Global cities and the geographical transfer of value

Abstract

Chinese

The central argument of this article is that global cities are, due to their clustering of producer service firms, critical governance nodes in global production networks. More in particular, the article scrutinises the role of producer service firms in uneven development and, especially, in the geographical transfer of value (Hadjimichalis, 1984). Because the direct as well as the indirect mechanisms through which value is transferred geographically require the intervention of producer service firms, global cities can be theorised as governance nodes for centripetal wealth transfers along global commodity chains. Moreover, and in the context of the persisting criticism that the global city concept has a bias towards Northern/Western cities, the article argues that the claim that global cities are critical places for the organisation of uneven development also holds for cities beyond ‘the usual suspects’. Referring to cases of how producer service firms in Hamburg and Mexico City erect entry barriers to protect their clients from competition and of how they shape labour relations at the expense of employees, I have maintained that governance is, as Sassen (2010: 158) has argued, indeed ‘embedded’ into the services provided. From that follows that even ‘minor’ global cities are strategic governance places from where the transfer of wealth towards the centres of the world economy is organised.

Keywords

Global cities global commodity chains governance producer services uneven development

Introduction

The aim of this article is to deepen an analysis, which in my view is central to the global city concept,¹ but which has not been elaborated satisfactorily since the publication of Sassen’s The Global City in 1991. I argue that, although the title of Sassen’s book suggests otherwise, the global city model is primarily not about urban theory. Rather, authors who have developed the concept such as Cohen (1981), Friedmann (1986), Friedmann and Wolff (1982), Hymer (1972) and Sassen (1988, 1991) were concerned with the role of specific cities in the organisation of economic globalisation, and not (primarily) with cities themselves. As Sassen (2016: 100) recaps, ‘When I first began my research on the global economy I was not thinking cities at all’. It is, thus, fair to say that the global city model has been developed as an economic geography concept to comprehend the role of specialised economic actors in certain cities: ‘The key indicator of global city status is whether a city contains the capabilities for servicing, managing, and financing the global operations of firms and markets’ (Sassen, 2001: 359). More in particular, global cities are conceptualised on the basis of their capabilities for the ‘command and control’ of the world economy.² The concept thus aimed to understand the role of producer service firms (henceforth PSFs) clustered in global cities in the organisation of the uneven relations underlying economic globalisation. The global city concept has therefore been, as Sassen (2001: 351) reiterates in the second edition of The Global City, developed as a theory ‘attuned to questions of power and inequality’.

The call to understand the novel geographies of economic power and the functions which global cities assume in it was, however, more programmatic claim than lived research practice. Already in 1986, in a comment on the then emerging global city literature, Roberts (1986: 459; emphasis in original) criticised that ‘there is not enough emphasis […] on how cities and the classes within them achieve control over other regions’. Thirty years and thousands of publications on the subject of global cities later, one must admit that this criticism is still valid. Though studies substantiating that global cities are organisational and power nodes in globalisation exist (Hanssens et al., 2012; Jacobs, 2014; Jacobs et al., 2011; Parnreiter, 2010, 2015; Rossi et al., 2007), we have not advanced satisfactorily in understanding the role of global cities in the exercise of economic power, because (too) much of the literature has either dealt with measuring the connectivity of world cities or focused on urban phenomena related to globalisation (Acuto, 2011; Derudder and Parnreiter, 2014; Parnreiter, 2013).

Against this backdrop, this article seeks to make two contributions. The first goal is to deepen the examination of the role of PSFs in global cities in the organisation of economic globalisation and, in particular, in the making and reproduction of uneven development. To specify this analysis, I make three moves. Firstly, I use the related concepts of global commodity chains, global value chains and global production networks³ (henceforth GCCs, GVCs and GPNs) to denote what is meant by ‘world economy’ or ‘globalisation’. This is appropriate not only because such networks form the world economy’s backbone, but also because the respective literatures’ interest in uneven development (Bair, 2014; Coe et al., 2008; Dicken, 2011; Gereffi and Korzeniewicz, 1994; Henderson et al., 2002; Werner, 2016; Yeung and Coe, 2015) overlaps with key concerns of global city researchers. Secondly, I borrow the governance concept of the GCC literature (Gereffi, 1994) because its actor-focused perspective on asymmetrical power relationships is apt to substantiate the notion of ‘command and control’, which is only vaguely defined in the global city concept. Thirdly, I refer to Hadjimichalis’ (1984, 1987) concept of the ‘geographical transfer of value’ (henceforth GTV) to analyse uneven development in GPNs. Conceptualising global cities as governance nodes in GCCs (Brown et al., 2010; Parnreiter et al., 2007), I seek to scrutinise the role of PSFs in global cities in such centripetal wealth transfers.

The second contribution I seek to make is to show that GPN governance through PSFs is not a matter of a very limited number of ‘Global Elite’ cities (AT Kearney, 2015). In the context of the persistent criticism that the global city concept has a Northern/Western bias on the basis of which ‘millions of people and hundreds of cities are dropped off the map’ of urban studies (Robinson, 2002: 535), I will argue that PSFs in ‘minor’ Northern/Western cities and in cities in the Global South are also busy in developing strategies that contribute to reconfiguring relations in GPNs in a way that wealth flows are diverted towards their clients (and themselves) in the world economy’s centres. This contention is illustrated by the example of the role of PSFs in two not so prominent global cities – Hamburg and Mexico City – in two crucial fields of GCC governance (entry barriers and labour relations). In exemplifying the conceptual arguments with cases from cities beyond ‘the usual suspects’, this article contradicts postcolonial urban studies’ critique (e.g. Robinson, 2002, 2006; Roy, 2009) of a Northern/Western bias of the global city concept: PSFs in ‘minor’ global cities are strategic agents, too. They are strongly involved in shaping the relations along GCCs in a way that wealth can be transferred towards the centres of the world economy.

Global cities and the governance of GCCs

As stated above, there is a paucity of studies detailing the economic control functions of global cities. A related, but even more serious critique is that the global city concept lacks an adequate theorisation of economic power, its subject matter. Jones (2002: 340) has criticised that the model is ‘unnecessarily focused on urban places and spaces at the expense of transnational firms and most especially key social actors’. Imbuing places with agency, the concept fails ‘to get to grips with theorising power’. In a similar vein, Allen (2003: 154) contended that ‘Sassen conflates resources and power’ because she seeks to read power off from the number of PSFs in a city. Yet, because power is ‘a relational effect of social interaction’ (Allen, 2003: 2), it cannot be stored nor radiate out from an authoritative centre like a global city.

This criticism of an insufficient theorisation of economic power has to be taken very seriously, because inter-firm and inter-city control relationships are the raison d’être of the global city concept. To overcome this flaw, I suggest turning to the concept of governance which is central to the GCCs, GVCs and GPNs literatures. In particular, I consider Gereffi’s (1994: 97) original conceptualisation of governance as the ‘authority and power relationships that determine how financial, material and human resources are allocated and flow within a chain’ as particularly useful because it draws attention to power relations in uneven development.⁴ Moreover, Gereffi’s concept implies a multi-actor and multi-scalar analysis, what is important because it invites scrutiny of the role of actors which are put centre stage by the global city concepts: PSFs. Their involvement in economic governance has been neglected for a long time, although in the early phase of GCC research it has been acknowledged that PSFs are ‘economic agents exerting a dominant influence over the governance of GCCs’ (Rabach and Kim, 1994: 125). Recently, however, the significant influence that PSFs in general, and financial firms in particular, exercise on corporate strategies has been put centre stage in GPN research (Coe et al., 2014). The consequences of lead firms’ financialisation have been discussed as regards the shape and extension of GCCs (Gibbon, 2002; Milberg, 2008) and the distribution of value amongst different actors (Palpacuer, 2008). Wójcik (2013) and Bassens and Van Meeteren (2015) point to the critical role of PSFs in enabling their clients to make superprofits and to then keep them through tax evasion.⁵ As to non-financial PSFs, Coe (2014) drew attention to logistic firms, while the IGLP Law and Global Production Working Group (2016) is launching an initiative to focus more on the role of law firms in GVC governance. These studies echo the findings of the broader literatures on financialisation and transnational private governance which confirm that PSFs supply key inputs for economic governance (Baud and Durand, 2012; Djelic and Sahlin-Anderson, 2006; Flood and Sosa, 2008; Froud et al., 2006; Graz and Nölke, 2008; Milberg and Winkler, 2010).

All these studies’ dealing with PSFs’ role in economic governance rest on the assumption that producer services⁶ (PSs) are more than just ‘technical’ support. Rather, they are guidance. In the perception of their clients, PSFs enjoy authority in Arendt’s (1961) or Sennett’s (1980) sense, because they master knowledge which is seen to satisfy the desire and need for leadership in very complex economic settings. Since PSFs are (believed to be) the providers of the know-how necessary for economic success (cf. Bassens and Van Meeteren, 2015), their counsels are usually followed. Because an advice which is known to be obeyed becomes to be more than an advice, PSFs do, though they have no formal autonomy in decision making, pre-structure corporate decisions in the sense that they shape a decision in advance. Sassen (2010: 158) calls this influence by means of the services provided ‘embedded governance – embedded in the lawyering, the accounting and the investment choices of the firm’. PSFs have thus become strategic partners of their clients, with their relationships being best understood as horizontal (Bryson and Daniels, 2007). Accordingly, PSFs’ power is not as exercised over clients, but together with them. It is a resource to empower clients vis-a-vis business partners, unions or governments. Therefore, the even and mutual relationships between PSFs and their clients are embedded into and serve the hierarchical relations which PSFs’ clients maintain in ‘their’ GPNs.

PSFs, global cities and the geographical transfer of value

To operationalise an analysis of uneven development in GPNs, it is worthwhile to return to Hadjimichalis’ (1984, 1987) concept of the ‘geographical transfer of value’. In general terms, this GTV refers to a process through which value produced at one location is transferred to and realised in another, with the result that the latter location’s accumulation base grows at the expense of the first. GTV thus leads to and intensifies differences in localised accumulation processes, which in turn increases and accelerates inter-regional inequality. This connection between the geographical reallocation of wealth, regionally differentiated growth rates and uneven development becomes most obvious in the case of the ‘urbanization of capital’ (Harvey, 1985).

According to Hadjimichalis (1984: 340), value is transferred geographically either indirectly through the market, or directly through violent methods and ‘more sophisticated policies such as state taxation policies, price policy, public transfer payments, multinational profit repatriation, and transfer-pricing’. This listing suggests that PSFs are strategic agents facilitating the GTV.

As to the market-mediated shifting of value, GCC, GVC and GPN analysis consistently points to entry barriers as a key instrument for achieving rents and hence an uneven distribution of surplus: ‘The GCCs approach explains the distribution of wealth within a chain as an outcome of the relative intensity of competition within different nodes’ (Gereffi et al., 1994: 4). For the purpose of this article, two things are important. Firstly, erecting entry barriers is a function of governance: ‘It is this role […] of identifying dynamic rent opportunities and apportioning roles to key players which reflects the act of governance’ (Kaplinsky, 2000: 124). Secondly, for creating and managing entry barriers, lead firms have to rely on PSFs. These are particularly important for erecting ‘strategic’ barriers, which the OECD (2005) defines as being intentionally created to deter entry of competitors. Prime examples are the creation and subsequent protection of intellectual property or the establishing of brands, firm reputation and customer loyalty, which would be impossible without the involvement of patent lawyers or advertisers. Yet, PSFs are also important as regards some structural entry barriers (which are related to industry conditions) such as financing, which obviously requires the engagement of banks and other financial institutions.

PSFs are also key agents in many direct mechanisms of value transfer. It is hard to imagine that policies related to taxation, pricing, foreign direct investment or the repatriation of profits could be put into practice without the involvement of bankers, lawyers, accountants and other consultants (e.g. Bassens and Van Meeteren, 2015; Clark and Monk, 2013; Flood and Sosa, 2008; Sikkaa and Willmottb, 2010; Wainwright, 2011; Wójcik, 2013). Another field in which PSFs are involved in value transfer are labour relations. These are critical to GCC governance not least because under competitive conditions, companies must reduce costs without impairing performance (Yeung and Coe, 2015). Labour costs and regulations are therefore essential criteria as to whether and how companies in a particular region become integrated into GPNs (Henderson et al., 2002; Selwyn, 2012; Smith et al., 2002). Finally, PSFs are key agents in the GTV for yet another reason. As ‘gatekeeper(s) of an enormous stock of sought-after knowledge’ (Bassens and Van Meeteren, 2015: 763), they draw massive fees from their clients, appropriating thereby an increasing part of the wealth produced along GVCs.

Considering PSFs as strategic actors in the GTV carries consequences for the geographies of the wealth transfer, in particular as regards its organisation. Contrary to Hadjimichalis (who developed his arguments more than 30 years ago, when the new geographical contours of the world economy were just emerging), I contend that the social agents active in transferring value are not located ‘usually …outside the donor region’ (Hadjimichalis, 1984: 340; emphasis mine). Current urban theorising stresses that knowledge intensive activities require constant face-to-face interactions and, thus, co-presence (e.g. Storper, 2013). This certainly applies to high-end bankers, lawyers or accountants, too: As distance-sensitive knowledge workers, professionals of PSFs had to follow their clients in globalisation processes (Bryson and Daniels, 2007). Accordingly, the global cities where these services cluster are necessarily spread over the world. Remember that Sassen (1991) contended that New York, London and Tokyo are leading examples of a much broader process of global city formation which cuts across the traditional North–South divide. Sassen’s (2001: 348) wording that global cities form ‘the operational scaffolding of … the global economy’ is quite unambiguous – scaffoldings typically cover the whole area ‘under construction’, and not just key intersections. Accordingly, Taylor and Derudder (2016) identify 525 cities creating the world city network – almost half of them in poorer countries (including classical mega-cities such as Mumbai, São Paulo, Mexico City or Jakarta). While the resulting geography of economic governance looks far more decentralised than the one deduced from a focus on lead firms only, the theoretical insight drawn from these spatialities of PSFs’ influence on GCC governance is that wealth transfer is organised from outside the donor regions as well as from within. Centre-periphery relations unfold thus as successive inter-city connections on various scales – an idea that Frank (1969) suggested with his spatialised account of the ‘Development of Underdevelopment’, in which Latin American capital cities were conceived of as bridgeheads for the interests of the dominant centres.

Conceptualising global cities in this way as governance nodes in GCCs (Brown et al., 2010; Parnreiter et al., 2007) draws attention to cities beyond the world city network. This is built upon inter-city ramifications which link global cities to the countless non-global, but yet globalised cities where production for the world market is carried out and from where wealth is being drained off (Parnreiter, 2014). In fact, the very idea of a world/global city as introduced by Friedmann and Sassen only makes sense if these cities are seen in a relational perspective, tied to each other, but also to all the globalised ‘ordinary cities’ (Robinson, 2006) whose work has to be articulated with the world market. There is, thus, no contradiction between Sassen’s (2016: 103) ‘analytic tactic … to focus on the extreme ends’ such as the financial sector in New York, and Robinson’s (2002: 547) assertion that export processing zones in poor countries constitute ‘quite the other end of the command and control continuum of global city functions’. It is precisely such a relational approach to centre-periphery interactions in GVCs and in urban networks that justifies the selection of PSs in global cities as key analytical lenses. The often disapproved ‘narrowing down’ of the focus on PSs (e.g. Robinson, 2002) is thus a means of a ‘critical exploration of exceptional power’ (Peck, 2015: 164), conceptually intended to draw attention to the ugly truth that most people in most cities (Southern and Northern alike) are off the map of economic decision-making. Because the world economy is so ‘spiky’, it is neither analytically accurate nor politically progressive to speak homogeneously of ‘globalising cities’ (Marcuse and van Kempen, 2000).

Seen in this light, the critique that global city researchers were treating non-global cities as ‘out of the game’, as ‘excluded from global capitalism’ and therefore as irrelevant to their theoretical reflections’ (Robinson, 2002: 538) is left without substance. Though the lack of empirical work on global cities’ role in the inter-city GTV must be recognised self-critically, it is not true that for global city scholars only the core matters. That such allegations arise from straw man rhetoric (Van Meeteren et al., 2016) can be illustrated with the travelling of the following quote. Referring to Robinson (2002), Roy (2009: 824; emphasis mine) states: ‘global/world cities mapping drops all other cities from the map, arguing that they are structurally irrelevant to the functioning of economic globalization’. Yet, in Robinson’s (2002) article there is no ‘arguing’ of a global/world cities’ representative in that respect, but a specification of what Robinson conceives to be a conclusion from global city research: ‘Many populations are excluded from the space of global capitalism, and thus from the field of world cities: they are “economically irrelevant” (Knox, 1995: 41)’ (Robinson, 2002: 534). Besides the fact that the quote is from Friedmann and not from Knox, the more substantial critique is that Robinson misinterprets Friedmann. Speaking of a polarised world, Friedmann (1995: 41) suggested that ‘São Paulo and the affluent metropolitan classes of Brazil do not require the country’s disempowered poor as either producers or consumers. In that sense … more than 50 per cent of Brazil’s population is economically irrelevant’. While it should be subject to empirical analyses whether this is correct,⁷ it is evident that Friedmann never suggested deleting the poor from the map of global cities. He did the opposite: ‘We must understand global cities in relation to their respective peripheries, to both their external and internal proletariat’ (Friedmann, 1995: 42; emphasis mine). Since the notions of periphery and proletariat are conceptually based upon uneven and exploitative relations, what Friedmann was really calling for was an analysis of the intra- and inter-city structure of wealth transfers.

Hamburg and Mexico City as governance nodes: Exemplifying the role of PSFs in erecting entry barriers and in shaping labour relations

So far I have developed two ideas: Firstly, PSFs are important governance actors shaping ‘how financial, material and human resources are allocated and flow within a [commodity] chain’ (Gereffi, 1994: 97), which is why global cities are governance nodes. Secondly, the specialised knowledge PSFs supply helps their clients to improve their position in GPNs – often at the expense of other actors. PSFs are thus involved in the organisation of centripetal wealth flows, what makes global cities to specific nodes of governance, namely of the GTV. A third notion touched upon is that this governing of GCCs and their inherent value transfers is not accomplished from a small number of Northern or Western cities. Rather, I have claimed that it is conceptually cogent (Sassen, 1991) and empirically established (Taylor and Derudder, 2016) that the world city network is truly global.

In order to exemplify the role of PSFs in the GTV, in this section I will give some examples of how professionals describe their role in shaping their clients’ governance processes. Since my intention is to show that this involvement in governance processes goes beyond ‘Global Elite’ cities (AT Kearney, 2015), the cases are taken from two ‘minor’ global cities – Hamburg and Mexico City. While Hamburg, though being a crucial hub in many GPNs due to its port (Hesse, 2006), is integrated into the world city network only relatively weakly (Taylor and Derudder, 2016), Mexico City is, as a classical ‘Third World megacity’, a case of a city which the postcolonial urban studies’ critique sees dropped off the global city map (Robinson, 2002, 2006).⁸

While many insights from my interviews tie in with the results of studies on the role and practices of PSFs in GPNs and in the world city network (e.g. Bassens and Van Meeteren, 2015; Beaverstock et al., 2015; Coe et al., 2014; Faulconbridge, 2007; Wójcik, 2013), here I pay particular attention to two aspects of governance, which are frequently denoted as being strategic: entry barriers (represented by cases of PSFs in Hamburg) and labour relations (cases from Mexico City) (Coe and Hess, 2013; Gereffi, 1994; Kaplinsky and Morris, 2002; Selwyn, 2012; Smith et al., 2002). The examples given draw from semi-structured, open-ended interviews with representatives of global PSFs drawn from the GaWC⁹ list (Taylor and Derudder, 2016) in the two cities (19 in Hamburg in 2013, 18 in Mexico City between 2007 and 2013). Respondents were mainly partners of the interviewed firm. Interviews lasted from 30 to 65 minutes, were recorded and completely transcribed without using transcription software. The analysis was carried out on the basis of the structuring content analysis (a variant of qualitative content analysis). For the development of the coding structure, I used a mixed deductive-inductive approach (Gläser and Laudel, 2010; Mayring, 2010). No software was used in the analysis of the transcript. Quotes have been translated by the author.

According to the insight that patents represent one of the clearest cases of an entry barrier (Kaplinsky and Morris, 2002), two interviewed business lawyers in Hamburg identify intellectual property as a key area both of GCC governance and of their influence on it. They also make clear that their objective in erecting such barriers is to alter the distribution of wealth created in a GPN in favour of their clients. The office managing partner of a law firm in Hamburg says that his service (patenting):

of course, quite clearly [has the purpose] to prevent others from entering the market … Because intellectual property, very, very clearly leads to monopoly rights. And monopoly rights of course always serve to crowd out a competitor. Thus, to have a monopoly … would always be suitable.

Yet, altering the distribution of value in a GPN requires more than just legal advice. In full agreement with Sassen’s (2010: 158) notion of governance as being ‘embedded’ into the services provided, the partner of another global law firm in Hamburg asserts that:

we go beyond the [legal] issue, considering how we can best serve the client, to help to achieve his economic goal as efficiently and profitably as possible … That’s precisely our job, to go beyond [the legal] and to develop things. Yet this development is part of the legal advice.

The example he gives refers to the recommendation to geographically restructure a client’s GVC because in a particular country the entrance barrier ‘intellectual property’ could not be guaranteed because of a ‘loose’ handling of laws:

So if I, if in some place I don’t have patent protection or not sufficient [protection], then the competition comes and takes [my product] away or modifies it or makes it cheaper … And that is certainly very significant … So, depending on whether you have them [patents], and where [a patent is registered], that has immediate impact on the added value, on value distribution.

Financing is another powerful entry barrier, in particular for suppliers in poorer countries (Gibbon, 2008). The head of the business centre of the Hamburg office of a global bank gives an example of how he can take advantage of the dearth of financial resources in an Asian country where his client’s supplier is located:

Well, in essence, it’s all about the question: When will I get my money? … That’s the most elementary payment condition, [which] also determines the strength vis-a-vis my suppliers … For example, you enable your supplier to get his money earlier … You can either put him in the position that he can no longer [hold out] because the payment terms are changed so that he is virtually no longer able to cover the pre-financing requirements, or you can make life easier for him, so to speak.

Offering the Asian supplier ‘mechanisms of liquidity’ brings him competitive advantages over other Asian suppliers. Yet, what the Hamburg financial service provider has ultimately in mind is, of course, not the supplier’s economic fate, but his client’s profit. The price the supplier has to pay for being empowered against local competitors is to be weakened against the German lead firm. As the banker says:

if you are paying him [the supplier] so early, that his position is clearly, significantly improved, then that in turn has implications on, for example, prices, yes, that is the other side, so to speak, the sooner I tell him: hey, I will pay you earlier, but you then have to make concessions, too, regarding the prices.

The example reveals, thus, two dimensions of how PSFs influence GCC governance. In organising the entry barrier ‘liquidity’, the Hamburg office of the PSF controls which companies can integrate themselves into the Asian segment of the client’s GVC. This powerful position is in turn used to siphon off wealth from the ‘empowered’ Asian firm and shift it to the Hamburg client (and to itself).

The second example of how PSFs are involved in GCC governance and in the organisation of the GTV refers to labour relations. According to the interviews in Mexico City, lawyers see themselves as strategic actors in their shaping. One issue recurrently addressed relates to the payment of social benefits. For example, the level of insurance benefits for employees depends on the risk class in which a company is classified by the Mexican Institute for Social Security. In order to reduce payments for the insurance protection of the employees of one client, an interviewed global law firm has successfully claimed in the courts the client’s re-classification in a less risky business field. Another issue mentioned repeatedly by labour lawyers concerns the configuration of employment contracts. If workers, for example, belong directly to the hiring company, they normally receive higher wages and more social benefits than if they were employed by a subsidiary founded for this purpose.

Another frequent topic is the ‘restructuring’ of labour relations, e.g. through the switching to a different union with which the collective bargaining agreement is signed. This is a critical issue, due to the closed-shop principle according to which companies in Mexico have to accept only one union as the workers’ legitimate representation. Because unions differ strongly in strength and political orientation, the closed-shop principle boosts high selectivity as regards with whom to sign the collective bargaining agreement. Lawyers therefore recommend their clients to ‘actively hunt for a trade union’, as the German Association for Foreign Trade and Location Marketing informs (Buerstedde and Päffgen, 2015). This ‘chasing’ of convenient unions is particularly important because of the geographical dimension of unions’ strength. Since unions are more employer-friendly in some federal states than in others, the proactive selection of workers’ representation involves localisation decisions: Because of unions’ impacts on the working environment, wages, the payment of social benefits and hence on profits, companies decide where to establish a plant also with regard to the geography of union power.

However, these spatialities of labour relations are difficult to grasp for foreign companies and especially for newcomers to the Mexican market. Lawyers from global law firms describe it therefore as one of their tasks to guide the client in this respect. As one lawyer underscores, the partners of his firm:

have conferences with the clients to plan a deal, to structure a deal … The one who takes the decision how things should be done, rather would be here, from the [law] firm … I do believe that the one who makes the strategy, it’s the partners of the law firm.

A partner of another law firm corroborates that the client:

contracts you precisely for that. That you tell him which union is the most convenient one … I think there’s much influence one has. A good example, as to labour issues, is … the firm x. X has closed plants, and has put other plants, only and exclusively because of the advice we have given … [They faced] problems with the union, because the union is very aggressive … Because [in that federal state] a contract was common, they had to pay certain, hm, benefits that were above market standards …

And the decision to relocate the plants, it was a joint decision, the client and you?

Well, … the client decides because it is his money, (but) based on the advice you give him … If you tell him the best place to establish a plant, then it is unlikely that the client will decide for anything else.

While these examples of the strategic involvement of PFSs in GCC governance certainly require a critical assessment through triangulation, it is also true that the interviews fit both the literature on the importance of barriers to entry and labour relations in shaping the structure, geography and governance of GCCs (Gereffi, 1994; Kaplinsky and Morris, 2002; Mahutga, 2012; Selwyn, 2012; Smith et al., 2002) and the literature on the role of financial and legal firms in GPN governance processes (Coe et al., 2014; IGLP Law and Global Production Working Group, 2016). To make it clear: PSFs are not only enablers of GCCs through ‘greasing’ assembly lines, they are also drivers, shaping how and where value is produced and accumulated. That is valid also for ‘minor’ global cities such as Hamburg and Mexico City, which is in line with the quantitative GaWC research that proves that the world city network is formed of more than 500 cities around the world (Taylor and Derudder, 2016).

Without claiming that the cases presented draw a complete picture, I think it is fair to say that they do support Sassen’s (2010: 158) contention that governance is being ‘embedded’ into the services provided. The cases show that services such as patenting, financing or making labour contracts ‘entail command functions that are distributed across those operations’ (Sassen, 2010: 158). The Mexico City lawyer, for example, who in his search for ‘convenient’ unions pre-structures clients’ strategies for plant relocation, is an active agent in GCC governance in two ways. Suggesting to clients a geographical reorganisation of their GPNs implies that the lawyer functions as a ‘disarticulator’ (cf. Bair and Werner, 2011) of plants, cities or federal states with combative trade unions. Because such exclusions are as ‘constitutive’ (Werner, 2016: 458) for the formation and restructuring of GVCs as their opposite, namely the integration through ‘strategic coupling’ (Yeung, 2015), lawyers can be identified as important network shapers. Secondly, plant relocation with the purpose of reducing wages increases a local GTV from workers’ households to the firm: Weaker unions imply less direct and indirect payments and therefore more value to be siphoned off. Yet, workers compensate the loss of income amongst other things through externalisation of costs to their households, which feed values into GPNs because (mainly female) household members shoulder more unpaid work for producing and reproducing the labour force (Dunaway, 2014).

As to the scales of this involvement of PFSs in GCC governance, the interviews with PSFs in Hamburg reveal that their influence clearly extends beyond national borders. When a lawyer advocates the withdrawal of a client from India because protection of intellectual property for pharmaceuticals there is ‘weak’, he/she defends ‘monopoly rights’ (and the corresponding profits) against a foreign government that seeks to provide affordable medicines. Suggesting to his client a geographical restructuring of the medical GCC with the purpose of bypassing the Indian market, the Hamburg lawyer once again can be identified as a ‘disarticulator’, and that on a global scale. In a similar vein, the Hamburg banker who provides financing to a client’s supplier in Asia is influencing GCC governance worldwide. His service can be decisive for which Asian firm will be integrated into the Hamburg client’s GCC, and he contributes to a global transfer of value because his financial service to the Asian supplier allows the Hamburg firm to beat down prices in backward linkages. On the other hand, PSFs in Hamburg also function as a pivot to other global cities, facilitating Asian or US companies’ entry into the European and/or German market (Parnreiter, 2015). While this role of a gateway city (Rossi and Taylor, 2006) for foreign firms to the national market is also assumed by Mexico City, and while Mexico City’s PSFs do service (the not so many) Mexican firms going global, the geographical reach of their shaping capacities seems to be more limited: None of the respondents brought up a case of modelling labour relations in, say, Central America (Parnreiter, 2010).

In any case, the consequences of the wealth transfers co-organised by PSFs in Hamburg and Mexico City are serious. In Latin America, for example, about 45% of total profits or 5% of total FDI were repatriated between 2000 and 2010 (Neme Castillo and Perezyera, 2013). Because a city’s or a region’s development depends critically on the capacity to ‘hold down’ the value created there (Coe and Hess, 2013), such policies of disinvestment and the GTV are part of the ongoing shaping of the landscapes of uneven development. Now, it is my contention that such relocations of resources are inconceivable without the daily collaboration of PSFs. And it is equally inconceivable that this GTV could be accomplished from a few places in the ‘North’, because high-end servicing is knowledge intensive and therefore distance sensitive. Mexico City is, thus, a place for the making of Mexico’s misery.

Conclusions

The starting point of this article was the disappointing acknowledgement that 30 years after the publication of Sassen’s The Global City (1991) our understanding of ‘how cities and the classes within them achieve control over other regions’ (Roberts, 1986: 459) has not improved substantially. In order to find answers to this question and to substantiate the notion of global cities’ ‘command and control’ functions, I have drawn on conceptualisations of global cities as nodes in GCCs (Brown et al., 2010). More precisely, and relying on the governance concept as originally defined by Gereffi (1994), I have scrutinised the role of PSFs in uneven development and, in particular, in the GTV (Hadjimichalis, 1984, 1987). My key contention is that because the direct as well as the indirect mechanisms through which value is transferred geographically require the intervention of PSFs, global cities can be theorised as governance nodes for centripetal wealth transfers along GCCs.

To exemplify this notion, I turned to PSFs’ activities in two less ‘eye-catching’ global cities. In the context of the persisting criticism that the global city concept has a bias towards ‘elite cities’, it has been my intention to substantiate the claim that global cities are critical places for the organisation of uneven development with reference to cities beyond ‘the usual suspects’. Referring to cases of how PSFs in Hamburg and Mexico City erect entry barriers to protect their clients from competition and of how they shape labour relations at the expense of employees, I have maintained that governance is, as Sassen (2010: 158) has argued, indeed ‘embedded’ into the services provided. From that follows that even ‘minor’ global cities are strategic governance places from where the transfer of wealth towards the centres of the world economy is organised.

Yet, this form of governance does not directly correspond to the notion of ‘command and control’, nor does it fit into the dominant approach in GCC, GVC and GPN studies, which until very recently has focused on bipolar governance relations between lead firms and key suppliers. I think that economic governance is best understood as a multi-actor, multi-scale and multi-local process. Paraphrasing Jane Jacobs (1970: 121), one could probably say that PSFs’ agency resembles the ‘little movements’ that turn ‘the great wheels’ of the GTV. Hamburg and Mexico City are two of the many global cities where these wheels are turned, and that is why the global city concept is a meaningful approach for studying the role of cities all over the world in uneven development. Thus, the challenge for urban studies is not so much to theorise the city ‘from the Global South’ (Parnell and Robinson, 2012), but to comprehend the role of global cities all over the world in the shaping of the uneven relations between cities that guarantee the centripetal GTV.

Footnotes

Acknowledgements

I thank the anonymous reviewers for their careful reading of my manuscript and their insightful comments and suggestions.

Declaration of conflicting interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

Notes

References

Acuto

(2011) Finding the global city: An analytical journey through the ‘invisible college’. Urban Studies 48(14): 2953–2973.

Allen

(2003) Lost Geographies of Power. Oxford: Blackwell.

Arendt

(1961) Between Past and Future: Six Exercises in Political Thought. New York: The Viking Press.

Bair

(ed.) (2014) Editor’s introduction: Commodity chains in and of the world system. American Sociological Association 20(1): 1–10.

Bair

Werner

(2011) Commodity chains and the uneven geographies of global capitalism: A disarticulations perspective. Environment & Planning A 43(5): 988–997.

Bassens

Van Meeteren

(2015) World cities under conditions of financialized globalization: Towards an augmented world city hypothesis. Progress in Human Geography 39(6): 752–775.

Baud

Durand

(2012) Financialization, globalization and the making of profits by leading retailers. Socio-Economic Review 10: 241–266.

Beaverstock

Faulconbridge

Hall

SJE

(2015) The Globalization of Executive Search: Professional Services Strategy and Dynamics in the Contemporary World. London: Routledge.

Brown

Derudder

Parnreiter

et al . (2010) World city networks and global commodity chains: Towards a world-systems’ integration. Global Networks 10(1): 12–34

10.

Bryson

Daniels

(eds) (2007) The Handbook of Service Industries. Cheltenham: Edward Elgar.

11.

Buerstedde

Päffgen

(2015) Nach wie vor Fachkräftemangel in technischen Berufen. Germany Trade and Invest. Available at: http://www.gtai.de/GTAI/Navigation/DE/Trade/Maerkte/Geschaeftspraxis/lohn-und-lohnnebenkosten,t=lohn-und-lohnnebenkosten-mexiko,did=1289472.html (accessed 10 December 2016).

12.

Clark

Monk

AHB

(2013) The scope of financial institutions: In-sourcing, outsourcing and off-shoring. Journal of Economic Geography 13: 279–298.

13.

Coe

(2014) Missing links: Logistics, governance and upgrading in a shifting global economy, Review of International Political Economy 21(1): 224–256.

14.

Coe

Hess

(2013) Global production networks, labour and development. Geoforum 44: 4–9.

15.

Coe

Dicken

Hess

(2008) Global production networks: Realizing the potential. Journal of Economic Geography 8(3): 271–295.

16.

Coe

Lai

Wójcik

(2014) Integrating finance into global production networks. Regional Studies 48(5): 761–777.

17.

Cohen

(1981) The new international division of labor, multinational corporations and urban hierarchy. In: Dear

Scott

(eds) Urbanization and Urban Planning in Capitalist Society. New York: Methuen & Co, pp. 287–315.

18.

Derudder

Parnreiter

(2014) The interlocking network model. Tijdschrift voor Economische en Sociale Geografie 105: 473–386.

19.

Dicken

(2011) Global Shift: Mapping the Changing Contours of the World Economy. London: SAGE.

20.

Djelic

Sahlin-Anderson

(eds) (2006) Transnational Governance: Institutional Dynamics of Regulation. Cambridge: Cambridge University Press.

21.

Dunaway

(2014) Bringing commodity chain analysis back to its world-systems roots: Rediscovering women’s work and households. American Sociological Association 20(1): 64–81.

22.

Faulconbridge

(2007) Relational networks of knowledge production in transnational law firms. Geoforum 38(5): 925–940.

23.

Faulconbridge

Taylor

Nativel

et al . (2011) The Globalization of Advertising: Agencies, Cities and Spaces of Creativity. Milton Park: Routledge.

24.

Flood

Sosa

(2008) Lawyers, law firms, and the stabilization of transnational business. Northwestern Journal of International Law & Business 28(3): 489–526.

25.

Frank

(1969) Latin America: Underdevelopment or Revolution: Essays on the Development of Underdevelopment and the Immediate Enemy. New York: Monthly Review Press.

26.

Friedmann

(1986) The world city hypothesis. Development and Change 17(1): 69–83.

27.

Friedmann

(1995) Where we stand: A decade of world city research. In: Knox

Taylor

(eds) World Cities in a World System. Cambridge: Cambridge University Press, pp. 21–47.

28.

Friedmann

Wolff

(1982) World city formation: An agenda for research and action. International Journal of Urban and Regional Research 6(3): 309–344.

29.

Froud

Johal

Leaver

et al . (2006) Financialization and Strategy: Narrative and Number. London: Routledge.

30.

Gereffi

(1994) The organization of buyer-driven global commodity chains: How U.S. retailers shape overseas production networks. In: Gereffi

Korzeniewicz

(eds) Commodity Chains and Global Capitalism. Westport, CT: Praeger, pp. 95–122.

31.

Gereffi

Korzeniewicz

(eds) (1994) Commodity Chains and Global Capitalism. Westport, CT: Praeger.

32.

Gereffi

Korzeniewicz

(1994) Introduction: Global commodity chains. In: Gereffi

Korzeniewicz

(eds) Commodity Chains and Global Capitalism. Westport, CT: Praeger, pp. 1–14.

33.

Gibbon

(2002) At the cutting edge? Financialisation and UK clothing retailers’ global sourcing patterns and practices. Competition and Change 6(3): 289–308.

34.

Gibbon

(2008) Governance, entry barriers, upgrading: A re-interpretation of some GVC concepts from the experience of African clothing exports. Competition and Change 12(1): 29–48.

35.

Gläser

Laudel

(2010) Experteninterviews und Qualitative Inhaltsanalyse. Wiesbaden: VS Verlag.

36.

Graz

Nölke

(eds) (2008) Transnational Private Governance and its Limits. London: Routledge.

37.

Hadjimichalis

(1984) The geographical transfer of value: Notes on the spatiality of capitalism, Environment and Planning D: Society and Space 2(3): 329–345.

38.

Hadjimichalis

(1987) Uneven Development and Regionalism: State, Territory and Class in Southern Europe. London: Croom Helm.

39.

Hanssens

Derudder

Witlox

(2012) Managing organizational and geographical complexity: The ‘positionality’ of advanced producer services in the globalizing economies of metropolitan regions. Erdkunde 66(1): 45–55.

40.

Harvey

(1985) The Urbanization of Capital. Oxford: Blackwell.

41.

Henderson

Dicken

Hess

et al . (2002) Global production networks and the analysis of economic development. Review of International Political Economy 9(3): 436–464.

42.

Hesse

(2006) Global chain, local pain: Regional implications of global distribution networks in the German North Range. Growth and Change 37(4): 570–596.

43.

Hopkins

Wallerstein

(1986) Commodity chains in the world-economy prior to 1800. Review 10(1): 157–170.

44.

Hymer

(1972) The mulitnational corporation and the law of uneven development. In: Bhagwati

(ed.) Economics and World Order. New York: Free Press, pp 113–140.

45.

IGLP Law and Global Production Working Group (2016) The role of law in global value chains: A research manifesto. London Review of International Law 4(1): 57–79.

46.

Jacobs

(1970) The Economy of Cities. New York: Vintage.

47.

Jacobs

(2014) Rotterdam and Amsterdam as trading places? In search of the economic-geographical nexus between commodity chains and world cities. Tijdschrift voor de Economische en Sociale Geografie 105(4): 483–491.

48.

Jacobs

Koster

Hall

(2011) The location and global network structure of maritime advanced producer services. Urban Studies 48(13): 2749–2769.

49.

Jones

(2002) The ‘global city’ misconceived: The myth of ‘global management’ in transnational service firms. Geoforum 33: 335–350.

50.

Kaplinsky

(2000) Globalisation and unequalisation: What can be learned from value chain analysis? The Journal of Development Studies 37(2): 117–146.

51.

Kaplinsky

Morris

(2002) A Handbook for Value Chain Research. Available at: http://www.prism.uct.ac.za/papers/vchnov01.pdf (accessed 25 July 2017).

52.

Kearney

(2015) Global Cities 2015: The Race Accelerates. Chicago, IL: AT Kearney.

53.

Mahutga

(2012) When do value chains go global? A theory of the spatialization of global value chains. Global Networks 12(1): 1–21.

54.

Marcuse

van Kempen

(eds) (2000) Globalizing Cities: A New Spatial Order? Oxford: Blackwell.

55.

Mayring

(2010) Qualitative Inhaltsanalyse. 11th edn. Weinheim: Beltz.

56.

Milberg

(2008) Shifting sources and uses of profits: Sustaining US financialization with global value chains. Economy and Society 37(3): 420–451.

57.

Milberg

Winkler

(2010) Financialisation and the dynamics of offshoring in the USA. Cambridge Journal of Economics 34: 275–293.

58.

Neme Castillo

Perezyera

(2013) Restrictions on the Latin American economy: The case of US FDI profits repatriation, Asian Journal of Latin American Studies 26(3): 29–53.

59.

OECD (2005) Policy roundtables: Barriers to entry. Directorate for Financial and Enterprise Affairs Competition Committee. Available at: https://www.oecd.org/competition/abuse/36344429.pdf (accessed 25 July 2017).

60.

Palpacuer

(2008) Bringing the social context back in: Governance and wealth distribution in global commodity chains. Economy and Society 37(3): 393–419.

61.

Parnell

Robinson

(2012) (Re) theorizing cities from the Global South: Looking beyond neoliberalism. Urban Geography 33(4): 593–617.

62.

Parnreiter

(2010) Global cities in global commodity chains: Exploring the role of Mexico City in the geography of global economic governance. Global Networks 10(1): 35–53.

63.

Parnreiter

(2013) The global city tradition. In: Acuto

Steele

(eds) Global City Challenges: Debating a Concept, Improving the Practice. Houndmills: Palgrave Macmillan, pp. 15–32.

64.

Parnreiter

(2014) Network or hierarchical relations? A plea for redirecting attention to the control functions of global cities. Tijdschrift voor Economische en Sociale Geografie 105(4): 398–411.

65.

Parnreiter

(2015) Managing and governing commodity chains: The role of producer service firms in the secondary global city of Hamburg. Die Erde 146(1): 1–15.

66.

Parnreiter

Fischer

Imhof

(2007) El enlace faltante entre cadenas globales de producción y ciudades globales: El servicio financiero en Ciudad de México y Santiago de Chile. EURE 33(100): 135–148.

67.

Peck

(2015) Cities beyond compare? Regional Studies 49(1): 160–182.

68.

Rabach

Kim

(1994) Where is the chain in commodity chains? The service sector nexus. In: Gereffi

Korzeniewicz

(eds) Commodity Chains and Global Capitalism. Westport, CT: Praeger, pp. 123–143.

69.

Roberts

(1986) Review of Timberlake, M, Urbanization in the World-Economy. International Journal of Urban and Regional Research 10: 458–459.

70.

Robinson

(2002) Global and world cities: A view from off the map. International Journal of Urban and Regional Research 26(3): 531−554.

71.

Robinson

(2006) Ordinary Cities: Between Modernity and Development. London: Routledge.

72.

Rossi

Beaverstock

Taylor

(2007) Transaction links through cities: ‘Decision cities’ and ‘service cities’ in outsourcing by leading Brazilian firms. Geoforum 38(4): 628–642.

73.

Rossi

Taylor

(2006) ‘Gateway Cities’ in economic globalisation: How banks are using Brazilian cities. Tijdschrift voor Economische en Sociale Geografie 97(5): 515–534.

74.

Roy

(2009) The 21st-century metropolis: New geographies of theory. Regional Studies 43(6): 819–830.

75.

Sassen

(1988) The Mobility of Labor and Capital: A Study in International Investment and Capital Flow. Cambridge: Cambridge University Press.

76.

Sassen

(1991) The Global City. New York, London, Tokyo. Princeton, NJ: Princeton University Press.

77.

Sassen

(2001) The Global City. New York, London, Tokyo. 2nd edn. Princeton, NJ: Princeton University Press.

78.

Sassen

(2010) Global Inter-city networks and commodity chains: Any intersections? Global Networks 10: 150–163.

79.

Sassen

(2016) The global city: Enabling economic intermediation and bearing its costs. City & Community 15(2): 97–108.

80.

Selwyn

(2012) Beyond firm-centrism: Re-integrating labour and capitalism into global commodity chain analysis. Journal of Economic Geography 12: 205–226.

81.

Sennett

(1980) Authority. New York: Alfred A. Knopf.

82.

Sikkaa

Willmott

(2010) The dark side of transfer pricing: Its role in tax avoidance and wealth retentiveness. Critical Perspectives on Accounting 21: 342–356.

83.

Smith

Rainnie

Dunford

et al . (2002) Networks of value, commodities and regions: Reworking divisions of labour in macro-regional economies. Progress in Human Geography (26)1: 41–63.

84.

Storper

(2013) Keys to the City: How Economics, Institutions, Social Interaction, and Politics Shape Development. Princeton, NJ: Princeton University Press.

85.

Taylor

Derudder

(2016) World City Network: A Global Urban Analysis. 2nd edn. New York: Routledge.

86.

Van Meeteren

Derudder

Bassens

(2016) Can the straw man speak? An engagement with postcolonial critiques of ‘global cities research’. Dialogues in Human Geography 6(3): 247–267 .

87.

Wainwright

(2011) Tax doesn’t have to be taxing: London’s ‘onshore’ finance industry and the fiscal spaces of a global crisis, Environment and Planning A 43(6): 1287–1304.

88.

Werner

(2016) Global production networks and uneven development: Exploring geographies of devaluation, disinvestment, and exclusion. Geography Compass 10(11): 457–469.

89.

Wójcik

(2013) Where governance fails: Advanced business services and the offshore world. Progress in Human Geography 37(3): 330–347.

90.

Yeung

(2015) Regional development in the global economy: A dynamic perspective of strategic coupling in global production networks. Regional Science Policy & Practice 7(1): 1–24.

91.

Yeung

Coe

(2015) Toward a dynamic theory of global production networks. Economic Geography 91(1): 29–58.