Globalization, Geography, and Regional Policy

Abstract

Regional policy can be defined simply as the deliberate use of public policy to influence the flow of resources in a national economy in favor of particular disadvantaged or backward regions. Most governments in Asia continue to who have either ‘strong’ or ‘weak’ versions of such policy, either on the grounds of equity, because important pockets of poverty are located in particular regions, or on the grounds of allocative efficiency, where it is deemed that the returns to immobile factors in a region are below their potential.1 Despite the skepticism in some circles over attempts to over-ride or influence market outcomes, a persuasive theoretical case for some form of regional policy can be argued from a range of perspectives. In this paper we reflect on what recent theorizing on trade and geography, that attempts to explain globalization patterns and their consequences, can add to the discussion on regional policy. The ‘new economic geography’ of the 1990’s, is itself arguably a variant of the ‘new international trade theory’ of the late 1970’s and 1980’s. Much of this literature focuses on trade between national economies and it is useful to assess how far it can be used to throw light on trends within national economies. Here we do not offer a precise definition of globalization, nor do we enter into discussions of whether current trends are entirely new or simply a revival of those from the pre –1914 era. We simply take globalization as a process in which there is an accelerated movement of commodities and capital between economies and a significant decline in the cost of transport and communications and reflect on what, if anything, this implies for regional policy.