Tuesday, 27 September 2016

Megacities and the Dick Whittington Principle - agglomeration versus central place

The world's most powerful drivers of change - economic, social, cultural and political - are large cities. We don't have to like all this change - Mike Bloomberg's fussbucketry being a case in point - to appreciate that this dynamic is very real. I'm not saying that everything is invented and every innovation takes place in developed world megacities but the evidence does suggest that disproportionately this is the nature of modern development.

I noted this a short while ago in observing that the 'London Problem' isn't really a problem just of London - it started with this Peter Thiel quote:
“If you are a very talented person, you have a choice: You either go to New York or you go to Silicon Valley.”
The same, of course, goes for London - let's call it the Dick Whittington Principle where ambitious, clever people go to where there are lots of other ambitious and clever people because they're more likely to succeed. This Dick Whittington Principle is at the heart of the idea in economic geography of 'agglomeration' where a critical mass of people (or resource availability) drive innovation and through this economic growth. The result is the idea that we need to use attractors for those people - given that, these days, most growth is driven by people not by the availability of other resources. These attractors include universities and research institutes, high technology businesses and cultural industries.

Now this approach produces problems - it runs counter to the idea that growth needs to be inclusive and results in some places being, as it were, left behind. It is this concern that sits behind the RSA's 'inclusive growth' work and the alternative economic models promoted by advocates of new localist approaches such as this from New Start Magazine:
But this agglomeration model – the dominant local economic model for UK cities – creates as many losers as winners and is an outdated approach to city economies that are currently experiencing huge social, technological and environmental change. This dominant model favours city centre economies, skilled workers and high-end jobs. It starts with the physical – buildings and infrastructure – rather than the needs of people. It encourages people to move or commute to areas of opportunity rather than creating jobs close to the neighbourhoods in which they live.
The result, so these people argue, is illustrated by a place such as Greater Manchester where a successful centre in Manchester and Salford contrasts with slightly tatty and declining mill or mining towns like Oldham, Rochdale and Wigan. The success of the city centre simply isn't delivering growth on the periphery of the Greater Manchester urban agglomeration. This same pattern will be seen in West Yorkshire, in Birmingham and on Tyneside.

This displacement - a sort of negative hysteresis - doesn't just create problems for economies but also underlies social disconnection. Although the debate about the 'left behind' and populist politics is a little overblown, the spatial distribution of support for such campaigns is hard to dispute.

The issue, however, is that whether we adopt the leftist approach of New Start or the sort of populist approach of Trump, Farage or Le Pen, the solutions on offer result - assuming we accept agglomeration theory - in a sub-optimal outcome. We get lower rates of growth because we want to equalise that growth across every community - preventing (if we can) Dick Whittington from going to London doesn't just mean Dick has less opportunity but, by not bringing together others like Dick, society as a whole is poorer.
Here is what the populists are sadly getting wrong: While cities and rural areas are — and have long been — politically competitive, they are in fact economically complementary.
This thesis - that rural areas (and suburbs for that matter) need cities and vice versa - draws on another central idea of economic geography: central place theory. Here's the basics:
The German geographer Walter Christaller introduced central-place theory in his book entitled Central Places in Southern Germany (1933). The primary purpose of a settlement or market town, according to central-place theory, is the provision of goods and services for the surrounding market area. Such towns are centrally located and may be called central places.
Now leaving aside that Christaller was quite an enthusiastic Nazi, we can see that the central ideas of his work remain perhaps the dominant thesis in modern spatial planning. Anyone close to the UK's local plan process will be familiar with concepts like 'settlement hierarchy' and 'rural service centre' that draw directly from European location theories. It is perhaps time, in economies dominated by services, to start questioning the use of central place theories based on economies dominated by trade in goods. And rather than trying to shoehorn agglomeration theory into the same box as central place theory, we should be seeing them as competing views of modern regional development.

The presumptions that underpin the European single market (and other customs unions) are that central place ideas are correct. By granting the megacities (and Europe really has only one - London) a place on the top of a classic hierarchy of settlements with each dependent on the settlements below, we acknowledge that removing barriers to trade in (primarily) goods results in more economic growth.

If, however, agglomeration theory is correct then this requirement carries less weight. The megacity - London, New York, Singapore, Hong Kong, Tokyo - is divorced from its hinterland. It may be convenient to trade with that hinterland but it is neither necessary or contributing to the success of the megacity. In this model, London's success isn't connected at all to its position at the top of a settlement hierarchy but rather to its capture of the modern world's most important resource - ambitious, clever people. As a global city, Europe needs London but London doesn't need Europe.

It's probably more nuanced than this and the question of what happens in the rest of England remains but, from the perspective of economic geography, the answer to agglomeration or central place gives you the answer to that other question: will Brexit work? And partly this is about the theories in question and their relevance but it's also about policy choices. Regardless of trade deals the UK government has to work out how to capture as much of the modern economy's key resource - human innovation - so as to ensure we get the greatest benefit from agglomeration.


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