directly from it (Lipschutz, 1991). To enable them to compete internationally,
production processes have to be internationally competitive, hence the shift in focus,
normally, from labour-intensive to capital-intensive production processes. In the
process the lowly skilled labour force looses ground, the labour force becomes
stratified and inequity deepens (Aguilar, 1997).
There are often indirect side effects to the sequence of depressing factors at the
local urban level. First, excessive premature urbanization often occurs in developing
countries. When too many people migrate to large urban agglomerations in lagging
countries that do not have the ability to successfully compete for employment in the
urban market, over-urbanization occurs. Large numbers of such people often live in
squalid conditions with little hope that they will ever be able to improve their lot
significantly over the short term under current economic conditions (Mukherji, 2002).
However, compared to rural poverty in developing countries, indicators generally are
that urban poverty seems to be the lesser of the two evils.
As the urban population becomes stratified, high-wage workers with a national and
international orientation operate within the formal urban economic environment,
while the lowly skilled workers lag behind (Aguilar, 1997). Due to increasing capital
mobility, massive shifts in capital could occur over a relatively short period of time
within the urban South when urban decay sets in. Because cities are the most
dynamic component of the space economy of the developing world (Harris, 1997),
such shifts in capital could have devastating effects on cities or parts of cities.
Business closures could occur causing crises in urban labour markets there. This has
happened in many of the metropolitan and intermediate-sized cities of South Africa in
recent years. Soon after the political transition, black migrants started infiltrating
parts of central areas of major cities. This infiltration was accompanied by the
invasion of those areas by the informal economic sector, followed by an increase in
crime and urban decay and the subsequent relocation of formal businesses to areas
where conditions are more conducive to formal business activities (Geyer, 2003).
MAKING MARKETS WORK IN THE SOUTH
Pillars in the Southern economic markets
As was stated before, the focus in the neo-liberal economic development approach
is on economic growth by means of procuring appropriate technology, increasing
labour productivity, creating investment opportunities by removing obstacles of
industrial development and international trade, and mobilizing capital. This approach
has been constantly criticized by the lagging South (Kaya, 2001), because many
developing nations in Africa and South America have been lagging behind in
economic terms, and are continuously losing ground, despite the successes that have
been achieved with neo-liberalism in the Pacific Rim over the last four decades. To
overcome deprivation in the South more and more voices have been going up for
sustainable development (Hall, 1996). With this development framework in mind, the
emphasis is shifting from conventional neo-liberal economic thinking as the principle
vehicle to bring about economic growth, to ways in which new global market
principles could be used to complement the economic strengths of the South. Two
issues are of importance in this regard. First, how neo-liberal economics could be
adapted to suit the circumstances of the lagging global periphery. Second, how
elements of the new flexible global economic environment, in which capital can shift
from one production branch to another and from factory production to informal
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