Reflections on creating conditions for uneven development across spatial scales

Abstract

We reflect upon uneven development not primarily as a result, but as a necessary and thus constitutive condition that has enabled the success of international financial centres (IFCs). By developing our argument on the example of small-but-global financial centres, in particular Luxembourg City (Grand Duchy of Luxembourg), we contrast the creation of local and global conditions, which together determine Luxembourg’s enormous economic success and are themselves stable preconditions for uneven development. Luxembourg’s growth trajectory over just five decades was made possible by an open, ‘extraverted’ political-economic setting, while gaining support from, what we call, ‘introverted’ political-economic governance and regulatory practices in order to mobilise essential financial resources and qualified workforce from abroad.

We trace Luxembourg’s development based on increasing inequality, effective not only within the small territory but especially beyond, to three overlapping and reinforcing dynamics across scales. At the global level, city and small states in particular have forged their territorialities of law over time by commercialising their sovereignty. At the inter-regional level, neighbouring regions have become a major labour pool to meet the IFC’s labour needs. Without the armies of high-skilled daily commuters, hardly any of the IFCs would have been able to progress and become dominant growth poles themselves. At the local level, urban policies and planning were geared towards providing the land, infrastructure and regulatory measures required for the physical anchoring of the financial industries: areas of specialised services, buildings, high-end office space, transport arteries and huge car parks, to name but a few.

The downside of these trajectories is rising levels of inequality between the regions involved. In this setting, Luxembourg can be seen as a big sponge. With almost half of the national labour market provided by foreign workforce, whose tax base is the workplace not the place of residency, neighbouring regions are demanding compensation – so far without success. National property markets have fuelled development dynamics and provided local land-/homeowners with a huge globalisation dividend, enabled by a national planning regime that favours growth at almost any cost. Moreover, the housing market is becoming the most important driver of inequality, despite – or because – of the high salaries paid in Luxembourg’s main economic sectors.

Yet, in the face of such glaring problems of unsustainable development, no adequate solution and long-term strategy is in sight. Rather, balancing the uneven spatial development patterns seems to be the ultimate aim. This is difficult to solve given the complexity of the challenge and the fact that almost every local issue is rooted in multiple scales and subject to interest politics.