Typology of economic flows

One of the most challenging aspects of making sense of Flow Paradigm is to identify the relevant types of economic flows. To start with, it is worth stressing that the flows between hubs are difficult to identify and quantify (see e.g. Salisbury & Barnett, 1999, 35; Pain & Hall, 2008; Limtanakool et al., 2009). Some simple dichotomies have some relevance in this respect, such as frictionless vs. frictional flows. ‘Frictionless’ flows - what Castells (1996) has referred to as a whole as the 'space of flows' - that are generally transferable as electronic or digital flows are characteristically production factor flows (technology flows, capital flows, and information flows), whereas ‘frictional’ flows or physical flows are basically of three kinds: (i) freight and material flows; (ii) client flows, such as tourists, conference visitors and students; and (iii) productive actor flows, such as relocating firms, inflow of skilled and creative people and professionals as well as low-skilled immigrants (cf. Kostiainen, 1999). These flows make up two primary realms, both of which are expedited by technological development. Digitalisation changes symbolic, information, and monetary flows, whereas improvements in mobility and logistics do the same to material and client flows (see e.g. Williams & Balàz, 2009; see also Anttiroiko, 2014b).

To make sense of the field of flows, we may consider the fundamental economic roles of people in terms of consumption and production, the classic typology of markets (factor and product markets) and the city as an economic spatio-temporal locus that combines these elements through investment, production, distribution and consumption functions. Such a robust model of the main aspects of economic flow analysis is presented in Figure 1.

Figure 1. Illustration of city as the integrator of different types of flows. (Anttiroiko, 2015).

Some of the typologies of flows are based on contextual analysis, such as Appadurai’s (2003) five ‘flowscapes’ – people, technologies, finance, media and ideologies – as the landscape of late modernity. Yet, to achieve a scheme that is relevant for local economic development policy, such a typology should be accurate and provide a synthesised approach to flows. An example of the generic typology of flows that fulfils this criterion is proposed by Williams and Balàz (2009, 679-680). It is built on four major categories related to regional development: (1) trade, (2) labour migration, (3) capital and (4) knowledge. Similarly, in McKinsey Global Institute’s report on global flows the main flow categories analysed were goods, services, finance, people, and data (Manyika et al., 2014). In DHL Global Connectedness Index 2014 global connectedness of a country or macro-region was defined as their participation in international flows of trade, capital, information and people. These four pillars were further divided into following components (Ghemawat & Altman, 2014):

Trade

- Merchandise trade

- Services trade

Capital

- FDI stocks

- FDI flows

- Portfolio equity stocks

- Portfolio equity flows

Information

- International Internet bandwidth

- Telephone call minutes

- Trade in printed publications

People

- Migrants (foreign born population)

- Tourists (departures and arrivals)

- International students

To summarise, it seems that the four most frequently included categories of flow analysis are capital, trade, information and people.

These form a good starting point for identifying different flows that have a critical role in local economic development. Yet, they show also clearly the differences in the clarity and availability of relevant data. As a rule, any flow that can be expressed in units, such as money or number of items or people, are fairly easy to define, even if the availability of data may be occasionally a problem. Yet, categories like information or knowledge are obviously difficult to operationalise not to speak of the difficulty of obtaining relevant data. The problem in the latter case concerns both ambiguity and uncertainty (Daft & Lengel, 1986). This explains the use of surrogate data, which leads sometimes obvious methodological problems. To illustrate the complexity of this setting, let us combine various flows in a rudimentary model, presented in Figure 2.

Figure 2. Illustration of economic flow analysis. (Adopted from Anttiroiko, 2014a).

This kind of analysis helps to make sense of the nature of local economy in an increasingly 'fluid' economy. Increasing share of our wealth is created at the hubs of flows, which should be taken into account in local economic development policy. It urges us to learn more about how to attract flows from the space of frictionless and frictional flows, how to process such flows within a local 'dissipative structure' (i.e. open city), and how to create products and services that meet the demand in global markets.

References

Anttiroiko, A.-V. (2014a). International City Branding: Attraction Imperative, Specialization and New Urban Brand Analytics. Proceedings of the 17th Annual International Conference of ASBBS, pp. 12-25. Paris, June 20-22, 2014. San Diego, CA: American Society of Business and Behavioral Sciences.


Anttiroiko, A.-V. (2014b). The Political Economy of City Branding. London and New York: Routledge.


Anttiroiko, A.-V. (2015). New Urban Management: Attracting Value Flows to Branded Hubs. Basingstoke: Palgrave Macmillan.


Appadurai, A. (2003). Modernity at Large. Cultural Dimensions of Globalization. First published 1996. Sixth printing 2003. Minneapolis, MN: University of Minnesota Press.


Castells, M. (1996). The Rise of the Network Society. The Information Age. Economy, Society and Culture. Vol. I. Cambridge, MA and Oxford, UK: Blackwell.


Daft, R.L. & Lengel, R.H. (1986). Organisational Information Requirements, Media Richness and Structural Design. Management Science, 32, 554-571.


Ghemawat, P. & Altman, S.A. (2014). DHL Global Connectedness Index 2014. Analyzing global flows and their power to increase prosperity. DHL. Retrieved February 12, 2015, from http://www.dhl.com/content/dam/Campaigns/gci2014/downloads/dhl_gci_2014_study_low.pdf


Kostiainen, J. (1999). Competitiveness and Urban Economic Development Policy in Information Society. Futura, 18(3), 14-36.


Limtanakool, N. & Schwanen, T. & Dijst, M. (2009). Developments in the Dutch Urban System on the Basis of Flows. Regional Studies, 43(2), 179-196.


Manyika, J., Bughin, J., Lund, S., Nottebohm, O., Poulter, D., Jauch, S. & Ramaswamy, S. (2014). Global flows in a digital age: How trade, finance, people, and data connect the world economy. April 2014. McKinsey Global Institute. Retrieved February 20, 2015, from http://www.mckinsey.com/~/media/McKinsey/dotcom/Insights/Globalization/Global%20flows%20in%20a%20digital%20age/MGI_Global_flows_in_a_digial_age_Full_report.ashx


Pain, K. & Hall, P. (2008). Informational Quantity versus Informational Quality: The Perils of Navigating the Space of Flows. Regional Studies, 42(8), 1065-1077.


Salisbury, J.G.T. & Barnett, G.A. (1999). The World System of International Monetary Flows: A Network Analysis. The Information Society, 15, 31-49.

Williams, A.M. & Baláz, V. (2009). Low-Cost Carriers, Economies of Flows and Regional Externalities. Regional Studies, 43(5), 677-691.

City of Tampere, Finland

Flow paradigm: a new perspective on urban development

If we want to understand the nature of urban economy in the globalised - and at the same time 'delocalised' -  world, such an analysis should be more than about local GDP, industrial composition, occupational structure and the like. A need for deeper understanding of urban economy calls for paradigm shift, a transition from a static place-based approach to a "Flow Paradigm", which operates with such concepts as urban attraction, dissipative structure and frictional and frictionless flows. Such an approach starts from the observation that flows are constitutive elements of reality and define our social existence. Urban communities are best to understand as dissipative structures and thus as ecosystems in which there is a continuous exchange of energy, matter, values and symbols between the community and its environment. In other words, dissipative structures breath through their material and immaterial flows, thus providing tools for reconceptualising places and local economies in particular (see Anttiroiko, 2015).

From the space of flows to a new flow paradigm

An important source of inspiration for such a flow paradigm is Manuel Castells' theory of network society and one of the insightful ideas related to this theory, the space of flows. Castells (1989, 351) points to a local-global dialectic that poses a challenge to local government: first, production in the informational economy becomes organised in the space of flows, whereas social production continues to be locally determined, and second, local governments must develop a central role in organising the social control of places over the functional logic of the space of flows. Castells’ conceptualisation of the local-global dialectics is fine as such, but the way the space of flows is conceptualised warrants further sophistication. The need for reconceptualisation comes simply from the fact that flows have been understood in macrosociology and political economy too vaguely, including Castells' works (see Castells, 1989; 1996). They are usually referred to only passing without theoretical grounding and sufficient empirical specification. 

Due to increased fluidity and mobility in economic life there has been in the recent decade a clear increase in the interest in global networking in business and governance. Now it seems that this discourse is developing towards sophisticated flow paradigm or economic ‘flowology’ with an aim at gaining better understanding of the new economic reality and its dynamics. Such a paradigm is manifest in various emerging concepts, theories and approaches, which seek answers to the question of the nature of this new reality, including new mobilities paradigm (Urry, 2000) and the politics of flows (Hubbard, 2001; Doel & Hubbard, 2002; Halbert & Rutherford, 2010). There are also urban analyses that go beyond individual flows to wider set of flows (Gertler, 2001; Williams & Baláz, 2009) and urban-regional analysis of economic flows of particular cities, regions or city-states (Laakso et al., 2013; Yeoh & Chang, 2001). Furthermore, there also are attempts to provide comprehensive analyses of our world in terms of flows (e.g. Van Hamme & Grasland, 2011; 2012) or holistic picture of the world economy by analysing the global material and immaterial flows, as in McKinsey Global Institute’s ‘Global flows in a digital age’ (Manyika et al., 2014) and the ‘DHL Global Connectedness Index 2014’ report (Ghemawat & Altman, 2014). Such analyses tell about a need to understand the fluidity, mobility and connectedness of our world and the fundamental aspects of the morphology of the new economic reality. Why? One reason is simply the fact that higher degree of connectedness of a nation has a positive correlation with the GDP growth, as suggested by economic theory of comparative advantage (Manyika et al., 2014, 6, 21-23).

Towards methodological sophistication

An interesting feature of the development of flow paradigm is the continuous methodological sophistication in terms of data, methods and interpretative frameworks, which makes it plausible to make methodology-wise a distinction between the earlier analyses of the internationalisation of the pre-1980s world and the development of approaches with increased sophistication of the analyses of globalisation of from the 1990s onwards. This reflects interestingly to some extent the transition from the internationally-oriented search for low-cost production sites to the emerging global era of knowledge-intensive flows organised within complex production and innovation ecology (Manyika et al., 2014, 17). 

Descriptive statistical analysis of specific cross-border flows have fairly long history, which had their methodological culmination in inter-regional flow analyses within regional sciences in the 1950s and 1960s (Isard, 1962). In the 1980s the shift from domestic economy to international economy gained ground, culminating in the globalisation discourse of the 1990s. The manifestation of this new period can be seen in methodological sense in research on global cities, first within political economy framework (Friedmann, 1986; Sassen, 2001) and later by the projects of GaWC research network with a strive for understanding global value flows through the world city networks. Research within GaWC started with the collection and analysis of data on corporate service office networks and later continued with the exploration of the spatial configurations of hyperlink networks at the interface of web mining and social network analysis. 

The recent phase of this development seems to bring the true flow analysis into the picture, which benefits from Big Data analytics and multi-dimensional interpretative frameworks (Manyika et al., 2014; Ghemawat & Altman, 2014). As described by Manyika and others (2014) in the preface of their analysis of global flows in a digital age, “[w]e know a great deal about individual flows such as goods trade and cross-border financial flows. Yet little research has been done thus far that seeks to paint a comprehensive picture of the web of cross-border interactions of the different types of global flows that increasingly characterizes our world.”

From the margin to the centre 
The term ‘flow’ is mentioned only passing and can hardly ever be found in keywords or indexes in the literature on urban management and urban economic geography. Flows have remained in the margin of urban analysis so far. It urges us to start an exploratory journey to shed light on urban flow analysis and its relevance for understanding the new premises of local economic development policy (see Anttiroiko, 2015). Such an endeavor certainly benefits from interregional flow analysis developed in regional science as well as from the models and concepts of mainstream economics, but it has to take a new course towards urban analysis in order to understand how such flows relate to the fixities of local communities, how they constitute local economies of late modernity, and how they eventually blow life into spatio-temporal instances of everyday life in the globalised world.

References

Anttiroiko, A.-V. (2015). New Urban Management: Attracting Value Flows to Branded Hubs. Palgrave Macmillan. 

Castells, M. (1989). The Informational City. Information Technology, Economic Restructuring, and the Urban-Regional Process. Oxford: Blackwell.

Castells, M. (1996). The Rise of the Network Society. The Information Age. Economy, Society and Culture. Vol. I. Cambridge, MA and Oxford, UK: Blackwell.  

Doel, M.A. & Hubbard, P.J. (2002). Taking World Cities Literally: Marketing the City in a Global Space of Flows. City, 6(3), 351-368.  

Friedmann, J. (1986). The World City Hypothesis. Development and Change, 17(1), 69-83.  

Gertler, M.S. (2001). Urban Economy and Society in Canada: Flows of People, Capital and Ideas. Isuma: The Canadian Journal of Policy Research, 2(3), 119-130.  

Ghemawat, P. & Altman, S.A. (2014). DHL Global Connectedness Index 2014. Analyzing global flows and their power to increase prosperity. DHL. Retrieved February 12, 2015, from http://www.dhl.com/content/dam/Campaigns/gci2014/downloads/dhl_gci_2014_study_low.pdf  

Halbert, L. & Rutherford, J. (2010). Flow-Place: Reflections on Cities, Commutation and Urban Production Processes. GaWC Research Bulletin 352. Edited and posted on the web on 9th June 2010. Retrieved January 23, 2015, from http://www.lboro.ac.uk/gawc/rb/rb352.html  

Hubbard, P.J. (2001). The Politics of Flow: On Birmingham, Globalization and Competitiveness. Soundings, 17, 167-171.  

Isard, W. (1962). Methods of Regional Analysis: an Introduction to Regional Science. First published in 1960. Second Printing, August 1962. Cambridge, MA: The M.I.T. Press.  

Laakso, S., Kostiainen, E., Kalvet, T. & Velström, K. (2013). Economic flows between Helsinki-Uusimaa and Tallinn-Harju regions. Helsinki-Tallinn Transport and Planning Scenarios project, 01/2013. H-TTransPlan. Retrieved March, 10, 2014, from http://www.hel.fi/wps/wcm/connect/15e9d665-795c-4429-91c9-af5abdb63d8e/Helsinki-Tallinna+talousvirrat.pdf?MOD=AJPERES&CACHEID=15e9d665-795c-4429-91c9-af5abdb63d8e  

Manyika, J., Bughin, J., Lund, S., Nottebohm, O., Poulter, D., Jauch, S. & Ramaswamy, S. (2014). Global flows in a digital age: How trade, finance, people, and data connect the world economy. April 2014. McKinsey Global Institute. Retrieved February 20, 2015, from http://www.mckinsey.com/~/media/McKinsey/dotcom/Insights/Globalization/Global%20flows%20in%20a%20digital%20age/MGI_Global_flows_in_a_digial_age_Full_report.ashx  

Sassen, S. (2001). The Global City: New York, London, Tokyo. First published 1991. Princeton, NJ: The Princeton University Press.  

Urry, J. (2000). Sociology Beyond Societies: Mobilities for the Twenty-first Century. London: Routledge.

Van Hamme, G. & Grasland, C. (2011). Divisions of the world according to flows and networks. Work Package 5: Flows and Networks – Synthesis. From deliverable 5.8. March 2011. EuroBroadMap.

Van Hamme, G. & Pion, G. (2012). The relevance of the world-system approach in the era of economic flows and networks. Geografiska Annaler, B, 94(1), 65-81.

Williams, A.M. & Baláz, V. (2009). Low-Cost Carriers, Economies of Flows and Regional Externalities. Regional Studies, 43(5), 677-691.  

Yeoh, B.S.A. & Chang, T.C. (2001). Globalising Singapore: Debating Transnational Flows in the City. Urban Studies, 38(7), 1025-1044.

New Urban Management: Attracting Value Flows to Branded Hubs (Palgrave 2015)

New Urban Management: Attracting Value Flows to Branded Hubs (Palgrave, 2015) discusses the logic of economic flows, which requires paradigm shift in urban management. The need for such an approach lies in increased fluidity in economic life, which has created new kind of space with its own logic, the space of flows. The emergence of such an economic condition has intensified global intercity competition, as metropolitan governments’ ability to maintain their economic vitality depends on their ability to attract flows of values through their innovation milieus, urban amenities and other assets. Ability to attract global flows in turn depends less and less on location-specific physical assets and increasingly on collective symbolic capital. This brings us to the core issue of this book: how to utilise flow analysis in brand-oriented economic development policy? This book conceptualises global flows of values and on that basis shows how such knowledge can be used to smarten up brand-oriented economic development policy.

Below is a short description of the chapters of the book. 

1 Introduction 

It is a truism to say that globalisation conditions urban development everywhere in the world. But do we know what kinds of changes they actually impose on cities? Discussion in this chapter aims to clarify one special aspect of globalisation, the increased fluidity in economic life, which urges local governments to reconsider the premises of their economic development policy. One new direction in this respect is emerging ‘flow paradigm’, which provides conceptual tools to understand the current economic reality and its dynamics. Ability to attract global flows depends less and less on hard factors of production and more and more on collective symbolic capital. Hence the relevance of city branding in global competition between cities. Such observations boil down to the idea of new urban management that focuses on attracting flows of values, such as capital, technological know-how, innovative firms, creative people and tourism consumption, to branded hubs in order to guarantee their wealth and economic resilience. 

2 Process view of local economy 

The promotion of local economic development takes place in an increasingly fluid economic environment. This is why local governments benefit from better self-understanding of their nature as hubs of flows or ‘dissipative structures’, which opens up a view of city’s interaction with the outside world. This chapter builds a picture of local economy within such a framework. Discussion starts from approaches to flows and continues with flow-based view of urban community and economy. It conceptualises local economic processes and builds ideal models of growing and declining city, which illustrate the idea of city as a dissipative structure. Lastly, this section discusses the implications of such a view to local economic development policy. 

3 Flows of people, cultures and symbols 

This section discusses the aspects of urban dissipative structure that go beyond material flows. Discussion starts with a brief outlook of migration flows. Next topic is the political economy of urban symbolism followed by discussion of economies of signs and of the cultural landscapes of late modernity. The figures whose theorisations are in focus include Manuel Castells, Scott Lash, John Urry and Arjun Appadurai. This chapter provides not only a glance at space of flows and similar concepts but also a selective introduction to the sociological side of flow analysis. 

4 Economic frameworks for flow analysis 

This chapter outlines the idea of flows in terms of economic taxonomies and categorisations. It provides brief description of circular flow models, T-account analyses (e.g. GDP), industry and cluster classifications, trade and capital flow analyses (especially FDIs) and descriptions of flows of goods and materials. The idea is to popularise the approaches and conceptualisations of flows on the basis of the rudimentary concepts and models in mainstream economics. Beside this, this chapter discusses briefly interregional flow analysis developed by Walter Isard and the new geography of flows as presented within GaWC research network led by Peter J. Taylor. This section provides thus conceptual tools needed to build a clear picture of flows that have economic value. 

5 Flow analysis in urban management 

In this chapter an economic flow analysis is built to concretise the picture of a city as an economic dissipative structure with in and out flows of consumption and production. Discussion is divided into three themes according to Attractors-Flows-Dynamics scheme: attraction factors, economic flows and dynamics of specific flows. As the types of flows are numerous and each have a dynamics of its own, this section discusses only selected types of flows as representative examples of the variety of economic flow dynamics. They are grouped into two broad categories, flows of business and people. Such flow analysis can be used by urban governments in managing their economic processes and directing development efforts to actions that maximise their benefits in the increasingly fluid economic environment.

6 Attraction management of branded hubs 

This chapter starts by linking localities with global economy using the scheme known as City Attraction Hypothesis. It discusses the attraction-oriented urban  development in the context of global intercity competition. Rest of the discussion takes a managerial view on flow analysis and related urban attraction management. If the economy is increasingly fluid, how are we suppose to promote urban economic development? What are the preconditions of the urban development vis-à-vis global space of flows? This section points to the increased importance of urban symbolism and its potential to improve cities’ ability to attract factors of production and consumption from the global flows. This discussion culminates in brand management as an aid to attraction management with a focus on mass, arena, institution and media branding. 

7 Concluding remarks 

This book provides a picture of new urban management. It is ‘new’ in the sense that the idea of urban management is built on a new premise, i.e. on cities’ need to cope with increasingly fluid economy. New urban management provides tools to understand the types and dynamics of flows of values and, as another side of the picture, tools to understand the nature of an urban community as a hub, including its assets and attraction factors. The global competition is increasingly symbolic. Value flows cannot be attracted by infrastructures or amenities alone but by collective symbolic capital. This is why city branding is valuable method to any city that has or aspires to have important role in some industries or niches in the global economy. The new urban management is, thus, a doctrine and practice that focuses on attracting flows of values, such as capital, technological know-how, innovative firms, creative people and tourism consumption, to branded cities in the purpose of guaranteeing resilient vitality and wealth through the maintenance and development of city’s transformative capacity. Taming the flows, in turn, is the key to cities future role as the primary loci of global solidarity.

Should you be interested in reading more, the book will be available in Palgrave's website.