Page 157 - Global Political Economy_Understanding The International Economic Order

CHA PTER S IX
particular industries, the concentration of wealth and economic activi-
ties in urban centers and core economies, and the uneven development
of the globe and the unequal distribution of wealth among societies
are, to a considerable degree, functions of chance, arbitrariness, and
historical accident reinforced by increasing returns and cumulative pro-
29
cesses. Nevertheless, several generalizations on the global process of
economic development can be extracted from the writings of econo-
mists on the new economic geography and other recent theories:

(1) The process of concentration or agglomeration divides the global
economy into developed and less developed regions. Concentra-
tion of economic activities is particularly characteristic of manu-
facturing, as firms desire to be close to large markets and to sup-
pliers of intermediate goods.
(2) Agglomeration is primarily confined to regions within individual
developed economies. However, as trade and other barriers fall,
uneven growth and a resulting core/periphery structure extend
across national boundaries. Divergent growth rates rather than
convergent rates are characteristic of the global economy.
(3) Economic development takes place sequentially and unevenly as
clusters of economic activity spread from industrialized to indus-
trializing countries.

While generally contributing to greater understanding of the dy-
namics of the world economy, the above generalizations lack certain
key components that a comprehensive analysis should include. In the
first place, Krugman’s core/periphery model overlooks the economic,
and especially the political, implications of that structure for the
world economy. For example, a nation that possesses one or more
regional cores with strong industries can achieve an overwhelming
economic and competitive superiority over other nations. As econo-
mists point out, an economy with a head start in the accumulation of
knowledge tends to widen its productivity lead. Actually, one implica-
tion of Paul Krugman’s core/periphery formulation is that a hierarchi-
cal global economic and political structure will be created in which
the core economy/economies possess the most important economic
activities and the dependent periphery is where lower value-added
economic activities are located. Such a situation inevitably becomes a
major source of economic tension and even political conflict.

29
Paul R. Krugman, Geography and Trade (Cambridge: MIT Press, 1991).
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