Saskia Sassen: University of Chicago Chicago, USA THE GLOBAL CITY: STRATEGIC SITE/NEW FRONTIER (Page 4) ELEMENTS OF A NEW SOCIO-SPATIAL ORDER The implantation of global processes and markets in major cities has meant that the internationalized sector of the urban economy has expanded sharply and has imposed a new set of criteria for valuing or pricing various economic activites and outcomes. This has had devastating effects on large sectors of the urban economy. It is not simply a quantitative transformation; we see here the elements for a new economic regime. These tendencies towards polarization assume distinct forms in (a) the spatial organization of the urban economy, (b) the structures for social reproduction, and (c) the organization of the labor process. In these trends towards multiple forms of polarization lie conditions for the creation of employment-centered urban poverty and marginality, and for new class formations. The ascendance of the specialized services-led economy, particularly the new finance and services complex, engenders what may be regarded as a new economic regime because although this sector may account for only a fraction of the economy of a city, it imposes itself on that larger economy. One of these pressures is towards polarization, as is the case with the possibility for superprofits in finance which contributes to devalorize manufacturing and low-value added services insofar as these sectors cannot generate the superprofits typical in much financial activity. The super-profit making capacity of many of the leading industries is embedded in a complex combination of new trends: technologies that make possible the hypermobility of capital at a global scale and the deregulation of multiple markets that allows for implementing that hypermobility; financial inventions such as securitization which liquify hitherto unliquid capital and allow it to circulate and hence make additional profits, the growing demand for services in all industries along with the increasing complexity and specialization of many of these inputs which has contributed to their valorization and often over-valorization, as illustrated in the unusually high salary increases beginning in the 1980s for top level professionals and CEOs. Globalization further adds to the complexity of these services, their strategic character, their glamour and therewith to their overvalorization. The presence of a critical mass of firms with extremely high profit-making capabilities contributes to bid up the prices of commercial space, industrial services, and other business needs, and thereby make survival for firms with moderate profit-making capabilities increasingly precarious. And while the latter are essential to the operation of the urban economy and the daily needs of residents, their economic viability is threatened in a situation where finance and specialized services can earn super-profits. High prices and profit levels in the internationalized sector and its ancillary activities, such as top-of-the-line restaurants and hotels, make it increasingly difficult for other sectors to compete for space and investments. Many of these other sectors have experienced considerable downgrading and/or displacement, for example, the replacement of neighborhood shops tailored to local needs by upscale boutiques and restaurants catering to new high income urban elites. Inequality in the profit-making capabilities of different sectors of the economy has always existed. But what we see happening today takes place on another order of magnitude and is engendering massive distortions in the operations of various markets, from housing to labor. For instance, the polarization among firms and households and in the spatial organization of the economy contribute, in my reading, towards the informalization of a growing array of economic activities in advanced urban economies. When firms with low or modest profit-making capacities experience an ongoing if not increasing demand for their goods and services from households and other firms in a context where a significant sector of the economy makes super-profits, they often cannot compete even though there is an effective demand for what they produce. Operating informally is often one of the few ways in which such firms can survive: for example, using spaces not zoned for commercial or manufacturing uses, such as basements in residential areas, or space that is not up to code in terms of health, fire and other such standards. Similarly, new firms in low-profit industries entering a strong market for their goods and services may only be able to do so informally. Another option for firms with limited profit-making capabilities is to subcontract part of their work to informal operations. The recomposition of the sources of growth and of profit- making entailed by these transformations also contribute to a reorganization of some components of social reproduction or consumption. While the middle strata still constitute the majority, the conditions that contributed to their expansion and politico-economic power in the post-war decades --the centrality of mass production and mass consumption in economic growth and profit realization -- have been displaced by new sources of growth. The rapid growth of industries with strong concentration of high and low income jobs has assumed distinct forms in the consumption structure which in turn has a feedback effect on the organization of work and the types of jobs being created. The expansion of the high-income work force in conjunction with the emergence of new cultural forms have led to a process of high-income gentrification that rests, in the last analysis, on the availability of a vast supply of low-wage workers. In good part the consumption needs of the low-income population in large cities are met by manufacturing and retail establishments which are small, rely on family labor, and often fall below minimum safety and health standards. Cheap, locally produced sweatshop garments, for example, can compete with low-cost Asian imports. A growing range of products and services, from low-cost furniture made in basements to "gypsy cabs" and family daycare is available to meet the demand for the growing low-income population. One way of conceptualizing informalization in advanced urban economies today is to posit it as the systemic equivalent of what we call deregulation at the top of the economy (See Sassen 1998: chapter 8). Both the deregulation of a growing number of leading information industries and the informalization of a growing number of sectors with low-profit making capacities can be conceptualized as adjustments under conditions where new economic developments and old regulations enter in growing tension. "Regulatory fractures" is one concept I have used to capture this condition. We can think of these development as constituting new geographies of centrality and marginality that cut across the old divide poor/rich countries, and new geographies of marginality that have become increasingly evident not only in the less developed world but inside highly developed countries. Inside major cities in both the developed and developing world we see a new geography of centers and margins that not only contributes to strengthen existing inequalities but sets in motion a whole series of new dynamics of inequality. more