Links to the global economy

Globalization has been progressing for decades but under the impact of new information technologies the speed of globalization has quickened and its reach has broadened. These technologies are reinforcing the importance of knowledge and information in economic transformation, while reducing the relative importance of traditional manufacturing and industrial development based on raw materials. In urban areas, this has manifested itself in the growth of the service sector in both absolute and relative terms. Technology has increased the already dominant economic role and importance of urban areas, not just those in the more developed economies but globally (Economist 2000, World Bank 2000), indicating the growing importance of cities in the global economy. In India, software development and related information-communication services is the leading sector for economic growth. This new growth sector - which has grown more rapidly and become internationally more competitive than any of the country's traditional industrial sectors - is concentrated in large urban areas because of the superior infrastructure and educational levels of human resources offered by cities.

Satellite image of global city lights prepared from a long time series of images of the Earth at night. The Eastern United States, Europe, and Japan are brightly lit by their cities while the interiors of Africa, Asia, Australia and South America remain dark and largely rural Source: Mayhew and Simmon 2000

In the 1970s, a new phase of globalization started with the deregulation of labour markets, liberalization of financial markets, and privatization of government functions. One of the results was increasing competition for foreign direct investment and employers found themselves able to shift the location of their production facilities more easily, which worsened job and income security in some urban areas but benefited others.

Between the 1970s and mid-1990s, some Asian countries clearly benefited from this development and showed spectacular economic growth and growth in general well-being. However, during 1997-98 the economic crisis in Asia struck not only these economies but also some in other regions. The human impacts of the crisis were severe; poverty in Asia increased and there were massive lay-offs, particularly of women, the young and the unskilled.

The Asian crisis showed that urban areas are highly vulnerable to global economic impacts. Although globalization has often increased opportunities for jobs and knowledge, it has also increased social inequalities and poverty. Benefits are not equally shared, resulting in large groups of people living in slums in developing countries unconnected to water and sanitary services, and unemployment, poor health and social exclusion in the developed world (UNCHS 2001b).