and industries forced their location out of the congested city centre to the fringes. Hence, cities weren’t considered the main production centres3 but became the market for these goods. Also, there was a huge growth of the middle class population because of the manufacturing industry which fostered large scale production & consumption.4 This facilitated the formation of labour 1
UN-HABITAT (2004) – State of the world’s cities – 2004/2005 – Changes and Challenges in a globalizing world – Pg.2 2 Saskia Sassen(2012) - Cities in a world economy – Pg.15 3 Saskia Sassen(2012) - Cities in a world economy – Pg.15 4 Saskia Sassen(1998) - Globalisation and its Discontents – Pg.158
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Cities in a transnational world Alok Kothari – Housing &Urbanism – 2012/13 Architectural Association School of Architecture, London
unions (relatively high wage levels and social benefits for the majority of the masses) helping in reducing the inequality. The oil crisis of 1970s and the failure of the public sector to mobilise the markets5 led to the adaptation of new free market policies by the states. The main objective was to reduce the cost of production, mobilise the capital flow and expand the market.6 In a way, expanding the markets was seen as the solution to this economical roadblock of the 60s & 70s. As a result, transnational flow of capital, fragmented production, deregulation and finance & specialised services became the essential forces of globalisation. The main components that played a pivotal role in the effective functioning of this global economy are transportation, telecommunications and information technology. These are the ones that helped in delivering goods and services much quicker and within the stipulated deadline. All the common factors binding these forces together were concentrated in a single place – the City. So the cities started becoming the primary source of wealth generation.7 Rise of the information technology: Historically, there have been many technological revolutions that have happened around the world. For instance, with the invention of a conveyor belt, many stages of the production process involved in the manufacturing of goods benefited. It not just helped in saving time but also led to the increase in production. But still, no other technological development has been as revolutionary in terms of the affectivity and pervasiveness as the information technology as it facilitated the digitisation of many entities. This digitisation directly affected the transport systems, telecommunications, production process, etc. modifying the life of the people and cities in general. The rise of the knowledge and information based service industry is the obvious result of this technological advancement. As a result, “in the late 20th century, this massive development in telecommunications and the ascendance of information industries led analysts and politicians to proclaim the end of the cities. Cities, they told us, would become obsolete as economic entities.” (Saskia Sassen, 2012 - Cities in a world economy – Pg.1).It was argued by the experts that due to the digitisation of work process, the need for the workers and the work places to be present at the same location would be eliminated and this would lead to a spatial dispersion of the economy.8 For example, an employee could be located in Mumbai and still be able to deliver for his company in London by staying connected through the virtual network. On paper at least, it seemed that information technology would enable a very detailed segregation of labour and still provide connectivity through the internet.9 Also, due to the possibility of very fast mobilisation of goods and services, aided by this technological revolution, the later part of the twentieth century saw a large scale relocation of back office activities of offices and some production units of industries to less congested and low-cost areas
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Manuel Castells (2010) - The rise of the network society – Pg.95 Manuel Castells (2010) - The rise of the network society – Pg.95 7 Saskia Sassen (2012) - Cities in a world economy – Pg.16 8 Saskia Sassen (2012) - Cities in a world economy – Pg.1 9 Paul Hirst (2005) - Space and Power – Pg.16 6
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Cities in a transnational world Alok Kothari – Housing &Urbanism – 2012/13 Architectural Association School of Architecture, London
outside the city.10 This, as discussed in the paragraphs above, was to facilitate the increase in the profits by reducing the cost of production – in many cases because of the availability of cheap labour and lower rents for the working space. Hence, it may be questioned that was the city losing its importance in this process of globalisation which was triggered by the restructuring of economic activities? Spatial Concentration – The flip side: This perception about cities caused by the economic distribution is not completely true in this era of globalisation.11 We also need to focus on the simultaneous growth of the cities into centralised territorial nodes. As discussed earlier, the inability of the public sector to expand the markets is linked to the birth of foreign direct investment (FDI) which required the capital to move very swiftly. The firms required very advanced communication systems for this and telecommunications and information technology provided all such tools.12 These tools provided for short – term and instant financial benefits for the private firms. Short – term because instead of investing in technological reforms which can be fruitful in the long run, they vouched for immediate profits and stock market gains.13 Finance and specialised services were the ones affected directly and positively by this restructuring of the international transactions which started locating their headquarters in cities where all the common resources were available easily. If we look closer, and try to analyse the factors that didn’t allow the claim made by the experts about cities becoming outdated due to the growth of the information technology to stand true, very interesting observations emerge. As argued by Paul Hirst (Space and Power, 2005), the most important reason for the concentration of financial and service based industries, enhanced by the development of information and communication technology, in the city, is that “communication networks are no substitutes for social networks” (Hirst, 2005, Pg.16). This means that the people (employees) still need physical interactions with their colleagues where they can discuss their ideas and share their knowledge. The place which provides the platform for these interactions to happen is the office.14 Also, having the best technological connectivity doesn’t suffice alone. Concentration of many other external resources viz. good office infrastructure, pool of talented people, etc. which would support this connectivity is also very crucial to achieve the best results. In today’s world, the internationalisation of the capital flow has led to the increase in the scale and the complexity of the transactions which has made the international markets very fragile and unpredictable. The tremendous amount of risk involved has made risk management a very essential task for all the
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UN-HABITAT (2004) – State of the world’s cities – 2004/2005 – Changes and Challenges in a globalizing world – Pg.2 11 Saskia Sassen (2012) - Cities in a world economy – Pg.1 12 Manuel Castells (2010) - The rise of the network society – Pg. 95-96 13 Manuel Castells (2010) - The rise of the network society – Pg. 95-96 14 Paul Hirst (2005) - Space and Power – Pg. 16
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Cities in a transnational world Alok Kothari – Housing &Urbanism – 2012/13 Architectural Association School of Architecture, London
firms. Converging talented people and enhanced technical connectivity at a single place – the city, is seen as the most effective and easy way of anticipating and tackling the problems.15 One more reason which supports this is the presence of a strong labour force in the city region. The flexibility that is facilitated in hiring and retaining the best employees and also for getting and changing a job for an employee is much higher in the cities as compared to the remote areas. 16The competition thus created gives a larger pool of selection both to the employee and the employer and hence attracts the firms and the labour force to the city. As per the above observations, the revolution in information technology and communications which has restructured the world economy by increasing the scale and intensity of financial transactions has helped cities emerge as the territorial nodes. Cities have become the places which facilitate the merger of all the common resources essential to reap in the benefits of this technological revolution and manage the risk factors associated with it.17 Employment restructuring & polarisation: Throughout history, any technological change has brought with it certain qualities that modify and alter the existing social structure of the society. Even today, with the advent of the information technology, the cities are experiencing a change in their employment and occupational pattern.18 For instance during 17th and 19th century, a virtuous model of a city was developed in England due to the agricultural and industrial revolution i.e. due to agricultural revolution the number of people required in the countryside for farming reduced which forced the people to move to the cities where industrial revolution had increased the number of jobs. Similarly, today the rapid entry of the finance and service industry in the city, favoured by the connectivity and capital mobility provided by information technology, has recomposed the employment structure. The result of this restructuring is the reduction of jobs in the manufacturing industry and increase of those in the finance and service sectors. Also, the increasing use of information technology in factories and offices has raised the fear of unemployment (manual work being replaced by machines) in the minds of the workers. This issue has been debated over the centuries whenever there was a technological progress that provided efficient tools of production over labour. 19For example, in the period from 1780 – 1988, the number of people engaged in agriculture in Britain reduced to half of the total labour force but the productivity per capita increased by a factor of 68; but if we analyse the after effects of this increase in productivity, it is seen that it facilitated the growth of manufacturing and services due to the reinvestment of capital and labour.20 Today what we are witnessing is the repetition of the same logic when we shift from an economy dominated by the manufacturing industry to a one dominated by service industry.
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Saskia Sassen (2012) - Cities in a world economy – pg. 222,223 Paul Hirst (2005) - Space and Power – Pg. 16-17 17 Saskia Sassen (2012) - Cities in a world economy – pg. 223 18 Manuel Castells (2010) - The rise of the network society – Pg. 217 19 Manuel Castells (2010) - The rise of the network society – Pg. 267 20 Manuel Castells (2010) - The rise of the network society – Pg. 267 16
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Cities in a transnational world Alok Kothari – Housing &Urbanism – 2012/13 Architectural Association School of Architecture, London
But this does not mean that the manufacturing sector is disappearing. Though many traditional industrial cities in the advanced economies have undergone the process of deindustrialisation, there are many cities in the developing world that have emerged as the new industrial hubs. For example, during the 19th century, Britain was a leading country to produce manufactured goods. But today, China and India lead the manufacturing industry while Britain has shifted mostly to the service based industry. This rise of the service industry and the shift from the manufacturing industry to service industry has not only restructured the employment pattern within the cities but also across the cities. Polarisation – Within and across cities: During the post - World war – II period, the main base of the economy was the manufacturing industry which led to an immense growth of the middle class population in the sub-urban areas. The mass consumption of the growing middle class population led to the standardisation of production which in a way contained and decreased informalisation of production. 21This mass consumption and mass production as argued by Saskia Sassen (1998, Globalisation and its discontents – Pg.158), aided the empowerment of the labour through unionisation which enhanced job security. The shift from the manufacturing to service based economy since the 1980s created a massive disturbance in the social structure and recomposed the employment pattern in the city. The new jobs created by the service industry, especially information and knowledge intensive service industry, tend to increase polarisation as they cater mostly to the extreme ends of the ‘technology spectrum’22hampering the growth of the middle income group. Towards one end are the highly specialised professional activities and top-level management which enjoy very high salaries and on the other end are the very low - wage jobs comprising of retail sales workers, cleaners, drivers, etc. The bipolarity thus created just doesn’t have any scope for the middle class to prosper. Hence, as explained by Martin Carnoy, the number of high – wage jobs created in the United States of America increased from 24.6% in 1960 to 33% in 1998 while the jobs at the lower end grew from 31.6% to 32.4% resulting into the decline of the middle income group.23 In a way, the similar implications which fostered the rise of middle class during the manufacturing led economy, have led to a growing economic dispersion today because of the shift to the service industry. But this does not mean that the middle class is disappearing; instead there is a segmentation24 of the middle class caused due to the growing inequality. Moreover, as noted by Saskia Sassen (1998, Globalisation and its discontents – Pg.142), “the ascendance of the finance & service based economy has given birth to a new economic regime because although this sector accounts for only a fraction of the economy of a city, it imposes itself upon the larger economy.” This means that the immense profits generated by this sector due to the strong connectivity and capital flow enabled by information technology and telecommunications 21
Saskia Sassen (1998) - Globalisation and its Discontents – Pg.158 Technology spectrum – These words are used by Saskia Sassen (1998) - Globalisation and its Discontents (pg.143) to explain the disproportionate growth of jobs in the service sector. 23 Manuel Castells (2010) - The rise of the network society – Pg. 269 24 Segmentation – Saskia Sassen (1998) - Globalisation and its Discontents – Pg.144 – to explain the division of the middle class 22
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Cities in a transnational world Alok Kothari – Housing &Urbanism – 2012/13 Architectural Association School of Architecture, London
undermines the value of the manufacturing industry which is unable to produce such profits. This difference in the profit-making capacity of the service sector and the manufacturing sector has led to economic polarisation resulting into vast growth of low-income population and high-income population at the same time. The bipolarity thus created (mainly due to the rise of the service sector, especially information and knowledge based service sector) was visible within the major service sectors and also between the manufacturing and service industries. This new trend has increased casualization of labour due to the weakening role of the firms and labour unions as a lot is left for the market to decide.25 The ever increasing competition and also the deregulation policies used by the state much to the advantage of the private firms has led to a growing job insecurity amongst the employees making it hard for them to find a stable job and salary. Along with the casualization of the labour, there are also a few other feedback effects of economic polarisation. For instance, private developers who earlier focussed on building homes for the low and medium income groups are now targeting the high-income group to increase their share of profits.26 This disturbs the social structure affecting the people at the lower end the most as they find it very hard to afford housing and other essential services. Along with the rising inequality within the city caused due to the ascendance of service industry, this new classification of some cities as the regional centres to serve the global economy has created a very stark differentiation between them and the other cities within the same nation-state. Thus, the polarisation is observed at two levels – within the city and across cities. The regions surrounding these globally connected cities start losing their relevance as all the new and essential resources required for economic growth start drifting away from them. The cities acting as regional nodes experience an immense development in infrastructure, housing, etc. while the cities with less importance are left out of this process. The manufacturing or port cities which once played a key role in the economic growth of a nation have now lost their relevance in some countries.27 This was also because of the deregulation policies used by those countries which resulted into the decline of the welfare state eventually making the survival of the manufacturing industries very hard in competition with the service industries. The negative impacts: A global market has always existed but what information technology has initiated is the immense increase in the scale, intensity and complexity of capital flow globally. These changes have created certain factors within the city which are outside the control of the local people or investors. Thus, the property prices in a global city like London are controlled by the international markets, especially the multi-national corporations who compete with each other to invest in a safe and a leading global financial market for their own interests. This competition generally escalates the land values beyond the reach of the local firms who are in no position to control these changes. The entry of these high-
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Saskia Sassen (2012) - Cities in a world economy – pg. 254-255 Saskia Sassen (1998) - Globalisation and its discontents – pg. XXIV 27 Saskia Sassen (1998) - Globalisation and its discontents – pg. XXVI 26
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Cities in a transnational world Alok Kothari – Housing &Urbanism – 2012/13 Architectural Association School of Architecture, London
profit making companies in the city not only increases the prices of the commercial rents but also the domestic services affecting production.28 Eventually the existence of medium & low profit making firms is under threat as they find it very hard to deal with the ever increasing property rents and other allied services. Very often the only survival option these firms have is to operate informally – either partially or fully. Partially because though some medium-profit making firms may manage to survive this competition with a growing demand for their products, but to succeed and to increase their surplus these firms subcontract a few of their production activities to the informal sector.29 Thus, ‘the informal’ that came into existence as a negative impact of globalisation starts supporting the formal economy and also enables the increase in surplus of the firms in this economy which is very essential for their success. But this is not very beneficial for the growth of the city as it decreases the revenue collection of the state affecting the infrastructure and other development projects in those areas where there is more informality. The growth in the service sector economy has given birth to jobs which require an educational qualification or a degree. The more qualified one is, the more skilled he/she is considered to be and thus receives higher salary as opposed to the one without or with less education. This increases the resultant inequality. In the US, weekly salary of a college graduate from 1973 to 1994 increased by 5% as opposed to a 20% decline for a high school graduate.30 As the firms are in search for the people with higher educational qualification, it reduces the window of employment opportunities for the ones with low education which forces them to take up jobs without much substance. This does not mean that jobs aren’t created for the people with low education. For instance, any- stateof- the- art office of a multi-national company would require people for doing the clerical jobs, repair work, etc. But then, these are extremely low-paid jobs and are mostly manual. This trend lowers the standard of living of these people leaving them with very less scope for further development. And though these jobs and activities are very essential for the smooth functioning of the global economy, they are never given the desired credit31 and are usually left out from the important policy formations. Conclusion: The analysis has helped in understanding the various impacts information technology has had on the cities and eventually the people either directly or indirectly. It has its own advantages and disadvantages. On the positive side, it has helped in increasing the productivity by enhancing connectivity, facilitating rapid mobility of capital, etc.; but on the other side, it has been instrumental in increasing polarisation (not just within cities but across the cities), casualisation of jobs, etc. To put it in a nutshell, it can be said that though Information Technology has a potential to reorganise the institution of city in a globalising world, it reinforces the dynamics of polarisation and inequality. This does not mean that Information and communication technologies have destroyed the cities completely. Though in his book ‘Space and Power’, Paul Hirst (2005, Pg.15), mentions ‘the 28
Saskia Sassen (1998) - Globalisation and its discontents – pg. 159 Saskia Sassen (1998) - Globalisation and its discontents – pg. 159 30 Saskia Sassen (2012) - Cities in a world economy – pg. 266 31 Saskia Sassen (2012) - Cities in a world economy – pg. 247 29
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communications revolution’ as one the five threats to the city, however by this it is meant that this revolution has the potential in it to restructure the ancient and the traditional way of city development. This restructuring has its own positives and negatives. Information technology has not only given cities a new centrality in the global economy but has also given all the cities on the global map a strong network of connectivity. But why have the benefits of this technological revolution reached only a few sections of our society? Why, even though the service industry is generating employment, the inequality in the city is on the rise? What policies can be made to incorporate the informal economy (resulting due to the growing polarisation and inequality) into the formal structure so that it starts supporting the development of the city? Though service industry has a great profit making capacity, it is highly speculative and involves very high financial transactions which are dependant mainly on the market which makes it very fragile. On the other hand, manufacturing industry adds value to the economy and also induces stability in the social structure. What can be done so that, information technology itself helps in reducing the gap between the service industry and the manufacturing industry? The solutions to these questions, though not easy, would indeed facilitate the increase in the potential of this technology and help it reach its scale, eventually benefiting the city by reducing the prevalent inequality and informality.
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Cities in a transnational world Alok Kothari – Housing &Urbanism – 2012/13 Architectural Association School of Architecture, London
Bibliography: Castells, Manuel. (2010). The Rise of the Network Society – The Information Age: Economy, Society and Culture – Volume I - Second Edition. Blackwell Publishing Ltd. Hirst, Paul. (2005). Space and Power: Politics, War and Architecture. Polity Press Sassen, Saskia. (2012). Cities in a World Economy – Fourth Edition. Sage Publications Ltd. Sassen, Saskia. (1998). Globalisation and Its Discontents. The New Press UN-HABITAT. (2004). The State of the World’s Cities – Globalization and Urban Culture – 2004/2005. Earthscan
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