Page 156 - Global Political Economy_Understanding The International Economic Order

SIG NIFIC ANCE O F NEW T HEORI ES
Hirschman, the core has power over the periphery because a rupture
of their ties would be more costly to the latter than the former.
Keohane and Nye (1977) had much the same point in mind when
they distinguished between “sensitivity” and “vulnerability” inter-
dependence. 26
The global process of uneven economic development and the exis-
tence of core/periphery structures are the result of the interplay of
opposed economic forces that successively create and undermine re-
27
gional concentrations of industry and economic activity. On the one
hand are found forces of polarization or agglomeration that promote
regional concentration of economic activities. These forces include
economies of scale, the technological and other advantages gained by
path dependence, and the cumulative process. In addition, externali-
ties and the learning experience can give a region a powerful competi-
tive advantage over other regions. For example, the ability of entre-
preneurs within a region to take advantage of local technologies,
knowledge spillovers, and economies of scale will enhance their com-
petitiveness. In addition, a region may also possess the advantages of
proximity to suppliers and customers and the linkages that develop
among firms dealing in intermediate goods. 28 Then there are the op-
posed forces of spread and diffusion. The forces of dispersal that lead
to development of new core economies include diffusion of technology
from developed to industrializing economies, the exhaustion of valu-
able resources, increasing labor costs in the core/s, rising land costs,
and such other diseconomies as urban congestion and rising taxation.
Whether the centrifugal forces concentrating economic activities or
the centripetal forces dispersing them will prevail in a particular case
is virtually impossible to predict; as with almost every economic ques-
tion, the answer is, “It depends.” It is impossible to know which
economies will become core economies or which will be in the periph-
ery over the long term. As Paul R. Krugman has pointed out, the
organization of the world economy with respect to the location of

26
These matters are discussed in Chapter 4.
27
Prior to Krugman, a number of scholars such as Albert O. Hirschman and Gunnar
Myrdal made important contributions to the study of the core/periphery formation.
These writings are discussed in my book, The Political Economy of International Rela-
tions (Princeton: Princeton University Press, 1987). One important element missing
from these earlier analyses, and emphasized by Krugman, is the role of economies of
scale in the formation of core economies. A discussion of this earlier literature is Keith
Chapman and David Walker, Industrial Location. Principles and Policies (Cambridge:
Basil Blackwell, 1987).
28
Anthony J. Venables, “Cities, Trade, and Economic Development,” May 1999,
unpublished.
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