This is not a Gateway

 

 

 

 

 

 

I was in the Economist last week talking about the Thames Gateway. As New Labour’s flagship regeneration programme, the Gateway has not surprisingly been dropped by the Coalition. It hasn’t vanished completely though. Later this year, the Centre for London is publishing a collection of pieces on prospects for the area (for a flavour see this post and discussion). What we might call ‘Gateway Thinking’ also periodically reappears, for example in legacy planning for the Olympics, and in the proposed  Thames Estuary Airport.  And the place retains a strong hold over a certain kind of urbanist, especially in the dystopian excursioneering pioneered by Iain Sinclair and Laura Oldfield Ford.

I spent some time working on Gateway policy while in DCLG, and all of this got me looking back through old notes and papers. Some rough thoughts follow.

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First, the Gateway concept now feels madly ambitious – especially compared to today’s minimalist development environment. Remember that the 70km Gateway was one of four ‘growth areas’ set out in the 2003 Sustainable Communities Plan.  The Plan proposed around  550,000 new homes in these zones by 2016 (42,000 a year, when current annual housing starts for the whole country are now around 98,000), and envisaged ‘delivery’ of  430,000 additional jobs.

In practice, the other three growth areas – Milton Keynes, Ashford, and the ‘Peterborough-Stansted-Cambridge’ corridor – involve building in popular areas where developers are happy to operate. The Gateway was always going to be a much more challenging environment.

Second, there was (and is) a strong social argument for public investment along the Thames Estuary. Some communities along the river are deeply deprived , with residents held back by low incomes, low skills and thin local labour markets.  However, the economic case is rather weaker. It was never clear whether the Gateway programme was intended  as a response to economic pressures in the Greater South East (in particular, high house prices and low building), or a much bolder attempt to restructure the deeper regional economy. Neither was it clear why these communities merited public spending ahead of (say) those in Manchester, Liverpool or Leeds.

The Greater South East economic ‘system’ is heavily weighted towards the North and West of London, where there is a polycentric system of smaller cities (Milton Keynes, Oxford, Cambridge, Reading) around the capital. East of London, towns and cities tend to be smaller and local economies are heavily commuter-powered.

As the Economist notes, parts of London’s economy have been moving Eastwards for years. But the Gateway attempts to shift the entire urban system  towards the East – and to shift activity away from commuting towards self-contained communities. The evidence tells us that urban economies are highly path-dependent (e.g. here, here and here), and  that this kind of rebalancing takes decades if it happens at all. By contrast, the Gateway strategy promised 160,000 net new homes and 180,000 net new jobs over 15 years.

Third, this terraforming aspect is integral to the Gateway’s staying power. As a classic grand projet, the programme was highly appealing to a certain kind of politician (Michael Heseltine, John Prescott, Gordon Brown) and urban planner (Richard Rogers, Terry Farrell). Brown actually raised the jobs target to 225,000 in 2007, just as the credit crunch was kicking in.

Such visioning also gets in the way of getting things done. An obvious but important example: the Gateway isn’t a single zone, but a collection of very disparate communities. This matters. Treating the Gateway as a kind of continuous policy space made for convenient shorthand in speeches, but obscures the huge differences between key economic sites like Canary Wharf and Shellhaven, versus smaller towns like Thurrock, and struggling former resorts like Southend.  Arguably, it also made it harder to think about economic development, since policy had to be retrofitted into a high-level planning concept rather than based on local circumstances.

Fourth, Gateway delivery systems were pretty badly designed. Governance somehow managed to be both too top-down, as explained above, and not dirigiste enough at a local level. Notably, detailed policy development was generally left to Urban Development Corporations, who lacked a democratic mandate, had no statutory powers and held no assets. By contrast, New Town Development Corporations could set long term planning goals, and leverage a substantial public land portfolio. The trade-off was the lack of accountability, but land holdings eventually transferred to local authorities.

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None of this is to call time on the policy or the area. As I said earlier, the kind of deep structure change envisaged by Heseltine and others take decades to take shape. Developments like the London Gateway Port are potentially transformational, and London’s eastern boroughs will continue to evolve. By starting with economic fundamentals rather than grand planning, and placing help for individuals alongside physical regeneration,  a simpler, more effective approach might begin to emerge.

[apologies to TINAG for stealing the title.]

The book of SERC

I’m happy to say that LSE’s Spatial Economics Research Centre (where I’m a Research Fellow) has been asked to write a new book. From Urban Economics to Urban Policy will be published by Edward Elgar in 2013. Paul Cheshire, Henry Overman and I are the editors.

The book is essentially SERC’s Greatest Hits Part 1. We’re putting together a number of chapters based on the Centre’s first phase of research, under four broad themes: the nature and drivers of spatial disparities, labour markets, housing markets and planning, and policy / governance responses.

You can get a flavour by looking at some of SERC’s policy papers imprint. Many of these authors will also be contributing book chapters. But we’re also commissioning brand new material (some of which I’ve been working on today).

More news when we have it. Academic publishers don’t move at great speed …

Planning reform

The past few months have seen furious public debate about planning reform in England. Here [pdf] and here [pdf] are two new papers on the economics of planning, written by me and SERC Director Henry Overman. Versions were also submitted to the National Planning Policy Framework (NPPF) consultation last month.

The papers pull together SERC research on planning, alongside wider evidence (paper 1) and assess the Government’s proposals for planning reform (paper 2). Henry and I don’t agree on all of this – I’m certainly more pro-brownfield than he is – but we both felt that important pieces were missing from the recent public conversation.

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The key messages are:

1) The job of planning is to balance environmental, social and economic welfare. This means tradeoffs, so all planning systems have costs and benefits.

2) Planning’s economic effects, especially the costs of the status quo, have been underplayed in recent debates. We summarise evidence strongly showing current rules increase house prices and volatility, increase office rents, probably lower retail productivity and lower employment in small independent shops.

3) Paradoxically, land restrictions in the most popular areas have led to some truly unsustainable development – such as selling off school playing fields for housing. Similarly, brownfield-first policies have delivered some positive benefits for cities like Manchester, but aren’t a panacea.

4) The draft NPPF needs to be much clearer about sustainable development, potential tradeoffs and how practical decisions might be made (for example, using the National Ecosystem Assessment).

5) We agree with the National Trust and others that there’s a basic tension between Government’s desire for localism and some important national objectives. Ministers need to be clearer about what trumps what, or (more in keeping with localism) provide stronger incentives to align interests.

6) The presumption in favour of sustainable development that is consistent with the plan should be retained. But local authorities need time to adjust to the new rules, and the Government should introduce the change gradually.

7) Current incentives to ramp up housebuilding, such as the New Homes Bonus, are probably too weak and need to be strengthened. And one-size land restriction policies (such as town centre and brownfield first) don’t work well in practice. Rather, we suggest Whitehall sets the appropriate framework to try to encourage particular patterns of development but then allows local authorities to develop their own land use restriction policies.

Megacities: the real story

We finally watched Andrew Marr’s Megacities last night. It’s a great piece of spectacular urbanism – endless cityscapes, vast crowds, skyscrapers, huge numbers, expansive metaphors. But it’s also quite badly wrong about what our urban future is going to look like. Let me explain.

The series has two basic premises. One, the world’s population is now majority urban. Two, we’ll be living in megacities – places with 10m people or more.

The first of these is very likely true. For urbanists it’s not an especially new fact, first appearing in this 2003 UN-Habitat report.

The second is part true at best. Megacities are telegenic, but most of the world’s population won’t be living in them. 

Sure, the number of megacities is rising – from two in 1950, three in 1975 to 19 in 2007. By 2025, the UN predicts  there’ll be 27. But the number of ‘large cities’ – five to 10m people – is already bigger, and growing faster. In 2007 there were 30: the UN suggests there’ll be at least 48 by 2025. More importantly, half the world’s urban population live in much smaller cities, of around 500,000 people. These may be the most common of all.

In fifteen years’ time, then, we’ll see far more Liverpools (around 400,000 people) and Londons (8m people) than Tokyos (26m people).

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Paradoxically, the biggest urban settlements are now hard to recognise as cities at all. Across the world cities are merging into mega-regions: notably China’s Pearl River Delta, the US Eastern seaboard, even the Greater South East.

Some of the numbers here are difficult to take in. An estimated 120m people live in the Pearl River Delta, the largest urban zone on the planet – China is now planning to merge nine cities in the Delta to create a single sprawl of 42m people. The Tokyo-Nagoya-Osaka-Kyoto-Kobe region may comprise 60m people by 2015, almost the entire population of the UK.

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All this may suggest that urbanisation is accelerating. In fact the opposite is true. Globally, cities grew fastest in the 1950s and early 60s: growth rates have been slowing ever since, from 4.1 percent to 2.5 percent today, and a predicted 1.8 percent by 2030. Developing countries are also on the same downward trend.  

Urbanisation runs in parallel with economic development, and so as developing countries industrialise, their urban systems tend towards steady state. Of course there is a lot of city by city variation. For example, the UN predicts Dhaka will keep growing – from 15.9m in 2007 to 22.8m in 2025. But Lagos, which has grown from less than half a million people in 1950 to over 13m in 2007, is predicted to reach just 16m in the next fifteen years.    

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Megacities makes much of the growth of urban slums. Again, the picture is complex. Over the past decade the share of urban slum dwellers has fallen from 39 to 32 percent, due to economic growth and policy interventions. But as people are flowing into cities faster than infrastructure can keep up, the absolute number of people in informal settlements is growing, and will keep growing.  

Marr stays the night in a Dhaka slum, discovering it’s quite like any other suburban neighbourhood – dirt streets and tin shacks aside. Marr echoes Stewart Brand, celebrating slum dwellers’ entrepreneurialism and inventiveness. Ed Glaeser describes slum neighbourhoods as ‘private energy, public failure’: the development challenges of poor public health, chaotic infrastructure and urbanised poverty remain considerable.

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Finally, we need to factor in the geography of climate change. Many megacities are coastal, and will be threatened by rising sea levels. Many will also be increasingly water-stressed in the years to come.

In his excellent book The New North, Laurence Smith explores the economic rise of the NORCS – cooler, resource-rich regions stretching across Canada, Scandinavia and parts of the US, Russia and China. He predicts new ‘hydrocarbon cities’ appearing across Canada and Russia, and new mega-regions like Cascadia – spanning Portland, Seattle, Vancouver and parts of NorCal.

Megacities are a great symbol of the global urban shift. But our urban future is going to be much richer and more complex than this.

Facetime limited

What’s on sale here? Will Davies and I both have been puzzling over this ad on the Tube. Will’s worried about the politics of ‘facetime’, but I think there’s a more basic problem.

I can see the point of putting this ad up in (say) Barrow-in-Furness, or in the middle of the countryside. But if ‘facetime’ is the commodity, why offer Londoners access to 400 million people, when they can reach several times that number in the capital itself?

I would have thought that Birmingham’s comparative advantage in ‘facetime’ (or dynamic agglomeration-derived proximity benefits, to be precise) has to be usability, not quantity.

Core cities like Birmingham offer a good balance between size, speed and access. For the businesses targeted here, Brum has pretty good infrastructure, amenities and markets – but is also easy to navigate. Isn’t that the selling point?

London might be a megacity, but it also has to be one of the least usable and most frustrating places in the UK to travel around – as anyone stuck on underground reading this ad would realise …

So, farewell then …

… eco-towns, by the look of it. This is a good thing. Eco-towns are largely unloved, often in the middle of nowhere, and would have little impact on overall CO2 emissions.

Dermot (and Adam Marshall) have rightly criticised eco-towns for distracting from the much bigger task of greening Britain’s cities. As I’ve explored elsewhere, that’s a job which should have both a significant impact on the UK’s carbon footprint, but also much greater economic development potential.

Eco-towns have also failed dismally at being the kind of demonstration project the Government originally envisaged. There are much better examples abroad, both self-standing cities like Masdar in Abu Dhabi, and (more realistically) urban extensions like those in Vauban, Freiburg, or Hammarby Sjostan, Stockholm.

The latter also have the benefit of localist in design and delivery. In the coming months, let’s hope the Coalition can give British cities the financial flexibilities to try something similar.

Getting ahead in the countryside

The big city’s the place to find fame and fortune, wouldn’t you think? Not according to the Commission for Rural Communities, whose new report claims ‘rural areas have more entrepreneurs’. This seems odd – aren’t cities supposed to help ideas flow, with banks to lend money, and customers to sell to?

All the evidence suggests innovation is heavily urbanised, for example. So what on earth’s been going on in the British countryside? Is the fresh air good for the brain?

The report’s here. It’s nearly 200 pages long, so to save you reading it I’ve done some digging. The relevant findings are:

1) A survey of bank lending finds that in 2008 and 2009, rural areas had more start-ups per working-age population than urban areas (p131)

2) GEM survey data for 2004-2008 finds higher rates of ‘entrepreneurship activity’ in rural areas than urban areas. Strikingly, the survey suggests rural entrepreneurship rates are ‘as high as inner London’ (p133).

The report uses good definitions of ‘urban’ and ‘rural’, based on this DEFRA typology. But there are questions about which rural areas we’re talking about – more on that in a moment.

Let’s start with start-ups. First, there’s not much urban-rural difference in business birth rates – 13.9 per thousand people in rural areas, 12.7 in urban areas. Second, in absolute terms there are far more start-ups in cities than the countryside – hardly surprising since c.80% of the English population live in urban areas.

Third, there’s noise in the data – the survey in question covers 93% of all bank lending, which is pretty good, but doesn’t adjust for the rest. If 80% of those loans were to city firms, a reasonable assumption, the urban-rural difference is less than one percentage point.

‘Entrepreneurship’ is a slightly more nebulous concept, and it turns out the GEM data needs a big pinch of salt. For one thing, the survey is based on just 43,000 firms across the UK – which might risk sampling error if you’re looking at small rural areas.

More seriously, GEM actually measures something called ‘total early-stage entrepreneurial activity’ – which is a weighted index including ‘nascent business activity’. This could include things like writing a business plan, but not actually doing anything with it. (I’ve also no idea how the Index is built because GEM doesn’t say.)

In the CRC small print, GEM concedes it’s tracking ‘propensity to be entrepreneurial’, rather than *actual* entrepreneurs. It’s hardly convincing.

So, case not proven – on the basis of these numbers. However, let’s suspend disbelief and assume there is a new generation of rural whizz-kids. What might explain this?

It could be a lifecycle effect – people downsize or move their families out of the city, starting new businesses in the countryside. Migration data suggests there could be something in this – young single people move into cities, older people with partners and children move out. Other studies suggest people gain skills and learning in cities, taking these with them when they leave.

There could also be a technology effect. The CRC’s start-up figures suggests that most loans go to business services like accountancy and consulting, a lot of which can be done by phone or online (anecdata – my accountant operates out of deepest East Sussex).

That implies a third point – many of rural areas are actually around the edges of big urban areas. In the jargon, they’re ‘peri-urban’ – pleasant, leafy communities with decent schools and public services, and good links into the urban core. Not surprisingly, these neighbourhoods tend to come near the top of ‘best place to live’ surveys.

In turn, that suggests some final lessons. Don’t overspin your data. The city and country have more in common than you might imagine. And ultimately, enterprise is less about place than about people.

City in a box, unboxed

Excitement online and in the twittersphere about the Cisco ‘city in a box’ being built in Songdo, South Korea. There seems to be a bit of a utopian city meme at the moment – instant cities,  floating cities and Paul Romer’s Charter Cities (which I discussed a while back). Last week’s Economist even showcased a whole series of prototype ‘cities for 2030′.

As the Economist piece points out, there’s something slightly odd about these kind of exercises. Cities tend to emerge and evolve organically, even chaotically, rather than being built from scratch: and their residents and users tend to be resistant to masterplanning.

A closer look at Cisco’s instant city actually confirms all this quite neatly. First, it’s not a city, it’s a business district – albeit one that could house up to 1m people. Second, it’s neither new or self-contained. Instead, it’s a bolt-on to an existing city, Incheon, the 3rd biggest in S Korea.

This kind of CBD megaproject has been done before – in Canary Wharf, for example, which works pretty well as a financial service cluster, if not as a functioning community. (With a working population of around 90,000 people, it’s over ten times smaller than Songdo.)

I can see the potential for this kind of plug-in planning in China in particular, given the pace of urbanisation there. The developer at Songdo reckons there’s a market for at least 20 more in China and across South East Asia. That’s plausible if the demographics and national economies hold up. But ‘build it and they will come’ is an inherently risky strategy – just look at Dubai.

I’d also love to see Cisco try this in a small, highly urbanised Global North country like the UK. Our biggest urban planning challenges in years to come is going to be greening the cities and buildings we’ve got. The eco-towns initiative doesn’t tackle this, and the programme is basically marginal.

But in growing places, there’s potentially an important role for high-tech, resource-efficient urban extensions – around Greater London, Manchester, York, Cambridge or Brighton, say. The problem will be the total lack of public funds to help actual building. Perhaps Cisco can step up to the Big Society plate and donate one?

ps. I’m now finally on Twitter – find me here.

pps. We’re now on holiday for a bit. Blogging returns in July.

Shrink to fit

My last post talked about the principles of dealing with shrinking cities. This one concentrates on the practice. In DC a few weeks back, I had an informal chat on shrinkage with some of the Brookings Metro team (helpfully organised by Dermot, whose writeup is here).

For me, there were four big points from the discussion:

First, US cities are mainly ‘shrunk’, not ‘shrinking’. With a more mobile population, and severe contraction in the 1980s and 2000s, people voted with their feet. In the UK the picture’s mixed: historical data suggests that Liverpool’s population has fallen by over 300,000 since the 1960s, while Stoke’s has only dropped by 25,000.

That means the challenges are different. In the US, the big issues are repairing the physical fabric for remaining residents, and pooling jurisdictions so local tax bases can cover cash for public services. In the UK, tasks include promoting individual mobility, raising human capital and doing physical repair.

Second, the US approach is bottom up, not top down. This is partly historical: people have bad memories of government Urban Renewal programmes in the 1960s, which had a disproportionate impact on African-American communities. It’s largely institutional – the US system gives cities strong local leaders, typically Mayors, who in cities like Youngstown (est pop 73,000) and Flint (113,000) have led the public conversation and put forward new strategies.

The Obama administration has dipped a toe in the water, talking about ‘auto regions’ like Detroit, and ‘cities in transition’, but none of this has yet translated into action. By contrast, UK efforts like HMR have been Whitehall-led initiatives, essentially aimed at ‘doing something about those inner cities’.

Third, US programmes are less radical, and more micro, than you might imagine. In practice, policymakers focus on struggling neighbourhoods, more than whole cities. Empty houses and land are bought up, and there is selective demolition and rebuilding. Often areas are simply returned to meadows, or turned into parks and bikeways. Rather than actually ‘shrinking the city’, the aim is to improve the city that’s left – making it nicer and greener.

In the UK, however, many  HMR pilots have tried to use housing market remodelling to stimulate area population and economic growth. Adding net housing when populations are shrinking does not feel wise.

Finally, finance differs. In the UK, Whitehall provides upfront funding to HMR, which leverages private sector borrowing – a funding model that’s now collapsed.  By contrast, US improvements are often funded via county-wide property taxes or fixes like TIF – as I’ve pointed out, tools that UK city leaders don’t yet have at their disposal.

Closer to home, Leipzig’s story is instructive too. The second-largest city in Eastern Germany, it lost 100,000 people after re-unification (20% of its current population). In 2000 an expert commission on the city was established, led by Leipzig’s Mayor. The resulting strategy involved some demolition and remodelling of inner urban housing, plus a range of quality of life measures (e.g. allowing artists to take over derelict properties).

Leipzig’s population is about the same size as Greater Manchester, so the city also developed its market potential, with a modernised train station and airport. Overall, it has stopped shrinkage: the population has stablised, and there has been slight employment growth (largely driven by high-tech manufacturing investment, such as a new BMW plant).

Lessons

So what are the lessons for the UK? First, cities – not Whitehall – need to be in control of policy and process, proposing ideas and getting local buy-in. Often, the pitch will need to be about a better, greener place to live – not ‘renewal’ or ‘shrinkage’.

Second, the policy mix should combine place elements (remodelling neighbourhoods) with people elements (improving skills, helping residential mobility). My post last year suggested ‘removing overcapacity in local housing; improving the local environment (which could include some US-style ‘greening’); levelling VAT rates on refurb and new build; developing local skills, access to employment and transport links to stronger labour markets; new funding tools; and some honest repositioning’.

That still feels about right. Although compared with Flint and Youngstown, big cities like Liverpool have far larger domestic markets, and thus potential for further jobs growth. Leipzig’s story suggests there’s a role for demand-side measures in bigger places: Liverpool’s recent economic and population growth confirms this.

The proposed Decentralisation Bill therefore looks quite promising. Big city Mayors and Local Economic Partnerships, more open local planning, and proposals to build local social action are all useful; uniform local incentives for housebuilding less so. More seriously, local leaders will still lack the financial tools to deliver the kind of programmes carried out in the US and in Europe. The forthcoming review of local government finance should look to broaden councils’ toolkit, and widen their tax-raising base.

One final point. CLG and bodies like the HCA have critical system designer and enabler functions, supporting and advising local leaders and communities – if not dictating to them. Whitehall will need to lead on promoting any ‘right to move’ in the social housing system; and will still be providing direct funds for skills and education. Despite the Secretary of State‘s emphasis on ‘localism, localism, localism’ ‘localisation, localisation and  localisation’ (thanks Grant!), I suspect central government will still end up with useful roles to play.

Geography and social justice

This is the first of two posts on ‘shrinking cities’, or as civil servants might put it, ‘places with a long history of economic underperformance’. In the UK, this means cities like Hull or Stoke-on-Trent with low average incomes and higher-than-average deprivation rates; abroad, places like Leipzig, Cleveland or Detroit.

The politics of improving life for people in under-performing places is extremely sensitive, as Policy Exchange discovered when they appeared to suggest moving people out of ‘failing’ Northern cities. Recently there’s been more interest, via LSE’s ‘Phoenix Cities’ book, Julien Temple’s ‘Requiem for Detroit?’ and from the Centre for Cities (see Dermot’s helpful summary, and my thoughts from last summer).

Why now? First, during the 2000s a lot of economic development funding went into cities. But this has not always improved residents’ overall welfare. As the business cycle turns, city leaders are looking for new ways forward. Second, there’s now less regeneration money around. Between 2011 and 2015, central government departments like CLG may face 20-25% spending cuts. So Whitehall policymakers are looking hard at if, where and how to spend.

At the recent AAG Conference in Washington DC, Michael Storper offered some helpful thoughts on all of this.

Spatial disparities exist, Storper argues, because there are benefits of clustering economic activity, and these persist over time. Agglomeration economies help explain why cities exist, and why they still matter. Theory and real world experience also suggest that long term convergence is unlikely.

So agglomeration leads to disparities between places. At the same time, increasing returns to skills lead to disparities between people. And because higher-skilled people tend to sort into more successful cities, we often get poorer people concentrated in poorer places.

The question for policymakers is what, if anything, we should do about this? Storper outlines three responses.

We could aim for ‘spatial equity’, compensating people and places who lose out. This feels appealing – but what does it really mean? Is holding successful places back fair to their residents? And how do we actually equalise outcomes? Even the UK’s very centralised public services haven’t got rid of postcode lotteries.

Another view is that we invest in poorer places. This is the traditional regeneration perspective. Structural economic change has long term impacts that markets won’t deal with – physical decay, poverty, crime. And there are efficiency costs to this – not least higher spending on benefits. Area-based policies tackle these externalities, get markets working again and places back on their feet.

This has been pretty much the UK approach for the past two decades. It’s given many cities a public makeover – and has made them nicer places to live. But most evidence suggests that improving places doesn’t easily translate into improving outcomes for people. Trickle-down regeneration works about as well as trickle-down economics.

People can move, and it’s hard to assess area-based initiatives if some recipients leave the area. ‘Regeneration thinking’ also doesn’t say how to balance limited resources between helping poor places recover, and helping growing places do better. CLG’s Regeneration Framework has a go, but isn’t completely convincing.

A third view comes from urban economics, especially Ed Glaeser (and now, Richard Florida). In its simplest form, this says we should focus on people, not places. People are mobile; investing in their mobility and human capital improves their economic prospects. Investing in immobile places does not, especially as convergence is unlikely.

To me, this feels like the right starting point for policy. This view is also increasingly fashionable in UK policy circles, and partly explains the bad press traditional regeneration has been getting. But as Storper points out, it’s more complicated than it looks to implement. There are three big policy points.  

First, it’s not clear everyone is truly ‘mobile’. People are free to move; but less skilled people have less information or resources to migrate between cities. Policy interventions might improve mobility, although we don’t have strong evidence here – increasing choice in the social housing system could help, also expanding housing supply in more successful places. Research and experiments should look to fill this gap.

Second, it implies we maximise economic welfare. But we know people think beyond money. Some local responses to Policy Exchange’s report reveal people happy to live in ‘failing’ Newcastle and Liverpool – because they like being there. At an LSE screening, critics of Julien Temple’s film similarly pointed out that nearly a million people still live in ‘failed’ Detroit.

Urban economists explain this in terms of spatial equilibrium. People sort by economic prospects, and prefer different kinds of communities. Low wages get traded off against low cost of living and/or better amenities. In spatial equilibrium local labour, housing and ‘quality of life’ markets all clear, so that real wages equalise across all places. Ongoing SERC research finds some UK evidence for this.

The spatial equilibrium approach implies we don’t need to worry so much about disparities in nominal income. But in some poorer places, especially given mobility barriers, we may want to adopt measures (better quality housing, tackling crime) which will improve residents’ wider wellbeing – and thus raise real incomes.

Finally, national politics and local delivery are both critical. The UK is generally less tolerant of inequality than the US. Our politics is steeped in notions of fair play and universal standards: we’re a long way from accepting apparently large income disparities on the basis of hard-to-explain equilibrium concepts.

British over-centralisation also makes it politically difficult to do anything about managing decline: London policy apparatchiks seem to be telling other cities what to do (which they are). This is one reason why the Housing Market Renewal programme has often been so painful, why Policy Exchange got in trouble, and why the Coalition’s emphasis on localism is important. In future, devolution and actually doing managed decline need to go hand in hand. I’ll explore these ideas further in the next post, and take a look at some international experiences along the way.