It crystalises much recent thinking on the spatial dimensions of growth, inequality and poverty. Paul Krugman’s work on economic geography is notable, earning him the Nobel Prize in Economics this year 'for his analysis of trade patterns and location of economic activity'. Jyotsna Jalan and Martin Ravallion's work on how the differing levels of physical and human capital within neighbourhoods can explain the diverging fortunes of otherwise identical households has drawn attention to the role of economic geography in development, alongside the UNU-WIDER project led by Ravi Kanbur and Anthony Venables, and its edited volume Spatial Disparities and Development.
The 2009 World Development Report highlights uneven economic development at the local, national and international levels, which, not surprisingly, means major disparities in well-being. It means one billion slum dwellers in the cities of the developing world, one billion people in fragile regions that lag behind the rest of their countries, and one billion people in countries that are in regions that are divided, distant from markets and lack a large local economy (now known as the 'bottom billion'). According to Reshaping Economic Geography, these overlapping populations 'pose today's biggest development challenges'.
The obvious solution would seem to be to spread economic development as far as possible to reach those left behind. And that is what a number of developing countries have tried to do in the past, for example, through the development of growth poles in lagging regions. But the report, controversially, turns this argument on its head. It argues that economic growth will always be unbalanced and that efforts to redress the spatial balance will only discourage further economic development and poverty reduction. Drawing on experience from ‘developers’, such as the countries of Europe and East Asia, and the USA, the report argues that successful development requires the spatial concentration of production and economic integration.
The report is based on three sets of three notions. The ‘first three’ are the 3Ds: density, distance and divisions. It argues that places do well because of transformations made in these 3Ds. In short, economic integration requires a greater density of population, as seen in the growth of cities; shorter distances (through transport infrastructure, for example), to encourage businesses and workers to migrate towards dense areas; and fewer divisions,through thinner economic borders and access to world markets.
The 'second three' are the strategies that help to transform the 3Ds: urbanisation, territorial development and regional integration. Put simply, the report argues that urbanisation can facilitate higher density; territorial development can integrate nations (and shorten distances); and regional integration, through greater access to global markets, can lead to fewer inter-country divisions.
The ‘third three’ relate to the policy instruments available for economic integration: institutions, infrastructure and interventions. 'Institutions' is shorthand for policies that are spatially blind in their design and universal in their coverage. Examples include policies on social services such as health, education and water and sanitation and regulations affecting land, international trade and labour. 'Infrastructure' is shorthand for investments and policies that connect geographic spaces, such as roads, airports, railways and communication systems that move goods, people, services and ideas. 'Interventions' are shorthand for programmes that are targeted at particular spaces, such as slum clearance, fiscal incentives for manufacturing investment and preferential trade access for developing countries. Importantly, it is argued that interventions are far too often the focus of discussions about spatial disparities and the report calls for a 'rebalancing' of debates to include all three groups of instruments to achieve successful economic integration and genuine development results.
In his foreword to the report, World Bank President Robert Zoellick says that he expects the report to 'stimulate a much-needed discussion on the desirability of 'balanced growth', which has proved elusive.'
From my perspective, it is balanced or inclusive growth that should be front-and-centre as we read this year’s World Development Report. What I want to learn from the report is what we can do to ensure the benefits of economic development are more equitable. I hope the report influences policies and programmes – most critically those of governments but also donors and other development actors –to reduce the billion slum dwellers, the billion in lagging regions and the ‘bottom billion’.
We should welcome this report and its focus on economic geography. I know that many of my colleagues at the Overseas Development Institute – experts in a range of the issues highlighted in Reshaping Economic Geography – certainly do. IIndeed, the World Bank commissioned the Overseas Development Institute to write background papers for the report: Kate Bird and I edited a series of policy briefs on policy instruments and spatial differentiation; Massimiliano Cali wrote a paper on urbanisation, inequality and economic growth in India and Dirk Willem te Velde wrote a paper on regional integration, concentration and growth. I encourage my Overseas Development Institute colleagues, and others interested in the issues the report raises, to contribute to this blog. What are the highlights? The strengths? The critiques? The implications?
The report argues that ‘place is the most important correlate of a person’s welfare’. If this is the case, all of us with an interest in inclusive growth, poverty reduction and well-being must read, and act on, Reshaping Economic Geography.