Tuesday, 26 July 2011

A successful North - we'd love it but not that way Julian!

Julian Dobson, on his Living with Rats blog, wrestles with the long-standing – and seemingly intractable problem of the relative underperformance of England’s Northern counties.

Julian asks us what a successful North of England economy would look like and sets out a ten-point descriptor – covering the offering of opportunities to everyone, not compromising on “sustainability”, encouraging distinctiveness and diversity, valuing the contribution of the “voluntary and community sector” and, of course, a local ownership approach founded on mutual and co-operative approaches. It is a delightful collectivist paradise described by Julian and this Shangri la will doubtless be peopled by selfless men and women sacrificing their own individual success to the collective whole. Commonweal will be all!

I was tempted to carefully dissect what’s wrong with all this item by item but there was one of Julian’s ten points that stood out above all the others as something the would shackle the North to a permanent dawdle behind more successful places:

A successful northern economy is one that reduces its dependency on other parts of the world and on national government support. This means ensuring our money supports local and regional businesses, and strengthening links between the north’s businesses and communities. There should be a clear correlation between incentives for business and firms‘contribution to local training, skills development and community wellbeing.

In this we see – and I could cry – the ‘import substitution’ approach to economic development being rolled out. This is the strategy that blighted Latin America as they cowered behind high tariff barriers and anti-yankee policies. The most successful places are places that are open to trade – even in a world where free trade is compromised by restrictions on free movement and a dysfunctional system of development finance.

Julian, like so many of the left, thinks that there is a way to ‘collectivise’ the free market and a means by which it will be civilized (at least in their terms) and controlled by “the community”. By taking this view, we are led inexorably towards state direction and a society where economic activity is categorised into “good business” and “bad business”. The little local co-operative – even if like the Meriden Motorcycle plant a co-operative that destroys value – represents the former while an industrial complex manufacturing parts for power stations and managed by a multinational PLC represents the latter.

The problem with Julian’s utopia is that it would place an intolerable burden on those wishing to do business and most importantly those wanting to do business that involves something other than a grand scale taking in of each other’s washing – a business that exports.

Since Julian asks though I’d better set out how we get to a successful Northern economy (perhaps more valid than what that economy might look like when we get there). For me success lies in people being empowered consumers – in us having the wealth and income to consume the things we want to consume. After all we live to consume (in its widest sense) rather than to produce!

Getting to success must be founded on:

Low taxes on personal and business income
No or very low tariffs and duties
A regulatory environment that encourages choice and flexibility in employment
A pro-business and pro-development planning regime
Priority for infrastructure investment that support growth – roads, ports, broadband
An education system focused on core skills and employability

Aside from infrastructure this is all about less intrusive government, about a tax system that avoids disincentives and an education system that works.

And what would be my measure of success? Aside from us all being healthier and wealthier, I guess the ultimately successful North of England would be a place that looked at itself and decided it didn’t need government any more.


Update: Seems I'm not the only person who finds Julian's prescription a little unworkable. Here's Tim Worstall on the subject:

Apart from the fact that high speed broadband (as opposed to the dial up/ broadband difference) doesn’t make any difference at all, it’s just the usual ritual cant about inclusiveness isn’t it?
There’s three things that are wrong with the “northern” economy.

1) The exchange rate’s too high.
2) Wages in one sector of the economy are too high.
3) The private sector is getting crowded out.

The solution is to cut government, cut wages (and taxes) and the exchange rate, well that’s more difficult.



Julian Dobson said...

Well, Simon, I'd agree with the last bit of your vision - an education system focused on core skills and employability.

Working backwards, I'd also agree about infrastructure (certainly broadband and energy infrastructure). The roads and ports, of course, depend either on having stuff to export or having the wealth to afford imports - neither of which will happen if we're not making and inventing things.

And to finance that infrastructure of course you need taxes. And taxes have another role, which you don't like, which is to mitigate the perverse and monopolising effects of the markets. You don't have to be a Marxist to recognise that all don't start from equal positions in a so-called free market - you just need to be able to see the bleeding obvious. Sadly, I think your low-tax, low-regulation nirvana will bring the good life only to the likes of News Corp and others who benefit time and again from 'pro-business' policies which really are of very little help to those who need business opportunities.

Simon Cooke said...

Julian - how did we all get so rich if it was not through the operation of the free market, at least in so far as governments have allowed that free market to operate?

And who built the railways, the ports? It wasn't taxpayers money - only in the late 20th century did we suddenly decide that tax was a better way to build infrastructure than private finance.

Finally that free market you despise - it is both liberating and equalising. That is the point - the Murdoch's of this world hate free markets which is why they spend millions trying to corrupt governments.

Julian Dobson said...

I don't despise the market - I just don't think it's particularly free. And the fact that we have state-funded basic pensions, healthcare and social security illustrates the market's inability to enable us 'all to get so rich', as you put it.

The point of government and taxation is to enable markets to do the good they can while limiting the damage they also inflict. We can of course argue till we're blue in the face about how much they should or shouldn't do that...