Countering the capital orthodoxy

Why Janan Ganesh is wrong about the north and economic agglomeration.

Janan Ganesh this week wrote a column that flew in the face of all the contemporary evidence on the nature of economic agglomeration; the role of mid-sized cities in developed economies; and the role of public policy in addressing contemporary globalisation.

Despite the most rapid growth taking place in the capital city, 57 per cent of net aggregate growth was generated by so-called "intermediate regions" in the UK. The north of England, for example, also produces a quarter of national economic output; it is twice the size of the Scottish economy and if it were a nation it would rank as the eighth-largest in the EU, ahead of Sweden, Denmark and Belgium.

Economists across the world – OECDMcKinseys to name but two – are increasingly interested in the role of mid-sized cities in driving national economic output and it is now widely recognised that the underperformance of UK cities outside London is the cause of a significant drag on the national economy. In fiscal terms, that drag appears through an ever-worsening gearing between tax generation in London and the south-east – supported by apparently "spatially-blind" policy measures - which is then redistributed beyond the capital city in the form of grants and benefits. That gearing needs to change by releasing the potential of Britain’s city economies.

Ganesh is right to name the strong “impersonal forces and historical trends” that have shaped London’s dominance in recent years and had devastating impact on a deindustrialising north and midlands. But to suggest that the north has never punched its weight is to deny the Industrial Revolution ever took place, even if the majority of its spoils – and those of the wider Empire – did end up stoking London’s stock exchange. It is the same trends and forces that led to the financial crash but again the idea that Northern Rock and Bradford & Bingley were somehow that causes of that crash is quite ludicrous – they were simply the first UK casualties of a global phenomenon.

It is also wrong to suggest that public policy has had – and will have – no purchase on these forces and trends. London’s agglomeration has a huge amount to do with it being the seat of political and cultural as well as economic power. Our own analysis of government spending on economic affairs shows that London has consistently received twice the amount per capita as any other region excluding Scotland and that since 2008/9 this amount has increased more than 25 per cent whilst declining in the rest of the country. In terms of transport infrastructure spending, the current National Infrastructure Plan commits £2,595 per head to London and the south-east compared with just £5 per head in the north-east. In terms of R&D, Scientific Research Council spending is three times as much per capita in London than in any Northern region despite the existence of eight world class universities in the North.

Much international evidence shows that agglomeration can be successfully supported by an active industrial policy which spreads wealth around nations such as Germany and Sweden through a range of effective measures. The problem – as Ganesh quite rightly points out – is that such measures in the UK have been relatively weak and ineffectual, largely hampered by the vested interests of an overly centralised bureaucracy as most recently evidenced in the pathetic government response to Heseltine’s Single Local Growth Fund.

His critique of the “Hezza-Prezza years” is though once again without evidence. The fact that London continued to grow faster than the regions is a function of the growth of the financial service sector rather than an indictment of public policy. And the role that Regional Development Agencies have played in the transformation of cities like Manchester, Leeds and Newcastle should not be underestimated. Although those cities and their hinterlands may not yet have fully made the transition to a post-industrial economy, they are a long way further forward and well-positioned to continue to grow.

Ganesh argues that London that needs a “citywide government of its own”. This is true, but it’s not just London. Central government control over economic affairs constrains not just London but the whole country. Indeed, one could argue that in wresting control of transport and housing, the London mayoralty is doing very well. From Travers’ London Finance Commission, to Heseltine’s No Stone Unturned, to last year’s Northern Economic Futures Commission the message is clear – Whitehall must let go: of transport, innovation, skills, welfare, housing and crucially fiscal powers and incentives if the national economy is to thrive.

One wonders what kind of London Ganesh sees as the outcome of his laissez-faire approach. With the lowest quality of life indicators in the country already, Londoners will surely be concerned at the prospect of a new overcrowded Mumbai? And what might be the constitutional implications of a new city-state like Singapore? This is a debate that has a growing urgency, for if recent reporting is anything to go by it may well be that the biggest legacy of the London Olympics will not be a sporting one but that Ganan’s orthodoxy reigns once and for all.

Ed Cox is the director of IPPR North. Find him on Twitter as @edcox_ippr

The Corus steelworks in Redcar. Photo: Getty

Ed Cox is Director at IPPR North. He tweets @edcox_ippr.

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Britain has built a national myth on winning the Second World War, but it’s distorting our politics

The impending humiliation of Brexit is going to have a lot more in common with Suez.

The Crown, Peter Morgan’s epic drama covering the reign of Elizabeth II, ended its first series with a nemesis waiting just off-stage to shake up its court politics. In the final episode, Egyptian president Gamal Nasser gives a rip-roaringly anti-imperialist – and anti-British – speech. The scene is set for the Suez Crisis to be a big plot point in Season 2.

Suez has gone down in history as the great foreign policy debacle of postwar Britain. The 1956 crisis – which saw Israel, France and Britain jointly invade Egypt to take control of the Suez Canal, only to slink off again, nine days later, once it became clear the US wasn’t having any of it – is seen as the point at which it became clear that even the bigger states of Europe were no longer great powers in the world. “President Eisenhower’s humiliation of Britain,” Jack Straw wrote in his 2012 memoir, “had been total.”

This was, though, a fairly limited sort of humiliation. Britain was not invaded or occupied; there was no sudden collapse in living standards, let alone a significant body count. Our greatest national debacle is nothing more than the realisation that Britain could no longer do whatever it wanted without fear of reprisal. As humiliations go, this one’s up there with the loss of status men have faced from the rise of feminism: suddenly, Britain could do what it wanted a mere 80 per cent of the time.

The Crown begins in 1947, when Prince Philip gives up his Greek and Danish royal titles and becomes a British subject, so that he can marry Princess Elizabeth. That year saw another British foreign policy debacle, one on which the show remains oddly silent. In the partition which followed India’s independence from the British Empire, 70 years ago this week, upwards of a million people died; in the decades since, the borders drawn up at that time have been the site of numerous wars, and Kashmir remains a flashpoint.

All this, one might think, might count as a far bigger regret than Suez – yet it doesn’t feature in the national narrative in the same way. Perhaps because partition was about the withdrawal of British forces, rather than their deployment; perhaps it’s simply that it all happened a very long way away. Or perhaps we just care less about a body count than we do about looking bad in front of the Americans.

I think, though, there’s another reason we don’t talk about this stuff: the end of empire is hidden behind a much bigger part of our national myth. In the Second World War, Britain is undeniably one of the good guys; for 12 months, indeed, Britain was the only good guy. Never mind that it still had the largest empire the world had ever seen to fall back on: Britain stood alone.

The centrality of the Second World War to the national myth warps our view of history and our place in the world in all sorts of ways. For starters, it means we’ve never had to take an honest account of the consequences of empire. In a tale about British heroes defeating Nazi villains, British mistakes or British atrocities just don’t fit. (Winston Churchill’s role in the 1943 Bengal famine – death toll: three million – by ordering the export of Indian grain to Britain rarely comes up in biopics.) In this dominant version of the national story, the end of empire is just the price we pay to defeat fascism.

More than that, our obsession with the Second World War creates the bizarre impression that failure is not just heroic, but a necessary precursor to success. Two of the most discussed elements of Britain’s war – the evacuation of Dunkirk, and the Blitz – are not about victory at all, but about survival against the odds. The lesson we take is that, with a touch of British grit and an ability to improvise, we can accomplish anything. It’s hard not to see this reflected in Brexit secretary David Davis’s lack of notes, but it’s nonsense: had the Russians and Americans not arrived to bail us out, Britain would have been stuffed.

Most obviously, being one of the winners of the Second World War infects our attitude to Europe. It’s probably not a coincidence that Britain has always been both one of the most eurosceptic EU countries, and one of the tiny number not to have been trampled by a foreign army at some point in recent history: we don’t instinctively grasp why European unity matters.

Once again, Suez is instructive. The lesson postwar France took from the discovery that the imperial age was over was that it should lead a strong and unified Europe. The lesson Britain took was that, so long as we cosied up to the US – Athens to their Rome, to quote Harold Macmillan – we could still bask in reflected superpower.

Until recently, Britain’s Second World War obsession and national ignorance about empire didn’t really seem to affect contemporary politics. They were embarrassing; but they were also irrelevant, so we could cope. Brexit, though, means that hubris is about to run headlong into nemesis, and the widespread assumption that Britain is a rich, powerful and much-loved country is unlikely to survive contact with reality. India will not offer a trade deal for sentimental reasons; Ireland is not a junior partner that will meekly follow us out of the door or police its borders on our behalf. The discovery that Britain is now a mid-ranking power that – excepting the over-heated south-east of England – isn’t even that rich is likely to mean a loss of status to rival Suez.

Morgan says he has planned six seasons of The Crown. (This looks entertainingly like a bet the Queen will be dead by 2021; if not, like Game of Thrones before it, he might well run out of text to adapt.) It’ll be interesting to see how the show handles Brexit. It began with the royal family facing up to a vertiginous decline in British power. As things stand, it may have to end the same way. 

Jonn Elledge edits the New Statesman's sister site CityMetric, and writes for the NS about subjects including politics, history and Brexit. You can find him on Twitter or Facebook.

This article first appeared in the 17 August 2017 issue of the New Statesman, Trump goes nuclear