Global Cities and Developmental States

Urban Studies, Vol. 37, No.
12, 2167 – 2195, 2000
Global Cities and Developmental States:

New York, Tokyo and Seoul
Richard Child Hill and June Woo Kim

[Paper rst received, September 1999; in nal form, April 2000]
Summary. The ‘world city paradigm’ assumes a convergence in economic base, spatial organis-
ation and social structure among the world’s major cities. However, Tokyo, capital of the world’s
second-largest national economy and the world’s largest urban agglomeration, departs from the
world city model on most salient dimensions. Seoul, centre of east Asia’s second OECD member
and the region’s second-largest metropolis, exhibits the same anomaly. Tokyo and Seoul’s
departure from the world city hypothesis stem from late industrialisation and especially the
relationship between industrial policy and nance institutionalised in a developmental state.
Understanding Tokyo and Seoul necessitates a different conception of the world system from the
globalist version of the world city argument. World cities differ from one another in many salient
respects because they are lodged within a non-hegemonic and interdependent world political
economy divided among differently organised national systems and regional alliances.
A new type of city has appeared. It is the portant contribution by urbanists to the con-
global city. Leading examples now are temporary globalisation literature.1 Oddly,
New York, London, and Tokyo … these however, the world city hypothesis has not
three cities have undergone massive and generated the vigorous debate among global-
parallel changes in their economic base, ists, statists and those attempting to bridge
spatial organisation, and social structure the two camps that so enlivens most current
(Sassen, 1991, p. 4; emphasis in original). work on globalisation. (For an excellent
codi cation of the globalisation debate see
The beauty of the world city paradigm is
Held et al., 1999.) John Friedmann and
its ability to synthesise what would other-
Saskia Sassen, the best-known architects of
wise be disparate and diverging researches
world city theory, take a globalist view—that
into labour markets, information technol-
is, they believe that a single global system is
ogy, international migration, cultural stud-
becoming superimposed on nation-states
ies, city building processes, industrial
which are losing importance as a result.
location, social class formation, massive
Globalisation produces a world city system
disempowerment, and urban politics—into
that transcends national institutions, politics
a single meta-narrative (John Friedmann,
and culture, they argue. Such a view as-
1995, p. 43).
sumes, for reasons discussed below, a con-
The ‘world city paradigm’ is the most im- vergence in “economic base, spatial
Richard Child Hill is in the Department of Sociology, Michigan State University, 316 Berkey Hall, East Lansing, MI 48824, USA.
Fax: 517 432 2856. E-mail: hillrr@pilot.msu.edu. June Woo Kim is in the Centre for Advanced Studies, National University of
Singapore, 5 Arts Link, Singapore 117570. Fax: 779 1428. E-mail: caskimjw@nus.edu.sg.
0042-0980 Print/1360-063X On-line/00/122167-29 Ó 2000 The Editors of Urban Studies

Downloaded from usj.sagepub.com at University of Groningen on January 5, 2015
DOI: 10.1080/00420980020002760
2168 RICHARD CHILD HILL AND JUNE WOO KIM
organisation and social structure” among the ship between industrial policy and nance
world’s major cities, especially New York, institutionalised in Japan’s developmental
London and Tokyo (Sassen, 1991, p. 4). state. The Tokyo pattern is by no means
In fact, however, fundamental differences uniquely Japanese, however.3 As we shall
in “economic base, spatial organisation and demonstrate, Seoul follows the Tokyo and
social structure” persist between major cities not the New York trajectory. We conclude
in the North Atlantic and east Asian regions. by assessing the likelihood that international
Most telling for the paradigm, Tokyo, centre market and class forces will eventually com-
of the world’s second-largest national econ- pel Tokyo and Seoul to conform to the
omy and the world’s largest urban agglomer- bourgeois, market-centred model.
ation, departs from the world city paradigm
on most salient dimensions. Seoul, centre of
1. World Cities in the World System
east Asia’s second OECD member and the
region’s second-largest metropolis, exhibits The world city literature is a large terrain
the same anomaly. An awareness of these with a blurry perimeter. Nonetheless, there is
differences has been creeping into the world a discernable path running through the eld,
city literature. John Friedmann (1995) has anchored in the writings of John Friedmann
acknowledged that Tokyo does not t the (1986, 1995; Friedman and Wolf, 1982) and
world city paradigm in some respects, but he Saskia Sassen (1991, 1995, 1997, 1999).
does not address the implications for the Friedmann (1986; Friedman and Wolf, 1982)
world city hypothesis. 2 Saskia Sassen (1999, codi ed today’s world city framework in two
p. 86), on the other hand, explains away seminal papers, and the ‘world city hypoth-
Tokyo’s differences as a temporary function esis’ has spawned an international confer-
of “Japan’s uniqueness” and continues to ence and an Oxford University Press
assume that convergence among the world’s collection (Knox and Taylor, 1995). Saskia
major nancial centres is the overall trend. Sassen’s, The Global City: New York, Lon-
We disagree. Understanding Tokyo and don, Tokyo (1991) is the paradigm’s bench-
Seoul necessitates a different conception of mark monograph. Anthony King’s (1990)
the world system from that underlying the study of London, a systematic empirical ef-
globalist version of the world city argument. fort to verify Friedmann’s world city hypoth-
World cities differ from one another in many esis, is also of special importance.
salient respects because they are lodged What then is a world city? 4 A world city is
within a non-hegemonic and interdependent de ned by its functions in the international
world political economy divided among dif- division of labour. “The world city hypoth-
ferently organised national systems and re- esis is about the spatial organization of the
gional alliances (Stallings and Streeck, new international division of labor”, says
1996). Friedman (1986, p. 317). According to
We begin with a discussion of the world Sassen (1991, p. 4), “Key structures of the
city concept. We then summarise the global world economy are necessarily situated in
city argument in six theses and illustrate cities” and cities are “both shaped by their
these tenets with ndings from New York position in the new international division of
City, the theory’s prototype. Next, we show labor and integral to the contemporary
how Tokyo departs from the main theses of globalization process”.
world city theory. New York and Tokyo are Global capital uses world cities as
two different world city types, we argue; the “basing-points” and “organizing nodes” in
former is market-centred and bourgeois, the spatial organisation of international pro-
the latter is state-centred and political- duction and markets (Friedmann, 1986,
bureaucratic. Tokyo’s distinctive world city p. 319). More concretely, major cities in the
characteristics stem from Japan’s late indus- world economy “concentrate the infrastruc-
trialisation and especially from the relation- ture and the servicing that produce a capa-

GLOBAL CITIES AND DEVELOPMENTAL STATES 2169
bility for global control”, Sassen (1995, economy is a single, globe-embracing struc-
p. 63) claims, and such global control capa- ture and process.
bility World city theory is not meant to be uni-
versal in the sense of applying to all cities
is essential if geographical dispersal of
across a very wide swathe of history. Rather,
economic activity is to take place under
the hypothesis attempts to explain transfor-
continued concentration of ownership and
mations in major cities corresponding to a
pro t appropriation.
wave of globalisation beginning in the late
Anthony King reiterates that 1970s. In Friedmann’s (1995, p. 21) view,
there was an “unprecedented shift from an
The most inherent feature of the world city international to a global economy during the
is its global control functions and this 1970s and 1980s”. In the new global econ-
gives it its principal geopolitical character- omy, industries function on a world scale via
istic. (King, 1990, p. 26). global corporate networks. And Sassen
It is their enhanced functions as ‘co- (1991, p. 3) asserts that
ordination and control centres’ in the capi- from the early 1980s, the geography and
talist world economy that provide the composition of the global economy has
selection criteria for world cities and give changed so as to produce a complex dual-
rise to the characteristics attributed to ity: a spatially dispersed, yet globally inte-
them (King, 1990, p. 5). grated organization of economic activity.
Sassen claims that New York, London and The combination of spatial dispersal and
Tokyo are converging on a similar urban global integration has created a new stra-
model due to the new functional role they tegic role for major cities.
play in the globalisation process. And not World city theory is meant to be universal,
just these three cities. Sassen (1991, p. 4) however, in the sense that it applies to the
argues that structure and functioning of all cities that
Transformations in cities ranging from perform key control and co-ordination func-
Paris to Frankfurt to Hong Kong to São tions for global capital in the present period
Paulo have responded to the same dy- of globalisation. 6
namic. In the following section, we distill the
world city paradigm into a manageable set of
Friedmann (1986, p. 318) also claims that veri able theses. Our rendition does not ex-
the form and extent of a city’s integration haust the paradigm, nor do we claim that all
with the world economy and the functions world city researchers would necessarily
assigned to the city in the new spatial agree with every thesis. We do take special
division of labour will be decisive for any care to demonstrate, however, that the theses
structural changes occurring within it.5 are derived from basic assumptions and argu-
ments in the writings of Friedmann, Sassen
And for King (1990, p. 154), and King, and that they are amenable to
empirical veri cation.7
there is no doubt that, despite their very
signi cant differences, speci c world cit-
ies in the capitalist world economy have 2. The World City Hypothesis
structural features in common that are
We can summarise the world city argument
identi ed by the world city literature.
in six theses.
None of these authors considers that funda-
mental regional differences among the
Thesis 1
world’s major cities might exist, probably
because they believe that the capitalist world The more globalised the economy, the

greater the agglomeration of central func- nies still need world city service complexes
tions in a relatively few sites (Sassen, 1991, to control their global operations (Sassen,
p. 5). Global corporations are dispersing 1995, p. 69). The emphasis is not on large
economic production through cross-border corporations and banks per se, but on the
sub-contracting, joint ventures and other global city as a market-place and production
transnational business alliances. But so long site where “the work of producing and repro-
as ownership remains concentrated, the terri- ducing the organization and management of
torial dispersal of economic activities creates global production systems” takes place
the need for expanded central management. (Sassen, 1991, p. 7).
Transnational corporations thus need a spe- Privatisation and deregulation are key fea-
cialised infrastructure of activities, rms and tures of the new global city regime. In the
jobs to control their globally dispersed facto- world’s major international nance and busi-
ries, of ces and nancial markets (Sassen, ness centres “ rms from around the world
1995, p. 63). World cities specialise in pro- can do business with each other in de-
viding the infrastructure that enables corpo- regulated markets and industries”. And
rations to control their global operations. “privatization and innovation in legal prac-
tice make cities like New York and London
key sites for the governance of global econ-
Thesis 2
omic processes” (Sassen, 1997, p. 183). Ac-
Global control functions drive world city cording to King (1990, p. 87), London’s
growth and are embodied in a small number primary function in the world system today is
of sectors: as a banking and nancial centre, and this
“role became more pronounced with de-
corporate headquarters, international
regulation … of securities dealing”.
nance, global transportation and com-
munication, high level business services,
ideological penetration and control via me- Thesis 3
dia and culture (Friedmann, 1986, p. 322).
International banking and producer services
Of these, international nancial and producer replace manufacturing as the engine for
services are the principal means for exercis- economic growth and social patterning in the
ing global corporate control (Sassen, 1995, world’s major cities. The practice of global
pp. 63 – 64). control is connected to a massive loss in
Because nancial and producer service manufacturing jobs, a corresponding rise in
rms bene t from proximity to one another, service employment, high levels of foreign
they cluster into producer service complexes immigration, extreme wealth concentration,
in major cities. Economies occur when spe- social and spatial polarisation and social
cialised service rms locate close to others costs exceeding a city’s scal capacity
that produce key inputs or whose proximity (Friedmann, 1986, pp. 324– 326).
makes possible joint production of a service Manufacturing continues to feed growth in
(Sassen, 1995, p. 68). Proximity among rms producer services, but the actual production
also boosts speed to market. People working location is of little importance to globally
in the high-end nancial and producer ser- oriented service rms. In fact, the inter-
vice jobs are attracted to big city amenities national dispersal of plants actually raises the
and lifestyle, so they also promote clustering demand for centralised producer services be-
(Sassen, 1995, p. 68; see also, Drennan, cause of the increased complexity of transac-
1991; Amin and Thrift, 1992; Leyshon and tions (Sassen, 1997, p. 178). The nance
Thrift, 1997a, 1997b). industry bene ts from circumstances harmful
While global trading and manufacturing to manufacturing rms. Manufacturers are
rms can and increasingly do locate their driven out of major cities by the real estate
headquarters outside big cities, these compa- speculation and gentri cation linked to inter-

national nance. There is not only a decline ascendance of specialised services and inte-
but also a downgrading of the manufacturing gration into world product markets, are major
sector, including an increase in sweatshops cities in the developing world (Sassen, 1990,
and industrial homework (Sassen, 1991, p. 4). Competition for place is severe. Cities
p. 9), “downward pressure on wages result- rise and fall in rank, and sometimes drop out
ing from large scale immigration of foreign of the running altogether (Friedmann, 1995,
workers” (Friedmann, 1986, p. 326) and “de- p. 26).8
industrialization in union blue collar employ-
ment” (King, 1990, p. 26).
The world city presence of corporate head- Thesis 5
quarters, global nance and international
World city regimes and the new urban hier-
institutions presupposes a high-paid
archy are under the sway of a transnational
“transnational producer service class in law,
capitalist class. Interested in a smoothly
banking, insurance, business services, ac-
functioning global system of accumulation,
counting, engineering and advertising”
possessing a cosmopolitan culture and a con-
(King, 1990, p. 26). The growth of a high-
sumerist ideology, the transnational capitalist
level service sector generates an even greater
class often clashes with more locally rooted
growth in low-level, low-paid service jobs in
classes (Friedmann, 1995, p. 26).
maintenance, of ce cleaning, tourism, cleri-
cal, sales, hotels, restaurants and domestic
service (King, 1990, p. 28).
Thesis 6
The sharp increase in occupation and in-
come polarisation increases the social segre- As world cities integrate with one another to
gation of residential space. The rising form a new urban hierarchy under the sway
demand for luxury accommodation displaces of a transnational capitalist class, they be-
the industrial working class and creates a come more like each other and less like other
housing crisis and a oating underclass areas in their own country, thus severing ties
(King, 1990, p. 147). The in ux of poor of mutual interest with their own nation-
workers pits their dire need for social ser- states.
vices against the infrastructure and service According to Sassen (1991, p. 8), “there is
demands of dominant corporate élites. The a systemic discontinuity between national
poor suffer as the wealthy exercise their pol- growth and forms of global city growth”.
itical power to evade taxes. The result is a Global cities are not just competing with one
“steady state of social and scal crisis” as the another but “constitute a system” of their
“burden of capital accumulation is systemati- own. The previous high correspondence be-
cally shifted to politically weakest, and disor- tween major growth sectors and overall na-
ganized sectors” (Friedmann, 1986, p. 326). tional growth reverses as
the conditions promoting growth in global

Thesis 4
cities cause the decline of other areas in
As world cities articulate regional, national the USA, UK and Japan and the accumula-
and international economies into the global tion of government and corporate debt
capitalist system, they form a new urban (Sassen, 1991, p. 13).9
hierarchy. Rank in the hierarchy is deter-
mined by a city’s ability to attract global According to King (1990, p. 145)
investments (Friedmann, 1995, p. 26). At the
top are the command and control centres of The strongest impression that emerges
the global economy—New York, London from the study [of London] is that the
and Tokyo. Lower in rank, but structured by world city is increasingly ‘unhooked’ from
the same deregulation of nancial markets, the state where it exists.

3. New York City Since most international transactions are ne-

gotiated under British or US law, and since
New York City has long considered itself
negotiations occur where British and US le-
the center of the world, and even more so
gal experts congregate, foreign banks feel
of late as globalization has intensi ed
they must maintain a presence in New York
(Crahan and Vourvolias-Bush, 1997, p. 1).
City (and in London). For example, policy
New York City is now more than ever decisions in the most recent Mexican
captive to forces beyond its control nancial crisis were made in Washington,
(O’Cleireacain, 1997, p. 34). DC and in Mexico City, but the nancial
deals and new market instruments came out
New York City is the prototype for world of New York City (Rosen and Reagan, 1997,
city theory. The global city idea has intellec- p. 49).
tual roots in classical human ecology
(McKenzie, 1917) and in theories about the
spatial organisation of transnational corpora- 3.2 Producer Services Complex
tions (Hymer, 1971); but the concept’s recent New York City business services are closely
history follows New York City’s path to tied to the nancial services industry. The
recovery from nancial collapse in the late city’s legal industry, the nation’s largest, il-
1970s (Drennan, 1991). New York City man- lustrates the point. Each merger, acquisition,
ufacturing had been declining and services hostile takeover, new issue or initial public
rising since the 1940s. But trickling manu- offering undertaken by Wall Street and the
facturing losses in the 1950s gushed into a commercial banks requires considerable legal
ood in the late 1960s. The city’s manufac- work. Firms specialising in accounting, pub-
turing employment declined 5 per cent a year lic relations, advertising, insurance and com-
between 1969 and 1977—285 000 jobs in mercial real estate also help to sustain the
all—and plunged New York into bankruptcy nancial sector. Demand for prospectuses
(Fitch, 1993, p. 273). ties even the city’s printing industry to the
Quite unexpectedly, international nance nancial sector (Rosen and Murray, 1997,
and producer services—banking, securities, pp. 40 – 41).10
insurance, accounting, publishing, lm pro-
duction, management consulting and legal
industries—pulled New York out of the 3.3 The New Urban Hierarchy
slump in the 1980s when privatisation and New York City’s commanding position in
deregulation spurred the global expansion of the new urban hierarchy is thus indexed by
trade, nance and investment (O’Cleireacain, the scope of its international banking opera-
1997). Manufacturing employment continued tions, the number of city corporations operat-
to decline and now accounts for less than 9.5 ing in foreign markets, the presence of
per cent of the city’s labour force; nance, higher-order nancial and producer services
insurance and real estate (FIRE), on the other and the city’s nodal role in international
hand, comes to 14.5 per cent and the rest of transport, communication and mass media
the service sector adds another 32.6 per cent networks (Friedmann, 1986, 1995; Sassen,
(Fitch, 1993, p. 274). 1991).
3.1 Global Control Capability 3.4 The New Social Regime

New York’s core labour force now creates Economic structure. New York’s world city
and supports international nancial transac- economy is volatile and cyclical. As Wall
tions. The city’s nancial institutions can Street pro ts go, so go New York City’s
transact loans, new securities issues and incomes, and the securities industry’s income
blocks of stock in any required magnitude. and employment uctuate rapidly. In 1993,

the FIRE sector accounted for 15 per cent of trast, except for a former leper colony in
city jobs, but 27 per cent of city wages; Hawaii, Manhattan was the most unequal
securities alone generated 14 per cent of city county in the US. In 1990, Manhattan had
wages while accounting for only 4 per cent the same level of income inequality as
of city jobs. Securities accounted for one- Guatemala. Average family income in the
third of the city’s new private-sector jobs in borough’s top quintile (US$174 486) was 32
the 1980s. When the stock market crashed in times greater than the bottom quintile
1987, securities job losses led the downturn, (US$5435), more than double the ratio for
and regained securities jobs led the recovery the US as a whole. In Mollenkopf and
in 1992 (O’Cleireacain, 1997, p. 27). Castells’ (1991) portrait, New York City is
polarised between a cohesive core of profes-
Extreme wealth concentration. The nancial sionals in the advanced corporate services
sector’s average wage in 1996 was and a disorganised periphery fragmented
US$99 700, compared to US$37 600 on av- by race, ethnicity, gender, occupation and
erage in the rest of the city economy. Within industry location. 12
the nancial sector, securities wages aver-
aged US$169 500 – 4.5 times more than any Fiscal distress. In the US federal system,
other sector. The top 1 per cent of New York cities are constitutional creatures of the
tax payers now pay about 65 per cent of the states. New York State thus has legal re-
city’s property taxes, more than half the busi- sponsibility for New York City to whom it
ness income taxes, almost half the commer- delegates certain responsibilities through mu-
cial rent taxes and about one-third of nicipal home-rule legislation. New York City
personal income taxes. Half the city’s busi- has sole operating authority over general mu-
ness income taxes come from the top 1000 nicipal services (police, re, sanitation,
payers, 40 per cent of whom are in the FIRE health, parks) and public education. But the
sector (O’Cleireacain, 1997, pp. 31– 32). state government controls all city tax rates,
de nes revenue base growth and charges fees
Foreign immigration. New York has always to administer the city’s income and sales
been a city of immigrants, but even more so taxes (O’Cleireacain, 1997, p. 28).
during the 1980s and 1990s. Over 28 per cent New York City’s tax revenue also depends
of the city’s population was foreign-born in on Wall Street, a rich, specialised, and unpre-
1990 (Salvo and Run, 1997, p. 92). More dictable revenue source. Wall Street accounts
than 3.5 million of the 18 million New York for less than 15 per cent of city jobs, while
Metropolitan Area residents were born over- generating about one-third of city tax rev-
seas; 1.5 million of whom entered the US enues. Because a big share of Wall Street
during the 1980s. 11 earnings is paid in annual bonuses, city tax
collections are as volatile as Wall Street
Social and spatial polarisation. New York’s pro ts. More than 7 per cent of private-sector
service-sector growth has increased high- employees work in foreign-owned establish-
and low-end jobs. Professional and business ments and foreign banks account for 60 per
services provide many highly paid jobs; percent of city bank tax revenue (O’Cleireacain,
sonal and hotel services pay some of the 1997, p. 30). Because nancial rms are so
lowest wages. New York is “increasingly mobile, city policy-makers have dif culty
hollow in the middle”, concluded a study predicting future business growth and face
recently commissioned by the City Council. severe competition from other locations
In 1989, over 35 per cent of New York City seeking the same business. Corporations,
residents lived in middle-class families; by through intricate accounting, are able to shift
1996, only 29 per cent did (McMahon et al., their costs and pro ts to the sites in their
1997, p. 5). global operations that minimise their taxes,
In Andrew Beveridge’s (1996) dismal con- further eroding New York city’s tax-base.

4. Global Cities and Developmental States state involvement in the economy than this
would interfere with the market mechanism,
Friedrich List once made a distinction be-
and by deviating from ef ciency and produc-
tween Anglo-Saxon economic thinking
tivity, would ultimately give way to competi-
and the German historical school. He ar-
tive pressures. In this view, capitalist
gued that in the former, the economy does
societies are bound to converge upon a mar-
not have a national boundary. As a ‘sci-
ket-driven corporate model (Hollingsworth
ence which teaches how the human race
et al., 1994).
may attain prosperity,’ List said, classical
In contrast to their neo-classical brethren,
economics was based on the assumption
Western development economists have long
that ‘A state of things which has yet to
been interested in comparing national paths
come into existence is actually in exist-
to development. In their view, latecomers to
ence.’ In contrast, the German historical
the industrialisation process must forge their
school presented ‘a science which limits
own development institutions and ideologies
its teaching to inquiring how a given na-
because they invariably face a different set of
tion can obtain, under the existing condi-
problems and possibilities from those of their
tions of the world, prosperity, civilization
technically more advanced predecessors
and power, by means of agriculture, indus-
(Gershenkron, 1962; Hirschman, 1981;
try and commerce. In this sense Japanese
Amsden, 1989).
developmentalism is an extension of mer-
A poor country’s edgling rms, for ex-
cantilism and of the German Historical
ample, confront formidable competition from
School (Gao, 1997, pp. 39– 40).
transnational corporations possessing far
New York City is the prototype for world greater economies of scale, advanced tech-
city theory and New York intellectuals, like nologies and global networks. But less devel-
New Yorkers in general, tend to think of oped countries also have hidden reserves of
their city as the centre of the world. But how labour, savings and entrepreneurship. Na-
representative of the world’s major cities is tions wishing to overcome the penalties and
New York, and how expansive is world city realise the possibilities of late development
theory? Before describing Tokyo’s departure require a strong state. The real issue, devel-
from the New York model, we must set the opment economists often conclude, is not
context in Japan’s political economy. whether the state should or should not inter-
Tokyo’s distinctive world city characteristics vene, but rather “the art of getting something
stem from Japan’s late industrialisation and done with intervention” (Amsden, 1989,
especially the relationship between industrial p. 140).
policy and nance institutionalised in Japan’s Japanese thinkers developed their own art
developmental state. of late development between the Great De-
pression and the end of World War II. In
contrast to liberal capitalism, Japanese devel-
4.1 Late Industrialisation and the Develop-
opmentalism addressed industrialisation at
mental State
the level of the nation-state. Strengthening
Western neo-classical economists enquire national production was the top priority of
mostly into markets, and occasionally into industrial policy. The economy was viewed
organisational hierarchies. They recognise strategically with the aim of building an in-
the state as a third means for economic gov- dustrial structure that would maximise
ernance but con ne it to de ning property Japan’s gains from international trade. State
rights, enforcing contracts, overseeing the regulations and non-market governance
general rules of competition and (sometimes) mechanisms were designed to restrain com-
providing collective goods; that is, to setting petition in order to concentrate resources in
the minimal conditions without which mar- strategic industries and maintain orderly
kets and hierarchies could not function. More economic growth. And the quest for short-

term pro ts was rejected to secure workers’ funds for banks, could then in uence the
co-operation in promoting productivity. The lending practices of the banks (Mabuchi,
Japanese rst institutionalised these princi- 1995). 13
ples between 1931 and 1945, but a number of MOF’s International Finance Bureau over-
studies (Morishima, 1981; Sakakibara, 1993; saw the foreign operations of Japanese
Okazaki, 1995; Gao, 1997) suggest that these nancial enterprises and the domestic opera-
tenets continued to underlie Japan’s post-war tions of foreign nancial institutions. To
industrial policy, despite changes in Japan’s maintain Japan’s international balance of
political institutions and national purpose. payments and to insulate the Japanese capital
The transformation of Japanese develop- market from foreign penetration, the MOF
mentalism from militarism to trade was tightly controlled the ow of capital to and
largely accomplished by the end of the from Japan during the 1950s and 1960s, via
1960s. The state emerged with a strong ca- the Foreign Exchange Law. Had the MOF
pacity to sustain economic growth in contrast not controlled the in ow and out ow of capi-
to the more free-wheeling role played by the tal, the domestic system of regulated interest
market in Anglo-American capitalist econ- rates could have easily been circumvented,
omies. Japanese managers emphasised co- undermining the industrial policy system
operative industrial relations in contrast to (Mabuchi, 1995, pp. 292– 293).
their con ict-prone Western counterparts. MOF lacked the formal power to direct
Family-based zaibatsu business groups were bank lending to speci c rms and industries.
reorganised into management-controlled MOF relied instead upon the Bank of Japan,
keiretsu networks as a powerful weapon in which controls the supply of money to the
market competition (Fruin, 1994). economy. Modelled on German legislation,
Japanese banking law decrees that “the Bank
of Japan shall be managed solely for the
4.2 Industrial Policy and State Finance
achievement of national aims”. The chain of
The effectiveness of a nation’s industrial pol- command stretching from the bureaucracy to
icy depends upon the way it organises its private-sector nance via the Bank of Japan
nancial system. When equity capital is the enabled the government to mount a growth-
primary source of industrial funds, as in the oriented nancial policy. Following BOJ
US and the UK, a state’s capacity to im- guidance, city banks allocated credit selec-
plement industrial policy is limited. When tively to large rms in targeted industries
banks are the primary suppliers of funds, and who adopted new technology, increased
the government has authority to shape bank productivity and expanded exports (Mabuchi,
behaviour and to administer interest rates, as 1995, p. 297; Hartcher, 1998).14
in Japan, the state is in a much better position Japan’s bureaucracy has a limited array
to in uence the industrial economy. of sanctions. Each agency therefore seeks
In the Anglo-American system, most to maintain close working relations with
funds for industry are collected through the the sector under its jurisdiction to build
bond or stock market. By contrast, Japan’s up the credibility necessary to secure volun-
Ministry of Finance (MOF) blocked the di- tary compliance. Dense policy networks con-
rect ow of funds from households to rms nect the state and civil society (Okimoto,
by setting low interest rates on bonds, rela- 1989). 15 “Public policy companies” are the
tive to personal savings accounts, and by prime nodes in these policy networks, that
strictly regulating bond issues. Requiring is,
rms to obtain funds through bank loans
rather than stock issues, enabled banks to corporations in which some or all owner-
in uence the business decisions of borrow- ship shares are held by the government
ers. And the MOF through its in uence over and management is charged with serving
the Bank of Japan (BOJ), a major source of public policy ends rather than making a

pro t for shareholders (Johnson, 1978, by the world market shares held by the na-
p. 25). tion’s industries, not by quarterly dividends
and privately accumulated wealth (Mat-
The practice of employing retired govern- sumoto, 1991).
ment of cials as executives in private com- Tokyo offers corporations global control
panies (amakudari) further lubricates the capability, but the primary vehicle is not
networks. private nancial and producer services clus-
MOF and the banking sector have a tered into complexes by market forces.
nancial policy network. The Ministry of Tokyo’s global control apparatus resides in
International Trade and Industry (MITI) sus- nancial and industrial policy networks
tains an industrial policy network with a among public policy companies, banks and
wide range of industries through deliberation industrial enterprises, under the guidance of
councils, industry and trade associations. government ministries like the MOF and
And since MITI must rely on the MOF’s MITI (Johnson, 1978; Sakakibara, 1993;
administrative guidance to get bank funds Mabuchi, 1995). Indeed, by emphasising
channelled to strategically targeted indus- reinvestment and employment rather than
tries, MITI and the MOF have a policy net- high pro ts and individual consumption,
work of their own (Mabuchi, 1995). Japanese policies have actively discouraged
growth in the kinds of services distinguishing
New York City (Fingleton, 1995).
Tokyo
The practice of global control in Tokyo
Given the differences between Anglo- has not resulted in a social regime character-
American liberalism and east Asian develop- ised by massive loss in manufacturing jobs,
mentalism—in history, ideology and political high levels of foreign immigration, extreme
economy, and especially in the relationship wealth concentration and social and spatial
between industrial policy and the organis- polarisation. One-quarter of Tokyo’s labour
ation of nance—it seems reasonable to ex- force continues to work in manufacturing (as
pect related contrasts in the role each against less than 10 per cent in New York
sphere’s major cities play in the world econ- City), primarily in high-tech, research-
omy.16 Table 1 offers such a contrast by intensive pilot plants (Fujita and Hill, 1998),
hypothesising two world city types: a mar- and the headquarters of Japan’s major manu-
ket-centred, bourgeois type, modelled on facturing companies continue to concentrate
New York City, and a state-centred, politi- in Tokyo to be near government ministries
cal-bureaucratic type, modelled on Tokyo. (Hill and Fujita, 1995). The state tightly con-
We provide a brief sketch of Tokyo to trols foreign immigration with an eye to
establish the contrasting type, and then focus available employment, and the foreign-born
our empirical investigation on another state- represent a minuscule 1.8 per cent of
centred world city, Seoul, Korea. Tokyo’s population (Cybriwsky, 1998,
The global economy is spatially imbedded p. 116), compared to 28 per cent in New
in Tokyo, to be sure (Douglass, 1993), but York City. In contrast to New York City’s
Tokyo is not primarily a global basing-point dualism, Tokyo’s occupational structure is
for the operations of stateless TNCs. Rather, compressed around the median, the middle
Tokyo is mainly a national basing-point for strata encompass most city residents, and the
the global operations of Japanese TNCs (Hill extremes in wealth concentration and impov-
and Fujita, 1995). Tokyo’s relationship to the erishment found in New York are missing. 17
world economy is not driven in the rst Tokyo’s commanding place in the world
instance by market ef ciency, but by a stra- urban hierarchy is not determined by the
tegic concern to preserve national autonomy city’s ability “to attract global investments”
through global economic power (Johnson, (Friedmann, 1995, p. 26), but by the ability
1995). In Japan, economic power is indexed of Tokyo companies to generate earnings

Table 1. Two world city types
State-centred political-
Market-centred bourgeois bureaucratic
Prototypical city New York Tokyo

Regional base West Atlantic East Paci c
Leading actors
Group TN capitalist class State bureaucratic élite
Organisation Finance TNCs State Ministries tied to
Vertically integrated rms business networks via
main banks
Economic ideology Liberalism Developmentalism
Self-regulating market Strategic national interest
Trade, investment and production
Relation to world economy Market-rational Plan-rational
Prime objectives Private wealth National power
Pro t-maximising Market-share, employment-
maximising
Global control capability via Private-producer service Government ministries
complexes Public corporations
Policy networks
Industrial structure Manufacturing HQs and Manufacturing HQs and
production dispersed high-tech production
concentrated
Services emphasised Services de-emphasised
Occupational structure Polarised Compressed
(social and spatial) Missing middle Missing extremes
High inequality Low inequality
High segregation Low segregation
Foreign immigration Weak controls Strong controls
High Low
Culture Consumerist Productionist
Yuppie, ethnic Salaryman, of celady
City– central state Separation Integration
relationship
Source of urban contradictions Short term pro t State capital controls
Market volatility Overregulation
Polarisation Centralisation
Competitive advantages Fluidity Stability
Mobility Planning
from abroad. In 1990, for example, Japanese in uence big- rm strategies via the supply
TNCs controlled 12 per cent of world FDI, and cost of capital to network banks, the
while foreign investment in Japan repre- system was also explicitly designed to pro-
sented only 1 per cent of the total world tect Japanese companies against foreign pen-
stock. The comparable gures in 1980 were etration and short-term pro t pressures
4 per cent and 1 per cent (Ostry, 1996, (Matsumoto, 1991; Sakakibara, 1993).
p. 334). While Japan’s keiretsu networks and Control over investment equals power in
the main bank system enabled the MOF to Tokyo as in New York City, but Tokyo is

under the sway of a political-bureaucratic residents, the capital region contains 39 per
élite, not a transnational capitalist class (Koh, cent of South Korea’s population (Kim and
1989; Hartcher, 1998; Gibney, 1998). Con- Choe, 1997, p. 43).
trol in New York City is in the hands of a Seoul is also Korea’s window on the
private investor class. The stock market is world. All but one of the nation’s foreign
the barometer of New York’s economy. Con- embassies, and 15 out of Korea’s 22 foreign
trol in Tokyo is exercised through manage- consulates are in Seoul. All of the nation’s
ment-run corporate networks centring upon stock brokerages (76), foreign bank of ces
main banks which in turn are guided by (66), of ces of foreign media (25) and broad-
government ministries. Employment is the casting networks (8) are in the city. Seoul
barometer of Tokyo’s economy. Tokyo’s hosts 71 per cent of Korea’s overseas-based
élite possesses a ‘productionist’ not a con- service industries, half the nation’s inter-
sumerist ideology (Fingleton, 1995; Vogel, national hotels and trading companies, and
1997). The clash between classes in the state- nearly all of its communication services
centred world city is not between transna- (Hong, 1996).
tional and local capitalist classes but between Seoul has grown explosively since the
bourgeois and political-bureaucratic élites 1960s, in step with Korea’s successful ex-
(Wade and Veneroso, 1998). 18 port-led industrialisation strategy. As Ko-
Finally, Tokyo is not parting company rea’s per capita GNP multiplied from US$81
with the Japanese nation and central state. in 1960, to US$1589 in 1980, to US$10 548
Japan is a unitary state, and the relationship in 1996, the percentage of the nation’s popu-
between the city of Tokyo and the central lation residing in cities expanded from 33.8
government is bureaucratically integrated in per cent to 66.7 per cent to 82.9 per cent
a myriad of ways (Muramatsu, 1997), and (Park, 1995, p. 70; Korea Embassy, USA,
especially through the Ministry of Home Af- 1998). Home to 2.33 million people in 1960,
fairs (Akizuki, 1995; Hill and Fujita, 2000). Seoul was the 19th-largest city in the world.
Tokyo is, in effect, a national champion (Hill By 1990, Seoul had mushroomed to 11.33
and Fujita, 1995). million residents and had become the world’s
7th-largest city. Seoul now ranks 7th among
the world’s cities in the number of industrial
5. The Seoul Republic
Fortune 500 transnational corporations
Seoul became Korea’s political capital and (TNCs) headquartered there, 13th in the
the centre of national culture at the onset of number of TNC bank headquarters, 17th in
the Choson Dynasty in 1392. 19 Today, Seoul number of international organisations and
is Korea’s command post for government 23rd in frequency of international confer-
planning and business management. While ences (Jo, 1992).
24 per cent of the nation’s population resides The outward indicators certainly point to
in Seoul city, virtually all of Korea’s central Seoul’s world city status, but how well in
government agencies (96 per cent) and top fact does the Seoul Republic t the world
corporate headquarters (48 out of the top 50) city paradigm? Before we can address this
are located there. Sixty-one per cent of Ko- question, we must once again set the context,
rea’s business managers and 64 per cent of this time in Korea’s political economy.
the nation’s research scientists work in the
city (Kim and Choe, 1997, p. 2).
5.1. Late Industrialisation and the Develop-
The city of Seoul combines with surround-
mental State
ing satellites in Kyonggi-do Province to form
the Seoul Metropolitan Region (SMR). Kore- The Japanese system of political economy
ans often refer to the SMR as the ‘Seoul came to be transplanted in many essential
Republic’ because it is so dominant over aspects in Korea, a country that had for
other regions of the country. With 17 million millennia existed near yet separate from

Japan, and with a bureaucratic tradition lenders supplied with state guarantees. Ko-
signi cantly different from that of feudal rean businessmen could also count on state
Japan (Woo-Cumings, 1995, p. 432). assistance when they got into nancial trou-
ble, considerably reducing their personal risk
Korean capitalism emerged out of imperial- (Eckert, 1993, p. 126).
ism. Korea was known as the ‘Hermit King- The South Korean state, like its colonial
dom’ during the late Yi Dynasty, when rulers predecessor, suppressed labour activities it
prohibited contact with foreigners. Japan deemed threatening to the country’s compar-
forced Korea to open up to the world econ- ative advantage. Many of South Korea’s cap-
omy in 1876, with the signing of the italists descend from an oppressive
Kanghwa Treaty, and then colonised Korea land-owning class and they tend to regard
from 1909 to 1945. workers with paternalism if not outright dis-
Japan’s colonial policies and post-World dain. Japan, after the Occupation forces dis-
War II growth strategies served Korea as a mantled its family-based business groups and
‘template’ for political-economic develop- created an opening for labour organisation,
ment, according to Woo-Cumings (1991, forged an enduring social contract between
1995). Korea’s state apparatus, and particu- management and labour. Korean class rela-
larly the state’s relationship to business tions, by contrast, remain charged and vol-
groups and the nancial system, derives from atile.
the colonial experience. Korea’s mode of The Western bourgeoisie had a material
industrialisation, like Japan’s, re ected a interest in promoting a more liberal state
concern for national security in the face of because it emerged against the grain of auth-
Western domination and a domestic econ- oritarian regimes who sought to block capi-
omy in need of state intervention if capital talist development. The Korean bourgeoisie
was to be mobilised. 20 had no such incentive to liberalise the politi-
Seoul grew into a city of 1 million under cal order. Korea’s authoritarian regimes sup-
Japanese rule. As the colony’s business, ported capitalist growth, and the desire of
nance and administrative centre, Seoul was business groups to keep labour costs down
organised primarily to meet Japanese needs. gave them an incentive to accommodate with
The colonisers built a shrine on top of Mt authoritarian rule (Eckert, 1993, p. 128).
Namsan and a colonial of ce in front of Still, as a late developer, Korea’s capitalist
Kyongbok Palace (a royal residence during creed did not originate with the bourgeoisie,
the Yi dynasty), and they took over much of nor with intellectuals interpreting an already-
the city’s central core for residential quarters. emergent capitalist society, but with neo-
But the Japanese also introduced streetcars Confucian scholars who had communitarian
and trains which provided Seoul with an values and an interest in capitalism as a way
infrastructure for urban and economic devel- to save their country from imperialist domi-
opment (Kim and Choe, 1997, ch. 1). nation (Brandt, 1987). Confucianism,
As in Japan, the Korean state, not the nationalism and capitalism fused in late 19th-
bourgeoisie, initiated and led the industrialis- century Korea into a moral vision of society
ation process. But also, as in Japan, there has strikingly at odds with Western liberalism.
been an element of reciprocity in the govern- Korean ideology stressed national needs and
ment– business relationship. The state used denigrated the purely self-interested pursuit
various incentives, including coercion, to tai- of wealth. The nation was viewed politically
lor business interests to national goals, but as a state in the midst of other competing,
the state also supported private business as and potentially hostile, states; and culturally
the primary instrument for national economic as a group of people who identi ed them-
development (Johnson, 1984, p. 145). Capital selves as Korean. The moral role of the
for business investment came from state- capitalist was to strengthen the political na-
controlled domestic banks or from foreign tion while enriching the cultural nation. Ac-

cording to Eckert (1993, p. 119), this vision the government (Mardon, 1990; Woo-
continues to inform all discourse on capitalist Cumings, 1991, ch. 4).
development in Korea, including workers’ The state promoted Korean exporters with
consciousness and militancy which have in- short-term credits and subsidies to explore
creased dramatically during the past two new opportunities, and funded general trad-
decades. ing companies according to their export per-
formance. State of cials marshalled capital
The state and nance. Like Japan, the Ko- for ambitious development programmes by
rean state targeted industrialisation and raising interest rates on savings deposits and
achieved it by controlling interest rates, then by protecting industrial rms from the
supervising foreign exchange and allocating rising costs of heavy borrowing by subsidis-
cheap bank credit to large industrialists. Pub- ing their interest payments. The state directed
lic of cials could persuade private business low interest loans to particular industries and
to build selected industries and expand ex- rms through directives to banks while sim-
ports because the state controlled the supply ultaneously protecting the pro tability of the
of capital. And state of cials could discipline commercial banks. This policy, as in the
business by threatening to withdraw credit if Japanese case, stimulated private savings and
a rm’s performance was not up to par. shifted control over capital to the banking
Koreans were paid lower returns on their sector where the state could exert consider-
savings, but they were rewarded as wage- able in uence (Cho, 1995).
earners with the expansion of job opportuni- To compensate for the shortage of dom-
ties and increased real wages. Rapid estic capital and declining foreign aid, state-
increases in income contributed to the accu- owned banks guaranteed foreign borrowing
mulation of domestic savings and the sub- by Korean companies (Mardon, 1990). State
sequent expansion of the nancial market loan guarantees prompted a large in ow of
(Woo-Cumings, 1991; Cho, 1995). 21 foreign capital, especially from Japan (Cho,
Korea’s early post-colonial state did not 1995, p. 216). And because state approval
have a clear economic strategy. Economic was required for each foreign loan, govern-
development goals were overshadowed by a ment of cials could use foreign borrowing as
political, nation-building agenda. Korea’s yet another means to support their industrial
economic policy was heavily in uenced by policy goals.
the US during the 1950s, and the government In sum, the regimes of Park Chung Hee
did not systematically intervene in the mar- and his successor Chun Doo Hwan, were
ket. 22 The turning-point came in May 1961, able to direct capital towards targeted indus-
when Park Chung Hee, a military general, tries and to ensure business co-operation
took control of the government in a coup with their ve-year development plans by
d’état. The Park regime, which ruled Korea controlling the banks, by setting interest rates
until Park’s assassination in 1979, had little and by underwriting foreign loans and in-
con dence in the free market and shifted vestments. Industrialists had to prove them-
economic priorities from stabilisation to selves in the international market by meeting
growth and from import substitution to ex- the criteria set by the government. Firms not
port promotion. The military government performing up to the standards faced losing
sought to accelerate economic growth by favourable treatment.23
taking the lead in mobilising and allocating Government of cials began relaxing their
resources. In pursuit of this goal, state controls over the economy in the early
of cials launched their rst ve-year devel- 1980s, to spur private initiative, and the
opment plan, strengthened their control over chaebols began acquiring nancial institu-
the nancial market by nationalising com- tions. But state of cials retained basic
mercial banks and amended the Bank of nancial control. The Ministry of Finance
Korea Act to subordinate the central bank to continued to supervise the Bank of Korea, to

appoint all senior bank of cials and to clear Seoul not New York City—just 4 out of
major credit allocations (Eckert, 1993, Tokyo’s top 20 rms are in the nance and
pp. 106 – 107). producer service sector.
Contrary to the world city model, Seoul is
primarily a national basing-point for the glo-
5.2 World City in a Developmental State?
bal operations of Korean TNCs. The Korean
Seoul’s global base. With scarce natural re- state has controlled the inward and outward
sources and a small domestic market, the ow of foreign investment until recently, and
Korean state subsidised export-oriented in- as Table 3 shows, the largest foreign hold-
dustries and South Korea industrialised by ings in Seoul as of 1990 were minority eq-
exporting to overseas markets. Seoul, as uity shares in major Korean corporations,
home to the central government, was the mostly held by Japanese TNCs, rather than
place to be for all who desired contact with subsidiaries that were wholly or majority
government ministries and exposure to inter- owned by companies headquartered abroad. 25
national markets.24 Little wonder then that Seoul hosts many fewer branches of foreign
Korea’s major rms and business associa- headquartered companies (161) than compar-
tions headquartered in Seoul. Following the able world cities in the Americas, like Mex-
chaebols, related industries and supporting ico City (266) or São Paulo (380) (Hoopes,
services also clustered in Seoul in pursuit of 1994).
close contacts with the major business
groups, central government agencies, trade Seoul’s global control capability. Seoul cer-
and industrial associations. tainly hosts an infrastructure for global con-
Seoul is certainly a basing-point for TNCs, trol. But, contrary to world city theory,
as emphasised by world city theory. Seoul Seoul’s global control apparatus is anchored
hosted 4 companies on the list of the world’s in central government ministries and the
100 largest in 1997—only 6 cities in the state’s continuous channels of communi-
world had more (Fortune, 1998). Ten of the cation with business leaders and organisa-
global Fortune 500 companies are located in tions that monitor industrial performance, not
Seoul, including the Daewoo Group (24th), in private nance and producer service rms.
Sunkyong (46th), Samsung (71th), Ssangy- Because export marketing requires substan-
ong (90th), Hyundai Corporation (109th), tial xed costs and externalities in the initial
Samsung Life Insurance Co. Ltd. (212th), stages of any industry, the expanded credit
LG International Corporation (216th), LG made available by the state crucially enabled
Electronics (270th), Hyundai Motor (278th) Korean exporters to ll foreign orders and
and Korea Electric Power Corporation explore foreign markets. Without govern-
(282th). ment intervention in the allocation of credit,
But contrary to world city theory, Seoul’s it is unlikely that Korea’s rapid transforma-
TNCs are industrial not nance or producer tions in industrial composition and level of
service companies, and the contrast with industrial development would have been
New York City in Table 2 is revealing. possible (Cho, 1995, p. 224; Mardon, 1991).
Ranked by sales, 16 out of the top 20 New Firms which nance their investments pri-
York City-based rms are in the nance and marily through bank credit and foreign loans,
producer services sector, but only 3 out of instead of through stock issues, accumulate
the top 20 Seoul corporations are in that heavy debt. Through its control over nance,
category; the rest are manufacturing and con- the Korean government became a risk part-
struction rms. Lest one think this difference ner for industrialists, enabling new export
is explained by New York City’s more ad- ventures and entrepreneurship. And by con-
vanced economy, Table 2 also reveals that trolling the banks, the government created
Tokyo, the capital of global capital according incentives for rms to maximise their assets
to the Global Fortune 500 list, resembles and growth, rather than to strive for immedi-

2182
Table 2. The distribution and ranking (by net sales) of producer services rms in New York, Seoul and Tokyo, 1997
New York Seoul Tokyo
1. Philip Morris, Inc. 1. Samsung Corporation 1. Mitsui & Co. Ltd

2. AT&T Corporation 2. Daewoo Corporation 2. Mitsubishi Corporation
3. Citicorp 3. Hyundai Corporation 3. Nippon Tel. & Tel. Corporation
4. Chase Manhattan Corporation 4. LG International Corporation 4. Hitachi, Ltd
5. American International Inc. 5. Hyundai Motor Co. Ltd 5. Sony Corporation
6. Merrill Lynch & Co., Inc. 6. Korea Electric Power 6. Dai-Ichi Mutual Life Insurance
7. ITT Corporation 7. Yukong Ltd 7. Toshiba Corporation
8. Travelers Group, Inc. 8. LG Electronics Co. Ltd 8. Honda Motor Corporation
9. Loews Corporation 9. Hyundai Engineering & Construction 9. Bank of Tokyo-Mitsubishi
10. American Express Co. 10. Kia Motors Corporation 10. Tokyo Electric Power Co.
11. RJR Nabisco Holdings Corporation 11. Ssangyong Corporation 11. NEC Corporation
12. Morgan J.P. & Co. 12. Hyundai Motor Service 12. Fujitsu Ltd
13. Bristol-Myers Squibb Co. 13. Ssangyong Oil Re ning 13. Japan Tobacco, Inc.
14. Lehman Brothers Holdings 14. Korea Exchange Bank 14. Mitsubishi Motors Corporation
15. Nynex Corporation 15. Daewoo Electronics Co. 15. Meiji Mutual Life Insurance
16. Morgan Stanley Group Inc. 16. Hanil Bank Ltd 16. Mitsubishi Electric Corporation
17. Viacom, Inc. 17. Cho-Hung Bank, Ltd 17. Kanematsu Corporation
RICHARD CHILD HILL AND JUNE WOO KIM
18. P zer Incorporated 18. Korean Air Lines Co. Ltd 18. Mitsubishi Heavy Industies

19. Chase Manhattan 19. Ssangyong Cement 19. Nippon Steel Corporation
20. Time Warner, Inc. 20. LG Chemical Co. Ltd 20. Ito-Yokado Co.
Note: Producer services rms are shown in bold.

Source: Disclosure (1998).
Table 3. Largest foreign af liates in Seoul and Mexico City, 1990 (industrial sector companies ranked
in terms of sales)
Major foreign investor, Nationality (ownership percentage)
Companies in Seoul
1. Hyundai Motors Co. Ltd Mitsubishi Group, Japan (5.8); Mitsubishi Auto, Japan (4.5)
2. Honam Oil Re nery Co. Ltd First Chemical, Japan (33.6)
3. Kia Motors Corp. Ltd Ford, US (10); Mazda, Japan (8)
4. Daewoo Motor Co. Ltd General Motors (NA)
5. Gold Star Cable Co. Ltd Hitachi Cable, Japan (12)
6. Hyundai Precision Co. Ltd GRAFF, Germany (NA); Japan Steel Works, Japan (NA)
7. Samsung Electronic Devices Co. NEC, Japan (10)
8. Tong Yang Nylon Co. Ltd Zimmer AG, Germany (NA)
9. Cheil Synthetic Textile Co. Ltd Toray Industries (20.8)
10. Nhong-Shim Kellogg Co. Ltd Kellogg, US (NA)
Companies in Mexico City
1. General Motors de Mexico
SA CV General Motors, US (100)
2. Chrysler de Mexico SA CV Chrysler Motors Corporation, US (100)
3. Ford Motor Co. SA CV Ford, US (100)
4. Volkswagen de Mexico SA CV Volkswagen, Germany (100)
5. Nissan Mexicana Nissan, Japan (100)
6. Celanese Mexicana SA Hoechst, Germany (100)
7. IBM de Mexico SA IBM, US (100)
8. Compania Nestlé SA CV Nestlé, Switzerland (100)
9. Kimberly-Clark de Mexico
SA CV Kimberly-Clark, US (100)
10. Cigarros La Tabacalera
Mexicana SA CV NA
Sources: UN (1994a, 1994b); Dun & Bradstreet, Inc. (1992); Hoopes (1994); Stopford (1992).
ate pro tability. As long as they satis ed the To be sure, manufacturing rms have relo-
government by expanding exports and con- cated from Seoul to other parts of the capital
structing new plants, rms ensured their region and nation, and service employment
access to credit. has grown in importance in the city’s econ-
omy. For example, Seoul’s share of the capi-
Economic organisation. According to the tal region’s industry declined from 64 per
world city paradigm, the decentralisation of cent of manufacturing rms and 70 per cent
manufacturing and the associated shift to a of manufacturing employees in 1960, to 48
service-based economy occasion a massive per cent and 36 per cent in 1991. But manu-
loss in a world city’s manufacturing employ- facturing decentralisation was not the out-
ment, the exodus of manufacturing headquar- come of market forces, as argued by world
ters and a downgrading in the manufacturing city theorists, but a planned move by the
jobs that remain in the city (Sassen-Koob, state to curb the vast concentration of popu-
1986; Sassen, 1991). But Seoul does not t lation and industrial activities in Seoul. 26 And
this pro le, either. As we have seen (Table the city’s manufacturing base has remained
2), the headquarters of Korea’s major manu- much more diversi ed than is implied by the
facturing companies continue to concentrate market-centred, world city paradigm.
in Seoul, one-quarter of Seoul’s labour force The Korean state has controlled industrial
continues to work in manufacturing and location since 1964, and Seoul’s industrial
the city’s manufacturing base is the most policies discourage permits for new manu-
advanced in the nation. facturing rms. City policies also encourage

the relocation of existing factories that cause the Han River, on the other hand, are well
serious pollution problems, and use heavy or planned, mixed residential and business dis-
antiquated equipment. But Korea’s high-tech tricts for the middle classes. 29
industries, as measured by R&D invest- Still, Seoul has few of the plywood shanty
ment and technology content, continue to towns visible in many Asian cities, and noth-
concentrate in Seoul and its satellite cities. ing like the bombed-out-appearing districts
Over 60 per cent of the nation’s semi- in New York’s South Bronx or Harlem. And,
conductors are produced in Seoul, for exam- contrary to world city theory, income dispar-
ple, and more than 50 per cent of Korea’s ities among Seoul’s wards are hard to dis-
high-tech products are produced in the capi- cern. In 1993, the average monthly
tal region. Universities and research insti- household income of the poorest of Seoul’s
tutes likewise cluster in Seoul and the capital 26 wards was 97 per cent that of the wealth-
region. Over two-thirds of Korea’s industrial iest (see Table 4). By contrast, per capita
research institutes were located in the capital income in the Bronx, New York City’s
region in 1989, one-quarter in Seoul (Hong, poorest borough, was just 38 per cent that of
1996, p. 160). Manhattan, the wealthiest.
Equity in the distribution of wealth has
Social and spatial polarisation. Seoul’s nonetheless been a persistent bone of con-
population multiplied ve times between tention in Korea. The aggregate net sales of
1960 and 1990. With limited nances and a the top 10 chaebols in 1985 came to nearly
severe housing shortage caused by devas- 80 per cent of South Korea’s GNP, up from
tation during the Korean War (1951 – 53), 15 per cent 10 years earlier. Concentration of
Seoul could not accommodate the massive business wealth has been further augmented
rural-to-urban migration set off by rapid in- by intermarriage among the leading chaebol
dustrialisation. 27 Much of Seoul’s physical families (Eckert, 1993, p. 122).
infrastructure was in dire need of repair, and Education is also a stratifying force. Under
public services lagged well behind popu- the in uence of Confucianism, Korea has
lation growth. Many migrants took up resi- one of the most ercely competitive K-12
dence in squatter settlements on the outskirts educational systems in the world. The best
of the city. City of cials attempted to restrict, high schools and universities are located in
yet accommodate, the in ux of newcomers Seoul. Parents consider it essential to put
through a green belt around the city, and by their children in the best school system poss-
encouraging high-rise apartments in varied ible and are willing to pay huge costs, includ-
sizes and prices in open spaces south of the ing migration from another region, for an
Han River. opportunity to send their children to second-
Thus you can certainly nd class- ary schools and universities in Seoul (Kim
segregated residential areas in Seoul. Squat- and Choe, 1997, p. 26).30
ters, most of whom work in construction, as And yet, even with the extreme concen-
street vendors, housemaids and taxi drivers, tration of capital in the hands of a few busi-
or in small factories (FEER, 1988b, p. 86), ness groups, and the relationship between
have settled on the hillsides surrounding the education and career opportunity, the distri-
city. But, contrary to world city theory, most bution of income among Korean families is
are migrants from Korea’s countryside not among the most egalitarian in the world
from abroad. Seoul’s foreign residents num- (Kim and Choe, 1997, p. 36; World Bank,
bered 39 246 in 1994, only 0.4 per cent of 1993, p. 31).
the city’s population (Hong, 1996, p. 162),
much lower even than Tokyo’s 1.8 per cent Seoul’s bureaucratic élite. The Yi Dynasty
(Cybriwsky, 1998, p. 16), let alone New preceded Japanese colonialism in Korea. The
York City’s 28 per cent! (Crahan and Vour- royal palace headed a highly centralised
volais-Bush, 1997). 28 Several wards south of government in Seoul. Palace decisions affec-

Table 4. Income disparity in Seoul and New York
Seoul (1993) New York (1989)
Average monthly Average annual per capita

Gu (ward) income (won)a Boroughs income ($)
Chongno 965 378 Bronx 10 535

Chung 955 149 Brooklyn 12 388
Yongsan 949 010 Manhattan 27 862
Songdong 955 721 Queens 15 348
Tongdaemun 959 383 Staten Island 17 507
Chungrang 952 040
Songbuk 958 976
Tobong 958 819
Nowon 964 934
Uunpyong 979 983
Sodaemun 971 203
Mapo 964 586
Yangchon 965 732
Kangso 969 517
Kuro 969 875
Yongdungpo 959 926
Tongjak 960 597
Kwanak 967 924
Socho 965 940
Kangnam 982 859
Songpa 981 658
Kangdong 971 956
a
In 1993, there were 808 Korean won to US$1.
Sources: US Bureau of the Census (1993); Lee et al. (1995).
ted all aspects of Korean life. The palace’s bureaucrats, also on the Japanese model,
annual civil service examination, known as have their own mutual aid associations, and
the Kwageo, was the signal event in the lives there is a great deal of policy co-ordinating
of young people aspiring to serve the King- and consensus-building within the civil ad-
dom. Young men ocked to Seoul where ministration (Woo-Cumings, 1995).
they spent years living in boarding houses The strongest con icts within the Korean
and preparing for the civil service examin- state are among regional factions. Regional
ation. The few who passed the exam were differences became even more acute after the
allowed to relocate their family to Seoul military coup in 1961. President Park and his
(Kim and Choe, 1997, p. 20). inner circle were from the south-eastern re-
Seoul is not under the sway of a transna- gion and, while promoting Korea’s economic
tional class, as posited by world city theory. development, they channelled new projects
Rather, the large political power of Korea’s disproportionately to their home region.
small bureaucracy continues to the present Particularly disadvantaged was the south-
day. As in Japan, Korea’s state of cialdom, western region where Park’s political oppo-
not the bourgeoisie, led the industrialisation sition was centred. The concentration of the
effort. And political bureaucrats controlled nation’s people and resources in Seoul and
the state. Most parliamentary statutes origi- the capital region has further aggravated re-
nated with the bureaucracy, not with legisla- gional factionalism because it pits provincial
tors, and administrative policies were also interests against the home territory of the
orchestrated within the bureaucracy. Korean central state.

Seoul’s integration with the nation-state. Ko- Tokyo and Seoul challenge world city the-
rea, like Japan, is a unitary state. Until re- ory’s assumptions about the nature of global-
cently, the city of Seoul was simply an isation and the role of world cities in the
appendage of the central government. The globalisation process. How damaging are the
central government appointed provincial east Asian anomalies to the validity of the
governors and important local bureaucrats world city paradigm? It depends upon how
down to the county level and rotated them one interprets the discrepancies.
frequently among jurisdictions to prevent the One could argue, for example, that Tokyo
consolidation of local power. The mayor of and Seoul do not t the world city de nition
Seoul was appointed by the cabinet prior to and therefore their anomalous characteristics
the passing of municipal self-government have no bearing on the model. This resol-
legislation in 1991. ution hardly seems satisfactory, however, for
There is no material basis for arguing that it would drastically reduce the geographical
Seoul is severing economic ties with the rest scope and empirical testability of the the-
of Korea, as world city theory would predict. ory—not to mention that Tokyo, along with
Just the opposite is true. Seoul’s gross prod- New York and London, has been held to
uct per capita was almost twice that of the exemplify the world city (Friedmann, 1995,
nation in 1960, but the gap has steadily p. 24; Sassen, 1991). In any case, Tokyo and
diminished, and by 1991 the city was about Seoul do t the world city de nition since
on a par with the nation as a whole (Kim and both cities provide an infrastructure that en-
Choe, 1997, p. 36). ables TNCs to control their global opera-
tions. However, both cities emphasise the
global operations of indigenous not foreign
6. Conclusion
companies, and their international infrastruc-
Like Tokyo, Seoul does not conform to the ture is primarily rooted in state ministries and
world city model. Seoul, like Tokyo, is a bureaus not in private nance and producer
national basing-point for the global opera- service rms.
tions of Korean transnational corporations, One could also argue that while Tokyo and
not a global basing-point for the global oper- Seoul may not have conformed to the world
ations of borderless rms. Like Tokyo, city model in the past, they are being forced
Seoul’s industrial policy and social structure by global pressures to move in that direction
are geared less to attracting investments from today and will continue to do so in the future.
abroad than to facilitating the foreign trade For example, Mikuni (1998) has argued that
and investments of Korean corporations. as nancial markets become more deregu-
Command and control functions are concen- lated and integrated on a global scale,
trated in Seoul, but so too is industrial pro- Japanese banks will nd it ever more dif cult
duction, particularly knowledge-intensive to reconcile their interests as business enter-
manufacturing, as in Tokyo. Seoul, like prises with their role as instruments of na-
Tokyo, has not experienced severe manufac- tional industrial policy. Unlike the relatively
turing decline, rapid expansion in producer closed and regulated national capital markets
service employment, extensive foreign immi- of the past, competition will be too sharp,
gration or much social and spatial polaris- clientèles too diverse and transactions too
ation. Like Tokyo, Seoul is under the sway dispersed to support special, long-term atten-
of a political bureaucratic élite, not a transna- tion to selected national business groups, es-
tional capitalist class. And, as with Tokyo, it pecially if those groups are internationalising
would be senseless to claim that Seoul is their own operations.
severing ties of mutual interest with the na- Saskia Sassen (1999) has recently
tion-state; if anything, the capital city is be- modi ed her argument along these lines and
coming even more integrated with the rest of now claims that Tokyo’s world city status is
South Korea. ‘unclear’. Tokyo’s “ascent toward global

nancial status”, which seemed a sure thing talism. Neither Japan nor Korea has the his-
in the late 1980s, was stunted by Japan’s torical, ideological or political underpinnings
refusal to accept “international accounting for Western neo-liberalism (Morishima,
and nancial reporting norms”, she argues. 1981; Eckert, 1993). Indeed, there is en-
While “global nance means abandoning trenched opposition to market liberalism in
national ties and embracing supra-national the state bureaucracies, business groups and
alliances”, Tokyo’s problem is that it “stayed trade unions (Sakakibara, 1993; Y.-S. Lee
too Japanese” (Sassen, 1999, p. 86). 1998). The current restructuring is more
Nonetheless, she goes on to say, Japan’s likely to result in a new phase of east Asian
US$10 trillion in bonds, savings and pension developmentalism than anything approximat-
schemes continues to preoccupy global in- ing Anglo-American liberalism (Chang,
vestors, and the recent nancial crisis, by 1999; Taggart-Murphy, 2000).
letting foreign rms into Asian markets, may A third way to resolve the east Asian
yet bring Tokyo the “denationalized exper- anomaly is to conclude that Tokyo and Seoul
tise” in producing and exporting sophisti- are a different type of world city from that
cated nancial services that is necessary for conceptualised by Friedmann and Sassen.
world city status. The world city paradigm makes sense in
Indeed, one could argue that this scenario market-centred New York and London, but
is unfolding in Korea, too. When the whole not in state-centred Tokyo and Seoul.35 But
Asia– Paci c region went into a nancial this resolution would put the state square in
panic in 1997, investors began scrutinising the centre of world city analysis, and that
the payment structure of Korea’s foreign clashes with two of the paradigm’s central
debt.31 The nation’s short-term obligations assumptions: that globalisation diminishes
were estimated to be US$110 billion, more the power and integrity of the nation-state,
than three times Korea’s of cial foreign ex- and that cities are replacing states as central
change reserves.32 The IMF put together a nodes in the world economy. This approach
US$57 billion loan package for Korea in is compatible, however, with comparative
return for an overhaul of the economy meant ndings that national institutions, politics
to reshape Korea’s state-centred nancial and culture mediate the impact of global
system into the Western market-centred processes to produce diverse urban outcomes
mould (Chossudovsky, 1997; Cumings, (Pickvance and Preteceille, 1991).
1998; Wade and Veneroso, 1998).33 Korea’s We believe Tokyo and Seoul’s divergence
leaders agreed to open their banking, in- from the world city model re ects more than
surance and securities markets to foreign national variation within a common global
rms, and the OECD pushed Korea, along context, however. Japan and Korea have de-
with other signatory governments, to treat veloped a different kind of political economy
foreign and domestic companies equally. from Western market capitalism, one nur-
These agreements, if institutionalised, will tured, ironically, under the US geo-political
preclude many of the policies of the develop- umbrella during the Cold War (Sakakibara,
mental state.34 Still, it is premature, to say the 1993; Matsumoto, 1991; Amsden, 1989;
least, to equate the very real crisis in the east Eckert, 1993; Woo-Cumings, 1995). IMF
Asian developmental state with the end of pressure for nancial reforms indicates
east Asian developmentalism let alone with ‘system friction’ (Ostry, 1996) between
the transition to liberal market capitalism Anglo-American and east Asian political
(Coombs, 1999; Woo-Cumings, 1999; Tag- economies, a kind of economic Cold War.
gart-Murphy, 2000). There is considerable The globalist world city paradigm is seri-
popular support in Japan and Korea for more ously awed because it fails to address the
state decentralisation, deregulation and pol- role of the state and national interest in the
icy transparency, but there is no similar formation of all world cities. By equating
groundswell support for market-driven capi- Anglo-American market liberalism with in-

ternational norms tout court, the world city hegemonic interdependence (Stallings and
paradigm bestows universality on a particular Streeck, 1996) better capture the trajectory of
cluster of national interests and hazards turn- cities in today’s world political economy
ing into a world city ideology.36 The role of than claims about cities ‘abandoning national
the state and national interest in the forma- ties’ in order to embrace supranational al-
tion of Western, market-centred world cities, liances and ‘denationalised expertise’. In
like New York and London, must also be short, the economic base, spatial organisation
conceptualised. For example, the global and social structure of the world’s major
strength of New York City’s nance and cities are strongly in uenced by the national
producer service rms is rooted in the US development model and regional context in
dollar as an international means of payment, which each city is embedded.
unit of account and store of value (McKin-
non and Ohno, 1997) and the global role of
Notes
the dollar is inconceivable apart from the
strength of the US federal government. Then l. John Friedmann uses the terms, ‘world city
too, New York City development strategists, paradigm’ and ‘world city hypothesis’ inter-
changeably. We will follow the same termi-
not to mention Wall Street investment nology in this paper.
bankers, openly call upon Washington to en- 2. Friedmann (1995, pp. 30 – 31) notes that
sure that the city’s nance and producer ser- Tokyo is an “exception among core coun-
vice rms have access to foreign markets tries” in the degree to which Japan has re-
(Rosen and Reagan, 1997) and the federal stricted foreign capital penetration and
immigration from abroad. He also speculates
government acts vigorously on behalf of that central states may have more in uence
their demands (Kristof and Sanger, 1999). over world cities that are national capitals,
Understanding Tokyo and Seoul necessi- like Tokyo (but also like London), than over
tates a different conception of the world sys- those that are not, like New York.
tem from that underlying the globalist world 3. In a breathless paean to global high nance,
Sassen recognises differences in specialis-
city argument. Tokyo and Seoul differ from ation among the world’s major nancial cen-
New York in so many salient respects be- tres but not institutional differences, save
cause these cities are lodged within a non- those outside “international norms”, because
hegemonic and interdependent world insuf ciently “denationalized”, as in Japan.
political economy divided among differently Compare this line of reasoning to Wade and
Veneroso’s argument in note 33 below.
organised national systems and regional al- 4. Friedmann prefers the term, world city;
liances (Stallings and Streeck, 1996). To be Sassen, global city. We will use the two
sure, market-driven investment, trade and terms interchangeably, as well.
corporate organisation are meshing cities in 5. According to Friedmann (1986, p. 318),
various parts of the globe. Equally important, We would expect to nd signi cant differ-
however, is the global shift, caused by the ences among these cities that become the
end of the Cold War, from a bipolar system ‘basing-points’ for global capital. We
of military opponents to a tripolar system of would expect cities to differ among them-
selves according to not only their mode of
regional economic competitors, centred on integration with the global economy, but
the US, Japan and a uni ed Europe, each also their own historical past, national
pursuing different models of capitalism policies and culture in uences. The econ-
(Ohmae, 1985; Albert, 1993; Stallings and omic variable, however, is likely to be
Streeck, 1996). decisive for all attempts at explanation.
Countries are attempting to open their 6. According to Sassen (1991, p. 3),
markets to foreign competition and to pursue
national and regional industrial policies sim- these cities now function in four new
ways: (1) as highly concentrated command
ultaneously. Concepts like ‘managed open- points in the organization of the world
ness’ (Weiss, 1997), ‘market access regimes’ economy; (2) as key locations for nance
(Cowhey and Aronson, 1993, p. 14) and non- and specialized business services which

have replaced manufacturing as the lead- proportion of the adult population active in
ing economic sectors; (3) as sites of pro- the labour force, about 56 per cent, is
duction, including the production of signi cantly below the national average of
innovations, in these leading industries; 67 per cent. While the demand for skills has
(4) as markets for the products and inno- been rising, the city’s high school perform-
vations produced. ance has been falling. New York City em-
ployers face a labour market lled with the
7. The world city hypothesis, according to growing ranks of city high school drop-outs
Friedmann (1986, p. 317), refers to “loosely and unquali ed graduates (O’Cleireacain,
joined statements which link urbanization 1997, p. 26).
processes to global economic forces”. It is 13. Japan’s Securities and Exchange Law of
“intended as a framework for research. It is 1947 prohibited banks from engaging in se-
neither a theory nor a universal generaliza- curities transactions other than those involv-
tion about cities but a starting point for pol- ing national bonds, thereby dividing the roles
itical inquiry”. We do not know what of banks and securities rms. Until recently,
Friedmann means by “political inquiry” in the banking industry comprised 13 city
this instance, but precisely because it is a banks, 63 regional banks, 3 long-term credit
“hypothesis”, we presume the world city banks, 7 trust banks, 71 mutual banks, 462
“paradigm” is amenable to evaluation by credit associations, 483 credit co-operatives
empirical evidence. and a large number of agricultural co-opera-
8. In his most recent ranking effort, Friedmann tives (Mabuchi, 1995).
(1995, p. 24) presents a table of “Spatial 14. In addition to the Federation of Bankers’
articulations among 30 world cities”. He Associations, the umbrella organisation for
ranks Tokyo with London and New York in Japan’s banking industry, each type of bank
the rst tier as a “global nancial articula- forms an association, such as the City Bank
tion”, and he ranks Seoul with Paris, Zurich, Roundtable, the Federation of Regional
Madrid, Mexico City, São Paulo and Sydney Bankers’ Associations and the Federation of
in the third tier as an “important national Mutual Bankers’ Associations. Credit associ-
articulation”. Also see Beaverstock et al. ations and credit co-operatives organise their
(1999a). own national federations as well. All these
9. More recently, Sassen (1997, p. 183) has voluntary organisations are forums where
argued that banks forge common positions vis-à-vis
instead of the traditional zero sum dualism MOF and where the ministry can consult
between global and national economy, a with them regarding nancial policies. Rep-
series of ‘triangulations’ are emerging resentatives of banks are also given opportu-
whereby subnational units, such as global nities to express their opinions in MOF
cities, and supranational units, such as the advisory councils, such as the Committee on
World Trade Organization emerge as play- Financial System Research and the Financial
ers on the global scene. Problems Research group (Mabuchi, 1995).
15. Okimoto (1989, pp. 152– 158) refers to Japan
What Sassen means by the “traditional zero as a ‘network’ state. Legitimation resides in
sum dualism” is not readily apparent, nor is the state’s capacity to co-ordinate social
how these “triangulations” t with her earlier groups to achieve collective goals. Public/
argument. private organisations binding government
10. New York City now accounts for 5 per cent and industry are the networks state’s arms
of non-farm US payrolls while possessing 43 and legs. These ‘public policy companies’
per cent of the national payroll in the securi- function like regulated monopolies. They
ties industry, 24 per cent in advertising, 14 raise revenues for development and social
per cent in banking, and 10 per cent in legal infrastructure; they channel funds for indus-
services (O’Cleireacain, 1997, p. 24). trial targeting; they gather information from
11. The ve top groups were from the Domini- abroad; they promote trade and investment;
can Republic (145 000), China (75 000), Ja- and they do industrial research. In short, they
maica (74 000), Columbia (67 000) and implement industrial policy.
Korea (58 000) (Beveridge, 1996). 16. Takashi Machimura (1992) is one of the few
12. About half of employed New Yorkers work Japanese urbanists to investigate Tokyo
in industries where the real wage is lower within a world city framework. He also pin-
than it was ve years earlier. New York’s points distinctive Tokyo characteristics, but
unemployment rate remains persistently takes a different approach and emphasises
high, at times exceeding the national average different issues from those addressed in this
by as much as three percentage points. The paper. Tokyo, Machimura argues (1992,

p. 114), has gained “global control capability from the export-oriented, non-sectoral-based
as a major world nancial center”. But there strategy adopted throughout the 1960s. The
are essential differences between Tokyo and state created the National Investment Fund
other “primary world cities in core coun- (NIF) to nance long-term investments in
tries”, including (1) Tokyo is a “purely econ- HCI plants and equipment, and it expanded
omic world center, unsupported by political BOK discounts. The government also restric-
or military hegemony of the state”; (2) ted business entry into HCI to encourage
Tokyo is more dependent on a global net- economies of scale and packaged the choice
work system than New York or London due of market entrants with nancial support
to geographical distance from Western coun- (Cho, 1995, p. 219).
tries and traditional centres of the global 24. In fact, chaebol were really the result of
economy; and (3) Tokyo has been closed to government nancial policy, especially dur-
foreign immigration but this is gradually ing the heavy and chemical industrialisation
changing. drive in the 1970s. When the Korean govern-
17. We do not have data on class segregation in ment helped to establish 10 general trading
Tokyo, but see Hill and Fujita (1997) for a companies in the 1960s, the trading compa-
depiction of the relative absence of social nies received most of the subsidised loans
and spatial polarisation in Osaka, Japan’s and became very big, very quickly and be-
second world city. came de facto holding companies for their
18. ‘The Dead Fukuzawa Society’, an Internet af liates, acting as pipelines supplying
discussion forum providing Western nance, nancial resources. The rms af liated with
producer service and cultural professionals a trading company developed into chaebol
with the opportunity to share their Japan (Y.-S. Lee, 1998).
experiences, is the liveliest expression of 25. As of 1990, two-thirds of FDI (3170 cases,
clashing bourgeois and political-bureaucratic amounting to US$3.8 billion) came from
values we know of. Asian countries, with Japan responsible for
19. Provincial capitals were key components of 1922 cases and US$3.5 billion. The US,
Korean central administration from the 6th West Germany, Hong Kong and the UK
century onwards (Henthorn, 1971, p. 49; were next in order. About three-quarters of
Smith, 1996, p. 124). The exact bureaucratic the FDI was invested in manufacturing
arrangements varied with changing dynasties (Hong, 1996, p. 163).
but, in general, the country was divided into 26. National policy-makers attempted to develop
eight or nine districts, each largely adminis- outlying regional industrial sites through in-
tered from its own capital (Hatada, 1969). dustrial location and legislative plans from
20. Korea’s Economic Planning Board—a super- 1964 onwards, emphasising sites for export-
ministry responsible for national budgeting, oriented manufacturing industries. The main
economic planning, high-level co-ordination policy tools were indirect incentives such as
and social mobilisation for economic devel- preferential treatment of public land and,
opment—especially evoked the Japanese from 1970, nancial incentives to attract in-
colonial pattern as did the country’s bureau- dustries to designated areas through the Lo-
cratic centralisation and weak local auton- cal Industrial Development Law. Tax
omy (Woo-Cumings, 1995). exemptions and reductions for a certain time-
21. Korea’s GNP rose from $90 per capita in period were awarded to rms relocating out
1955 to $7660 in 1995 (Korea Ministry of of the SMR. The Industrial Distribution Law
Reconstruction, 1958; World Bank, 1995). in 1977 laid out new national industrial zon-
22. When the ruling party and strong political ing and allowed a reduction of corporate
gures intervened in the economy, they did income tax by 10 per cent of the relocation
so without rules for the reallocation of re- building cost for rms moving to a desig-
sources. State of cials organised a relatively nated industrial zoning area, along with cor-
independent central bank, modelled on the porate income tax breaks and other
US Federal Reserve Board, and banks were incentives. As the robust growth of Seoul
privately controlled. However, the govern- and the SMR continued, the SMR Redevel-
ment did regulate external nancial transac- opment Planning Law—the basic relocation
tions and restricted imports. Some of Korea’s plan—was introduced in 1982 to curtail fur-
major business conglomerates (chaebol) ther development of industries in the region
came into being through these import subsi- as well as to aid the relocation of heavily
dies (Lee, 1998). polluting existing industries. The revised law
23. Korea’s shift to heavy and chemical indus- of 1993 assesses congestion charges thereby
tries (HCI) in the 1970s required enormous prohibiting large industrial developments of
amounts of cheap nancing and a departure any sort (Kim and Choe, 1997, p. 56).

27. Seoul has grown from a small city with one 33. By instituting a world-wide regime that al-
distinct central business district in the 1960s lows easy entry and exit from any particular
to a multinodal megalopolis. Population den- country, the nancial reforms sought by the
sity does not decline as one moves outwards IMF were meant to open up Asian econom-
from the traditional town centre. Some of the ies to the owners and managers of inter-
most spectacular growth in skyscrapers hous- national capital, and particularly, US capital.
ing banking, information services, of ces, In the words of Wade and Veneroso (1998,
hotels and restaurants has occurred 20 and p. 17):
30 km from the traditional core. The cost of
land in and around these CBDs prohibits Troubled nancial institutions are to be
conventional residential development, forc- closed down or recapitalized; foreign
ing people to seek homes at greater and nancial institutions are to be able freely
greater distances from the urban core. to buy up domestic ones; banks are to
28. Foreign residents include 90 nationalities but follow western (“Basel”) prudential stan-
are primarily made up of Americans dards; “international” (read “western”) ac-
(15 032), Chinese (11 521) and Japanese counting standards are to be followed and
(4603). (Seoul Metropolitan Government, international accounting rms to be used
1998). for the auditing of the bigger nancial
29. Kangdong-gu, Kangnam-gu, Songpa-gu and institutions. The government is required
Seocho-gu, for example. not to intervene in the lending decisions of
30. Seoul has eight school districts for K-12 commercial banks, and to eliminate all
education, and the performance of a school government-directed lending; also to give
district is generally measured by the percent- up measures to assist individual corpora-
age of high school students who receive tions avoid bankruptcy, including subsi-
admission to a few highly selective universi- dized credit and tax privileges. The Fund
ties in Seoul after taking a nationally conduc- also requires wider opening of Korea’s
ted test. Because of shortages of housing, capital account, to enable even freer
national law prohibits residents in Korea in ow and out ow of capital, both port-
from owning more than one home per head folio capital and direct investment. All
of household. People seeking a better school restrictions on foreign borrowings by cor-
district lease their current residence and rent porations are to be eliminated.
another home in the school district of their 34. South Korea’s unemployment rate rose from
choice. Consequently, in one of the most 2.6 per cent in 1997 to 6.8 per cent in 1998
highly coveted school districts south of the (Korea Herald, 1999a). The income of urban
Han River, the cost of leasing a home is workers in the bottom fth of the income
often higher than the actual selling price of distribution dropped 17.2 per cent in 1998
the home (Kim and Choe, 1997, p. 28). while the income of the top fth dropped
31. Korea’s huge investment requirements for only 0.3 per cent (Korea Herald, 1999b).
rapid industrial expansion had been nanced 35. Our typology of world cities does not ex-
largely with domestic and foreign loans. The haust all possibilities, of course. Tokyo and
debt to equity ratio of the Korean manufac- Seoul could be thought of as a developmen-
turing sector increased more than fourfold tal sub-type of the state-centred world city,
during the 1960s, from 92 per cent to 394 per an urban con guration particularly germane
cent, and Korean rms continued to remain in Asia. One might hypothesise, for example,
highly leveraged to the present day. Vulner- that Taipei, Singapore and perhaps even
ability to nancial crisis was thus built into Shanghai are variations on a developmental
the Korean development model and for this state urban model and that these cities would
reason the state took an active part in risk look, under closer comparative inspection, a
management through credit intervention. The lot more like Tokyo and Seoul than New
Korean government, for example, imple- York City or London.
mented major business bail-outs in 1969/70, 36. We take Jagdish Bhagwati’s comments quite
1972, 1979– 81, and 1984– 88 to help chae- seriously:
bols ride out recessions and avoid major
nancial crises (Cho, 1995, p. 228). Wall Street has become a very powerful
32. Korean banks had borrowed low-cost foreign in uence in terms of seeking markets
funds and then invested heavily in ‘junk’ everywhere. Morgan Stanley and all these
bonds, with high yields and high risks, in an gigantic rms want to be able to get into
essentially speculative way, always on the other markets and essentially see capital
assumption that the exchange rate would account convertibility as what will enable
hold. them to operate everywhere. Just like in

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Urban Studies, Vol. 37, No.

12, 2167 – 2195, 2000

Global Cities and Developmental States:

Richard Child Hill and June Woo Kim

0042-0980 Print/1360-063X On-line/00/122167-29 Ó 2000 The Editors of Urban Studies

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the conditions promoting growth in global

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3. New York City Since most international transactions are ne-

3.1 Global Control Capability 3.4 The New Social Regime

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Table 1. Two world city types

Prototypical city New York Tokyo

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New York Seoul Tokyo

1. Philip Morris, Inc. 1. Samsung Corporation 1. Mitsui & Co. Ltd

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Note: Producer services  rms are shown in bold.

Major foreign investor, Nationality (ownership percentage)

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Table 4. Income disparity in Seoul and New York

Seoul (1993) New York (1989)

Average monthly Average annual per capita

Chongno 965 378 Bronx 10 535

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Note: Producer services rms are shown in bold.