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Technology and deglobalisation: A sceptical view

Before the Covid-19 pandemic erupted onto the world stage, a new narrative was beginning to emerge about the impact of the Fourth Industrial Revolution (i4.0) and new technologies in general, on the future of work and employment. There was particular concern over the impact of 3D printing on the manufacturing sector and 3D printing was just one of many ways companies would take part in a new industrial revolution both desired and feared.

As early as 2012 The Economist had labelled 3D printing as heralding a major transformation in manufacturing. In discussions of ‘spatial leapfrogging’, new locations of economic activity and innovation were seen as emerging, leading to what might amount to a ‘Schumpeterian surfboard riding a Kondratiev-like wave’. Though generalisations about revolutionary changes in the geography of manufacturing should be avoided, 3D printing has the potential to change manufacturing and innovation.  This warning has not been heeded by many proponents of the emerging new orthodoxy.

Arguing that there is no inevitability to globalisation, some have suggested that we are seeing early signs of deglobalisation for the making and supplying of physical products across a number of industries, creating problems for developing economies by exacerbating premature deindustrialisation. New production technologies are key to a new geography of making. Evidence for deglobalisation is taken from the fact that, following the financial crisis, global trade is growing at a slower pace than global GDP. Regionalisation rather than globalisation is likely to gather pace, owing to the pressures of new production technologies, automation, and the demands for speed and environmental constraints. Regionalisation is expected to deepen the path for localisation for some types of manufacturing, and thus a shortening of global value chains. As half to two-thirds of world trade happens within value chains, this has important implications. For example, in 2018, Gary Gereffi, the leading theorist of Global Value Chains, argued that 3D printing in particular would be crucial, producing a potential manufacturing paradigm shift, which would facilitate the decentralisation of production. He concluded that, industries can now be reorganized in ways where proximity to the consumer is going to be even more important than labor costs, which are falling throughout the chain as a result of automation.

And then came Covid-19

The advent of Covid-19 had some immediate and far-reaching consequences. For example, the almost complete shutdown in China had a dramatic effect: 94% of Fortune 1000 companies are experiencing coronavirus supply chain disruptions. Across the world the fragility of just-in-time driven supply chains has been vividly exposed. Andrew Liveris, a special advisor to the Australian National Covid-19 Commission and former CEO of Dow Chemicals also bought into the new conventional wisdom. He argued that the domestic shortage of all personal protective equipment items had brought Australian manufacturing, or the lack of it, to national attention. Pointing to Australia’s current standing of 87th in the Harvard Growth Labs Economic Complexity Index, he suggested that the country needed onshore access to the basics of healthcare, energy, defence, technology, food and water. He was quoted as arguing that ‘we are connected to the world through technology these days, and that means we can have new opportunities to scale, in areas we could not scale before’.

I4.0 has not gone unquestioned. Many have argued that the technologically deterministic view of i4.0 and its technological marvels threaten a ‘digital despotism’ that will make human workers subservient to integrated digital production systems that monopolise decision-making.  Industry 4.0 has been described as a ‘capitalist panacea’ to economic and social problems that ignore the existing social and economic inequalities being created by the disruptive nature of digital capitalism. Whilst attention was focussed on i4.0 a parallel and crucial debate was taking place over the dynamics of the growth of megacities and the emerging geographies of innovation associated with this phenomenon.

Extreme cities

Under the conditions of globalisation, economic activity is clustering within massive territorial formations that incorporate and functionally integrate multiple city-regions. However, there is a downside to the emergence of a distinctive new urban form, the polynucleated, densely networked, information intensive and increasingly globalised city regions, what Ashley Dawson calls the era of extreme cities: ‘an urban space of stark economic inequality, the defining urban characteristic of our time, and one of the greatest threats to the sustainability of urban existence’. The city is where capitalism’s central contradictions play out.

The concentration of technology production in sub-national metropolitan hotspots mirrors the geography of per capita income and the increasing concentration of the skilled in hotspots. The hubs or hotspots stand in stark contrast to those areas and regions left behind. As nodes of accumulation, cities are no longer enclosed within relatively autocentric, national economies, but have been embedded more directly within transnational urban hierarchies, inter-urban networks and circuits of capital. Thus, the goal of development policy is no longer to alleviate uneven development, but to intensify it, through policies designed to strengthen unique space specific assets and infrastructural equipment of transnationally networked urban regions.

However, there is little systematic evidence of any general success of policies trying to create new local clusters. Firms form ecosystems that are not easily transplantable or reproducible. Although ICT based forms of urban development may successfully unleash short- or medium-term bursts of economic growth within a small group of privileged ‘first mover’ local and regional economies, the conditions underlying these putative paradigms are extremely difficult, if not impossible, to replicate or generalise elsewhere.

Geographies of Platform capitalism

The geography of technology development and adoption appears to be following mostly tried and true paths based on existing sites of human capital formation and longstanding industrial concentrations. However, technological diffusion of AI or other technologies is not always straightforward and can be complicated by regional or national working practices.

There is an important distinction between the development and the adoption if AI. The development of AI is likely to reinforce the economic power of existing agglomerations. Growth is most likely to occur in ready-made clusters of similar activities, and thus do little to improve the problems of uneven development. Initial endowments are therefore critical determinants of an areas potential to benefit from developments in technology, leaving lagging regions at a distinct disadvantage. The adoption of AI is also likely to be uneven and strongly tied to existing industrial strengths and weaknesses. Poorer regional economies in peripheral regions are most likely to experience job displacement from automation.

In geographical terms, the entrepreneurial and managerial core of the platforms is concentrated in the home bases, augmented by a huge number of largely invisible contract employees, often employed by labour-contracting firms. There is, therefore, a vastly expanded market in terms of geographic reach which allows far more people to transact. The platforms have also been introduced for service provision, both in person and remotely. The conclusion is that, at a global scale, the power to extract value is highly concentrated in a few firms located on the US West Coast. Most businesses are dependent on platforms and become consumers or merchants transacting on and taxed by the platform. Crucially, the platforms are re-routing commerce in ways that centralise power while decentralising the ability to participate in the economy.

The new conventional wisdom suggests that 3D printing is going to help motor a revival of clustered firms producing a new geography of re-shored manufacturing industry. This process of deglobalisation is going to have implications for the nature and location of employment into the future. This prediction has been widely, and usually uncritically, accepted. However, if we draw on analysis of urbanisation and the emergence of extreme cities a different picture emerges. The alternative view is reinforced if we examine the emerging geography of platform capitalism. Power remains highly concentrated, largely metropolitan based, and re- or near-shoring appears to be overplayed. It is clear that the emergence of new clusters in localities is not impossible. However, outside the already existing hubs and hotspots, it is unlikely. Even if it does occur, it will tend to be fleeting.

Al Rainnie is a Research Professor at the University of South Australia, Australia.

Image credit: Kadir Celep on Unsplash