Local protectionism is no way to raise economic growth in poor places - a critique of inclusive growth

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The RSA, that trendiest of slightly left wing think tanks, has launched a thing called the 'Inclusive Growth Commission':

Chaired by former BBC economics editor Stephanie Flanders and building on the success of the RSA’s City Growth Commission, the Commission will seek to devise new models for place-based growth, which enable the widest range of people to participate fully in, and benefit from, the growth of their local area.

The core of the Commission's argument is:

Public services and welfare remain fragmented; economic and social policies often seem to pull in opposite directions. Although growth is happening and unemployment falling, large sections of the population are not benefiting. Big wealth gaps and large numbers of economically inactive people have negative impacts on local economies, life chances and social cohesion. Costs to the state remain high, growth is low and prosperity the privilege of a few.

It seems an entirely noble idea to look more closely at how, to borrow a phrase, the proceeds of growth can be shared. The focus - entirely right for a geographer like me - is place-based, stressing the uniqueness of a particular town or city and seeking development solutions that resonate with that locality. The problem is that the RSA, like many other such organisations, has taken as its text the idea that inequality is the cause of poverty in places like Manchester, Liverpool and Bradford.

The worry I have with this place-based model, especially when coming from a centrist, 'government is good' ideology, is that we fall easily into the ideas about resilience, the local multiplier and social models of business. Here's Neil McInroy from the Centre for Local Economic Studies (CLES):

Overall, the plans to build a more inclusive growth model faces a choice. On the one hand the commission can add a stronger social face to an economy which works for the few, not the many. In this, they will reveal some of the problems of growth and this will prompt some policy changes. However, will the commission’s recommendations alter the longstanding frame to local economic activity – where productivity and growth has a pre-eminent position and is viewed as having much higher importance than that of inequality and poverty?

McInroy sets out a 'critique' based on his organisation's position - alongside the New Economics Foundation, Transition Towns and the New Weather Institute - as advocates of what I call local protectionism. For McInroy there is a dominant regional growth model - agglomeration - that needs to be challenged if we are to get an inclusive economy. Essentially in the critique the place-based model means that growth has to be spread across a region rather than being focused on city centres and 'growth hubs'. McInroy will point to the success of Manchester city centre and then to the fact that, despite this success, the metropolitan area of Manchester still contains many of England's poorest places.

It also has losers – city region peripheries, smaller towns and the low skilled. We must look at areas beyond city centres to outer boroughs. We must focus much more on local supply chains and ensure investment to local small businesses is on an equal footing to global corporates and global investors.

In here we have the problem - that reference to 'local supply chains' will be familiar to anyone reading the output of CLES, NEF and NWI. It refers to the view that local supply chains keep more money within the community than supply chains based on the national economy. The idea of the local or regional multiplier is central to this assertion - NEF make a good living from plugging their LM3 model to all and sundry (despite it having no real theoretical basis or any robust empirical support). The problem is that the local multiplier is something of a myth - the impact of excluding national supply chains is, in effect, the same as any act of protectionism. So any gain from having the money circulate within the community for longer is lost in that community having to pay higher prices.

The second element here is the persistence of the view that welfare payments somehow contribute to a local economy. It's true that the very poor places in Manchester and Liverpool receive large amounts of the money we redistribute (giving the lie to those who say there is no dispersal, no 'trickle down') but it is also true that, however valid that welfare payment might be, it still carries an opportunity cost. If the money wasn't raised in taxes it would have been used in another way - perhaps on consumption, maybe invested.

No-one disputes the objective - we'd like more of those people dependent on benefits not to be dependent on benefits. I'm guessing that's what the RSA mean by inclusive growth. The issue is how we go about this - do we run the risk of a slower rate of growth by insisting that large sums are redistributed in some way. If we reject the idea of agglomeration as a driver of growth, then we have to put something in its place. The problem is that the alternatives on offer from the likes of McInroy will act only to futher damage local economies by raising prices and decoupling them from the more successful national economy.

In the end local economies thrive because government does not direct them - the vanity of the RSA position and the stupidity of the CLES outlook is that there is some magical role for local or regional government in delivering both economic growth and a less unequal society. For me the reduction of actual poverty is more important than endlessly fretting over measures of inequality (or 'relative poverty' as folk like to call it) and this is brought about by government not obstructing the drivers of growth. It implies lower taxes when often poorer places have high taxes. It demands less regulation and intervention when the preference of big city governments is to intervene more. And it requires that we connect poor places to the rich places making it possible for people to travel - economically and physically - from the former to the latter.

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I like choice - and so should you

Vivienne's masterpiece salmon

We hear often of the sin that is "consumption". Not the 18th and 19th century killer of literary genius but the preference that many of us have for spending a fair old chunk of the limited time we get on stuff we actually like doing. If you want to call that decadent, uncaring or planet-threatening that's fine by me. But I intend to carry on consuming.

And I am not swayed by the righteousness of some folk who, having failed to persuade us - the consumers - that consuming is a bad thing - have shifted the attack. The problem, they tell us, is choice - there's too much of it, it is making us anxious, stressed and meaning that we are no longer "organising ourselves and making a critique of society".

This little animation from RSA (entitled "Choice") peddled all this stuff - including the quote in the above paragraph. We have here all the regular left-wing anti-choice arguments including jolly little stories about how some bearded professor was uptight about which wine to buy in a restaurant or how some self-indulgent journalist wrote that sex life wasn't like the sex lives described in the pages of Cosmopolitan. Plus the usual rubbish about the stress we get from being over faced by the range on offer in the supermarket.

I feel so sorry for all these sensitive folk living in their convenient little anecdotes. But the argument - so typical of pop psychology - is founded in story and prejudice rather than in the reality of consumer behaviour. Yes, consumers will tell you they don't like choice. But consumers also use heuristics to mange and moderate choices - mostly they're called brands although they may also be choices about shopping location or, today, the use of comparison web-sites. There is an entire academic discipline - consumer behaviour - that studies such stuff.

More substantially, however, the argument against choice presented here tiptoes towards anti-capitalism - not just through an ignorance of what, precisely, we might mean by capitalism (it is presented as the creator of our consumer society) but through the contention that choice is used by "capitalism" to prevent us from achieving "social change". I have to smile at the manner in which "capitalism" is anthropomorphised - made to have an existence as master of an "ideology of choice".

But what is the alternative to this "ideology of choice"?  Logic tells us that the only alternative must be an "ideology of choice denial". Our choices - whether of wine with dinner, of places to live or of clothes to wear would be constrained, limited and even stopped entirely (bit like healthcare really). And one presumes - although this isn't stated - the limitation of choice would require mandation. Somebody will have to set out the choices we can have - assuming that "somebody" actually thinks we should have any choice at all.

So the argument presented - for all its wit and literacy - is profoundly illiberal, requires a mechanism for limiting choice (so we are not stressed or otherwise pained by our choices) and represents the continuation of the Nancy Klein attack on that choice. Or rather on the "wrong sort of choice" (as we can characterise Ms Klein's argument) - the idea that the brand "McDonalds" is essentially different from "Liberal " or indeed from "Chateau Lafitte Rothschild". All are those pesky heuristics - short-cuts to decision-making - that enable a complex consumer society to work.

Although the RSA do not present any alternative - "organising to achieve social change" is as far as it goes - the vision, characterised by the use of bees as a metaphor, owes more to Aldous Huxley than to a happy vision of the future. Indeed it could be this:

"Our world is not the same as Othello's world. You can't make flivvers without steel-and you can't make tragedies without social instability. The world's stable now. People are happy; they get what they want, and they never want what they can't get."

Please let it not be so. Let us be free. Stop speaking of some idea of social change as if "social change" is absolutely desirable. And stop offering excuses that permit governments to control our lives, to remove our choices. And stop already with this angst, this post-millennial ennui, this pseudo-guilt trip - choice is good, it makes us happier, healthier, wealthier and, each day, the chance to do it differently means that innovation, change - even social change - takes place.

However, the sad little assault on choice will continue, partly because some folk makes choices that people who do cute animations for the RSA disapprove of (you know getting drunk, smoking and eating the wrong food) but mostly because the social change that is driven by choice isn't the "social change" such people want. Rather than the controlling hand of the benevolent masters directing the ignorant towards enlightenment, we get a messy, exciting, chaotic mish-mash of changes - some fantastic, some problematic but all of them driven by the individual actions, initiatives and, yes, choices of men and women doing stuff they like doing.

Choice is good. And don't ever forget it!

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