Introduction

5. Lagging Places: Missed

Opportunities, Left-Behind People

Introduction

Chapters 2 to 4 lay out recent advances in understanding the building blocks of spatial economics and their links to productivity: the power and persistence of agglomeration, the promise of mobility, and the tyranny of distance. This chapter illustrates how they also guide our thinking about approaching lagging places and the people who populate them.

That economic activity and employment are distributed highly unevenly across space moves spatial policy to center stage. If distortions and inefficiencies were redressed, what might be the growth potential of lagging regions such as Brazil’s Nordeste, China’s Xinjian region, or India’s state of Bihar? Or if we do not deal with sustained territorial inequalities, will they lead to social discontent and even armed revolts, for instance, in Colombia, Indonesia, Nigeria, Peru, and Thailand.1 What should be done to support the populations left behind where foreign competition or new technologies have undermined the previous basis for prosperity, contributing to, for instance, the populist backlashes in the United States and the United Kingdom?

Policy responses to redress such spatial disparities often proceed by analogy to development policy for nations as a whole. However, as discussed in chapter 3, where migration is reasonably fluid within the country, then the wage gaps that have proven so attractive for firms to relocate abroad—for instance, from the advanced economies to China, Ethiopia, or Vietnam—will be vastly reduced. Hence, certain regions may possibly have “no comparative advantage.” They may be fundamentally “unviable” as locuses of growth and be left behind. On the other hand, it is this very internal mobility that offers one solution to lagging places: moving individuals from lagging areas to leading ones. Box 5.1 discusses the case of Kolmanskop, Namibia, which once produced 12 percent of the world’s diamonds and was one of the richest towns on the planet—its hospital had the first X-ray machine in the Southern Hemisphere. Yet now it is an abandoned desertic site on the excellent B4 road between the port of Luderitz (population 12,000) and Aus (population 1,200). Conceptually, there is no market failure at work here and national welfare is maximized: factors are optimally reallocated in response to diverse shocks.