The "glocal" economy is one of five major forces affecting community life in new ways, report Peter Plastrik and Theodore Staton in this excerpt from Chapter 2, "The Disruption of Community Life," of the book they are releasing on the nuPOLIS site.
A community’s economic advantages come from its geographic location, business assets, and economic climate. But in the globalizing new economy, the power of these factors has diminished and new factors are in play.
Geographic location—proximity to raw materials and markets, and access to transportation—doesn’t matter as much anymore. The development of information, communications, and transportation technologies allows companies to run their operations practically anywhere in the world. When work can be digitized or done by telephone, a 2007 study for the National Governor’s Association notes, “a place like Bangalore, India, is now functionally as close as the neighborhood bank or insurance office for routine activities that do not require face-to-face interaction.”
For similar reasons, the importance of a community’s business assets—major businesses that become job-creating anchors, or clusters of companies in the same sector, such as automotive suppliers in Cleveland, that establish a critical mass of special competence and commercial relationships—has been reduced. Corporations competing worldwide are less loyal to their historic location and more interested in being wherever they can gain crucial business advantages. A place-based cluster of companies that has enjoyed comparative advantages tends, as a result of success, to build up high-cost structures; they become vulnerable to the lower-cost competition that now comes from many places around the globe. Even being a high-skill, high-tech business or cluster doesn’t inoculate you from competition, as other nations rapidly build similar “high end” competencies.
Add to this changing mix of natural and business factors a community’s economic climate, the availability and cost of skills businesses need, the physical infrastructure—highways, railroads, airports, sewers, electricity—and government taxes and mandates such as unemployment insurance and environmental safeguards. For decades communities tried to compete by holding down costs they controlled, or subsidizing particular businesses through tax breaks and cheap financing, while investing in the basic infrastructure businesses needed. But they can’t win that way when competing with places in China, India, and other nations whose costs are just a small fraction of those in America. Many one-company towns, in particular, feel obliged to help the major local employer that is in competitive trouble, only to find that the subsidies they provide aren’t enough to overcome the companies’ cost disadvantages in the global market. And when communities do hand out subsidies, they may find they don’t have enough resources left to invest in the necessary infrastructure for economic development, which now includes broadband Internet access and a college-educated workforce.
The new economy has created other factors that communities have little experience addressing. It’s more knowledge-based, driven by research and development, and well-educated people. Its growth is generated by small, young, entrepreneurial businesses, not the blue-chip giants. This economy, the governors’ study concludes, “is driven by innovation, the development and adoption of new products, processes and business models.”
Read more... |
