A borderless world will focus on cities

By Stephen Poloz

Have you ever looked at one of those satellite photos of the earth, taken at night? It is truly a remarkable sight, and full of economic meaning, besides.

What most people see when they look at these photos is the lights – literally billions of them. Of course, they also see massive areas of darkness. But what an economist sees is not the lights, but a map of economic activity. Dense clusters indicate intense economic activity. The photo reveals what might be referred to as economic gravity.

Contrast that to what we see when we look at an ordinary map of the world. Then, we see land and water, countries, borders and so on. B ut looking at the night satellite shot, we don’t see any of that – no countries, no borders – all we see is – cities.

This idea is simple, yet profound. Earth’s lights represent economic activity, and they also represent cities. The two are the same. Indeed, most of the world’s cities have emerged through natural economic forces. Economic history documents the process of increasing specialization in economic activity, beginning with the hunter-gatherer, to the stationary cultivator, and culminating in a society of specialists, all engaged in trade with one another to get everything they need. Eventually, society develops a surplus through specialization that fosters the development of the arts, a military class, learning, research and development, much of which takes place in – cities.

Today, companies see the world more like the night-time satellite photo. They think of the world as their workshop, using the world trading system to build global supply chains and maximize their productivity. Borders, and countries, matter much less today. But what does matter? Cities. Cities represent natural economic agglomerations built by economic forces, forces as compelling as gravity. Cities offer ingredients essential to economic progress, including energy, health, communications, finance, transportation, trade portals, clusters of similar firms, skilled workers and a ready market for new products and services. Being able to access those ingredients can make all the difference for a company’s competitiveness equation. Even if the firm chooses not to locate within a city, it usually must use a city’s resources, its infrastructure, to get the job done.

In Canada, this matters a lot, because we are small. Canada must go global to achieve the scale economies that underpin most economic progress. American companies hardly need to do so. Going global is harder and more risky than not, a competitive disadvantage. Fortunately, we can help make up the difference with synergies and other agglomeration efficiencies in our cities. And Canada has world-scale cities – indeed, 55 per cent of Canada’s GDP is produced in our top 10 cities.

The bottom line? Cities are a natural lens through which to look at Canadian economic activity, and to improve our understanding of it. The competitive advantages that cities offer are core to future Canadian prosperity given an increasingly demanding global economy. Figuratively speaking, we want the next satellite shot to show more lights, and brighter lights, here in Canada.

The writer is Chief Economist for Export Development Canada and a PhD from Western. He may be contacted directly at spoloz@edc.ca

Source: The Western News