Technological “Third Wave” Crests Over Cities

By Leonard Ruchelman

American cities are in the midst of a technological revolution. Driven largely by advances in communications, the nation’s urban areas are being profoundly reshaped, portending dramatic changes in the way most Americans live and work. Perhaps the biggest change now taking place is that computer networks make most places accessible over ever greater distances. At the same time, the geographic location of labor and capital has come to mean less as firms and industries, located at different sites, use information technologies to coordinate the production and distribution of goods. Fiber optics, satellites and digital electronics constantly increase the speed and efficiency of transactions. Money now moves easily across regional and national boundaries while stocks, currency and bonds are traded on worldwide electronic markets.

Businesses, communicating over thousands of miles with no regard for distance, are able to close old industries or open new ones; shift thousands of workers from one location to another; and, with the touch of a switch, transfer huge investments instantaneously anywhere in the world. Consequently, many firms and even whole industries now have the capacity to locate wherever they wish. This creates fierce competition among cities to attract jobs and investment. While some cities succeed and become winners, others struggle and some lose; still others accept their status as mere survivors.

A few cities like New York and Los Angeles have been able to strategically position themselves in the world economy. Critical factors in attaining such status are the ability to provide necessary services such as transportation and communications networks, a workforce with the requisite technical and professional skills, and institutions with strong knowledge-producing capabilities. More importantly, such cities typically perform as high-powered command centers in the world economy.

Most American cities have come to perform more marginal roles in the global economy, however. Some export low-value, labor-intensive products made by unskilled workers. Others, having lost their manufacturing base, now strive to restructure their economies by aggressively pursuing high-tech industry. Given the increased mobility of capital and the limited capability of government to enforce development conformity among localities, urbanization now reflects a growing diversity of functional capacity and development. Because some regions are better able than others to attract investment, metropolitan economies reflect different growth patterns. Thus, cities and their surrounding areas can increasingly be categorized by the kind of economic activities they attract and promote. In addition to the headquarters designation already mentioned, urban areas can be defined as innovation centers, module production centers, edge cities, leisure-tourist playgrounds and retirement sites.

These types are, at best, approximate descriptions of reality and in many instances, they overlap. Nor do they represent an exhaustive topology. Rather, they are intended as general categories for suggesting new forms of urban development during what some are calling the “Third Wave” of technological innovations (First Wave refers to the development of agricultural technology and Second Wave refers to the development of industrial technology as it has affected society.). For the residents of cities, the Third Wave brings with it consequences in terms of wages and wealth, taxes and services, as well as overall quality of life.

Defining City Types

Headquarters cities may also be referred to as “world” cities, “global” cities or sometimes “capital” cities. They are places where banks, corporate headquarters and other command functions and high-level enterprises, such as law firms and advertising agencies, are concentrated. At the highest level, headquarters cities are sites of most of the leading global markets for commodities and investment capital, and usually have the highest concentration of corporate headquarters. In addition, they are the favored location of media organizations and usually serve as cultural capitals for music, art and theater.

As part of the shift toward more flexible forms of economic organization, a relatively new urban phenomenon has evolved: namely, self-sustaining centers of innovation linked into global markets. In these locations, continuous inputs of knowledge are far more important to the production process than in previous eras. Here, research and development are an ongoing activity, as short production cycles call for constant product improvement. Heavy reliance is placed on face-to-face and informal links between key entrepreneurs and innovators, as well as the wider “innovative milieu” within which continuous innovation can flourish. Linkages to research institutes and universities tend to be important assets, as are good international transport and telecommunications. Key economic sectors usually include electronics, biotechnology, aerospace, nuclear technology, medical technologies, environmental technologies and space. Examples of such areas are Silicon Valley in California and the Route 128 technology corridor in and around Boston.

Module-production centers are regions where routine economic tasks are performed. This includes, for example, auto assembly in Detroit, or storage of nuclear waste in Hanford, Wash. Cheap land and low labor costs typically attract development and investment to such places. Thus, Omaha, Neb., has become the toll-free telephone exchange center of the nation, while Citicorp has located its credit card processing center in Sioux Falls, S.D. Other module cities survive because of their proximity to a natural resource: for example, Norfolk, Va., and Pensacola, Fla., serve the U.S. Navy as port cities near the Atlantic Ocean.

Module-production centers tend to manifest two disturbing qualities. They are dependent on control centers located elsewhere, and they are expendable in the system of places. That is, they do not have any of the distinctive organization features of headquarters or innovation centers that would allow them to control their own destinies. The functions they perform can be carried out elsewhere. Old factory cities of the Northeast and the Midwest, such as Providence, New Haven, Bridgeport, Newark, St. Louis, Cleveland and Detroit, among others, have been especially vulnerable to mergers and downsizing decisions made by distant companies with global interests. The efforts of leaders in these cities to reverse course by remaking the physical and economic infrastructures has so far produced mixed results at best.

Another growth strategy that is becoming commonplace emphasizes the development of technology-related leisure-tourist playgrounds. There has been no dearth of ambitious projects in many urban areas, such as the construction of sports arenas, cultural centers, entertainment-enhanced malls and urban theme parks. The expectation is that entertainment zones can help restore some of the luster to America’s central cities, bringing back the appeal lost to the suburbs. From Cleveland’s Rock and Roll Hall of Fame, to Universal Studio’s Citywalk Mall in Los Angeles, to the overhaul of New York’s Times Square, urban planners are making the point that centrality can still be advantageous for entertainment. In contrast to the isolating effects of home video and the Internet, urban entertainment zones also provide social interaction.

Aside from its quality-of-life challenge to central cities, the suburbs have encouraged the rise of a new form of urban concentration: that of the edge city. Typically located at the intersections of a beltway with a lateral road, edge cities emerged in the 1950s as the result of advancements in automobile and communications technology. Among the most impressive of these centers are Tyson’s Corner in Fairfax County in suburban Washington, D.C., King of Prussia in Pennsylvania, and The Galleria in suburban Dallas. Edge cities are oriented to mixed-use concentrations of retail, office and high-tech industries; their industrial parks are places that benefit from cheap land where factories and other production centers can be designed and built according to specifications. But such a form of development brings its own downside: many separate communities legally independent of one another, encouraging economic and social segregation into enclaves grouped according to income levels.

Third-Wave Transition

Looking to the future, we can anticipate the continued growth and proliferation of new types of cities. For those who bear responsibility for governing these places, as well as for those who will be living in them (which can be expected to be more than 80 percent of the American population), a new agenda of questions must be examined. Most important is: how can cities adapt to change, taking note of the advantages and disadvantages that accrue to their populations? Places that have trouble adapting will confront disinvestment, job loss and fiscal difficulties.

Viewing the recent past, older core cities have been particularly hard hit. Their infrastructure is in poorer condition, their unemployment rates higher and their governments more impoverished than those of the suburbs. If they are to survive as viable entities, they must be able to maintain and strengthen those activities in which they possess a comparative advantage. Most notable is the concentration of managerial and professional offices that facilitate face-to-face communication, a facet of human interaction unlikely to be completely supplanted by technology, at least in the near term. They provide a dynamic environment for innovation because of ready access to specialized skills, detailed market knowledge and the presence of support services for the development of new products and services. Central cities also feature attractive amenities, such as concentrations of restaurants, lodging, lively street life and easily accessible cultural offerings.

However, the ability of core areas to adapt to postmodern conditions is limited by factors that pull in opposite directions, such as high living costs and spotty quality of life that will continue to draw business and industry to lower-cost, high-amenity areas outside city centers. While technology may be a hindrance in certain respects, it can also be a facilitator. Among such promising urban-deployable technological innovations are intelligent transportation systems, video surveillance for public safety, electronic delivery of services, distance learning, and the use of telecommunications to promote citizen participation.

In the long run, much will depend on the quality and organization of public-private leadership in meeting new challenges. This is one of the fundamental tensions that will be carried into the next century. For most of history, humans have shaped civilizations commensurate with the level of their material technology. In some cases, like ancient Athens, the former far outstripped the latter. New technologies will inevitably continue to proliferate in the years to come, but we need to remember that the measure of a civilization is not the tools it owns, but the use it makes of them.

Leonard Ruchelman is Eminent Professor of Urban Studies and Public Administration at Old Dominion University and author of Cities in The Third Wave: The Technological Transformation of Urban America.