Economic Actors and Practices in the World City Network
Edited by Michael Hoyler, Christof Parnreiter and Allan Watson
Prologue: The global city: enabling economic intermediation and bearing its costs
One key hypothesis I arrived at early on in my research was that intermediation was an increasingly strategic and systemically necessary function for the global economy that took off in the 1980s (Sassen, 1991/2001, 2012; Sassen-Koob, 1982). This in turn led me to generate the hypothesis about a need for specific types of spaces: spaces for the making of intermediate instruments and capabilities. One such strategic space concerned the instruments needed for outsourcing jobs, something I examined in my first book. But what began to emerge in the 1980s was on a completely different scale of complexity and diversity of economic sectors: It brought with it the making of a new type of city formation. I called it the global city – an extreme space for the production and/or implementation of very diverse and very complex intermediate capabilities. This did not refer to the whole city. I posited that the global city was a production function inserted in complex existing cities, albeit a function with a vast shadow effect over a city’s larger space. In that earlier period of the 1980s, the most famous cases illustrating the ascendance of intermediate functions were the big mergers and acquisitions. What stood out to the careful observer was how rarely the intermediaries lost. The financiers, lawyers, accountants, credit rating agencies, and more, made their money even when the new mega-firm they helped make eventually failed. Finance became the mother of all intermediate sectors, with firms such as Goldman Sachs and JP Morgan making enormous profits, followed at a distance by the specialized lawyers and accountants. From the early phase dominated by mergers and acquisitions, intermediation has spread to a growing number of sectors. This also included modest or straightforward sectors: For instance, most flower sellers or coffee shops are now parts of chains, they only do the selling of the flowers or the coffee, and it is headquarters that do the accounting, lawyering, acquisition of basic inputs, etc. Once, those smaller shops took care of the whole range of items; they were a modest knowledge space. Intermediation can now be thought of as a variable that at one end facilitates the globalizing of firms and markets and at the other end brings into its envelope very modest consumer oriented firms. It also contributes to explaining the expansion in the number of global cities and their enormous diversity in terms of specialized knowledges.
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