Welcome to this week on Globalization.
My name is Ronald Wall,
working at the Institute for Housing and Urban Development Studies
at the Erasmus University Rotterdam.
I'm an economic geographer,
and urban planner with a fascination for the topic of globalization,
and how this impacts local economies around the world.
Probably, just like you,
I've become increasingly aware that the city in which I live is no
longer only affected by local economic social and environmental forces,
but increasingly by regional and global relationships.
Example, breaks it, the recent global financial
crisis migration into Europe and climate change.
These relationships extend far beyond our borders,
and increasingly tie us together into an interdependent global community.
Based on this, we can say that globalization is equal to the ties that bind us.
We and our local economies are strongly
connected together through networks of information,
culture, trade, financial flows, and transport.
So, do you learn it?
If these global and regional flows are affecting the development of our cities, example,
income inequality and climate change,
should we not include this knowledge in how we govern our local economies?
If so, can we map these networks or taste their effect on the development of our cities?
Do you agree that governing your economy can
no longer only be confined to the municipal scale?
To support your answer,
this video will be based on empirical data to
show you how cities are connected through financial flows,
and how this affects local economic development.
I hope we will stay tied together for the next part.
Let's first have a look at the distribution of foreign direct investment,
otherwise known as FDI into roughly 1200 world cities over the period of 2003 to 2016.
In the video, we see
a three-dimensional GIS animation of these investments into the cities.
The higher the peak,
the more total investment received in a city.
We also see that FDI is very unevenly distributed around the globe.
There is an uneven geography of investment.
Did you notice that the Global North receives the most investment?
Especially regions like Europe,
North America, and Pacific Asia which get the lion's share.
Africa receives by far the least investment.
What could be the reason for this?
In relation to the video,
let's now look at the flow of investment between these cities.
What you see here is a GIS map of the top 1000 investments
taking place between cities in the period 2003 to 2016.
Again, we see that these investment flows are
mostly between wealthy cities in the Global North,
while the Global South has very few linkages.
From this, you might question,
what the effect can be on countries and cities in Africa,
Latin America, and Southeast Asia?
In the map, you will see green cities as well as blue cities.
The green cities represent the outward or source investment sent to other cities.
The bigger the green dot,
the more outward investment.
The blue dots represent the inward or destination investment.
This is the investment received from other cities.
Do you see the legend?
It is clear that cities that have the highest outward investments are the usual suspects,
Paris, Tokyo, London, and New York.
These powerful cities control production and markets around the world.
It should also be clear to you that the strongest receivers
of foreign direct investment are cities like Shanghai,
Singapore, London, and Dubai.
You might also have noticed that seven out of 10 of these are in the East.
Now, let's zoom into Europe.
It is evident here how complex the FDI system is.
The key outward investment cities are cities like London,
Paris, Amsterdam, Frankfurt, and Zurich.
It will also be clear to you that there is
a green outward investment corridor running from London to Milan.
This is one of the core outward investment regions of the world.
Now that you see how unevenly distributed FDI is in the world,
and also in Europe, you may now wonder what
the effect is on FDI and local economic development.
As you will see by the presented quotes of other researchers, these opinions vary.
There is not a straightforward answer to this,
although most research tends to support the fact that FDI has
a direct positive effect on local economic development,
as is the case of the study by Lu and Liu in 2005.
In the next quote, the work of Kinoshita and Lu,
also shows a positive significant relationship,
but they stress that this is not a direct relationship,
but conditional to a country's level of human capital,
infrastructure, and financial, and market development.
This means in other words,
that FDI can lead to economic growth,
but that cities and regions need to play their part in achieving this.
On the contrary, an insignificant relationship has been shown by Onaran and Stockhammer,
where they show FDI and local development do not have any relationship at all.
The variation in these results can be due to geographic scope,
the years of the data observed,
and the quality of the data.
The previous slide explains different views from more mainstream types of analysis.
In the following slide,
I introduce to you a more sophisticated quote by Alderson and Beckfield,
which has always been a strong inspiration to
my own work and forms a bridge to the rest of this video.
It states that world cities, in other words,
local economic development, is not only determined by aspects such as education levels,
innovation, infrastructure, etc., but that a city
depends also very much on its position within the global economic system.
As we have seen earlier,
cities are connected by investment flows,
creating the ties that bind us.
It is this measure of how tied together cities
are and the different metrics used to measure this,
that also determines a city's level of local economic development.
This will be explained next. Please keep connected.
In this next part, based on a very simple example,
I will explain to you the basics of understanding and measuring network data.
In this example, imagine a hypothetical world with only 12 cities, in other words,
dots A to L. The gray colored cities are source cities,
investing into the cities that are colored blue.
Their outward investments are called the Outdegree.
The white lines depict the investments,
and the arrows show the direction of the investments.
The blue cities receiving investments are called the destination cities,
and they express the Indegree.
It will be clear to you that City D receives the most investment,
in other words, an indegree of five.
This is followed by City H with three investments and so forth.
At this point, you might be asking yourself,
what has this got to do with city development?
In this image, we now see the relationship with development.
The indegree is a measure of the number of cities investing in a particular city.
It is a measure of how integrated a city is in the world investment system.
According to the theory,
the more a city is integrated into the global investment system,
the better or worse it will be formed in terms of development.
In this sense, if you look at City D,
due to it having the highest number of city linkages,
it would have the strongest economic integration, and therefore also,
the highest impact on urban properties like prosperity, inequality, or smartness.
City D is followed in order by cities H, G,
and F. Next, how do we convert
the schematic data into useful data that you could use in a statistical analysis?
Here, we see that the original city network diagram
has been translated into a simple matrix table.
It concerns investments from City H to L in the rows,
and the Cities A to L in the columns.
For instance, City A invests in City D, G,
and also H. City B only invests in Cities D and F, and so forth.
Now, we can add up all the investments in the rows to define the outdegree of each city.
If we edit the investments downwards in the columns,
then we obtain the indegree.
These measures can now be added to other city data to test their significance.
I will explain this in the next part.
In this last table,
we see a simple statistical model testing in a real situation
indegree and outdegree measures on the urban sustainability index.
This is a measure of sustainability developed by the research group Arcadis,
and had been done for many global cities.
Some other indicators have been added to the analysis which serve as controls.
These are, for instance, population,
urban land area, and unemployment rate.
The indicators with asterisks stars represent
the indicators that significantly affect sustainability,
marked for your convenience in black.
It is clear from this table that indegree has
a positive and significant effect on urban sustainability.
In turn though, outdegree has no significance on sustainability.
Population has a significant,
but negative effect on sustainability,
while all the other indicators remain insignificant.
This introductory video has introduced you to the concept of
globalization as a network phenomenon of interactions between firms,
and cities, and especially how this affects local economic development.
In other words, the ties that bind us.
The video importantly reveals that a city, or region,
or a country is increasingly influenced by global economic forces,
in this case, foreign direct investment.
In other words, you have discovered that
external network characteristics also importantly determine the performance of cities,
not only local internal ones.
You have also learned how to represent city network relationships, but also,
how this can be interpreted into a network matrix table,
and that network can be calculated and used for further statistical analysis.
Then, based on a real world model,
it was demonstrated to you that network measures
significantly affect the sustainability level of cities.
I hope through this video,
you agree with me that local economic development is dependent on the ties that bind us.