Explaining Southern California's economy

The future of business is with the world's big cities

Global Cities Initiative

A panel discussion at the Global Cities Initiative, which convened at USC on March 21 at USC in Los Angeles. On the agenda was the shift from trade between countries to trade between cities.

We're accustomed to thinking about global trade as being between countries or large political and economic entities, like the European Union. The U.S. trades with China. China trades with Europe. Australia trades with Japan. And so.

But that wasn't the story presented at the Global Cities Initiative conference I attended last week at USC. The event was put on by the Brookings Institution and J.P. Morgan Chase and featured a series of panels structured around the transformation of trade for something between countries to something between cities. 

The big driver here is that the world's emerging middle classes, in countries as divergent as China and Brazil (to name two of the real heavy hitters), are increasingly moving to cities, rather than staying in the countryside or establishing urban alternatives. 

This led Bruce Katz, the Director of the Brookings Metropolitan Policy Program, to present something of a back-to-the-future outlook for the global trade. During the Renaissance, cities — especially Italian cities — traded with other cities. Over time, nations aggregated these nations states and leveraged the collective power of their trading abilities. The U.S. is an excellent example of the end result: New York, Chicago, Detroit, St. Louis, Denver, San Francisco, Los Angeles — a nation of cities all trading collectively. 

China offers a counterpoint, with a band of coastal mega-cities accounting for the majority of the economically liberalizing trade that the Chinese people have seen over the last 30 years. At the same time, America's largest cities have accounted for a larger portion of the economic pie in the U.S. 

This sets the stage for modern-day city states trading more directly with other city states. Los Angeles and coastal China can have a closer trade relationship than China and the U.S. as a whole.

It's a fascinating insight that just shows that, in the 21st century, markets are trumping nations, even to the extent that markets are advancing concentrated urban markets while discounting the interests of nations as a whole. Anyone who has seen a job outsourced to Asia understands this phenomenon.

It's a global economic shift that worth keeping an eye on. 

Follow Matthew DeBord and the DeBord Report on Twitter.

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