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January 9, 2010
Our economy is in the midst of a fundamental long-term transformation—similar to that of the late 19th century, when people streamed off farms and into new and rising industrial cities. That industrial epoch of capitalism had its own distinct geography, a post 1945 spatial fix of suburbanization based on mass production, cars and consumer credit.
Today, the economy is shifting away from manufacturing and toward idea-driven creative industries--what some call the knowledge economy. The decline in manufacturing is the result of long-term trends—increasing foreign competition and the relentless replacement of people with machines. This transformation will also have its spatial fix.
Adelaide is one of the older, manufacturing regions whose heydays are long past, and it has continued to struggle long after the mega-regional hubs and creative cities have put the crisis of the early 1990s behind them. As a rust belt city it stands for a region in decline as the manufacturing industry has shrunk, whilst the local high-end services—finance, law, consulting—that it once supported have also diminished. This region is no field of dreams.
The policy question is: How does a city such as Adelaide prevent its stagnation and decline? Will it make the transition from a resentful, post-manufacturing tawdry inward- looking city to a cosmopolitan friendly, hip city open to the global economy? Or will the city and its regions continue to decline and become a relic of the industrial age? Can Adelaide reinvent itself?
Richard Florida in his The Rise of the Creative Class. argues that innovation., economic growth, and prosperity occur in those places that attract a critical mass of top creative talent. The key drivers of such a transition are the "three T's" of technology, talent, and tolerance. If cities could make themselves appealing to the Web designers, architects, biomedical researchers, and other innovators who are now the drivers of economic growth, then they would also attract the businesses that want these footloose pioneers to work for them.
Florida's urban renewal theory is that the creative class fosters an open, dynamic, personal and professional environment. This environment of bohemian lifestyles and creativity in turn, attracts more creative people, as well as businesses and capital. It is a “creative capital” view of human capital generating growth.
I've thought that the “creative capital” view of human capital generating growth is on the right track. First, about the importance of knowledge-creation and creativity becoming a more important part of the economy Secondly, as cities turn on creative people, they need to attract creative people. Thirdly, bohemian types like funky, socially free areas with cool downtowns and lots of density, as in Melbourne. This is funky, creative chic, innercity area is what Adelaide lacks, even if it has the odd bohemian coffee shops with free wireless. So we have the idea of the new economy that stands in contrast to the old economy with its older-style industries and more traditional values-----a smoke-stack economic development.
The problem for Adelaide is that the well-established tendency for most types of economic activity to cluster in relatively few places rather than dispersing widely--Michael Porter's theory of industry clusters. A second problem is is another well-established characteristic of economic activity: in addition to being clustered geographically, the various activities are also tiered functionally. It is tiered functionally because ventures of one sort systematically demand services of other particular sorts. Consequently, people are crowding into a discrete number of mega-regions, systems of multiple cities and their surrounding suburban rings. The ability of different cities and regions to attract highly educated people—or human capital-- varies immensely.
Adelaide's prospects as a creative magnet are too daunting, and it has limited possibilities to become a magnet for talent clustering to be come a postindustrial phoenix. It really needs economic development and the city has to grow skills and talent from within. So Adelaide needs to present itself as being in the top category—of something---in order to grow its skills and talent and prevent people from leaving, getting by on tourism and retirees subsisting on the pension.
What is this top something for Adelaide in a global economy? Rann Labor has little time for the creative industries. Their drivers are uranium mining and defence industries based around building submarines, and these are seen as the key drivers of technological innovation, economic growth, and improved living standards. This version of high tech and laptop professionals is a long way from Florida's idea of cities with its thriving arts, cultural climates and openness to diversity of all sorts and also enjoying higher rates of innovation and high-wage economic growth.
Will these drivers result in a new economy based on generating ideas, with a higher density of of talented and creative people? A creative, postindustrial economy? I cannot see uranium mining and submarines coupled with low-density urban sprawl creating new software and alternative energy industries. I cannot see that encouraging and shaping economic growth through mining and defence will position Adelaide so that it is becomes best positioned to compete in the coming decades. These are not enough to attract young professionals and creative types or to ensure the emergence of high-growth services and industries.
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Florida now argues How the Crash Will Reshape Americas in The Atlantic magazine that most big economic shocks ultimately leave the economic landscape transformed. Some of these transformations occur faster and more violently than others. The period after the Great Depression saw the slow but inexorable rise of the suburbs. The economic malaise of the 1970s, on the other hand, found its embodiment in the vertiginous fall of older industrial cities of the Rust Belt, followed by an explosion of growth in the Sun Belt.
America is going through a similar economic shock from 2008, that is destroying jobs, bankrupting businesses, and displacing homeowners. It has damaged some places much more severely than others:
He argues that place still matters in the modern economy—and the competitive advantage of the world’s most successful city-regions seems to be growing, not shrinking. Population and economic activity are both spiky, but it's innovation—the
engine of economic growth—that is most concentrated.