Mexico and the World
Vol. 2, No 4 (Fall 1997)
http://www.profmex.org/mexicoandtheworld/volume2/4fall97/preface.html
Integrating Cities and Regions: NAFTA and the Western Hemisphere Face Globalization
Edited by James W. Wilkie and Clint E. Smith
Associate Editor: Francisco Gil-White
Preface
by William F. Miller*
_
* Professor, Graduate School of Business, Stanford
University. President Emeritus, SRI International.
The economic geography of the world is undergoing
rapid and profound changes, and nowhere is this more apparent than in North
America. There are various symptoms of these global changes. We have accelerated
economic growth in new areas, particularly in major portions of Asia, but
in the Western Hemisphere as well. The World per capita GDP continues to
grow, trade growth is even greater than world GDP growth, and foreign direct
investment grows even faster than trade. What is driving this change? How
are governments -- at the national, state, and local levels -- responding?
The old concept of economic geography focused
on the natural endowments of regions and countries -- mineral resources,
rainfall, agricultural production, the level of manufacturing, port facilities,
and other infrastructure. Today, economic geography is much more concerned
with created economic assets such as technology and education, industrial
clustering and its sociology, and community-industrial process dynamics.
It is also concerned with inter-regional business, economic, and institutional
relation ships.
Technology, the embodiment of knowledge, is
driving most of the changes in the world economy, and, either directly
or indirectly, will be the center of political concerns. Global economic
data show that the per capita use of basic materials is declining or growing
more slowly than the per capita growth of GDP while the per capita growth
of knowledge intensive business and services exceeds the per capita grown
of GDP worldwide.
This lesson has not been lost on developing
countries. Whereas it was important to improve and develop their agriculture
in order to have a well-fed, healthy population, it was essential that
these countries participate in the growth of the knowledge int ensive industries
in order to be a participant in the growth of the world economy. The countries
that have pursued market-based export-oriented growth in manufacturing
and other knowledge intensive areas have experienced job creation, rapid
growth in dem and for labor, and rapid growth in real wages. The global
share of manufactured goods in developing countries rose from twenty percent
in 1960 to sixty percent in 1990.
Led by technology, the first major change of
the last two decades is the pronounced shift to knowledge intensive industries.
Even rather basic products such as glass and steel employ sophisticated
high tech production processes. Since the mid 1970s the aggregate per capita
growth of the world economy has come largely from the knowledge intensive
industries and services. This increase in knowledge intensity means that
research and development are now more important than ever, and recuperating
their imm ense costs are dependent on global sourcing of system components
and global distribution of products. In regional terms, this is apparent
in terms of regional industrial integration in North America, as well as
in other areas around the globe.
What could be called a new "world business
paradigm" then requires new government to government relationships,
with fewer trade barriers, tariff and non-tariff, to work efficiently.
NAFTA is a good case in point, as is the drive to expand NAFTA in the direction
of the proposed Free Trade Agreement of the Americas (FTAA) by early in
the next century. Business has led governments in developing such global
interdependence, but there is growing evidence that at least some enlightened
political lea ders are catching on and changing their thinking.
This is in part because it is increasingly clear
that many social issues can be solved only at the trans-boundary, transnational
level. For example, environmental problems, health and disease, water supply
problems, drugs, terrorism, and regional conflic t do not know national
boundaries. Governments have moved to greater cooperation and agreements
(such as the NAFTA side agreements on the environment, labor, and trade
disputes) to solve these problems. In fact, the U.S. is signatory to more
than 150 ag reements on the environment alone. These agreements deepen
international interdependence.
It has also become clear that history has not
been kind to the notion of centrally planned economies, which enjoyed a
considerable vogue in Latin America up until the 1970s and in some cases
even beyond. In fact, the unilateral opening of Mexico in the 1 980s and
a shift from protection and import substitution to a more open export oriented
economy laid the framework that made the subsequent NAFTA negotiations
possible. By the mid-1980s, the shift in Mexico was dramatic.
It was a recognition that import substitution
and a policy of "self sufficiency" leads to a stagnant economy.
Mexico's earlier economic regimes had much in common with centrally planned
economies: large amounts of state owned industry; tra de was not an engine
of growth, and entrepreneurship faced large barriers of entry because of
the special position of the protected industries. When Mexico changed course
under the presidencies of Miguel de la Madrid (1982-1988), Carlos Salinas
(1988-94) and Ernesto Zedillo (1994-2000), Mexican capital returned to
Mexico, foreign direct investment increased, and exports grew. This lesson
was not lost on other economies practicing import substitution. It was
the beginning of a trend. In spite of recen t financial difficulties, Mexico
and other Latin American countries are moving to more open economies.
The Mexican, Latin American, Asian, and Eastern
European experiences in the late 1980s and 1990s were mutually reinforcing
of the idea of open competing economies -- an economic globalism essentially
based on comparative advantage which means specializati on. But specialization
today is not based on single products or single industries, but on clusters
of industries mutually supporting each other. Clusters mean locales or
regions. Networks may diffuse some of the effects of regional clusters.
But much of the economic dynamics of a cluster occurs in specific regions.
As can be seen in this important, benchmark
volume Integrating Cities and Regions: NAFTA and the Western Hemisphere
Face Globalization regions differ greatly in their industrial sociology,
and the comparisons and contrasts offered in this volume are rich in insights
for researchers and policy makers alike. For as local regions of a country
become more the locus of economic development, economic authority is decentralized
from the national capital to the region. Additionally, these local regions
are buil ding relationships to regions in other countries, e.g. the U.S.
and Canada, or the U.S. and Mexico. Several such examples are reported
in this volume.
Finally, as economic authority diffuses away
from the nation state -- upward and outward and downward and inward --
policies, particularly economic policies, are less effective at the national
level. As the economies of the world become more interdepende nt and as
governments move to more and deeper transnational agreements to solve social
problems, there is an inevitable loss of sovereignty, though the nation
state will into the forseeable future still be the basic unit for global
governance. The nation state is needed to solve security problems, to keep
the world financial system secure, to solve global environmental and health
problem, and in general to make the world a hospitable place for working
and living.
Within this context, the present volume provides
a pioneering look at how regions from Cascadia to Silicon Valley, from
San Diego-Tijuana to New York, Toronto, and Mexico City, are addressing
emerging regional challenges in the new millennium.
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