According to Baldwin (2011), in the 18th century, the Steam Revolution allowed for a decrease in transportation costs, which stimulated and expanded geographically international trade, triggering what the author calls “Globalization’s First Unbundling”. The author also argues that “Globalization’s Second Unbundling” started in 1945 and that this process accelerated from the mid-1990s onwards, as communication costs decreased significantly and there were further improvements in transportation technologies, which enabled global value chain production, task outsourcing and offshoring.
However, despite the Second Unbundling, there has been a resurgence of regional economies and an increase in urban concentration. In some sense, in this hyperglobalized world, location is, at least partially gaining importance. Many have contributed to explain this phenomenon, in which agglomeration economies play a main role, in particular Porter (2014), by developing on the concept of “cluster”. According to many urban economists, citieshave a comparative advantage relative to rural areas, due to substantial productivity benefits for firms, and that agglomeration economies explain urban growth and concentration.
However, in the paper “The revenge of the places that don’t matter (and what to do about it)”, Rodríguez-Pose (2018) argues that evidence that big cities are the main drivers of growth is far from consistent. Moreover, the author further claims that economic growth which relies heavily on agglomeration economies is geographically unbalanced, at a country level. As a result, some places are being “left behind”: the urban/regional divide has been increasingly reinforced, leading lagging-behind areas to experience long-term economic decline, poverty, diminished opportunities and lack of prospects. Furthermore, some of these regional economies have become dependent on transfers from the government, as the most standard policies have focused on moving “people to places where there are opportunities, not opportunities to declining areas”. (Rodríguez-Pose, 2018)
In the same paper, Rodríguez-Pose develops on the political consequences of the economic decline of certain regions. The author focuses his analysis on specific cases, such as Brexit vote in 2016, the Donald Trump election in 2016 and the French presidential elections in 2017, and argues that the discontent in the lagging-behind areas was expressed via ballot-box (“The reaction is coming from politics rather than economics”), leading to the growth of political populism with territorial foundations, in many Western societies.
Rodríguez-Pose expects that the “revenge” of the lagging-behind areas affects negatively economic growth at country-level. The author highlights the importance of acknowledging the geographic dimension of this economic and political phenomenon and suggests the implementation of place-sensitive development policies, contrary to what has been done in many countries, in the last years.
Baldwin, R. (2011). Trade And Industrialisation After Globalisation’s 2nd Unbundling: How Building And Joining A Supply Chain Are Different And Why It Matters. NBER WORKING PAPER SERIES. https://doi.org/10.3386/w17716
Porter, M. E. (2014, August 1). Clusters and the New Economics of Competition. Harvard Business Review. https://hbr.org/1998/11/clusters-and-the-new-economics-of-competition
Rodríguez-Pose, A. (2018). The revenge of the places that don’t matter (and what to do about it). Cambridge Journal of Regions, Economy and Society, 11(1), 189–209. https://doi.org/10.1093/cjres/rsx024
Student of the Master’s Degree in Economics
Nova School of Business and Economics