Where is the light for towns like Wakefield?

Last week I spent a few days in Wakefield, a small city to the east of Leeds in West Yorkshire. The economic fortunes of such small towns in Britain is one of the big issues in British public policy. I am still searching for the answers.

Wakefield goes back at least to that era which Britons refer to as the Dark Ages – after the Romans left and England was subject to invasion successively by Anglo-Saxons and Danes. The Normans proceeded to raze it to the ground in the Harrying of the North, after William the Conqueror took over in 1066. But its geographical location, at an important crossing of the River Calder, a navigable waterway, ensured its future. The Normans built two castles there. It prospered as a port serving the wool and tanning trades. This economic success continued into the industrial revolution, when its river connections were boosted by canals. It flourished as an agricultural trading centre. It diversified into textiles, coal (mined nearby) and glass, and became an important administrative centre. Its grand church (the tallest spire in Yorkshire) became a cathedral with its own bishop in 1888, and City status soon followed.

Alas this has fallen apart. The coal, glass and textiles industries were wiped out in the 1980s, usually blamed on the policies of Margaret Thatcher, but in fact the result of changes to technology, assisted by globalisation. It lost its bishop in 2014. The town looks rather sad today. There are plentiful vacant spaces used as car parks. Empty shops scar its streets. Benefits are claimed by about 18% of the population, compared to the English average of 13.5%. Unemployment is higher than average, though, according to the claimant count (4.3%), far from catastrophic. There are few immigrants living there – a sure sign of a weak economy (though our hotel cleaners were east European). We could buy about ten houses of the same size from the current value of our London home. Let’s not overdo this. It it did not appear to be a disaster area. It was easy to find nice places to eat in the town centre. But our hotel (part of a characterless budget chain) was the only central one we could find. There were other hotels on the outskirts: a bleak land of dual carriageways, roundabouts, retail parks and industrial estates, dominated by national chains, doing things as cheaply as possible, and sending the surplus elsewhere.

Quite a bit has been spent on redevelopment. The town centre has a smart shopping mall (albeit with quite a few empty shops), and the central square looks newly revamped. The cathedral has been very tastefully restored and modernised, with some lovely new furnishings, and is an uplifting space. Above all there is the Hepworth, which was why we visited. This is a modern gallery that celebrates Barbara Hepworth, the sculptor and artist, who was born and brought up in Wakefield. This is a lovely building on the town’s otherwise derelict riverside – and a world-class gallery, taking advantage of many years of collecting by its unprepossessing but imaginative predecessor, the Wakefield Art Gallery (converted from terraced houses) – and the generosity of local artists like Hepworth and Henry Moore, who was born and brought up in nearby Castleford. The dedication to art does not end there. A few miles from the town there is the Yorkshire Sculpture Park (YSP) – an outstanding collection of sculpture and other art, in the setting of an old country park – and another reason for our visit.

But how far can you regenerate a town on art? There did not appear to be many jobs in it. No flourishing urban environment has developed around the Hepworth in the manner of London’s South Bank, in spite of its riverside location. The same can be said for the YSP, which barely keeps a couple of snack bars going, in spite of its many visitors – though a posh hotel and conference centre is under development. The nearby motorway service area on the M1 motorway may do more business than both of these facilities put together.

So Wakefield has achieved a sort of economic mediocrity. There are jobs, and not just in the usual services, but it is not prospering. One clear weakness is the lack of a university (unlike nearby Leeds, and even Huddersfield, another smaller town nearby). Education should be at the heart of a modern economy. There is a decent further education college – but this is a neglected sector in Britain’s education system, starved by government austerity even as schools and universities have prospered.

The town must aspire to better. The weakness of such towns drives much of the foul political mood in not just Britain. People there feel left behind and neglected by metropolitan types who promise much and deliver little (or so it appears to their residents). New jobs tend to be poor quality; capital sends its rewards to the big metropolises or to offshore tax havens. Surely there is untapped human capital here? How can local networks be revived to counter the giant national and global networks that will otherwise suck these places dry? Too many economists are sinking into pessimism. A recent article in the Economist compared the fate of less-skilled humans to that of horses, which became obsolete a century ago. Is the weakness of such centres an inevitable consequence of the march of automation and an obsession with productivity?

I’m not convinced. I see too many jobs that need doing that are being neglected – in education, health, social care and local services generally – and in the world’s large but hollow corporations and state agencies, who pass the buck rather than solve problems. The liberal market economy, so favoured by the conventional wisdom of the 1990s and 2000s is failing – just as the publicly directed command economy has failed before it. But what to do? Local currencies perhaps? This approach is favoured by new economy thinkers like David Boyle – and regular commenter to this blog Peter Martin. Perhaps it is worth a try, but I suspect that political power structures must be altered first. It is no accident that countries with a highly devolved political culture, like Switzerland and Germany, are faring better than centralised polities like Britain and France. Though that is not enough – as the fortunes of the highly devolved United States shows. You need a strong social safety net too.

If I was trying to make something of Wakefield, I would start with its further education college. It has failed in a bid to acquire university status – but Britain needs world-class technical training for less academic young people and adults. Surely building on neglected human capital must be a large part of any solution? But that needs a strong state to provide up front payment and carry risk – and the state is weakening.

So a larger state, but not one dominated by giant agencies with Key Performance Indicators and lacklustre management; local democracy that does not turn into cronyism and mediocrity; thriving businesses that recycle their surpluses locally rather than send them elsewhere. A big challenge, but the future of  liberalism depends on it.

 

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13 thoughts on “Where is the light for towns like Wakefield?”

  1. Wakefield isn’t as disadvantaged as other places such as Middlesbrough, for example. It’s only 2 hours by train from Wakefield to London, but over 3 hours from Middlesbrough.

    Distance to London is a key indicator for economic prosperity. It’s obviously not the only factor. When Aberdeen was an oil boom town that made a big difference to the local economy. Areas of outstanding natural beauty can be a big influence too. So there’s lots of money in the Lake District and Cornwall. But, whether that “trickles down” to local people would be a matter of some debate. I’d say it probably doesn’t. They just end up being priced out of their own housing market and working as gardeners for the incomers on minimum wages.

    The worst area for unemployment in the UK used to be in the western parts of Derry in Northern Ireland. It was surely no co-incidence that this was in a part of the country which was the most isolated from the London region. There’s surely nothing different about the people of Derry. They do just as well as anyone else when they move away from the region. But why should they have to? Even when there is full employment in most of the country in the 60’s and 70’s, rates of unemployment, poorly paid employment and underemployment were very high. Add in sectarian discrimination, and no-one should have been surprised that NI had the troubles it had.

    So we see, from observation, that there is a strong gravitational pull on money by other money. In the UK, that means the economy of SE of England can become overheated at the same time as it is overcooled in the regions. Especially the regions which have suffered industrial decline and, to be blunt about it, aren’t particularly attractive places to live.

    We see the same effect in the EU. Regions that were wealthy before the EU, and would be wealthy even without the EU, do well. The peripheral regions, which were supposed to benefit from the EU do very badly. I do remember laudable statements from pro-EU types that the EU existed to spread prosperity. Instead the regions that have needed it the least have benefited most and vice versa.

    This is all caused by the “free market” of course. So if we are happy to see the present state of affairs, both here and in the EU continue then we just push for more free market policies. If we aren’t happy then we need to press for more fiscal equalisation. It doesn’t mean that the people in the SE of England or the Western parts of Germany have to become any worse off themselves. They just need to recognise that Governments can’t spend what they would regard as their money in their region. It simply causes too much inflation. But they can spend in the depressed regions where it won’t cause inflation.

    Neither will the spending add to the deficit. It all comes back as tax revenue unless it is saved. If the Government provides useful jobs for the unemployed people of Middlesbrough, the wages will be spent very quickly!

    1. Good point about Wakefield’s relative connectedness to London. It was a simple drive home along the M1. Still I would like to dig into some facts before accepting your idea that free market economics has favoured already prosperous areas at the expense of more prosperous ones. I suspect a much more complex picture which depends on the quality of economic management of the countries concerned. For example I think that Ireland, Poland and the Baltics have dome well from a poor start, notwithstanding setbacks along the way. Meanwhile northern Italy, one of the powerhouses of the most prosperous areas of Europe, is being relatively dragged backwards.

    2. Yes Wakefield is relatively well connected with London – it was quite easy to drive home on the M1. Earlier that week I had visited Grimsby which by comparison is much harder to get to (and that applies to rail travel too). I wouldn’t like to say that Grimsby is worse off than Wakefield. It is well connected to the world outside Britain, which allows some substantial industrial activity, especially in food processing, even if the fishing industry has gone.

      And as for your contention that the EU has benefited relatively prosperous economies at the expense of the others, I am sceptical in the absence of facts. I see a much more complex picture dependent on the quality of economic management. Ireland, Poland and the Baltics have done relatively well, in spite of a poor start (and some bumps along the way); Spain may be following them, though unemployment is still dire there. Meanwhile poor Italian national government has hurt northern Italy, which was one of the most prosperous areas of the continent.

      Hmm. I think tha

  2. “It is no accident that countries with a highly devolved political culture, like Switzerland and Germany, are faring better than centralised polities like Britain and France.”

    I think we should all be suspicious of this push for devolution. We all know what will happen and what has already happened.

    Government increasingly hands over the running of the NHS , education, roads etc to the cities and local councils. Government then cuts back on funding. Government is able to deny all responsibility for bad services , bad roads etc. They’ll say that if the people of Manchester want better roads, health, education for Manchester then the people of Manchester will have to pay for them. A superficially plausible answer but we know that’s not how economies work.

    The examples of Germany and Switzerland aren’t typical. They are both currency manipulators who effectively export their economic problems to others. Not every country can be a net exporter! This is really just a fallacy of composition.

    1. I’m all for scepticism about devolution, which is too often treated as a panacea by liberals. True devolution requires freedom to raise taxes and to borrow money – something which the UK government has been loth to do. Still there may be some benefits. It think that it is no accident that Scotland has been faring much better than northern England.

      I suspect the surpluses of Germany and Switzerland (and I could add Austria, another highly devolved country) are the result of a well managed economies of which devolution is a critical element (even though I agree with you that they are not good for the rest of the world) rather than a coincidental fact arising from currency manipulation. Though it the logic which says that Germany and Austria are manipulating a currency that they don’t own, and whose policies they are very critical of, is a stretch. I would say that they are the only countries that have understood how best to survive in the Euro in the medium term.

      There is also something a bit contradictory in your critique (and, to be honest, mine one in the opposite direction too). You suggest that devolution is nonsense and harmful – and yet you are even more vehement that the EU works too much in the opposite direction. We need I wider idea of the best form of political organisation. And to my mind to say it should be based on an idea of a nation-state than embraces the USA and German to Luxembourg and Malta lacks coherence.

      1. I didn’t suggest that devolution is always a “nonsense and harmful”. I’d be cynical enough to suggest it almost certainly would be in a UK context though.

        Unlike Germany and Switzerland, the UK is runs a trading deficit in near perpetuity. This means that the Government needs to deficit spend to recycle and replenish the pounds back into the economy which go overseas to pay the import bill.

        The UK government can do that at just about zero cost. Interest rates are hardly ever higher than the rate of inflation. Buyers of UK gilts know they are an ultra safe option. The UK government can never go broke with £ based debts. That wouldn’t be the case if the sellers were regional and devolved governments. The buyers would demand a higher rate of return to cover the risk of default.

        So if the pounds had to be recycled by their borrowing instead, the costs would not at all be insignificant.

        1. Yes the borrowing costs of devolved local entities will be higher than central government, and the idea that they could control their own currencies is scary! That has to be weighed against the benefits to productivity and better use of assets (through better coordination and superior knowledge) and the network effects that mean that fewer economic assets will gravitate to the centre. The financial costs are simply an aspect of financial engineering, and don’t necessarily represent the real transfer of resources, after all. I would argue the transfer of resources from the regions to the centre in a centralised economy make a bit of extra interest look like chicken feed!

      2. “you are even more vehement that the EU works too much in the opposite direction”

        No. I’m saying that the EU is stuck in failed and failing in-between position. It could be successful if it moved back to freely trading nation states each with its own freely floating currency. It could be successful if it moved forwards to a Federal United Sates of Europe with a single currency and adequate fiscal transfers between rich and poorer States as we see happen in the USA and any other currency zone. Like the UK pound currency zone.

        I’d argue that they probably need to be be bigger than they are in both the USA and the UK. But the situation in the Eurozone is far worse. Just devolving ‘power’, or so called, politically without the ability to control the currency isn’t ever going to work reliably.

        1. Now you are the one supporting conventional Anglo-Saxon economics, and I’m with the rebels trying to cast doubt on it! And I must admit I am not sure how much my views arise from my politics and how much from my attempt to look at the facts objectively. But that said I will voice some doubts about your view.

          I am really not sure that fiscal transfers in big national currency zones like the USA, China and India play as important a role in balancing the regional economies as the Anglo-Saxon economists suggest. A lot of federal spending is on things like defence and health care that are independent of local economic conditions – and the welfare safety nets are quite weak and often a matter for the locals. The stabilisers are more likely to be migration and local wage rates. In the EU, migration has been much more of a stabiliser than was predicted – though not because Britons and French people are mobile, but because east Europeans (and others) have formed a mobile pool of labour. And if you look at GDP per head rather than gross GDP, and employment rather than unemployment, the performance of the Eurozone is not dissimilar to that of the USA (or so I read in the Economist!). The problem with the Euro has mainly been political failure in Italy and Greece, exacerbated by the German hypocrisy over bank bailouts.

          Which isn’t to say that the Euro is a success – but that the criticisms of the Anglo-Saxons, and their faith in freely floating exchange rates in particular, is misplaced. There is no iron rule of economics which says that political and monetary unions must go together. I think that Mundell was onto something when he proposed the idea of optimal currency areas even if they are very hard to define in practice. Of course if you are a new monetarist, and favour the aggressive use of the currency policy by sovereign governments then you will always think that the Euro zone is a crazy idea.

  3. The belief that a trade surplus is the result of good economic management is both well established and erroneous. I had a conversation recently with a German colleague of mine who thought exactly this. In his mind a surplus was a profit and a deficit was a loss. That’s not the right way to look at it. A surplus is just a way of saving.

    The purpose of saving $$ or ££ is to eventually spend them at some later date. There’s no point saving them in perpetuity just for the sake of it. Eventually, and maybe that’s already happened, there are so many ££ and $$ saved that the ability of the USA and UK to make good on their IOUs is purely theoretical. It has to be assumed to keep the financial system from collapsing.

    He was an intelligent person, but until I pointed this out I don’t think the problem had even occurred to him.

    Another way of looking at this is to consider that half the world is in deficit and half in surplus. So half the world can’t possibly ever have well managed economies? Which half is doing better? If I swap a greater value of goods and services for a lesser value, am I really being that smart?

    1. You misunderstand me, Peter. That a trade surplus is the result of good economic management does mean that I am saying that it is good economic management in itself. Viewed in purely economic terms, it is usually wasteful, as you say. The benefits are political – surplus countries tend have more control over their economies and be less beholden to foreigners. We should remember that economics is a means to an end, and that maximising consumption is not always the best way of maximising welfare. And there will always be plenty of countries that want to run a deficit, for good reasons and bad.

      Germany, Switzerland and Austria all have high productivity, well-ordered civic infrastructure, and effective coordination between the various components of civil society. This makes them economically efficient, producing low levels of poverty and a relatively broad geographic spread of wealth. They choose to use this strength to run surpluses. I wish they didn’t but their strength gives them that choice. A highly devolved political culture is an essential component of that economic efficiency in my view.

      1. There is some disagreement between people like Steve Keen and others that I support like Stephanie Kelton on the question of trade deficits. Steve favours deficit countries like the UK taking active measures to balance their trade. These would include actively intervening to stop the pound rising on the exchange rates and pressing for international agreements to limit the extent of trade imbalances. Keynes himself was very much of the same view.

        Stephanie, Bill Mitchell, Randall Wray, Warren Mosler argue that a floating currency is all that is really needed. If our overseas suppliers want to save in pounds the Government just needs to sell them as many gilts as they wish to buy. This keeps the pound high and finances the purchase of imports. But it does mean that the Government does have to deficit spend the proceeds of the gilt sales back into the economy to keep the economy ticking over.

        If they don’t want to save then they don’t buy the gilts and the pound falls. Meaning that trade will then balance anyway. They would all , including Steve, disagree with your claim that only the surplus countries aren’t beholden to foreign investors or speculators. The speculators only lick their lips when the deficit countries do something stupid like trying to peg their currency at an artificially high value. You’ll remember, or have heard of Black Wednesday.

        Not so Black IMO. It taught government a useful lesson on the need for freely floating currencies and helped keep the UK out of the euro.

        I see both sides of the argument. If everyone understood that someone had to borrow to cover the deficit then I’d be with Stephanie et al. But, nearly everyone wants a healthy low debt economy, with a high pound and no controls on imports. They can’t have it all. And when they try they end up needlessly pushing the economy into recession.

        So, in reality, something has to give. I would personally favour this to be the high pound. Let’s have a lower pound, balanced trade and a low debt economy. I’d settle for that.

        1. Interesting. If you can get away with financing a current account deficit in your own currency then I’d agree with you that you are unlikely to be beholden to foreigners, or not if your government is happy to ride to the rescue when things get tough. I know you think that creditors can always be persuaded to use your own currency – but as you know I don’t buy that. The USA is a special case as it has achieved a form of hegemony – but it is still worth asking what circumstances might bring that hegemony to an end. The UK has been able to borrow in its own currency to its heart’s content too – but is that because of the Treasury’s conservatism? Or is the Treasury’s conservatism the squandering of one of the UK’s prime assets? We’ll never know until it is too late.

          On managing exchange rates, as you know, I think it is a question of swings and roundabouts. Since so many anglo-saxons are convinced that floating rates are superior in almost all circumstances, that usually leads me to argue in favour of fixed rates. But a successful fixed rate policy requires excellent economic management. I tend to accept the Mundell-Fleming view that floating rates neutralise fiscal policy – which is why I sympathise with Keen in your picture. But, as you so rightly say, you have to accept that you can’t have everything – and trying to have everything is why managed exchange rates so often fail. But because the new monetarists advocate monetary and fiscal policies pushing in the same direction, I suspect that it adds up to a managed exchange rate policy (i.e. loose fiscal policy pushes the currency up, but loose monetary policy brings it back down again)- but you don’t have to call it that and accept all the baggage that comes with it.

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