Home Economy Building back for the better must address regional inequality

Building back for the better must address regional inequality


Here are three small observations that in and of themselves cause a lot of thought, but they also reflect the empirically documented economic trends.

A: when the British in the areas that favor Brexit decline ask them what they want Now that the UK has left the EU, the high position on their list is The higher road is more beautiful.

Two: French “yellow vests” protest actions are three times more likely to erupt in recent autonomous cities. lose their last convenience store than elsewhere.

Third: in economically deprived UK local government areas, right-wing populist support in the UK is greater than elsewhere. The community pub is gone faster (top hat: Twisted bell).

All three of these examples illustrate a politics of alienation, which has risen sharply in most Western societies in recent decades, and has economic origins. Commenting on the Observer third example, Writes Kenan Malik that “the pub closure is a manifestation of the erosion of social capital in an area. . . as such social spaces disappear, people become more divided from each other, more anxious, feel less in control of their lives, more open to sirens seeking scapegoats for social issues “.

He’s right, but it’s not just a question of social capital. Driving social degradation is erosion of economic capital. After all, pubs close (and as Malik points out, where they work, so do other social centers like music venues) when they’re no longer economically viable. Or rather, Where they are no longer economically efficient. For it a striking model, for several decades, the postwar convergence of productivity between richer and poorer regions within the same country. stalled or reversed.

(A recent research of the EU regions, for example, found that “The regional convergence of regional incomes across the EU since 1996 has benefited from the convergence of income between countries, while inequality in domestic income is still significant and has even increased slightly over time. Urban areas – and even many metropolitan areas – have grown faster than average, thus contributing to regional convergence among EU states but also creating internal disparities. family. “)

Our politics is largely the politics of economic change and more precisely the politics of the way economic change unevenly affects the places where people’s lives are coming from. the physical side. All three examples above show how changing economic structures lead to declines in many places, increasingly separate from the more thriving areas of society – what I call economics. failure.

They also hint at the opposite. For a national economic strategy to be successful, it must be both economically and politically sustainable. That means it should be one of the local economies that can support prosperous community life. A good livelihood and a good life are supporting each other.

That justifies policy programs as the UK’s preferred goal of “upgrading” the country. But easier said than done. (The Center for Progressive Policy found that the British government’s response to the pandemic crisis was, in fact, spent more per person in London against clear targets to level up.)

We know that the structure of the most modern economies favors the biggest cities: that’s where high value-added knowledge jobs lead to thriving productivity growth. Any solution to regional inequality would be one where those jobs could more easily exist in smaller places as well. That would require smaller places to replicate some of the advantages and attractions that are currently creating the best jobs concentrated in the biggest places, maybe in a “fractal” decentralized fashion. with the second city serving as the economic hub for the metropolitan areas, the third city and the town serving as the hub for their subregion, etc.

For this to happen would require a lot of things to go right, backed up by a full portfolio of policies that I have elsewhere. called “strategy of attraction”. The point I want to emphasize here, because it is tied to the examples I started with, is that in order to make troubled places more effective, they must creating more attractive places to live for those with the most productive jobs. Hence, that could increase local spending to create exactly the right things that make a place rich in social capital. Turning vicious cycles into virtuous cycles requires establishing the effects of higher purchasing power and attractive amenities in both directions.

The switch to telework during a pandemic offers an unexpected opportunity to do exactly this. So it’s very interesting to see my colleague Laura Noonan report on one New policy initiatives by the Irish government. Dublin intends to introduce incentives to turn temporary migration related to the closure of knowledge jobs from the capital into something more permanent. While the details still have to be decided, tax incentives are available to both the employee and the employer are on the table.

Ireland could be the first to come out of the door with specific incentives aimed at harnessing our involuntary home work revolution to reduce productivity inequality in the region instead of returning to the status quo. . (I’d love to hear from the Free Lunch readers what they’ve seen other governments do.) But a lot of thinking in that direction is happening elsewhere.

In Italy, experts have formed an association that encourages their colleagues to take their jobs to lagging towns in the poorer southern Mezzogiorno region. In France, one Trend of “security” has been observed before the pandemic and will likely be intensified by it: professionals who choose to live in smaller cities, travel to Paris a few days a week for work.

Some of the changes are driven by employers accepting teleworking – questioning the future of office-dense city centers. such as Manhattan – or move jobs from the capital to second cities, as in Goldman Sachs’ decision to open in Birmingham, the largest office in the UK outside London, to organize a data science center.

Eradicating regional inequality in productivity is a tough battle. But there is no reason not to try. While not everywhere can be saved from the economic downturn, some vicious cycles can be turned into virtuous cycles. If the pandemic gives us new opportunities to do so, it would be tragic not to use them.

Another readable

  • I wrote my own Column FT this week, when the introduction of the new Washington Consensus, an agreement that agrees with the action of the state rather than the old one. Sadly coincidentally, news had arrived that John Williamson, the economist who defined the term “Washington Consensus” in the first place, had passed away. Published by his longtime owner, the Peterson Institute a good dedication on its website.

  • Three political scientists argue that this change in consensus is largely due to perception the success of state capitalism, especially in China.

  • Contribution of Megan Greene green central bank debate by pointing to some concrete steps that monetary policymakers can take.

  • The French business is Feel the trade costs of Brexit.

Digital news

  • The IMF found that despite public support, a pandemic would be increase share insolvency of small and medium-sized enterprises as high as 16% – 34% in the hardest hit sectors – in 20 mostly advanced economies, putting 20 million jobs at risk.

  • A ship’s motion tracking study found that last year’s shipbuilding was caused Marine trade in production slip more than 10%.

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