The following is an extract from the RSA 2018 Presidential Address. Professor Ron Martin, President of RSA, is Professor of Economic Geography at the University of Cambridge. His main research interests include the geographies of labour markets; regional development and competitiveness; the geographies of money and finance; geographical economics; and evolutionary economic geography. He has published some 35 books and monographs, and 200 articles, on these and related themes. Ron is a Fellow of the British Academy, and in 2016 was awarded the Royal Geographical Society’s Victoria Medal for outstanding contributions to economic geography and regional development studies. Ron is a Fellow of the British Academy, and in 2016 was awarded the Royal Geographical Society’s Victoria Medal for outstanding contributions to economic geography and regional development studies.

 

Uneven Regional Development

My theme this year is the vital role that trade plays in regional and city development. The history of uneven regional development – the evolution of economic landscapes – is essentially one of shifting patterns of trade, whether destined for elsewhere in the domestic national market or for international markets. The rise and fall of regions and cities invariably has to do, to some extent, with the expansion or contraction of demand for their exports, or the rise and fall of their competitive advantages in those activities.

This has always been the case, of course, but the issue is particularly pertinent at the present time.  Over the 25 years prior to the global financial crisis of 2008-2009, global trade expanded 370%, twice the rate of growth of world GDP.  It was also a growth, however, that was highly unbalanced geographically, with an increasing divergence between the trade surplus nations – mainly China, Germany and the Middle Eastern Oil states – and the trade deficit countries, especially the United States and much of Europe. As Michael Pettis (2013) has shown, in his book on trade, conflict and the future of the world economy, the ultimate source of the financial crisis of 2008-2009 resided in the great trade and capital flow imbalances that had accumulated in the preceding two decades or so.

Geopolitical Tensions in Trade

Now we appear to have entered a quite different period, one of an encroaching protectionism and neo-mercantalist geopolitics with the USA imposing tariffs on Chinese exports, and vice versa in retaliation. According to President Trump, US protectionism is justified on the grounds of saving industry and jobs in the country’s rustbelt regions and cities, those areas where he gained much of his election support. Whilst his wanting to protect, preserve and even recreate old jobs in old sectors, rather than reviving lagging regions by creating new jobs in new activities may be akin to driving forward by looking in the rear view mirror. There is indeed evidence that the growth of the US’s trade imbalance with China has been a significant source of job loss in many of the country’s industrial cities and areas (Autor, Hanson and Gordon, 2013, 2016).  The same is true elsewhere. On the other side of the coin, many of the rapidly expanding cities and regions in China owe their success to (state subsidized) export-driven growth.  But retreating behind tariff walls is not in the long run the best means of reviving lagging regions; giving such regions what Paul Krugman (2006) has called ‘second or third wind’ requires purposive policies that whilst taking account of industrial legacies aim to rebuild the economies of these areas around new roles, new activities, new skills and new jobs. This is not to suggest that re-orientating the economies of those regions that have lost or are losing their traditional export markets is straightforward – far from it.  But it is a challenge that careful evidence-based research of the sort we do in regional studies and economic geography can surely help to meet.

The Value of Trade

There have been export-based models of regional growth in the past, especially in the 1970s, and some sophisticated theories on how a region’s balance of payments constrains its growth (eg work by McCombie and Thirlwall). In the 1960s and 1970s, the leading urbanist Jane Jacobs assigned key importance to exports and trade in her writings on cities and city regions. And one of the most impressive and suggestive papers was written back in 1967, by Marina Whitman, published in the Princeton Studies in International Finance, in which she eloquently shows how a region’s balance of payments – its trade balance and associated capital flows – shapes it growth. She demonstrated how exports can be both a driver of regional growth, but also a driver of regional contraction. I suspect few today will know of that work, but although written half a century ago, her essay has direct relevance today. Interestingly, it had a major influence on Stuart Holland’s prescient book Capital Versus the Regions, published in 1976, probably another work that few know today, but one that anticipated much of current regional studies, with compelling discussions of uneven regional development, capital flows, migration, specialisation and agglomeration. As I’ve stressed in these short addresses on previous occasions, there are important earlier works out there, written decades ago, that remain relevant and which repay discovery.

Of course, it can be countered that we now have a large literature on global production networks and global value chains, on how industrial supply chains are geographically distributed and organized. To be sure, much trade today is intra-industry, even intra-firm. Therefore, it could be argued that sectoral export specialisation is no longer a driver of regional and city growth, but rather the position and role of regions and cities in global supply chains and production networks.

But this literature notwithstanding, the issues of trade, exports and balance of payments are not, perhaps, attracting our attention to the extent that they should. Indeed, a key problem still facing many regions and cities in the advanced economies is precisely to find new trading roles in the global economy. No city or region is self-sufficient, and their prosperity ultimately depends on producing or supplying goods and services that others want. Yet too often, we tend to analyze regions and cities, their specialisations, technologies, their skills and so on, as if those regions and cities are isolated entities.

Bringing trade into much sharper focus in our studies would not only be warranted in its own right, but at a time when global trade is being threatened and distorted by unfair competition, global monopolies, and protectionist policies, would seem to me to be an essential component of our theoretical and empirical toolkit. By doing so, we would perhaps not only enrich our understanding of uneven regional development, and rediscover some relevant long-forgotten early theoretical contributions, but also bring our voice to bear on the folly of trade wars and protectionism, and their adverse geographical consequences.

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