Tuesday, 27 October 2015

Want a Northern Powerhouse? Then don't ignore success!


The think tank IPPR North has issued a report rather grandly entitled 'State of the North; Four tests for the Northern Powerhouse'. And, like many people writing about regional economics and economic development, IPPR North assumes that the solution rests with some sort of governmental activism:

If the northern powerhouse is to be successful, economic powers must be devolved to allow northern businesses and policymakers to develop an economic model that supports more productive, resilient and sustainable growth: jobs that pay well, prosperity that is shared, and opportunities for all. This does not mean simply adopting the ‘London model’ in northern cities, which would be unlikely to build the prosperity that the North needs – and indeed would be likely to lead to widening inequalities. Instead, it means finding a more equitable balance between productivity, employment rates and wages. Evidence suggests that raising productivity and employment simultaneously can be challenging, and that in most situations the two are antagonistic.

It all sounds good doesn't it? But IPPR North isn't specific about which 'economic powers' need devolving. We are presented with a barrage of graphs, a narrative heavy on statistics but no help as to what needs to be handed over to cities or regions. In talking about 'economic powers' is IPPR North won't be referring to trade policy, monetary policy or the tax treatment of companies. Perhaps IPPR North are thinking about planning rules - you know being able to put an end to the NIMBYism delaying the economic benefits or fracking in Lancashire and North Yorkshire. Or maybe it's taking over central government investment in science and technology - even when the evidence for that helping economic growth is pretty mixed.

So having asked for devolved 'economic powers' without specifying which powers we're talking about, IPPR North then go on to talk about education and skills. Again we get an avalanche of graphs and statistics showing that gap between the North and the South. But again, amidst calls for 'policy' to change, IPPR North gives no hints as to what should change except to point at better performance in London from early years through to higher skills.

Yet in amongst all this IPPR North repeatedly reject what they call the 'London Model' (although they don't actually describe this model). This does, if it's evidence-based policy-making we're after, seem a little counter-intuitive. After all the entire 'State of the North' report is given over to describing the scale of the gap between us in northern England and the more economically successful South. And the reason for that southern success is pretty simple - London. What IPPR North are saying is 'look there's a really successful place there, we need to be as successful as them but we're not going to do what they did to be successful':

The North’s economy clearly does need to grow in order to generate the wealth and jobs that its citizens need. However, focusing on economic growth in isolation, or in any way adopting the ‘London model’ in northern cities, is unlikely to lead to the kind of inclusive and sustainable prosperity that the North should aim for.

The suggestion here is that London focused on 'economic growth in isolation' - again without describing what this might actually mean - and that there is, somewhere, a different model for economic success. Sadly, IPPR North don't introduce us to the things that might be included in this magical economic development model other than that it involves city mayors to 'run' it alongside a sort of corporate hi-jack by business interests.

If we want that Northern Powerhouse, want to meet the economic aspirations of people in the north then we need to focus on economic growth. Firstly because that economic growth will lead to new employment. Then because when everyone who wants a job has a job, wages will rise. And then, because there is still demand for labour, people will move to the north. With the result that the consumer economy is bigger and can sustain the high added-value tertiary services that make the big difference in London and other successful cities. None of this - bar infrastructure investment - really needs government. Indeed there's a pretty strong case that the size of government in the north is part of the problem not part of the solution.


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