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Varieties of Capital Cities

The Competitiveness Challenge for Secondary Capitals

David Kaufmann

The political and symbolic centrality of capital cities has been challenged by increasing economic globalization. This is especially true of secondary capital cities; capital cities which, while being the seat of national political power, are not the primary economic city of their nation state. David Kaufmann examines the unique challenges that these cities face entering globalised, inter-urban competition while not possessing a competitive political economy.
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David Kaufmann

The political and symbolic centrality of capital cities has been contested by economic globalization. Secondary Capital Cities – defined as capitals that are not the primary economic city of their nation states – are especially pressured by economic globalization because their political economy is nationally oriented and shaped by the influence of the national government. Thus, Secondary Capital Cities are politically superior but economically inferior. These types of capital cities are nevertheless pushed into a globalized and increasingly knowledge-intense interurban competition. The competitiveness challenge sketched in this book is that Secondary Capital Cities must enter globalized interurban competition without possessing a competitive political economy. The book is guided by three research questions. First, what kinds of locational policies are being formulated in Secondary Capital Cities? Second, which factors explain the formulation of locational policies in Secondary Capital Cities? Third, which actors formulate locational policies in the urban governance arrangements of Secondary Capital Cities?

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David Kaufmann

Locational policies aim to enhance the economic competitiveness of localities by developing place-specific assets that are considered to be most competitive. The proposed Locational Policies Framework captures the wide array of policy endeavors of cities to compete in interurban competition. The analytical framework of this book draws from the Varieties of Capitalism theory. This theoretical lens enables the theorizing of local governments as actors that formulate locational policies based on political and economic institutions. The economic institutions are examined using the Regional Innovation System concept, which stems from the economic geography literature. The political institutions are analysed by using the Multilevel Governance concept which has emerged from political science literature. The analytical framework assumes that these two explanatory factors constrain or enable the formulation of different types of locational policies. Furthermore, local decision-makers may draft locational policies which aim at the very structures that simultaneously enable or restrict them.

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David Kaufmann

This brief chapter justifies the selection of Bern, Ottawa, The Hague, and Washington, DC from the population of Secondary Capital Cities in OECD countries based on a ‘most similar systems’ design. The chapter shows that the configurations in the two main explanatory factors – Regional Innovation System and Multilevel Governance setting – vary, whereas potential influential control factors are largely stable.

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David Kaufmann

In general, the status of Bern as the federal city of Switzerland does not come with considerable benefits and the federal government is rather indifferent towards its capital city. The locational policies agenda of Bern is closely aligned to the capital city function without many economic-oriented locational policies. Thus, Bern is indeed a government city. The city of Bern’s locational policies agenda is geared towards maximizing tax revenue and is dominated by three main topics. First, cluster policies in highly regulated and knowledge-intensive economic sectors are formulated. However, compared to the other three secondary capital cities under scrutiny, innovation policies are rather rare in Bern. Second, Bern concentrates on improving the city’s quality of life by protecting green spaces, preserving its old town, organizing cultural activities, and ensuring educational opportunities. Third, Bern positions itself as the Swiss political center and thereby differentiates itself from the Swiss metropolitan powerhouses.

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David Kaufmann

The sub-arctic farming and lumber town of Ottawa was named the Canadian capital city in 1859. Since then, Ottawa has experienced an impressive development from a small town to a modern city due to the federal administration. The capital city metropolitan region is located on the politically and symbolically charged border between Ontario and Quebec. The locational policies agenda of Ottawa tries to simultaneously position Ottawa as a government city and as a business city. This dichotomy reflects that Ottawa is indeed a fragmented city. The metropolitan region is fragmented between the cities of Ottawa and Gatineau, the different economic sectors being divided between the government sector and the export-oriented high-tech sector, and also between the high-tech sectors in Kanata and Downtown. City officials play an active role in the formulation and implementation of locational policies.

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David Kaufmann

The Hague not only hosts most major national government organizations, but it is also home to an impressive number of international organizations that are active in the field of international law and security. Given this international importance, The Hague is mostly described and studied in the context of its international organizations. The importance of public sector organizations provides The Hague with a distinct economic profile. The overall aim of The Hague’s locational policies agenda is to become an international business city, while still leveraging the brand of ‘International City of Peace and Justice.’ The fast-growing cyber security sector especially capitalizes on the presence of international organizations and is expected to add the business element to The Hague’s positioning strategy. Thus, locational policies in The Hague mainly target international organizations and the emerging cyber security sector. Generally, city officials in The Hague are very active in formulating locational policies.

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David Kaufmann

Washington, DC represents a unique case within the US urban system because of its constitutional status and its many capital city specific local autonomy constraints. The District of Columbia is neither a state nor a city within a state, but it bears the responsibilities of a state as well as those of a county, a city, and a school district, yet does not have the authority to raise revenue the way all other states do. The overall aim of the locational policies agenda in DC is to become a competitive international business city. However, DC simultaneously tries to consider the needs of its longstanding residents. Furthermore, DC pushes large-scale development projects. In general, the DC administration faces the challenge of balancing its locational policies agenda and its social agenda. Its ambitions to become a global powerhouse (sometimes) clash with the needs of its poorer residents.

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David Kaufmann

This chapter systematically compares the findings of the four case studies. The findings can be summarized as two core types of locational policies agendas. The first is geared towards the physical development of the city and the attraction of public funds. It can empirically be found in Ottawa and The Hague. The second locational policies agenda is geared towards maximizing tax revenues, and it is predominant in Bern and Washington, DC. The emergence of these two different locational policies agendas can be explained by four factors, namely local tax autonomy, the development stage of the Regional Innovation System, capital city specific constraints and vertical institutional fragmentation in combination with local tax autonomy. The degree of local tax autonomy is the best predictor of locational policies as it sets up the structures under which cities can raise funds. Thus, institutions seem to matter when explaining the variance of urban policies.

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David Kaufmann

The conclusion summarizes the aim of the book, its contribution to the literature, its central findings for both theory and practice, and it generalizes the findings. The book shows that the four cities face similar pressures due to economic globalization. However, their policy responses to cope with these pressures do not converge. Instead, they are diverse, because they are mediated by the institutional constraints and opportunities of their political economies. The study found that cities can exert agency when they formulate innovation policies to alter economic institutional constraints. Furthermore, urban governance arrangements in Secondary Capital Cities seem to be distinctive from other types of cities. Secondary capitals are government cities that lack an industrial tradition. In such a context, local governments take a leading role in urban governance arrangements and developers are the only important business actors that engage in the formulation of locational policies.