Global Cities and Economic Development

Notes on Global Cities, Geography, and Economic Development Gregory Rehmke, February 22, 2011

The Houston World Affairs Council invited me to give talks to Houston area teachers on Global Cities. In my notes below I discuss Paul Romer’s proposal for charter cities, and the historical role of cities in economic development.

I have further notes and links to handouts, websites, and videos here: https://www.economicthinking.org/chartercities/

First Session: Cities and Economic Development
1. Edward Glaesner in Triumph of the City outlines the advantages cities offer both in the developed and devel- oping worlds. He argues is is better in China, India, and Africa to be poor in the city than among the rural poor.
2. Paul Romer argues that Charter Cities could be devel- oped on vacant land to allow rule of law institutions that encourage investment, create jobs, and improve options. Economic prosperity from technology and rules. Doug- las North and Mancur Olsen on institutions.
3. Hernando de Soto in Globalization at the Crossroads notes that Western Europe and America experienced similar migrations to cities over the last two centuries, and these migrations “broke the back of The Old Order” bringing legal reforms and economic growth.
Law develops from everyday local commerce, and and governments that ignore these “natural” laws, try instead to force often top-down regulations on societies.
4. What are the advantages of density? Specialization, concentration of knowledge, increased scope of trade, reduced transportation costs for workers, goods, and services, more choices for consumers, and for employ- ers, workers and entrepreneurs. Plus environmental benefits as increase agricultural productivity means less farmland.
5. Long-delayed economic growth finally arriving in some of the booming cities of Africa and Latin America.

Second Session: Cities Modern, Ancient, Medieval
1. Basic economics, division of labor, specialization, and the scope of trade. The central role of rivers and ports for low transportation costs.
2. The geography of development in the ancient world. Greek colonies as the competitive Charter Cities of the ancient world. Greek institutions favored commerce.
Transportation and trading networks are essential to economic development. Expanding the scope of trade over inexpensive sea and river routes encouraged ex- panded production through the division of labor, spe- cialization, investment, and knowledge flows.
3. “Trans-national” monasteries through the Middle Ages (which weren’t so “Dark” after the 8th Century). At its height, 37,000 Benedictine monasteries and: “Every
Benedictine monastery was an agricultural college for the whole region in which it was located.” 742 Cister- cian Monasteries transferring factory and agricultural knowledge technology across western Europe. Trade around and between monasteries, along rivers and ports.
4. The geography of development in the Medieval world. Italian city states and the Hanseatic League as similar to
Charter Cities. Novgorod the Great vs. Moscow.
European cities of the Hanseatic League gained char- ters to protecte their commerce from local princes, al- lowing self-rule, and contract and property law.
5. Amsterdam became a global city through religious tolerance, open trade, investment, and migration.
6. Some Medieval cities survived the Middle ages. (Rick Steves “Little Europe”: Andorra, Liechtenstein, Monaco, San Marino.) The recent success of Estonia, Slovakia, Montenegro.
7. New city-states from regional conflicts from the fall of the USSR, might succeed (and might not): Albania, Moldova, Georgia, Crimea.

Notes on basic economics of development
1. The basics of economics: from scarcity to providing food, clothing, and shelter.
2. Most were farmers, so advances came from agricultural productivity. Steady improvements in standards of liv- ing, decade by decade over centuries.
3. Economics as a coordination problem. Usually econom- ics begins with a discussion of scarcity: not enough goods and services available to satisfy all wants. Good and services are scarce and the people who produce them want value in exchange. Trade increases wealth.
3. The natural instability of commerce and manufacturing. Open market push prices down and wages up, but profits out… Two examples: the imaginary box and the NYT coffee article, new equipment from William Sonoma,
4. Economic History is similar to Development Econom- ics. Which cities and countries prosper, and why?
5. Students tend to study the history of states, but eco- nomic progress follows more the history of cities. Jane Jacobs in Cities and the Wealth of Nations, claims cities are the sources of wealth and states act more as parasites.
6. Grotius: Rulers traditionally obtained their legitimacy through their commitment to enforcing the law–law be- ing coeval with society itself… Rulers didn’t create law.

Gregory Rehmke • grehmke@gmail.com