Working remotely: Implications on the fate of smaller cities, towns and villages in the New economy.

Part of our Post COVID-19 Urban Futures series.

This article is about imagining the future of smaller cities, towns and villages through the lens of economic geography three months into a global lock-down in response to the COVID-19 pandemic.

Economic geography is a field of economics that aims to understand the ‘sorting’ of firms and workers across space as well as the evolution in the industrial structure of cities and regions, which determine the economic activities and per capita income of different places. It is a rich and sophisticated approach to understanding economic development, one that has been informing economic models with deep insights from economic sociology, political science and organisational theory for the past 100 years.

In the 1980s some scholars believed that technological change would mean the more even distribution of economic activities across space. Over the subsequent 4 decades quite the opposite has happened: Urbanisation and the concentration of people and economic activity in large mega-cities has increased, with larger cities coming out on average as the winners when measured in terms of per capita income (albeit not when measured in terms of inequality it must be noted).

It became sacrilege to imagine the resurgence of smaller cities, let alone that of towns and villages, as we look back at those early scholars who ‘had gotten it all wrong’.

In fact, the field reached such a strong theoretical understanding of the link between urbanisation and economic development that economic geographers and policy-makers accepted that inequality was inevitable and even good for unleashing the potential of large successful cities. Rebalancing spatial inequalities was best left to social welfare initiatives rather than wasting our time kidding ourselves about the economic potential of backward cities and towns. The EU thus changed its mission from ‘social cohesion policy’, trying to equalize per capita incomes across its regions, to implicitly accepting spatial inequality as inevitable, while boosting its large agglomerations at the expense of increased inter-regional inequality (Barca, 2009).

The forces that make big cities ‘winners’ in terms of economic growth, per capita income, innovation and productivity are known as agglomeration economies. They emerge from the size of their urban labour and consumer markets, the high demand for public services in densely populated areas (that reduces the per-capita cost of access to public services, utilities and amenities), lower-cost access to the inputs of other firms (the proximity of lawyers and traders and other business and financial services) and the interaction between people from different worlds or fields (the social ‘soup’ for creativity and innovation – cite Powell). These are known as ‘matching’, ‘sharing’ and learning’, the three agglomeration economies that attract people and firms to cities.

The larger the city, the more industries can reach critical mass, often in clusters within the city, unleashing further external economies of scale and scope within an increasingly diverse ‘kaleidoscope’ of clusters, thus increasing the probability of creative and innovative expression (It has been shown that more diverse places with greater generalised trust are indeed more innovative (Kemeny, 2012).

In reality however, if you read between the dots above and below the regression lines economists point to as evidence that cities are engines of economic growth (which on average they are, but not really), it becomes evident that in developed countries “big cities are not always the most dynamic engines of growth (Dijkstra et al. 2013) [and] in developing countries urbanisation without growth is increasingly the norm (Jedwab and Vollrath, 2015) as cited by Rodriguez-Pose in his article titled The revenge of places that don’t matter.

The dreams of scholars in the 1980s predicting the spread of economic activities, people and firms, across geography proved to be un-founded due to the agglomeration effects of propinquity and the interaction effects of face to face contact.

The technology however since then has evolved substantially and today we are 3 months into a global lock-down where almost all service industry jobs have been taken online through remote working from home, with 45% of workers expecting to work more flexibly after the lock-down.

This sudden shift to remote work seemed to me like a seamless shift given our online skills (most of us have chatted over WhatsApp and Skype before) but it was only after a few weeks that it really dawned on me that despite being computer savvy and comfortable with the internet, social media and working in cafes, I had transcended to a qualitatively different culture of working remotely because now everyone was doing it.

This cultural shift has its advantages: C02 emissions are down, traffic diminished considerably in our cities and I spent less money on coffees and sandwiches and ate more healthier home-cooked food. I also found myself engaging in more meetings (that no longer required long journeys on the tube) and generally being more productive while paradoxically feeling like I was on a summer holiday (the sunshine, river-walks and my balcony helped for sure). My conversations with friends, admittedly a privileged middle-class segment of the population in the service sector who had not lost their jobs, substantiated my intuition that the lock-down was being secretly enjoyed by those whose lives were not shattered by the virus.

I did feel that remote working had finally kicked into full force for the first time since the technologies for it were widely available over the past 10-15 years. What was needed was cultural change, which either happens over a very long period of time (North, 1981) or very rapidly due to a sudden shock or crisis.

This new way of working and the slow-paced lifestyle I have enjoyed makes me wonder, and I say this at the risk of heresy and ridicule in the field of economic geography: Is there a role for smaller cities, towns and villages in the new economy?

Local Economic Development (LED) strategies offer small cities, towns and villages the opportunity to achieve their potential. Locally-led bottom-up LED approaches to the challenges of urban economic development emerged in the 1990s as a response to fiscal austerity and demands for independence. Looking back, we have learnt a great deal about the perils of inter-jurisdictional competition with its dead-weight loss in the aggregate and the inability of many municipalities to engage in LED with stakeholders and catalyse economic development due to fiscal and capacity constraints. But we have also learnt that the places and communities that do organise across community boundaries, that develop a sense of shared identity and vision of the future and do so in a way that is realistic in light of their own circumstances and the changing world around them can achieve more inclusive and sustainable development (Rodriguez-Pose, 2002).

If we can replace a significant share of our regular face to face interaction with the occasional face to face interaction as a way to (socially) cement regular online interaction through webinars, meetings and other forums of interaction, with most service industry inputs and outputs being digital and if new technologies reduce the per capita costs of accessing amenities, public services and utilities, might the economic geographers of the early 1980s have actually been correct (albeit premature) in predicting the more even distribution of economic activities across space? And if so, what will villages and towns of the future look like? Can they unleash agglomeration economies and economic specialisation in a combination of spatial and digital interaction enabled by local economic development strategies and an emerging new culture of remote working?

I’ll leave you with these questions as I turn my attention back to the web page that inspired me to write this article in the first place.

 

Dr. Naji P. Makarem

Lecturer – Political Economy of Development

Program co-Leader – Msc. Urban Economic Development

Bartlett School’s Development Planning Unit (DPU) – UCL

 

References:

 

Dijkstra, L, E Garcilazo, and P McCann (2013), “The economic performance of European cities and city regions: Myths and realities”, European Planning Studies 21(3): 334-354.

 

Frick, Susanne, and Rodriguez-Pose, A, (2018), “Big or small cities? On city size and economic growth”, Growth and Change, A journal or urban and regional policy, Volume 49, Issue 1 (March 2018). Access online: https://onlinelibrary.wiley.com/doi/abs/10.1111/grow.12232

 

Jedwab, R and D Vollrath (2015), “Urbanization without growth in historical perspective”, Explorations in Economic History 58: 1-21.

 

Kemeny, T, (2012), “Cultural Diversity, Institutions and Urban Economic Performance, Environment and Planning A; DOI: 10.1068/a44385 – access online: https://www.academia.edu/33968043/Cultural_Diversity_Institutions_and_Urban_Economic_Performance?auto=download

 

North D C, 1981, Structure and Change in Economic History (W. W. Norton, New York, NY)

 

Rodríguez-Pose, A (2018), “The revenge of the places that don’t matter (and what to do about it)”, Cambridge Journal of Regions, Economy and Society 11(1): forthcoming.

 

Rodríguez-Pose, A  (2002), “The role of the ILO in implementing local economic development strategies in a globalised world”, International Labour Organization, Geneva. Acess Online: https://www.ilo.org/empent/Publications/WCMS_111545/lang–en/index.htm