Microclusters: a more targeted economic development model?

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Aaron Renn gets the concept of 'clusters' bang on here:

If you look at the list of target industries for any given city or state, you usually find several from the same list of five common items: high technology, life sciences (under various names), green tech, advanced manufacturing, logistics. Take a few from this list, and add a legacy industry if there’s one or two where you are already particularly strong, and there you have it.

The problem is, as Aaron points out, that everybody is chasing the same clusters using the same strategies. And this means that most of the time the winners in the 'cluster battle' are those with a broad economic base, more businesses and greater variety. In the UK that's London and the South East.

The cluster strategies of Yorkshire Forward and the other northern Regional Development Agencies (RDAs) failed to deliver on their general clusters (which, of course, were drawn straight from Aaron's list). However, the concept of 'microclusters' - much more specific business ecosystems - may make more sense for driving economic development:

One way to stand out is a concept I’ve called “microclusters”. That is, rather than simply saying “We’re high tech”, you have some specialty within the broader tech industry where you can be a real national leader.

Indeed the idea of 'high technology' applies to almost every industry so being the place at the forefront in a specific element of on-line business (e.g. encryption or, in the example Aaaron cites, Internet marketing technology) means a more genuine 'cluster' that just having a clutch of businesses that are vaguely connected by the tag: "high tech".

I don't think these 'microclusters' will respond to planning - given the variety of start-up businesses - but they should benefit from inward investment and place marketing. In Bradford -  people are welcome to add to this list - we've two (possibly three) microclusters: the South Asian food business (both running restaurants and also making/distributing meals or ingredients) and blinging up cars. These are growing, have a local economic base as well as a wider appeal and draw on Bradford's distinct advantages.

Perhaps this gives us a different way of thinking about - and perhaps supporting the development of - local economies? What I do know is that it's a better bet than the 'cluster theory' that dominated the economic development strategies of the RDAs - that definitely failed.

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Business & politics - why Heseltine is wrong

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There's a sort of conservatism - let's call it the "business right" - that sees politics through the prism of a thing called either "business and industry" or else "business and commerce". This viewpoint produces familiar comments such as:

"We need more businessmen in politics"

And:

"Government needs to be more businesslike"

Or indeed any number of variants on this theme where the essential premise is that "business administration" is somehow a superior construct to "public administration". And, this being so, that we have only to introduce such administration to government to bring about a miraculous transformation in the efficiency and effectiveness of public services.

Moreover, by bringing in business people, we get a sudden rush of initiative, enterprise and other fabulous business virtues. Thus we get boards established, run on corporate principles and populated by private sector folk - the holy grail of public services and public investment being "business-led" is met. And we rejoice for it will be but a short while before the benefits of such initiative is felt by all!

This is the essence of Michael Heseltine's politics. The lion-maned, millionaire businessman (and politician) does not believe in free markets, free trade and free enterprise. Heseltine believes in "business", in industrial strategies, in subsidies, in picking winners. Above all, Heseltine believes that government should harken to the cries of the business establishment and fund their schemes (while putting those business 'leaders' on the boards that administer those programmes).

And it seems like the Coalition plans to adopt Heseltine's approach:

"In line with Lord Heseltine’s report, today we have also announced a package of wider support that is a big vote of confidence for our industrial strategy, particularly the aerospace, automotive and agri- technology sectors. This support not only gives businesses certainty, but shows the Government is determined to back those sectors where Britain can deliver and compete on a global scale in partnership with industry."

Weirdly, Heseltine pretends that all this is somehow radical, new and change-making. It's almost as if the old interventionist has written George Osborne's script for him:

 “We asked Lord Heseltine to do what he does best: challenge received wisdom and give us bold ideas on how to bring government and industry together. He did just that, and that is why we are backing his ideas today.”

I fail to see anything at all in Heseltine's proposals that "challenge received wisdom" or indeed do anything but repeat what Heseltine has proposed off and on since the 1970s. Hand control of planning to unelected boards, pour money into regeneration, create new regional quangos and define a privileged set of industries that benefit from government largess (chiefly the property development industry).

In the North we have had thirty years and more of this 'partnership with industry'. It hasn't delivered salvation - indeed with each passing year the North slips a little further behind the rest of the nation. It's true that some already successful business folk get to sit on grand boards - the latest being Local Economic Partnerships - but these boards achieve little even when (as with the Regional Development Agencies) they're given loads of money to spend.

Challenging received wisdom would have meant a very different approach. Rather than a snuggly little relationships with the grandees of big businesses, we might work instead with the real enterprise of millions. Instead of a grand board proposing sweeping nonsense about "green industry", "creating the technologies of the future" and other such tommyrot, we might have teams of coaches working with real people in the communities of the North. Helping people realise their aspirations, navigating start up businesses through the thickets of red tape, linking them to networks of other businesses and building a new economy on real enterprise rather than random guesses about "those sectors where Britain can deliver and compete".

This isn't about whether GDP or GVA grows but more about helping Mary, Steve, Iqbal and Samara to get their idea to work. It's about helping a bunch of young people without great qualifications to achieve something of their aspirations - whether that's to be a singer on a cruise ship or to run a successful computer repair business.

The "business right" - rather like the Fabian left - does not recognise free markets but only business markets. We're in a 'global race' rather than a peaceful, pleasant exchange of value with others. Countries, regions, cities, even neighbourhoods, 'compete' - that Porterian 'dog eat dog' philosophy dominates thinking. At no point do we consider that the object isn't actually competition but the successful operation of comparative advantage.

We have a government set in the belief - the hubris - that there are a set of levers that, if pulled in the right pattern, will result in success. And the rhetoric of liberty, of allowing people the space to succeed, is pushed aside in favour of a business-led quangos and investment in privileged sectors.

I have only one prediction. Just like every other time we've followed Michael Heseltine's advice, every time we've adopted "business-led" regional strategies, these policies will fail.

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So long Yorkshire Forward & thanks for the cash!

Should we scrap Yorkshire Forward - our "region's" delightfully dubbed Regional Development Agency? (Quick aside - why isn't is Yorkshire & the Northern Bit of Lincolnshire Forward?).

The Leader of Bradford Council seems to think so and other politicians in the city seem to want it either scrapped or subject to "greater democratic accountability". Certainly, the Conservative Party seems set on abolishing RDAs.

Tom Riordan, Chief Executive of Yorkshire Forward - and a shrewd, bright and capable guy - puts up a spirited defence of the system:

“There are three alternatives to Yorkshire Forward’s existence as far as I can see: leaving the market to its own devices, which history has taught us leads to economic growth being driven south; a national approach, where recent experience has been Bradford is not a priority; or local solutions that would be less able to deal with cross-boundary issues or attract global investment.”

In the spirit of debate, let's look at Tom's three alternatives:

1. Leaving the market to its own devices. Tom says this will result in economic growth going south. I'll not dwell on the great industrial and commercial heritage of Leeds & Bradford - the result of a market acting on its own devices. Instead I'll remind Tom that the GVA (Gross Value Added) gap between Yorkshire and the South has increased during the time of Yorkshire Forward's stewardship of the "closing-the-gap" objective! On your chosen measure, Tom, Yorkshire Forward hasn't delivered.

2. A national approach. Here Tom tells us Bradford won't be a priority for investment (on the basis of past performance which is we know no guide to future performance). Again Tom let's look at one key area of investment priority for the "region" - transport. Did Yorkshire Forward secure even a fair share of transport investment for Yorkshire? No - it all went to London as usual and we in the North were told that this investment (Channel Tunnel Rail Link, New Medway Bridge etc) would benefit Yorkshire. You and I were at that meeting Tom.

3. A local approach. Apparently this will not address "cross boundary issues" - which of course is why all the railways stop at city boundaries! An utterly nonsensical argument - Leeds and Bradford set up the Leeds-Bradford Corridor study without any help from Yorkshire Forward and there are myriad examples of local councils working together on shared problems. And it won't attract "global" investment of course because no-one's ever heard of Leeds, Bradford or Sheffield! And Tom - our biggest problem isn't inward investment its the lack of new local businesses and local enterprise. Places like Hull & Barnsley have rates of new business creation well below half that of the national average and only a fifth of the most dynamic places such as West London and the Thames Valley.

Yorkshire Forward and the other RDAs have not been a total failure - the money they have spent has supported some great regeneration initiatives, some super new buildings and has helped get people into work. Investments such as the cancer centre at Bradford University and the Advanced Digital Institute are successful and contribute to the profile of the area considerably. But their time has gone - as part of the rejuvenation of local democracy investment in economic development and regeneration has to come back to local councils just as spend on skills, post-16 education and economic assessment has already done.

And you know Tom, I think those local councils - singly and together will prove you wrong!