APS hierarchy and agglomeration

In perspective of early twentieth century location theory the study of service activity was largely linked to the distribution of settlements. In this regard, service activity was also innately related to a hierarchy of central places, an approach linked to the work of Christaller (1933). The theory focused on the size and distribution of settlements in explaining why certain places functioned as hamlets, villages or towns. In this approach, the objective of settlements was linked to the provision of goods and services for surrounding areas. The determining factor in terms of market control or influence was related to the threshold of each settlement, i.e. the smallest market area necessary for products to be traded economically.

Once a threshold was established, firms would expand their market area until a maximum distance was reached, beyond which consumers would be unwilling to travel due to nearer alternatives. The relative importance of threshold depended upon the value of goods and services provided. Areas with higher-order products were fewer in number, but wielded greater regional influence over lower-order settlements (determined by how far people would travel to purchase luxury goods and specialised services). The theory advanced by Christaller held that settlements were distributed evenly over a uniform plane, while population density and purchasing power remained constant. This implied that movement across the plane was uniform in any direction, that transportation costs were linear, and that purchasers made rational choices to minimise travel costs by visiting the nearest location that offered what they desired.

As a result of problems associated with the homogenised nature of Christaller’s work, Lösch (1952) modified and refined the theory by the use of hexagonal complementary regions (or hinterlands). By assuming that different goods and services have market areas of different size, Lösch was able to superimpose a number of complementary regions around fixed central places. Additionally, the number of dependent settlements were variable rather than constant, thus the size distribution of urban centres in regions was more continuous than in Christaller’s rigid hierarchy. This allowed some central places to develop into richer areas than others. The approach also incorporated the idea that certain areas could specialise in certain goods and services. The resulting pattern of central places was much more complex than Christaller and yielded a more fluid rather than a stepped distribution of population size (Böventer, 1969; Richardson, 1973; Preston, 1985). Central place theory as a model of regional spatial structure has been subjected to criticism over many years, particularly in terms of diseconomies, globalisation and polycentric (dispersed or edgeless) settlements.57

Studies related to urban theory tended to focus upon the internal workings of cities and in particular the consumption of goods and services, as derived from Chistaller (1933) in terms of urban hierarchy rather then the external workings of cities. An exception to this according to Taylor (2004) was the work of Berry (1964) who viewed cities in terms of their

interrelations. Taylor also makes reference to the work of Harris and Ullman (1945), in analysing the external workings of cities, but which has largely been forgotten in favour of the multiple-nuclei diagram contained within the article. For Taylor, external relations significantly influence the functionality of cities, since they cannot survive on their own. It is this focus on interrelationships, which informs the research of the Globalization and World Cities (GaWC) study group co-ordinated by Taylor from the University of Loughborough. The term ‘world cities’ according to Hall (1966, p.7) was coined by Patrick Geddes (1915), a pioneer writer on city and regional planning, in his book ‘Cities in Evolution’ to describe great cities within which a disproportionate part of the world’s most important socio-economic activities were conducted. Hall was one of the earliest researchers to highlight the significance of world cities within the urban systems approach of the post-war period.58 He selected London, New York, Tokyo, Paris, Moscow, Rhine-Rhur and the Randstad Holland as leading world city regions and analysed them as major seats of political and social power as well as places where professional talents of all kinds congregated, where R&D was conducted and where information was gathered and disseminated. While the interconnections of world cities were not fully detailed, Hall’s work nonetheless provided the impetus for others to explore the concept.

In the 1970s world cities increasingly became associated with the rise of multinational corporations (MNCs) and globalisation of operations and production (see Hymer, 1972). This involved the shifting of production, especially mass-produced goods (such as bicycles, toasters or kettles for example), away from high–cost western economies towards newly industrialised countries with low labour costs such as in the Far East. The control functions of MNCs nonetheless tended to remain in world cities, this contributed towards the idea of a ‘new’ international division of labour and its relationship to territory (Cohen, 1981; Friedmann and Wolff, 1982).59 Within this framework the role of world cities was significant as centres within which corporations structured or co-ordinated production strategies, capital and markets (Friedmann. 1986). The level of importance attached to various world cities differed (leaving aside the issue of population) according to their main functions as headquarters, financial centres or as co-ordinating cities in linking national or regional economies to the

global marketplace. These differences were considered to contribute towards a form of international spatial hierarchy, in particular there were primary and secondary types. Core primary (world) cities encompassed all three functions listed above, while secondary cities contained one or two (see Figure 3.3).

Figure 3.3 The hierarchy of world cities. Source: Friedmann, 1986, p.74.

According to Friedmann (1986) many world cities seemed to operate as a conduit for their national economies into the interlinked world city economy, their mode of integration was viewed as affecting their economic, social, political and spatial structures. The divisional, hierarchical network of world cities as advanced by Friedmann contributed towards analysis of interconnections. Camagni (1993) for instance configured the hierarchy into three tiers, with world cities at the top, national cities below and regional cities at the substructure (see Figure 3.4). He attempted to integrate the hierarchy of world cities into a ‘synergetic’ network, and suggested a relational view of the global economy similar to the network ‘paradigm’ approach between firms as found in NEC Italy (ibid., pp.78-81). Criticism regarding this approach by the GaWC group however has centred on the lack of detailed evidence concerning co-operation between cities, and potential co-ordination problems related to a synergetic world city network system.

Figure 3.4 Nested hierarchies. Source: Camagni, 1993, p.78.

In the 1990s, the term ‘global’ cities began to be more extensively used than world cities as advanced by the likes of Friedmann, in part this was due to the work of Sassen (1991). She considered the term ‘global’ cities more appropriate in reflecting not only the heightened influence of economic globalisation and communication technologies, but also to enable consideration of places which have developed global city functions such as Miami, but do not fit into the world city criteria set out by Friedmann. Such strategic territories according to Sassen articulated a new international system helped by ICT, cities such as New York, London and Tokyo (the ‘triad’) formed part of a modern network of strategic locations, these acted as centralised service nodes for the management and regulation of the ‘new’ space economy. The hierarchical triad cities fulfilled a co-ordinating role and function as international

marketplaces for the buying and selling of capital, expertise and as contact points for different kinds of entities, enterprises, organisations and institutions. Cumulatively, Sassen viewed global cities functioning as a single trans-territorial marketplace, often competing or complementing each other in terms of what they offered. She also makes reference to the development and expansion of an intermediary world of strategic agents from lawyers, accountants to bankers that help to develop the structural network of strategic locations. In analysing how the global system works, Sassen points out that there is a significant material infrastructure needed to manage, co-ordinate and service the corporate hierarchy involved. She also suggests that global cities to various degrees have become denationalised i.e. not only operating outside the nation state within which they are embedded but also the inter- state system. Particular emphasis is placed upon the case of New York and London because they are heavily deregulated, and have increasingly begun to operate partly outside the inter- state system in the trading for instance of financial products and commodities. Interestingly, nation states have over the last couple of decades become incorporated within the global system by engaging with intermediaries rather then other nation states directly. This includes merchant banks or legal establishments for example in the privatisation of public utilities and offering of shares in the international marketplace, as well as the issuing of international government bonds. Cumulatively, in this context the network of global cities has become the focal point of what Brennar (1998) has identified as new ‘city-centric’ capitalism. This form of capitalism is allied to the re-emergence of traditional city regions over the nation state as a ‘fundamental geographical unit’ (ibid., p.4) and as innovative centres of production with often dynamic (and growing) population base and economic growth in leading sectors (Sassen, 2000, p.43).

In attempting to understand ‘city-centric’ capitalism, and what Sassen refers to as the ‘new’ space economy, it is useful to look at the work of Castells (1996) and his concept of cities as ‘space of flows’. Castells stressed the importance of networks in his social theory of space, in particular the old (social) practice of buyers and sellers needing to be located in close proximity physically was no longer necessary due to the use of ICT. This allowed time to be detached from space, as a consequence, the dominant form of space was no longer attached

to specific places but rather new space of flows (ibid., 412). Places however do not disappear, but become defined by their position within the space of flows. This includes the infrastructure support for social practices, from technology to the spatial organisation of skilled labour. There is also the involvement of agents who use the network infrastructure to link together specific places, to carry out economic transactions as well as cultural and political functions (ibid., pp.413-15). Such places constitute operational nodes and hubs allied to differing intensity and scale of flows. Nodes are strategically important places where activities take place and where they link localities into the spatial network; hubs in contrast function to co- ordinate interactions within the network. For Castells ‘the analysis of global cities provides the most direct illustration … of the space of flows in nodes and hubs’ (ibid., p.415).

Unlike Sassen who focuses upon a hierarchy of global cities, Castells (1996, pp.385-6) advances the concept of a global network that is more horizontally inter-linked, ultimately it is the network itself (not a place but rather a process) which is the most important driver of change. As world cities become more specialised (e.g. London in terms of producer services), horizontal links become an important component of the network along with vertical links to other larger cities (Camagni and Salone, 1993). As part of this network, the prosperity of a particular world city is not determined by its competitive advantage over its other rivals but their collective capacity to maintain flows through the network (Beaverstock et al. 2002, p.115). This connectivity is something Taylor (2004, p.8) regards as important, since cities in urban studies have often been seen as urban places, complete with boundaries and enclosed within their respective countries. Taylor suggests that major service providers (most prominently business and financial service firms) across the world have created a new network of world cities. Thus for instance ‘a German firm doing business in Australia can work through the local office of a global bank in Hamburg, just as an Australian firm doing business in Germany can work through a ‘local’ office of a global bank in Adelaide’ (ibid., p.102). Taylor points out that APS activity alone however are not responsible for the creation of the global city network but are key contributors.60 APS firms have in the post-industrial economy benefited significantly from technological advances in ICT, however trade in complex value- added services requires some sort of physical presence in addressing purchaser or client

needs (refer to Chapter 2). As a result APS firms contemplating or engaging in international trade are frequently forced to establish international office networks usually in other world cities (ibid., p.58). It is this that Taylor attempts to evaluate with regards to the strength of APS connectivity and inter-city relations within the global world city network.

Taylor (2004) based upon the availability of information from the Internet, company accounts or other sources identifies a hundred or so firms pursuing global strategies with offices in different countries for study. Selected firms include those in accountancy, advertising, banking, insurance, law, and management consultancy. The information gathered included firm size presence, number of employed professionals, offices in each city as well as extra- locational functions such as headquarter or regional offices. From this information ‘service value’ or how intensive cities are orientated towards services are gauged. In terms of global network connectivity (i.e. an aggregate relational measure based upon representative office locations), London was at the top, New York second, followed by the likes of Hong Kong, Paris, Tokyo, Singapore, Chicago, Milan, Los Angeles and Madrid. The most connected cities for most service activities from advertising, accountancy, banking to legal services were London and New York, except for non-governmental organisations where Nairobi ranked first, this reflected according to Taylor the very different aid related nature of the global space of flows. London and New York achieved high scores for various service activities because of their critical mass and well rounded service economies.

Taylor suggests that whilst traditionally urban places have been considered as serving local needs and covering an immediate hinterland as within the Christaller model, within the world city network there are no such boundaries. With the wide use and diffusion of ICT, every city’s hinterland overlaps with every other. Further the issue of greater mobility via air transport or the availability to travel from London to Paris for instance by rail in 3 hours (a shorter travel time than to Newcastle) for example blurs clearly defined boundaries. Such world city hinterlands however according to Taylor do not supplant long established local hinterlands that are unlikely to disappear, but reflect the geographical scale and nature of service provision by an interconnected world city network. Thus ‘a city’s hinterland is the global

distribution of service connections that lies behind its world city formation’ (ibid., p.102). In analysing these service connections, Taylor comes up with a map of global service space contoured around global network connectivity (see Figure 3.5). Within this map London and New York define the highest peaks, it also demonstrated the closeness or distance of particular cities to one another in terms of global network connectivity.

Figure 3.5 A landscape of globalisation. Source: Taylor, 2004, p.123.

A key problem associated with world or global city literature according to the likes of Thrift (1998) has been its preoccupation with rankings and connectivity in relation to ‘world city- ness’. For many cities internationally, to attain the status of a world city has become a key objective in itself in recent decades. In parallel, analysis has been dependent upon ‘measurement’ including number of multinational companies and advanced producer services, this does not however give an in depth understanding of how relationships function but rather contributes to preoccupation with the position of cities within the global network system. As a result, the underlying dynamics of world or global cities and relationship to other socio-economic spheres of activity are left unexplored whilst categorisation to a certain extent becomes meaningless. Thrift (1996, p.231) advances the idea that general economic globalisation contributes towards specific world cities with specific attributes i.e. localised processes of identity formation, this contrasts with the idea that world cities are not places but rather part of a network process. The connection between place and process is explored by Thrift in context of the City of London as a node of ‘reflexivity’, where people endeavour to make contacts and to present themselves rather than just communicate globally through the use of ICT.61 Thrift maintains that the City:

has become a global node of circulating stories, sizing up people and doing deals ... much of the City’s population will consist of visitors, but they are not incidental … They are part of the communicative commotion that places the City in the electronic space of global finance.

(ibid., p. 252)

World cities, especially those within the ‘triad’ according to Thrift (1993) were becoming more social, reflexive and interpretative, as a result they were also becoming more dominant and important as spatially fixed centres in controlling the construction, negotiation, and validation process of capital accumulation. This perspective has gradually evolved from the likes of Friedmann (1986) who viewed world cities as apexes of formal corporate hierarchy, or agglomerations of corporate services by the likes of Sassen (1991). Smith (2002) for example suggests that the work of Friedmann and the GaWC group have tended to be economically

orientated, neglecting to some extent the dynamic city processes associated with cultural, social and political spheres of activity. As a result there has been gradual movement towards a post-structural approach, where global, national, regional and local spatial frameworks are interwoven together through the complexity of reflexive connections. This sphere of interest has contributed towards a wider research perspective as outlined by the likes of Hall and Pfeiffer (2000), Friedmann (2002) and Sassen (2002). The concept of ‘world’ or ‘global’ cities within published literature collectively remains incoherent in terms of what is implied by dominance, the degree of external versus internal city orientation, and concentration of key transactions for example. As Markusen (2003) highlights, the precise nature of what is implied therefore depends upon the connotation intended.