Nations today are roiled by regional disparities and the turbulent politics surrounding “places left behind.” Andy Burnham, Britain’s new Prime Minister, owes his recent ascension in no small part to the long-standing resentment of the radical differences in regional economic performance that have persisted in England, particularly between London and Northern cities.
This raises a fundamental challenge. If regional disparities are to be curbed, policy makers need to understand why they have occurred in the first place. To that end, Janan Ganesh offered a long view perspective in a recent Financial Times piece, which sets the stage for a more comprehensive assessment.
“London dominates for a reason. England has been a unified entity for a millennium. Unlike Germany or Italy, which consolidated late, its regions did not have ages to develop as independent powerhouses. So, Yorkshire is not Lombardy, Birmingham is not Hamburg. Even in Manchester’s Victorian pomp, it had around a fifth of the population of the capital, whose scale has been freakish almost forever.
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There is no conspiracy here. The regions are not being done down on purpose. It is historical path dependence at work. In fact, were it not for artificial constraints, such as the planning laws, London might be even more dominant than it is. Reducing the gap is an honorable mission, which every government of my lifetime has tried. Attributing the gap to conscious malice in the capital is demagogic.”
While I appreciate the role that historical path dependence played in UK regional disparities, it leaves us a bit bereft of solutions. Fortunately, there are other forces which explain the gap between places and are more conducive to policy intervention than path dependence.
I will focus on just five to stimulate reflection and action.
First, macro political and economic orders, which often transcend national borders, affect the disparate performance of city and metropolitan economies. In a recent newsletter, I recommended Gary Gerstle’s The Rise and Fall of the Neoliberal Order. Gerstle, a Professor of American History at the University of Cambridge, brilliantly describes the rise of the Neoliberal Order in the late 1970s-to-early-80s and its fall from grace in the mid-2010s during Obama’s second term in office and the first election of Donald Trump. Here was my take:
From 1980 to 2015, the Neoliberal Order dominated the American political and economic systems. The U.S. economy was simultaneously globalized, financialized and de-industrialized. Price and efficiency were the driving forces, allocating the manufacture of goods to those parts of the world where labor costs were cheap and production expansion was frictionless.
For mature economies like the US, the result was a wave of offshoring and outsourcing, with enormous spatial and societal consequences. The Neoliberal Order decimated manufacturing hubs of the country and hollowed out the middle class. It also cemented a small group of superstar cities (e.g., New York City, San Francisco, Boston) as the epicenter of economic growth, financial services, and the allocation of private venture capital.
Beginning in the mid-2010s, however, a new order began to emerge. This new paradigm put Economic Nationalism as its core. This period has centered on reindustrializing, remilitarizing and re-energizing, driven by the relentless acceleration of technological innovation. Rather than price and efficiency, security and resilience have become the new drivers, as policymakers have sought to ensure national sovereignty at any cost.
As with neoliberalism, economic nationalism will profoundly alter the fortunes of places. Unlike neoliberalism, however, this new order could lead to a rebalancing of growth by revaluing the economic relevance of a broader set of cities and metropolitan areas, particularly those that play critical roles in bio, defense, energy and semiconductor manufacturing and the deployment of next generation technologies that power advanced production. In the US, for example, places as disparate as Columbus, Hampton Roads, Philadelphia, Phoenix and San Diego are taking advantage of this new order.
Second, by devolving more powers to local governments and broader private and civic networks, national and state governments can also affect the performance of disparate places. To his credit, Andy Burnham has made localism and the decentralization of power the central themes of his young Administration. Burnham’s 9-year tenure as the mayor of Greater Manchester has given his calls for greater for greater devolution a legitimacy that has been missing from prior government’s dalliance with “levelling up.”
The potential for devolution to remedy regional disparities has been embraced by a growing number of decisionmakers and opinionmakers. Here is a recent editorial by the Financial Times:
“An ambitious devolution plan can be part of the answer to driving faster productivity growth. The UK is one of the most fiscally centralised nations in the world. This contributes to its vast regional economic inequalities and helps to explain why the country’s second cities lag so far behind their international peers. Greater regional autonomy would allow policy to be more tailored closely to local needs, while giving local authorities a strong incentive to foster economic growth.”
At the same time, Burnham’s effective branding and promotion of “Manchesterism” has elevated devolution from a mere reform in the division of governmental powers to, as Andy Haldane recently argued in an FT op-ed, “a new model of governance.” In Haldane’s indelible phrase, “The radical rewiring that Burnham offers is not (or not just) from Whitehall to city hall, but from city hall to city square.” (Emphasis added)
Third, the long-tail, legacy effects of de-industrialization and the inadequate corrective measures taken by federal and state governments have also contributed to regional disparities. De-industrialization left affected cities with large swaths of polluted and abandoned land and with a population devastated by plant closures, job losses and sectoral decline. The response of national governments to this economic collapse and social upheaval was inadequate, inconsistent and largely ineffective. The long overhang of deindustrialization can be measured in social and fiscal distress, particularly in small municipalities that often did not have the large anchor institutions that formed the foundation of economic renewal in larger cities. Solving legacy effects (e.g., the redevelopment of brownfield sites) must be part of the rebalancing fervor that is taking hold.
Fourth, the quality of urban and metropolitan leadership matters. Burnham is the first to admit that Manchester’s success built substantially on the remarkable leadership of Sir Richard Leese (Leader of the Manchester City Council from 1996 to 2021) and the late Howard Bernstein (Chief Executive of Manchester City Council from 1998 to 2017). In a 2022 interview, Bernstein described their efforts to pioneer a UK version of “place leadership,” crafting an “overarching vision for transforming Manchester” around which public, private and civic leaders could coalesce. This has been common in the US since the 1980s and the formation of multi-sector partnerships between elected officials and business, university, philanthropic leaders in industrial cities like Cleveland and Pittsburgh. The result in Manchester was a remarkable regeneration in the core of the city, stimulated not just by central government funding but private investment. It is, of course, impossible to clone leaders but the collaborative, multi-sector approach to regeneration of Leese and Bernstein can be codified and adapted across multiple communities.
Finally, the effectiveness of urban and metropolitan institutions has played a role in regional disparities. In their seminal work, Why Nations Fail: The Origins of Power, Prosperity and Poverty, Daron Acemoglu and James A. Robinson described the critical role of a nation’s institutions in determining whether a country progresses or struggles. While institutional design is different at the national versus urban scale (e.g., Acemoglu and Robinson focused on “inclusive” versus “extractive” institutions), it is critical to note how municipal and metropolitan institutions help advance or hinder economic momentum. Many existing institutions were created for the sole purpose of distributing funds allocated by higher levels of governments; creating entities at the urban and metropolitan scale with the power and agency to, in Geoff Mulgan’s words, “mobilize capital, energy and ideas,” could help address persistent transportation and housing challenges as well as unlock competitive assets and advantages that have been revalued.
Remarkably, Copenhagen is a model worth emulating. Their creation of a powerful redevelopment agency in the early 1990s helped that city survive a manufacturing collapse by not only enabling the redevelopment of the harbor but also financing the build out of a modern transit system via revenues from the redevelopment. Copenhagen’s best-case example in land value capture is now informing the creation of public asset corporations in the United States, starting with Atlanta.
Given political tumult and economic challenges, addressing regional economic imbalances has become a central theme in multiple countries. As this focus gathers momentum, it is critical that we understand why these disparities emerged in the first place and what policymakers and public, private and civic capital providers and institutions can do about it. It turns out the past informs but does not constrict progress.
Bruce Katz is Founder of New Localism Associates and a Visiting Professor in Practice at the London School of Economics.