When we think about the global economy, we might imagine a sprawling network of activity distributed across continents, with wealth and commerce flowing through countless communities worldwide. The reality is far more concentrated than most people realize. A remarkably small number of cities generate an outsized portion of the world’s economic output, creating what economists call extreme spatial inequality.
Consider this: the New York metropolitan area alone produces an annual GDP larger than that of South Korea or Canada. Tokyo’s economy rivals that of entire nations like Indonesia or the Netherlands. Just fifty cities worldwide account for roughly 8% of global population but generate nearly 21% of global GDP. This pattern holds across countries and continents, from London to Shanghai, from San Francisco to Singapore.
The concentration becomes even more dramatic when we examine specific industries. The global financial system essentially runs through a handful of cities: New York, London, Hong Kong, Singapore, and Tokyo dominate banking, insurance, and capital markets to such a degree that decisions made in these urban centers ripple through economies thousands of miles away. Silicon Valley’s dominance in technology is equally striking, with the San Francisco Bay Area hosting a disproportionate share of venture capital investment, startup formation, and tech industry employment. Similar patterns emerge in entertainment concentrated in Los Angeles, fashion in Paris and Milan, and pharmaceuticals in Basel.Why does economic activity cluster so intensely? The phenomenon reflects what economists call agglomeration effects, where proximity creates compounding advantages. When talented people congregate in one place, they exchange ideas more freely, switch jobs more easily, and collaborate on projects that wouldn’t be possible in isolation. A software engineer in San Francisco can attend three networking events in a single evening and bump into potential cofounders, investors, and mentors. That same engineer in a smaller city might struggle to find even one relevant professional connection.
Companies also benefit from being near other companies. A startup can more easily find specialized suppliers, service providers, and talent pools in major urban centers. A biotech firm in Boston can draw from nearby universities, contract with specialized laboratories, and recruit from a deep pool of scientists who moved there precisely because of the industry concentration. These advantages become self-reinforcing: success attracts more talent and capital, which generates more success, which attracts still more talent and capital.
Infrastructure investments amplify these disparities. Major cities attract better airports, more sophisticated transit systems, fiber optic networks, and cultural amenities that make them more attractive places to live and do business. A company choosing a headquarters location knows that Singapore or Dubai offer world-class logistics, while a second-tier city might have aging infrastructure and limited international connections.
The consequences of this concentration are profound and often troubling. Small cities and rural areas watch their most talented young people leave for urban centers, draining local economies of human capital. The journalist James Fallows documented this pattern extensively in his travels across America, finding town after town struggling with demographic decline even as coastal cities boomed. Property values in major cities have skyrocketed, creating housing affordability crises that price out middle-class families and exacerbate inequality.
Political tensions follow these economic divides. In country after country, we see growing resentment between thriving urban centers and struggling peripheral regions. Brexit drew much of its support from areas of England left behind by London’s growth. Donald Trump’s political coalition was built partly on anger from communities that felt forgotten while New York and San Francisco prospered. France’s Yellow Vest movement emerged from frustration in towns far from Paris. These aren’t merely cultural divides but reflections of genuine economic divergence.
Some economists and policymakers argue that we should embrace concentration rather than fight it. They point out that density enables the innovation and productivity growth that benefits everyone eventually. Edward Glaeser’s work on urban economics suggests that attempting to spread economic activity more evenly often backfires, resulting in wasteful subsidies that don’t create sustainable growth. From this perspective, the solution is to make successful cities bigger and more accessible rather than trying to revive struggling regions.
Others advocate for more deliberate efforts to distribute economic opportunity. This might include infrastructure investments in secondary cities, tax incentives for companies that locate outside major centers, or policies to strengthen regional universities as anchors for local economies. Some countries have experimented with moving government functions away from capital cities or creating special economic zones to jumpstart development in lagging regions.
The rise of remote work during and after the pandemic briefly suggested a possible reversal of urban concentration. If talented professionals could work from anywhere, perhaps they would disperse to smaller, more affordable cities. Early data showed some movement away from the most expensive cities, with people relocating from San Francisco to Sacramento or from Manhattan to smaller towns. But the long-term trend remains unclear, and many companies have since insisted on return-to-office policies precisely because they value the collaboration and innovation that comes from physical proximity.
Technology offers both promise and peril for spatial inequality. Digital platforms theoretically allow anyone to participate in the global economy regardless of location, and we do see examples of successful remote companies and distributed teams. Yet in practice, technology often reinforces concentration rather than diminishing it. The platforms themselves are overwhelmingly built and controlled by companies in a few cities, and success in the digital economy still seems to require plugging into the networks of talent and capital that exist primarily in major urban centers.
The concentration of economic activity in a handful of cities represents one of the defining features of the modern global economy. It generates tremendous wealth and innovation but also creates deep divides that challenge social cohesion and democratic governance. Whether through policy interventions, technological change, or the natural evolution of where people choose to live and work, how we address this concentration will shape economic opportunity and political stability for generations to come.
