Approximating Geographic Patterns of Residential Development During the Past Half Century and Forecasting Future Trends: Are Wisconsin

1
Globalization and Economic Restructuring
2
What is Globalization ?

• The increased freedom and capacity of individuals
  and firms to
• undertake economic transactions with residents
  of other countries
• operate on a global scale

3
Comparative Advantage
Free mobility of goods across borders allows
countries to special-ize in production in which
they have an advantage, increasing overall
welfare. But with the international-ization of
capital, it may choose not to invest in a country.
4
Domestic Regulations
Regulations imposed on the domestic production of
goods lead to unfair disadvantages when imported
goods produced under less regulated circumstances
are allowed free entry.
5
Externalities
For various reasons market prices often do not
accurately reflect the true costs of goods, there
is no reason simply to assume that a policy of
free trade will necessarily generate the most
socially efficient outcome.
6
Driving Forces

• A reduction in official obstacles/ barriers for
  conducting business with foreigners
• Fast reduction and convergence of transaction
  costs associated with doing business

7
Examples of price decline in transport and
communication

• Between the early 1980's and 1996 real sea
  freight costs fell 70.
• Real air freight costs have fallen 3-4 a year
  over a long period.
• Real costs of international phone calls fell 4 a
  year in the developing countries in the 1990's
  and 2 a year in the industrial countries.

8
Cost of a 3-Minute Telephone Call, New York to
London (Constant 1990, U.S. )
0.30
9
Average Air Transport Revenue per Passenger
Mile (in 1990 US dollars)
10
Average Tariffs in Industrial Countries
11
Examples of Innovation Driving Improved Quality/
Lower Cost
Containerization
easier tracking
less pilferage/losses
faster port services
Electronic data
easier tracking
interchange
faster delivery
(better scheduling)
just-in-time inventory
management
Fiber optics
Lower costs
12
Trade to GDP Ratios Rose Dramatically over the
Last Decade(Export plus import as a percentage
of GDP)
Forecast
Developing countries
High-income OECD
13
Trade and Employment

• New imports entering the market directly displace
  American producers.
• Job losses occur when corporations move
  production overseas.
• In the face of labor organizing, firms are more
  likely to threaten to close and relocate.
• Labor market volatility has increased in recent
  decades

14
Adjustment costs and inequality

• Workers in protected sectors of the economy may
  lose their jobs as trade liberalization proceeds
• Wage inequality may increase as a result of
  diffusion of more capital/science-based
  production that favor skilled over unskilled labor

15
The Home Economy

• The world today is one in which the input of
  capital can be and is moved across borders.
• Trade" does not consist simply of different
  countries' capitalists competing in product
  markets on the basis of comparative advantage.
• Rather, investments are regularly made across
  borders as capitalists seek not only comparative
  but absolute advantage.
• When they do so, as Ricardo understood, they
  weaken the home economy.

16
Developing Economies

• The supply of labor in many developing countries
  is so enormous that a simple increase in demand
  for labor, while beneficial, will not lead to a
  "tight labor market."
• Globalization and free trade can worsen this
  situation, as small entrepreneurs and millions of
  small farmers are displaced.

17
Capital Mobility

• In a world of mobile capital, the old Ricardian
  story of "comparative advantage" among nations
  with rooted capital competing in product markets
  is no longer adequate we live in a world where
  increasingly mobile capital seeks out absolute
  advantages.

18
Social and Environmental Welfare

• Social welfare or even long-term economic
  efficiency are not necessarily enhanced by
  permitting standards of production, including
  labor and environmental laws, to be eroded by
  unrestricted trade among countries with different
  social standards.

19
State and Local Control

• The emergent global trade regime threatens to
  undercut policies in the United States,
  particularly at the state and local levels, that
  are aimed at strengthening community and helping
  local producers and local workers.

20
Developing Economies

• The current institutional arrangements of the
  global economy often allow or even foster
  economic instability.
• It is by no means clear that globalization is on
  balance nearly as advantageous to developing
  nations as its advocates claim, especially when
  its destabilizing aspects are accounted for.

21
Democracy and Community

• From the standpoint of democracy and community,
  there are important values other than gains in
  aggregate "economic welfare" or "consumers'
  well-being" that must be taken into account in
  formulating international economic policy.

22
Globalization and Localization

• more economic activity in the United States
  economy is now inherently local,
• at the same time that more economic activity is
  tied to trade and global economic activities.

23
Declining Manufacturing Emerging Services

• During the 1980s, the proportion of economic
  activity serving local markets increased in the
  metro areas with population greater than 1
  million.
• Increase due to deindustrialization and
  expansion of local consumer services, public and
  health sectors.
• Urban economies continued to become more local in
  the 1990s.

24
Globalization and Localization

• The stakes in the free trade debate may have been
  exaggerated by free trade advocates.
• The negative economic effects of globalization
  upon American workers and communities may also
  have been overstated by some activist critics.
• Only 12.2 percent-less than one-eighth-of the
  goods and services produced in the United States
  in 1999 were sold abroad.

25
Community Economic Stability

• Community economic stability is obviously vital
  to the nurturance of "civil society" and what has
  come to be known as "social capital."
• The strength of a society's social networks have
  been identified as an important determinant of
  overall institutional performance.
• Communities that experience economic displacement
  and long-term population decline will inevitably
  lose a substantial portion of their
  social-capital enhancing long-term residents.?
• After an economic dislocation, it is the
  better-educated, higher-income residents who are
  most likely to be able to leave-the very people
  who are most likely to be involved in a
  community's civic life.

26
Efficiency and Stability

• Rather than provide subsidies or assistance to
  places experiencing economic instability, it is
  more efficient to let firms decide where to
  locate jobs then encourage job-seekers to
  migrate.

27
Efficiency and Stability

• Efficiency argument fails to account for the
  costs of throw-away cities.
• Sunk private and public investments in
  infrastructure, housing, utilities etc.
• Disutility of losing something, a job, a home,
  may be greater than utility of gaining a
  replacement.

28
Efficiency and Stability

• Optimal firm location is no longer rigidly
  determined by traditional technical
  considerations such as the need to locate heavy
  industry near transportation networks.
• With manufacturing on the decline and the
  tremendous improvement in modern communications,
  most of the activities of the contemporary
  American economy can be efficiently located in
  any number of places.

29
Technically-Determined Firm Location

• Purely technical determinants of firm
  location-that is, factors rooted in physical
  geography, the distribution of natural resources,
  or the logistical need for centralized
  coordination-are shrinking in importance and will
  continue to shrink as manufacturing occupies a
  decreasing share of the national economy and as
  communication and transportation technologies
  continue to advance.

30
Socially-Determined Firm Location

• Factors that remain important in driving firm
  location in the postindustrial economy are
  primarily socially determined
• labor costs,
• tax rates,
• subsidies available to firms,
• access to universities and technical assistance,
• access to good public infrastructure (roads,
  airports, etc.),
• regulatory policies,
• quality of education,
• quality of workforce,
• and, perhaps most important, presence of a
  large-scale development anchor