Wednesday, 12 March 2014

A Tale of Two Cities

Evan Davis's Mind the Gap: London vs the Rest was an attempt, across two programmes, to explain why London is so super brilliant and the North is a bit wank. As a balanced BBC essay, this was interesting more for what it omitted than for what it included, unless you just can't get enough of media-botherers like Boris Johnson and Ian McMillan. The first programme, last week, attributed London's current dominance to agglomeration, though this concept was reduced to the banality of "clever people like being around other clever people", while the impact of globalisation and the changes to capital flows since the 1970s were simplified to a fashion for "hubs".

To illustrate this, we had clich├ęd scenes of Silicon Roundabout (hipster bikes and carefully curated beards, natch), though the cat was let out of the bag when the exemplar business, whose "representative employee" commutes from Stockport, turned out to be a marketing outfit. This is less agglomeration in action than evidence that the growth of the London economy has been driven by business services, such as marketing, recruitment, law, business consultancy etc. While the historic shift from manufacturing to services (and the structural bias towards the South that this entails) was acknowledged, the more subtle compositional change in the economy, from productive to distributive services, was ignored in favour of the usual anodynes about innovation and dynamism.

Davis probably thought the mayfly controversy triggered by the second programme would be the broad hint that the HS2 cash might be better spent on trans-pennine links, to create a new second city "hub" combining Manchester and Leeds, but it looks like the day's rage is focused more on his suggestion that Salford should rebrand itself as West Manchester, which has at least eclipsed Jim O'Neill's recent attention-grabber of "Manpool". The focus on Salford was explained by the BBC's own heavy investment in Media City. Salford Quays remains a pretty desolate place, despite the extensive boosting, so the programme combined shots of small numbers of office workers in front of glass buildings with greater depth shots of football crowds on the way to a match to give the impression of numbers and vibrancy. Unfortunately, the latter showed City fans on the other side of Manchester.

What was missing from either programme was any mention of London's role as a tax haven, both in respect of domestic pro-capital policies and as a gateway to offshore jurisdictions. Though globalisation and financialisation have drawn international and domestic capital into the City, the wider metropolis has also benefited from the political decisions taken to make it congenial for foreign and domestic elites. The massive sums invested in property, with which the right-wing media have a love/hate relationship, are just the tip of the iceberg. As Boris Johnson put it, London is becoming the capital of the world (his childhood ambition, according to his sister, was to be king of the world). Of course "the world" here specifically refers to a cosmopolitan elite who can afford to eat in the Shard's restaurants, not economic migrants trying to paddle across the Mediterranean.

The ideological underpinning of the series was the impossibility of central planning. The first programme noted that the grand schemes to rebuild London after World War Two, notably the Abercrombie plans of 1943/44, came to nothing because everyone just got on with it and rebuilt higgledy-piggledy. In fact, the plan was scaled-back due to its enormous cost at a time when the UK was desperate to pay down US war loans, retool industry and build new houses. Despite this, the key recommendations, including an expanded green belt and new towns such as Stevenage and Harlow, eventually went ahead. The plans that never got off the drawing board, such as inner-city orbital motorways (the Westway is a fragmentary exception from a 1960s revival) and rigorous zoning, were seen as overly American in approach (a bit too much like Robert Moses's imprint on New York) and thus not suitable for London.

The second programme's critique of central planning (an amusing tale of a thwarted attempt to move the Bird's Custard factory from Birmingham to Liverpool, which succeeded in bumping it further South to Banbury) was pure Hayek: government cannot second-guess the market, there are unintended consequences etc. But this ignored continuing state intervention from Thatcher onwards in respect of deregulation, tax privileges and the symbiotic relationship of business and government. The proactive development of the Tube was skipped in favour of concerns that Crossrail is playing catch-up, the implication being that infrastructure projects follow demand, rather than creating it, despite the evidence of the Metropolitan line and "Metroland".

A significant omission in the story of the decline of Northern cities relative to London was privatisation. It has become conventional wisdom that Labour offset the free market growth of the capital in the first decade of this century by funding lots of public sector jobs in the North: "Under Gordon Brown, great swathes of the public sector were relocated to the regions, and the benefits system was bolstered to help engineer more equitable spending power. Predictably, these policies have only succeeded in embedding a culture of dependency while simultaneously pricing the private sector out of the market for enterprise and jobs".

In fact, the growth of public sector employment between 1999 and 2009 was spread proportionately across the country because it was largely geared to popular areas such as health and education - i.e. where hospitals and schools (and thus the population) are. The increasing share of public sector employment in the regions also reflected the relative decline or slower growth of other sectors, not just an absolute growth in state-funded jobs. With the privatisation of public services, many lower-wage jobs have stayed in the regions, essentially because they are point-of-delivery roles that cannot be moved elsewhere, but a lot of high-wage roles have moved to corporate HQs in London or backoffice centres in the South East (of the four largest outsource providers of public services, Atos and Capita are headquartered in London, while G4S is based in Crawley and Serco in Hook). This has exacerbated the wider shift to a low-wage economy in the regions.

Between 1951 and 1981, Greater London's population shrank from 8.2m to 6.6m, due to a combination of the central planning of new towns and the free market development of the commuter belt, both heavily dependent on the (centrally planned) investment in regional transport. It was the policy decisions of the 80s (including tighter planning laws and attendant "nimbyism" in the Home Counties) that reversed this trend and led to the rapid growth of Greater London over the last 30 years (back up to 8.2m by 2011), of which spiralling house prices were the most obvious symptom. This was not some sudden efflorescence of innovation or Cockney genius. Apart from acknowledging the importance of big infrastructure, Davis was remarkably coy about the role of central government.

One thing he did chose to mention was Zipf's Law and the observation that city sizes within a country tend to follow a standard distribution. In fact, Zipf's Law relates to word frequency in language, but the principle of a power law distribution has been found to apply in other areas. That it isn't strictly applicable to city size - the UK being one exception - shows that this is an imposed paradigm in this context, rather than an immutable "law", serving the ideological purpose of defining what "ought" to be. The point of Davis's observation is not that London is too big (it isn't, relative to the size of the country), but that the second tier UK cities are under-sized because there are simply too many of them competing for the same "human capital".

The reason why Northern cities are where they are is largely down to power and raw materials (coal, water, iron ore), which encouraged spatial distribution rather than consolidation. Most factories in the nineteenth century were small-scale - the Black Country and the Potteries were typical. The large Pennine mills were the exceptional result of limited access to water power, which necessitated local concentration but also limited growth in any one location, thus the mill towns spread along the upper reaches of the rivers, much as shipyards spread along the lower banks. The massive "works" of the early 20th century, such as car plants, were the product of electricity, which allowed industry to be consolidated on existing urban peripheries and arterial roads. The argument of Davis and others is that we now need to consolidate further into a few large "hubs", given the near-ubiquity of datacoms and the free-floating mobility of the "knowledge economy".

The ironic agenda behind this is a desire to "pick a winner", the quintessence of old-school central planning. In practice, it means lobbying for further planning deregulation (i.e. let the private sector dictate growth) and an end to "jam-spreading" (i.e. put more of our state investment eggs in one basket, to fuel a localised boom). This is a continuation of the neoliberal theme that we should write-off certain parts of the North and encourage labour mobility: "The balance of spending should be strongly tilted towards ensuring better education and training for local people and away from shiny buildings and expensive new transport infrastructure that will do little, if anything, to turn these places around". The chosen winner for Davis and others is Manchester, hence the photo-op visit to the penthouse of a new "executive class" tower block in the centre of that city to chew the fat with a property developer.

One thing the programmes incidentally highlighted was the evolution of two distinct city-scapes since the 80s. Where once we had the dichotomy of office and factory (clean and dirty, polite and sweary, middle-class and working-class etc), now we have a dichotomy based on two middle-class visions: the corporate space that looks more like a hotel (Canary Wharf and Salford Quays both have an air of the dormitory about them) and the hipster "creative hub" that marries a fantasy village vibe and high-tech. Both revel in their inauthenticity, aspiring to be somewhere else at all times: usually a mythical Manhattan and a mythical Haight-Ashbury.

The reality is that London is two cities, Westminster and the City. Its dominance is a product of the combination of government power (which attracts corporate power in search of privileges and leverage) and financial opportunism (which attracts capital). The former is equally responsible for London's exceptionalism, though it's the latter that usually gets the credit (Boris Johnson's campaign for lower corporate and personal taxes is as central to his brief as his defence of bankers as "wealth-creators"). Government is never going to leave London, and nor is the City. Blaming the cities of the North for being in the wrong place, for being too many and various, is just a cruel distraction. Decanting the population of Liverpool into Greater Manchester isn't going to change the balance of power.


  1. David,

    I agree with most of this, but on an historical point this is not accurate.

    "Most factories in the nineteenth century were small-scale - the Black Country and the Potteries were typical".

    Although, there were many small pottery firms in the 19th century, just as the large majority of firms today are small, by the 19th century pottery firms had already been reduced to a relatively small number of large dominant players.

    In 1841 according to Burchill and Ross “A History of the Potters Union” (1977), most potters were employed in factories containing 250-300 workers. Some factories were much bigger.

    Davenports 1400
    Thomas Mayer 500
    Adams 650
    Ridgways (Shelton factory) 500

    By 1833, Enoch Wood’s factory was recorded as having over 1,000 employees. In the early 1840’s, Copeland and Garrett employed 1,000 in a factory covering nearly 11 acres. By 1871 there were seven potbanks employing each between 500 – 1,000 workers. The national average factory size at the time was 84.

    Wedgwoods Etruria factory not only employed over 1,000, but it also employed one of the largest number of steam engines for factories of the time anywhere in the country. It was the size of these factories that made North Staffordshire a centre for Chartist activity, and made the Potters Union one of the most militant in the country.

    I've set out this history in my post Birth Of A Labour Movement.

  2. Boffy, you're quite right, but my point was not to imply that there were no big works like Etruria in the Potteries (or the Soho Foundry in the Black Country), but that spatial distribution was the norm. In one sense this is banal: most industries are composed of a few large enterprises surrounded by smaller sub-contractors and specialists, and literally "surrounded" in the early 19th century when transport was still relatively costly. The change over the last 200 years is that technology has allowed the distance between them to gradually increase, until we consider it unremarkable that components and services can come from all four corners of the globe. Agglomeration still occurs, but at an aggregate level globalisation has led to greater diffusion.

    This is why I am sceptical of plans to concentrate economic activity in Manchester. The concentration seen in London is in large part the product of legislative fiat (in the case of the privileges of the Square Mile, protected by the "haven" of the City of London) and the modern incarnation of the courtier principle, i.e. the need to be physically close to government to influence decisions. Chucking more money at Salford Quays is trivial in comparison.

  3. One point I forget to make earlier (having been distracted by the Spurs-Arsenal game, a determined one-nil to the Gunners since you ask), is that the Potteries were actually six towns, though cut to five by Arnold Bennet for purley artistic reasons.

    The contrasting forces of agglomeration (economies of scale, network effects etc) and diffusion (access to lower property and labour costs etc) tend to naturally produce the "close but not too close" effect in industrial areas that so bothers planners obsessed with zoning. You can see the same forces at work today in China's Pearl River Delta.

    Examples of "extreme agglomeration", like London, are usually predicated on artificial governmental and financial concentrations as much as actual economic geography. My issue with Davis is that he ignores this dimension entirely, leading him to construct an imaginary second city that is as mythical as the redistributive powers of HS2.