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Regional economies are synergy-laden systems of physical and relational assets, and intensifying globalization is making this situation more and not less the case. As such, regions are an essential dimension of the development process, not just in the more advanced countries but also in less-developed parts of the world. Development theorists have hitherto largely tended to overlook this critical issue in favor of an emphasis on macro-economic considerations. At the same time, conventional theories of the relationship between urbanization and economic development have favored the view that the former is simply an effect of the latter. To be fully general, the theory of development must incorporate the role of cities and regions as active and causal elements in the economic growth process. This argument has consequences for development policy, especially in regard to the promotion of positive agglomeration economies and the initiation of growth in poorer regions. A related policy problem concerns ways of dealing with the increase in interregional inequalities associated with contemporary globalization. Issues of economic geography are thus of major significance to development theory and practice.