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Urban Studies
DOI: 10.1080/0042098993321 1999; 36; 1001
Urban Stud
Ian Gordon
Internationalisation and Urban Competition
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Internationalisation and Urban Competition
Ian Gordon
[Paper received in ®nal form, January 1999]
1. Introduction
Cities compete in a variety of ways, across market areas of very different extents, in conditions which may be more/less stable, and with or without the involvement of terri-torial agencies. Among the forms of compe-tition, the most signi®cant involve rivalry within product markets, and that for inward investment, the attraction of desirable resi-dents, and contests for funding or events from higher levels of government. In each case, competition may be concentrated among a few (identi®able) rivals or may involve many, and the ®eld within which it occurs may be local, regional, national, con-tinental or global. Each of these ®elds has always been involved but, for many key ur-ban functions, the likelihood of competition across national borders has been substantially increased by the growth of multinationals, rapid information exchange and the liberali-sation of trade and capital ¯ows. This bundle of developments is often labelled as globali-sation, although important elements are re-ally continental in scale; since also, nation-states continue to be actively involved in these processes, internationalisation is a less misleading tag.
By altering the terms, scope and intensity of urban competition, these developments highlight its signi®cance, in terms of poten-tial losses and gains for speci®c cities. The uneven impact of actual
competitionÐpartic-ularly in the context of a more general growth slowdownÐprovides a further mo-tive for exploring competimo-tive strategies as a means of resolving urban problems. Together with structural shifts towards economies based more on information-intensive func-tions, they have also given credibility to the use of urban strategies as a means of pursu-ing national competitiveness. These factors seem to have been particularly important in Europe, where the tradition of urban booster-ism was much weaker than in North Amer-ica, but where the advance of European integration has contributed to a notable growth in self-conscious `territorially com-petitive’ activity over the past 15 years or so (Cheshire and Gordon, 1995). Broader scale processes of economic globalisation have also been invoked, because of the prospect of a heightened role for a limited set of `global cities’ occupying key roles as control, ®nancial and cultural centres (Friedman and Wolff, 1982; Knox and Taylor, 1995).
In fact, the growing perception of links between internationalisation and urban com-petition re¯ects not only the extension of economic integration beyond national bor-ders, but also a more general sense of height-ened competitiveness (both as fact and ideology), and increasing recognition that `geography matters’ to economic perform-ance. Both of these last two themes have
Ian Gordon is in the Department of Geography, University of Reading. Whiteknights, PO Box 227, Reading, RG6 6AB, UK. Fax: (0118) 9755865. E-mail: [email protected]. This paper draws on work from two ESRC-funded projects: Territorial competition in metropolitan regions (grant L1135 1003, co-directed with Paul Cheshire); and London: economic competitiveness, social cohesion and the policy environment (L130251027, co-directed with Nick Buck, Peter Hall, Michael Harloe and Mark Kleinman).
0042-0980/ 99/05/1001-16Ó1999 The Editors of Urban Studies
at Middle East Technical Univ on March 16, 2010 http://usj.sagepub.com
been prominent in the academic literature on emergent forms of ¯exible economic devel-opment since the mid 1980s, although in the world of affairs a more crucial source has been Michael Porter’s (1990) Competitive Advantage of Nations. This was important both in popularising the view that (at a com-pany level at least) success depends on de-veloping unique skills and know-how in particular industries, and in linking the pres-ence of clusters of internationally successful businesses in related activities to particular attributes of their home city-regions. More speci®cally, it suggested that the critical competitive factors no longer involved re-source availability, labour cost or the macroeconomic context, but rather qualita-tive aspects of the environment, intensi®ed through clustering. Crucially, these new competitive factors seemed rather more open than their predecessors to in¯uence by terri-torial agencies.1
Against this, Krugman’s (1996) critique of policies to boost national competitiveness has been seen as challenging to the whole notion that places could be meaningful actors in economic competition, since that was the preserve of private businesses. The force of this argument is somewhat blunted by Krug-man’s (1995) own emphasis on the signi®cance of urban agglomeration econom-ies as a source of increasing returns, incom-patible with there being any unique competitive equilibrium. Even at a national scale then, there is `an intellectually respect-able case’ to be made for state intervention to promote long-term competitive advantage (Krugman, 1996, p. 101). In practice, how-ever, he contends, that most such cases fail this test, and represent disguised forms of special pleading on behalf of particular sec-tional interests, seeking subsidy or protection at the expense of other producer or consumer groups. From a quite different theoretical perspective, Logan and Molotch (1987) make a very similar point in their critique of (American) urban `growth machines’ as nar-rowly based coalitions advocating competi-tive policies that serve primarily to redistribute resources and bene®ts within an
area, rather than securing real overall gains for the community. This issue is further com-plicated by internationalisation, since na-tional economic interests may now also be invoked as a rationale for boosting particular cities (or speci®c sectors in those cities) that compete directly with foreign cities as inter-national service centres.
In fact, this case highlights two aspects of the question of whether cities as such actu-ally compete, that need to be distinguished. On the one hand, there is the (economic) issue as to how important, if at all, urban or locational attributes are to the success and failure of businesses based, or operating, in particular places within modern economies. On the other hand, there are (more political) questions as to: how meaningful the notion of a collective urban economic interest is; whether in particular cases local integration ensures that gains to key sectors bene®t all; and how the priorities of competitive strate-gies are actually constructed. These issues have an especial salience in candidates for `global city’ status, such as London, where the success of specialised international ser-vice sectors may be of substantially greater salience to external stakeholders than to their own citizens. The relevance of these political concerns is enhanced by the fact that mobil-isation of a representative coalition of local economic interests to secure collective com-petitive action can never be taken for granted. And, it may be particularly problem-atic in large metropoles with diverse econ-omic bases serving a variety of different market areas. Where signi®cant action of this kind does emerge (rather than symbolic ges-tures towards it), it is likely then to depend on a smaller core of in¯uentials with very particular interests to advance and/or the ac-tive participation of national policy actors (Cheshire and Gordon, 1996). Substantial moves towards internationalisation may well provide an occasion for such alliances to develop, but also for new or intensi®ed cleavages over the direction of urban econ-omic policies.
compe-tition within urban systems (section 2); evi-dence on the competitive responses of major cities to recent stages of international econ-omic integration (section 3); and the use of international economic performance as a criterion of competitiveness (section 4); be-fore focusing on the case of London and a decade’s debate over approaches to boosting its competitive position (section 5).
2. Competition and Urban Systems
Adopting a competitive approach to urban development and to the opportunities/threats presented by internationalisation depends on some conception of how particular places ®t into the urban system. Four principal aspects of the system which can be highlighted in this context are:
(1) its hierarchical, central place character; (2) the pattern of (horizontal) specialisation/
differentiation of activities and place-products;
(3) the functional division of labour; and (4) the role of more particularistic networks
among subsets of cities.
In each case, internationalisation offers pres-sures and/or opportunities for change, which can be expected to lead to some in-tensi®cation of that dimension of the sys-tem’s structure as integration proceeds.
Discourse about competition has tended to concentrate on the ®rst of these dimen-sionsÐi.e. the hierarchy of central places, ranked in terms both of the spatial range of their markets and the level of specialisation of products (particularly services) which they are able to offer. The progressive breakdown of barriers to trade in characteristic central place products (i.e. those most sensitive to agglomeration economies)Ðthrough the eventual implementation of all the provisions of the Single European Market, and (on a wider spatial scale) of the General Agree-ment on ServicesÐimplies a shift from sep-arate national central place systems toward continental and global systems. This has two general implications, both recognised by cit-ies developing competitive strategcit-ies. On the
one hand, the emergence of a new top layer to the system can be expected, with knock-on effects in the layers immediately below, as centres accustomed to a virtual monopoly in (national) markets for the highest-order prod-ucts face competition from other centres with a similar, or greater, capacity. Most conspic-uously, this has aroused aspirations to the roles of `global city’ or European `business capital’. But it also presents challenges for other national centres to preserve as much as possible of their role in the face of others with stronger competitive advantage in vari-ous of their key services. On the other hand, perhaps less dramatically, it opens up the likelihood of substantial change in border regions, where middle (and lower) ranking centres have the potential to increase their market areas and standing, or lose outÐ although collectively these centres can ex-pect to gain from access to less fragmented market areas. This has been an important factor in the active competitive response of nationally peripheral cities (such as Lille), with potentially much greater international
hinterlands to serve as European integration proceeds. But it has also been seen as pre-senting opportunities for some second-order inland centres (such as Lyon) to expand their markets internationally in directions away from the `shadow’ cast by particularly strong national centres.
compete successfully in carrying out someof those functions. In other words, that service centres as well as individual service providers can, and should, specialiseÐjust as industrial cities traditionally did.
Theoretically, the presumption that those (higher level) functions which require larger markets for viability must accumulate in the same centres is one of the weakest elements in central place theoryÐpropped up by ad hoc observations about the role of multi-pur-pose trips, cross-functional interaction, com-munication network externalities or general agglomeration economies. Empirically it ac-quires credibility from national studies such as that of Parr and Budd (forthcoming) on the distribution of ®nancial service functions across the British central place hierarchy. The UK is, with France, a rather extreme case in this regard, however, re¯ecting their very state-centred imperial pasts, and the pat-tern is a good deal more complex in federal countries such as Germany and the US, while the Netherlands and Italy exemplify in differ-ent ways the possibilities for divisions of labour within a unitary state. In crucial re-spects then, the form of existing central place systems may owe as much to the logic of (national) bureaucracies as that of markets (with more insight to be gained perhaps via Max than Alfred Weber).
Whatever the futures of European political integration and global governance may prove to be, they must be very unlikely to provide the simple institutional underpinnings on which the one-dimensional Anglo-French type of urban system has rested. Without this framework, and with a reduced need for whole businesses to be sited in close proxim-ity to political in¯uentials or regulators, more complex systems are likely to emerge inter-nationally, with implications for the structur-ing of national urban systems also. In simple economic terms, a purely hierarchical system implies higher rents and related congestion costs for a given level of agglomeration of particular functions than a more pluralistic system. Loss of monopoly power for national centres, and monopoly authority from na-tional governments, weakening the glue
keeping all specialised (service) functions in those centres, opens up the possibility for movement towards a more pluralistic struc-ture in contexts where other centres can build on an existing competitive advantage in some niche specialisms. The scope for this may be seen both in the notable divergences among the various `rankings’ of European cities (RECLUS-DATAR, 1989; Hall, 1993; Wegener, 1995; and others reviewed in Cheshire et al., forthcoming) and the multi-polarity of the (more fully integrated) US urban system (Markusen and Gwiasda, 1994). Even in the case of the highly concen-trated activity of international ®nancial ser-vices, detailed research on London’s competitive position suggests that its chal-lenges may not come from other `monolithic centres’ but from more speci®c sources, in-cluding `niche’ centres specialising in off-shore fund management, shipbroking, etc. (CRP, 1995). As wider markets for urban services are opened up through practical re-alisation of the Single European MarketÐ and development of the General Agreement on ServicesÐspecialised centres of this kind can expect to bene®t from dynamic agglom-eration economies. To get to take-off point, however, they may well require a kick-start from territorially competitive agencies.
The third dimension of existing urban sys-tems involves afunctional division of organ-isations’ activities between centres, as in the delegation of routine administrative tasks to places offering concentrations of the relevant kinds of labour at lower pay rates. As with the central place model, relations on this dimension are essentially hierarchicalÐal-though in this case the geography is shaped more by supply than demand factors, often on a broader regional scale with a stronger core±periphery aspect. Internationalisation extends the available range of locations par-ticularly for routinised functions. Some of these, such as international call centres, may
potential are defensive ones, since having the home bases of successful ®rms (competitive success in Porter’s terms) is no longer a guarantee of local employment, particularly for residents with only routine skills to offer. The fourth dimension of urban systems to be considered is in terms of inter-urban net-worksÐi.e. some patterning to the interac-tions or linkages between places beyond that expected simply from their proximity, com-plementarity and relative positions within the urban hierarchy. This has echoes of the role of trading leagues in an older mercantile era, before nation-states became the principal me-dium of economic integration. But it also re¯ects current interest in mixed forms of co-ordination, involving agreements among a restricted group and privileged exchanges of communication, as a means of capturing ex-ternal bene®ts without the rigidities of mega-organisations or mega-cities (Senn and Gorla, 1993). Such networks may emerge from a series of disconnected decisions, or from a deliberate strategy of encouraging links with particular places in order to build mutual competitive advantage vis-aÁ-visother sets of places. Between these two extremes, however, inter-urban networks may be sub-stantially affected by existence of infrastruc-tural links providing more rapid and reliable forms of communication for people, services and information between discrete locations, such as the CBDs of major cities, than are available at places in between or entirely off the route. Whether embodied in air or TGV services, high-capacity digital connections, or a high level of trust between business communities, such links can permit a sort of distributed agglomeration economy, of par-ticular advantage to medium-sized cities.
International integration offers both new opportunities to develop these networks and a greater incentive to use them as a means of achieving the economies of scale/scope necessary to enter transnational markets. One type of example involves cities with comple-mentary specialisms (for example, high-tech centres) pursuing joint marketing, infor-mation exchange or investment in shared facilities (such as research institutes) in order
to operate at a higher competitive level. An-other involves cities around major communi-cations links (for example, TGV lines), particularly new ones crossing national bor-ders, seeking to reorient trade at the expense of other centres by-passed by this link and higher-order centres outside the regions in-volved. A third type of network comprises transnational coalitions of cities pursuing common interests (in terms of sectors, pe-ripherality, position within national urban hi-erarchies or proximity to potential transport links), in relation to EU and/or national poli-cies (Kresl, 1992). European integration has stimulated new networks of all three kinds, although the real signi®cance of these net-works is hard to evaluate at present. Their tendency is, however, to facilitate a more differentiated pattern of urban development as against a reinforcement of established urban hierarchies.
3. Internationalisation as a Motive for Territorial Competition
specu-lative) initiatives in particular places to seize development opportunities while the options are open.
At the global level, the enhanced role ac-cruing to ®nancial markets (as distinct from direct inter-bank transactions) in the 1980s substantially increased the importance of ag-glomeration economies, offering large prospective gains to those centres which se-cured a competitive edge and to the national economies concerned (Leyshon and Thrift, 1987; Sassen, 1991). Beyond established competences and the effects of the shifting geography of demand for ®nancial services, the key factor in this competition appears to be the regulatory environment of particular centres, rather than more obviously `urban’ variables. At this level, territorial compe-tition has been largely a matter of national administrations acting together with key ®nancial institutions, with only a minimal role for urban or regional agencies. A partial exception, however, was the Japanese bid during the 1980s to transform Tokyo into a real `world city’ rather than simply the chan-nel for (rapidly growing) capital exports from the surpluses accumulated by Japanese business. The Nakasone government’s aspi-rations to this end were implemented in part (as in New York and London) through dereg-ulation of international ®nancial trading. From the mid 1980s, however, urban plan-ning initiatives became a central part of the bid to make Tokyo a `world city’, through concerted action by national government, business leaders and the Tokyo Metropolitan Government. These included extremely am-bitious (and controversial) proposals for a huge new Waterfront sub-centre, incorporat-ing a `teleport town’, as well as action to make the city a more welcoming environ-ment for overseas business people. Follow-ing the collapse of the Tokyo stock market in the early 1990s, however, these plans ran into serious dif®culties and, by 1995, a new metropolitan administration had abandoned all references to `global city’ objectives, re-placed as a goal by the new catch phrase `life city’ (Machimura, 1993; Kamo and Sasaki, 1996).
Within Europe, several of the key exam-ples of the development of territorially com-petitive strategies have been associated with particular steps in the process of European integration.
Paris. In the case of Paris, despite a regional policy requiring restraint on its growth in the interest of national balance, active promotion of the city goes back to the formation of the Common Market and De Gaulle’s ambitions to use it as a means of establishing an inde-pendent international role for France. Both instrumentally and symbolically this in-volved establishing a substantial inter-national role for Paris. In this context, development of La DeÂfense as a `Manhattan sur Seine’ was explicitly intended to attract corporate of®ces from competitor cities such as London, New York and Brussels (i.e. two international centres outside the Market and the other pretender to Euro-capital status). In important respects, this initiative anticipated developments 25 years later in London’s Docklands (and New York’s Battery Park City), though with the national government using the full range of its planning, mana-gerial and infrastructural powers to ensure its success (Savitch, 1988). The 1965 Schema Directeur for the Paris region took this ap-proach further, linking RER and New Town development to enable accommodation of substantial growth without excessive press-ure or congestion of the core and making explicit a strategy of promoting spatial divi-sions of labour within France in order to strengthen the capital’s international compet-itive position (Dagnaud, 1983). Against a background of deepening integration and in-ternationalisation, the Parisiangrands projets
of Presidents Pompidou and Mitterand (from the Beaubourg Centre to the Grande Arche) and the Ile de France 2000 project have continued this policy of boosting Paris’ com-petitive position as a means of boosting France (and long-term political reputations).
also involved an interplay between European integration (with Spain’s eventual entry into the EC) and national aspirations, although in this case the nationalism was more that of Catalonia than of Spain. For Spain as a whole, free trade with Europe involved new challenges to competitiveness. For Barcelona, it also presented new opportuni-ties for emerging from under the dominance of Madrid to become an international busi-ness and cultural centre in its own right, with strengthened links to other Mediterranean city-regions. International success in attract-ing the Olympics provided a means of pursu-ing these broader competitive aims through mobilising resources for urban reconstruc-tion, strategic investment in transport and telecommunications, as well as selling the city’s image worldwide. Total expenditure associated with this project was around $9 billion, of which some two-thirds came from public sources, including a substantial element associated with its position as an Objective 1 region under European regional policyÐanother important aspect of interna-tionalisation (Sanchez, 1997). Barcelona’s case is exceptional, but among more recent entrants to the EU there are other examples where this event has been crucial in stimulat-ing a more proactive policy towards develop-ment in the leading regionÐas in the case of the Greater Stockholm region (Linzie and Boman, 1991; Wijmarck, 1997).
Lyon. Within existing member-states, the years leading up to formal completion of the Single European Market at the close of 1992 saw an increased consciousness of the impli-cations for inter-urban competitionÐmost notably in the case of Lyon. This city’s 1988 development strategy has been seen as a paradigm of the new territorial competition (Gordon and Jayet, 1994), starting from an expectation of:
heightened competition between the cities and regions of Europe for ¼ the location of ®rms, of®ces, factories and, ultimately, wealth and population. This heightened competition would give every chance to
the most attractive cities, those who will know how to develop their geographical advantages and their growth assets, with-out compromising opportunities for co-operative ventures with other cities (SEPAL, 1988, p. 23).
Missing this challenge would be to risk fall-ing behind other European cities and experi-encing cumulative decay. But the emphasis was on the positive side where the city recognised opportunities to exploit a much wider transnational hinterland, pursuing the network model through alliances with Turin, Barcelona and Geneva (as well as more local centres) and campaigning to make itself a hub on the future TGV network. To establish itself as an alternative to Paris, rather than a provincial shadow, it sought specialised niches, notably as a ®nancial centre for smaller ®rms, with markets across France and elsewhere in the EU. As Kresl (1992, p. 140) summarised their stance, planners in Lyon saw international integration as offer-ing ªthe city an opportunity to substantially rede®ne and to reposition itself in a continen-tal economic spaceº.
Urban areas in England. These continental examples are far from typical of the current level or sophistication of territorially compet-itive activity, but rather illustrate the role which internationalisation has played in the strongest cases, where the political/organisa-tional capacity has existed to pursue positive opportunities. A possibly more representative picture may be provided by looking at the range of competitive responses to interna-tionalisation of urban areas in England. Here, apart from the London case (to be discussed in section 5), the main impacts of interna-tionalisation on competitive activity seem to have been, ®rst, in relation to the attraction of overseas inward investment and, secondly, as a response to the incentives offered by EU structural funds. The EU is a factor in the ®rst of these (as well as the growth of global FDI), given the incentive for non-European ®rms to locate production facilities inside its tariff barriers. Its importance as a form of competition in the UK owes much to na-tionalpolicy and central government funding of both regional policy and the Invest in Britain Bureau (compare with the roles of DATAR and Invest in France; Wins, 1995). In terms of bottom-up initiatives, a recent review of regional and subregional partner-ships does cite as one of the main triggers to their formation:
partners’ responses to economic down-turns, heightened global competition and the economic de®cit between English re-gions and their European counterparts (GFA Consulting and EIUA, 1998, p. 5).
However, in almost all of the cases which were studied, it appeared to be simply econ-omic downturn which was the crucial factor, both in the northern/midland regions hit by the restructuring of traditional industries dur-ing the 1980s and in southern regions affec-ted by the more service-focused recession of the early 1990s. Speci®cally, European con-cerns are referred to only in the case of the Thames Valley Economic Partnership (in the western part of the London region) whose main objective was to promote the area’s development as a major European business
location. Even in the UK’s one border region (facing Nord-Pas de Calais) internationalisa-tion is not cited as a key factor in formainternationalisa-tion of the Kent partnerships. Indeed, generally the salience of the European dimension ap-pears to have been in terms of the Com-mission’s ªinsistenceº (coupled with that of the British government) ªthat partnerships are put in place to deliver various regener-ation programmesº which they funded (GFA Consulting and EIUA, 1998, p. 11). There is thus an element of `shotgun partnership’ in some of these `bottom-up’ initiatives, or at least of marriage broking, as in the case of the North West Partnership, launched in re-sponse to a Commission `suggestion’ that relations on funding issues would be eased by production of a region-wide economic strategy. The importance of top-down initia-tives is evident also in the case of the strengthening of the Chamber of Commerce network, noted to be an important contributor to territorial competition elsewhere in Europe, but promoted nationally as a step towards enhanced competitiveness (Associ-ation of British Chambers of Comerce, 1991).
4. International Competitiveness as the Test of Economic Performance
academicsÐor does `international’ simply denote a superior quality which could be possessed by some works too parochial/na-tional in their subject-matter to interest (for example) many American outlets or read-ers?2 In the context of urban competition, however, notions of `competitiveness by in-ternational standards’ seem more often to be equated with actual export performance, with `globally oriented’ businessesÐand hence `global cities’ alsoÐas the acme of competi-tive success.
Two probable sources for this emphasis are the in¯uence of Michael Porter’s work and the particular interest of national govern-ments (for good or bad reasons) in export performance. In fact, Porter (1990) himself tends to bracket his use of `competitive ad-vantage’ with the quali®er `international’, implying the possibility of other terms of comparison, outside his ®eld of concern. Fur-ther, he de®nes international success for an industry as ªpossessing competitive advan-tage relative to the best world-wide competi-torsº (p. 25) rather than the existence of exports per se, to avoid the distorting effects of factors such as protection or the preva-lence of border trade with neighbouring countries. Still, either substantial exports (to a wide range of markets) or signi®cant out-bound foreign investment based on skills and assets created in the home base are taken as the best measures of international competi-tive advantage. The inclusion of overseas investment here provides in principle for ac-tivities where high distance costs impose substantial friction on trade ¯ows but where direct investment provides an alternative means of capitalising onÐand demonstrat-ingÐcompetitive advantage. Nevertheless, the question arises as to whether businesses operating primarily within national (or more local) marketsÐwhether because of distance costs, a limited degree of specialisation (or specialisation geared to local tastes) or a restricted potential for exploiting scale econ-omiesÐmay not also possess competitive ad-vantage. At an urban or regional level, areas specialising successfully in products with primarily national markets are clearly no less
competitive than those struggling to maintain sales in more internationalised product mar-kets. Indeed, Porter’s contention that ªthe only meaningful concept of competitiveness at the national level is national productivityº (1990, p. 6)Ða view endorsed by Krug-manÐis just as appropriate for cities and regions.
One implication of this argument is that the fate of a place and the long-term welfare of its residents, are not necessarily bound up with the attraction and growth of high-order `international’ functions, if that does not ®t with its particular source of competitive/ comparative advantage. Hence, in relation to American inner cities, Porter (1995) empha-sises the potential associated with local pur-chasing power in distinctive and underserved markets, while follow-up `benchmarking studies’ ignore issues of export performance (see for example, Boston Consulting Group, 1998).
The other side of this coin is that a place’s success depends on the productivity, innova-tiveness and market-orientation of all sectors of the local economy, and not simply on those which are most extensively traded. There is a general temptation to overlook this point by characterising places in terms of the highest-order, most cosmopolitan activities in which they are engaged, even although all placesÐeven so-called global citiesÐ contain a layering of functions serving differ-ent markets with differdiffer-ent spatial ranges (Markusen and Gwiasda, 1994). Nor, despite internationalisation, is growth necessarily as-sociated with the most spatially extensive functions.3
fore-shadowed in Friedman and Wolff’s (1982) speculations. On this view, the social conse-quences of the shift were not entirely posi-tive, involving increased polarisation as well as rising incomes, but part of a fundamental development on which the city’s long-term future rested. In fact, this interpretation sub-stantially exaggerated the signi®cance for the city of undeniably dramatic developments in its international ®nancial sector and con¯ated sets of changes occurring over quite different time-scales. The most fundamental of these, involving chronic decline in levels of manu-facturing and port employment and their replacement as the dominant sector by expanding ®nancial and business service activities, had been underway since the late 1960s. Hence it long predated the onset, in the early 1980s, of ultra-rapid growth in the scale and sophistication of international ®nancial transactions (see, for example, Swyngedouw, 1996). This development did, however, clearly play a central role in the sharp boom and bust experienced by the London economy over the following decade. Taking a longer-term view, between the years before and after this bubble, there is evidence of some acceleration in the rate of growth of ®nancial and business services (over that in the previous 10 years or so). But the bulk of this appears to have been associ-ated with growth in the domestic market, particularly for business services, rather than with growth in the global city functions, re¯ecting the fact that the bulk of service activity continued to be oriented to the na-tional market (Gordon, 1996).
More recent analyses of the market orien-tation of London business con®rm that City ®nancial services are exceptional in their orientation to global markets. Even in central London, there are rather more jobs in busi-nesses whose main market is national (i.e. within the UK but outside the South East) than overseas. Across Greater London as a whole, these nationally oriented ®rms are about two and a half times as signi®cant as the international sector. Indeed, they are actually responsible for more export jobs4 than those whose main markets are either
`European’ or `global’ (Buck et al., 1997). Given the higher salaries prevailing in City ®nancial sectors, their role would clearly look stronger in value rather than employ-ment terms, but these comparisons serve to show that global functions are far from domi-nant and not the only source of competitive strength or potential. The extent to which they have been central at various times dur-ing the 1990s to attempts to upgrade the city’s performance are discussed in the next section as a case study of the interaction between internationalisation and territorial competition.
5. Promoting London’s Competitive Position
of®cial reports, but there is less evidence of substantial action, whatever the exigencies of market forces.
The crucial example should be the Thatcher government’s 1982 decision to im-pose a Development Corporation, backed by £2 billion or so of public investment, to press ahead with the redevelopment of the former London docklands as a site for prestige com-mercial properties and housing, rather than the more `community-oriented’ schemes ad-vocated by local authorities (Fainstein, 1994). The prioritisation of market values in this case was clearly symbolic as well as a response to circumstances, just as it was evidently intended to symbolise (as well as aid) a revitalisation of the inner-city econ-omy. But there is very little evidence that it was undertaken either in the expectation of a major growth in global economic functions or to protect London’s position vis-aÁ-vis
other international centres.
In fact, the issue of London’s competitive position in the international arena has really only come to the fore since the bursting of the economic bubble associated with the `global city’ rhetoric in the late 1980sÐ following the 1987 Wall Street crash and a `bust’ in the London economy deferred (but also exaggerated) by British domestic at-tempts to avoid an international recession.
Since then, in a period also marked by the absence of a city-wide authority, there has been an unprecedented series of major stud-ies commissioned by different government bodies representing some or all of the city’s interests. These include
ÐLondon: World City (LWC) undertaken for the (boroughs’) London Planning Ad-visory Committee and various partners (Coopers and Lybrand Deloitte, 1991); ÐThe City Research Project (CRP) for the
City of London’s Corporation (CRP, 1995);
ÐFour World Cities(4WC) for the (central) Government Of®ce for London (Llewelyn Davies et al., 1996); and
ÐThe London Study (LS) jointly commis-sioned by the Association of London
Government (representing the boroughs collectively) and the European Union, again with an extensive set of partners (Association of London Government, 1998).6
In the ®rst two cases at least, a major stimu-lus to this bout of re¯ection was the com-pletion of the Single European Market and the questions this potentially raised about both London’s national and international roles, as competition for the provision of specialised services crossed national borders and as European ®nancial institutions emerged. But it was also known that New York, Tokyo and Paris, among others, had already been exploring ways and means of enhancing their positions in the global econ-omy through integrated urban initiatives. The key example for LWC was Ile-de-France 2000 project’s bid to make Paris the `econ-omic and cultural capital of Europe’ (CLD 1991, p. 4)Ðalthough the study’s sub-title `moving into the 21st century’ also contains echoes of Tokyo’s ®rst long-term metropoli-tan plan (Tokyo Metropolimetropoli-tan Government, 1984).
com-parable problems in each of the other `world cities’. As their summary report argues:
Although most governmentsÐnational and localÐwill make positive but anodyne statements of support in principle for their world cities, there is a great variance in the priority they attach to devising and imple-menting public policy, and even more in the allocation of investment. Common to all is a strong link between the ®nancial sector and ®nance ministries, particularly on macro-economic policy and regulation, but elsewhere the policy relationship is weak. Only in France does the world city vitally concern the national government (Llewelyn Davieset al., 1996, para. 5.3.4).
In the long run, however, they suggest that no city as dependent on its international functions as London, can afford to rest on its laurels (i.e. its accrued agglomeration econ-omies), or it will lose out to a new set of competitors with more dynamism. As this implies, the short-term pressures to give pri-ority to building competitive advantage may not be at all strong (except when this is aligned with the more immediate interests of some powerful group), and there is rather little evidence that governments are yet being driven by international market pressures to pursue particular urban policies.
Undeniably, however, the 1990s have seen increased efforts in London both to identify policies which could boost London’s com-petitive positionÐin tourism and the creative industries, as well as in ®nance, business and corporate controlÐand to ®ll the governance gap identi®ed by LWC, with an array of new institutions. Under the Major government, these included both a Government Of®ce for London (responsible for 4WC) and the Lon-don Pride network of public±private partner-ships. Neither of these innovations was entirely unique to London, but in addition the Environment Secretary was given speci®c responsibility for the city, chairing a joint committee following up a set of London-speci®c issues highlighted in the 1994 Com-petitiveness White Paper (DTI, 1994). London First was (and is) a business
cam-paign group, with particularly strong inter-ests in central London and transport issues, which spawned the London First Centre, now the city’s inward investment agency. London Pride, however, embraces public- and volun-tary-sector representatives from all parts of the city, and its Prospectus (London Pride Partnership, 1995) ®rst sought to integrate concerns with economic competitiveness and
social cohesion.7 The Blair government’s alternative solution to the governance issue, combining elected mayor/assembly with a business-oriented Development Agency, in its turn stimulated the LSÐas a `roadmap for an incoming administration’, according to one of its managersÐwhich asserted a need to link both of these concerns to environmen-tal sustainability.
priority may be more clearly justi®ed in terms of national economic interests than those of Londoners. The greater effective-ness of central-London busieffective-ness interests in mobilising for collective competitive action is, however, symbolised by the substantially greater resources allocated to (the more nar-rowly focused) CRP than to its London-wide counterparts (Gordon, 1995).8
In the most recent of the studies (the LS), competitiveness is less central than its prede-cessors, with the emphasis falling instead on a version of `sustainability’ involving the simultaneous achievement of economic, en-vironmental and equity goals. Thus inte-grated transport policies, including ®scal incentives, are advocated (rather than speci®c investment schemes) as a means of mitigating the impact of congestion on com-petitiveness, as well as of improving the quality of life. More positively, improved business services (with speci®c consideration for small businesses) and a skills strategy are seen as of crucial importance in addressing problems of social exclusion as well as im-provements in competitiveness. Similarly, achieving cleaner air, safer streets and other quality of life concerns is linked both to aims of keeping young people in touch with civil society and retaining mobile professionals in inner areas. Among the policy recommenda-tions, conventional (international) competi-tiveness concerns surface primarily in the responsibility that the new mayor is expected to assume for a new marketing initiative, attracting a major world event, and advanc-ing London’s case in the EU. In relation to this last concern, the point is made that the EU (as well as the UK) has a stake in the city’s success:
In the context of global competitiveness a successful London is critical to the pros-perity of the European project (Associ-ation of London Government, 1998, p. 38).
The city is, however, still a couple of steps away from a practical programme of compet-itive policies.
6. Conclusions
The London case, although as extreme in its way as the European exemplars of territorial competition, illustrates some general points about the relationship between internationali-sation and urban competition. The most basic of these is that even a much strengthened demand for competitive action does not guarantee the `supply-side’ capacity to achieve this. And the scale, heterogeneity and (likely) institutional fragmentation of major centres in the frontline of internation-alisation may make it particularly dif®cult to achieve thereÐunless national/nationalist/ supranational political interests either take on a leadership role or provide strong ®nancial incentives. A second point is that in any case there is more likelihood of building such action around opportunities for substantial gain (which internationalisation can offer in some circumstances) that will accrue in part, whether in ®nancial or prestige terms, to core actors, than around resisting challenges to the
status quo. Another point is that no city (other than the obvious city-states) is purely or primarily an international city in economic terms, although external and internal stake-holders in the international sectors may be more able and strongly motivated (like the property interests of Logan and Molotch’s growth machines) to mount collective action. Hence there are likely to be a series of particularly important con¯icts of interest to be attended to if territorially competitive strategies are to be pursued in those places. And, ®nally, although the London case can-not illustrate this point directly, the point should be made that the most signi®cant outcomes of internationalising urban compe-tition could well be the emergence on to an international stage of highly competi-tive specialist centres, from lower down the urban hierarchy, rather than any of the old national centres securing global/continental superiority.
Notes
hard-nosed strategy to identify and build on competitive advantage; investing in institu-tions that build their knowledge-base and cultural assets; improving the ef®ciency of business-related infrastructure; making the territory an inviting place for people and enterprises to concentrate; eliminating obsta-cles to productivity growth; improving the environment for business; and developing the skills and attitudes of (particularly min-ority) workforces.
2. Rather perhaps in the way that `World Se-ries’ baseball is legitimised despite a lack of overseas sales, or competition.
3. Persky and Wiewel (1994) argue that in ma-jor cities both the international and locally oriented sectors are increasing their share of activity, presumably at the expense of na-tional (or regionally) oriented activities. They base this conclusion on the fact that manufacturing (assumed to be national) has been declining while consumer services (pre-sumed local) and traded producer services (partly international) have been growing. In doing so, however, they largely ignore the importance of national markets for producer (and some consumer) services as well as the international markets of the manufacturing sector.
4. That is, jobs associated with exportsÐan estimate derived by using establishment employment levels to gross up survey data on the proportion of sales which are ex-ported.
5. Leyshon and Thrift (1987) trace deregulation in the City back to action against restrictive practices in the Stock Exchange initiated by the Labour government 10 years earlierÐi.e. primarily as an attempt to raise the ef®ciency of City institutions, rather than to make Lon-don more attractive as a location for foreign ®nance houses (although this was one of its signi®cant effects).
6. In addition to these, Scanlon (1998) identi®es three other `major studies’, for London Training and Enterprise Councils, the London Chamber of Commerce and In-dustry, and the City of London (again), to-gether with seven signi®cant `functional studies’ during the 1990s.
7. London Pride is presently being superseded by a (privately initiated) London Develop-ment Partnership preparing the ground for the London Development Agency, which is to be appointed by the mayor once they are elected.
8. Similarly large resources are also reported to have been used by the City in seeking to attract the European Central Bank to Lon-don.
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