The most important graph in British economics

Birmingham: somehow less than the sum of its parts. Image: Getty.

“Is there a relationship between city size and productivity?” the Centre for Cities asked in February 2015. The blog takes two reports and hundreds of pages from the OECD and distils it down to the biggest topic in city economics today – does being bigger make you richer?

It’s a question that I’ve been asking myself since I was 19, when I moved to London and Paris to study. I’ve been asking myself the same questions consciously since I was 25, and I couldn’t find a job in science after finishing a PhD in Leeds.

And now, thanks to some more great work by Centre for Cities, I can get a lot closer to answering the question than the OECD did.

I think that these questions are going to matter even more in the coming years because, for a number of reasons.

  • Manchester and Birmingham, the UK’s two biggest underperformers, have since elected their own mayors. Both cities are determined to make up the 30 per cent gap between them and comparable cities in the EU.
  • Richard Florida’s recent book, The New Urban Crisis, has started informing debates in the UK in the same way that Edwards Glaeser’s Triump of the City did five years ago.
  • Theresa May’s government has said it is determined to “build a country that works for everyone”. It will try to expand the UK’s successful industrial strategy beyond South-East England to more of the country. The loudest voices in opposition to this will claim that focusing on London will always deliver greater returns due to its size.

So what does the data say? Do agglomeration benefits exist? Are bigger cities richer?

French and German cities show agglomeration benefits

In France and Germany there’s a pretty clear answer: yes. The line of best fit slopes up with size. It is statistically significant. It’s the same in the USA. (GVA is a measure of how much economic value is created in a place.)

Click to expand.

Cities in Scandinavia and the Low Countries show large agglomeration benefits

There aren’t enough cities in Sweden, Denmark, Belgium, and The Netherlands to do a proper regression. But their economies are similar enough, so I just lump their cities together.

And there’s a very strong agglomeration benefit.

Click to expand.

Spanish and British cities show no agglomeration benefits at all

Spain and the UK are different. Size doesn’t matter. In fact in the UK the best fit line slopes down a bit, but not significantly so.

Click to expand.

The most important graph in British economics

And now the most important graph. The one’s that’s frustrated me all my life. The one that I don’t accept that the UK has ever tried to fix. And the one that makes taking lessons from books written in America and applying them to UK cities risky.

Remove London from the graph of UK cities, and the larger a city gets, the poorer it is. This doesn’t happen in France or even in Spain.

Click to expand.

I think that we can fix this. The Northern Powerhouse is the right strategy; metro mayors will help, moving things the way that we moved 10 per cent of the BBC to Manchester will help; and investing in transport and science in big cities where businesses want to grow will help.

But my faith in all those things is based on a belief that we can make our country more German, French, American, and Dutch in terms of agglomeration benefits. I hope that I’m right.


Want the data and graphs? They're here in Excel. Ecept France which broke.

Tom Forth is an associate at ODILeeds. This article first appeared on his blog.

 
 
 
 

What does the fate of Detroit tell us about the future of Silicon Valley?

Detroit, 2008. Image: Getty.

There was a time when California’s Santa Clara Valley, bucolic home to orchards and vineyards, was known as “the valley of heart’s delight”. The same area was later dubbed “Silicon Valley,” shorthand for the high-tech combination of creativity, capital and California cool. However, a backlash is now well underway – even from the loyal gadget-reviewing press. Silicon Valley increasingly conjures something very different: exploitation, excess, and elitist detachment.

Today there are 23 active Superfund toxic waste cleanup sites in Santa Clara County, California. Its culture is equally unhealthy: Think of the Gamergate misogynist harassment campaigns, the entitled “tech bros” and rampant sexism and racism in Silicon Valley firms. These same companies demean the online public with privacy breaches and unauthorised sharing of users’ data. Thanks to the companies’ influences, it’s extremely expensive to live in the area. And transportation is so clogged that there are special buses bringing tech-sector workers to and from their jobs. Some critics even perceive threats to democracy itself.

In a word, Silicon Valley has become toxic.

Silicon Valley’s rise is well documented, but the backlash against its distinctive culture and unscrupulous corporations hints at an imminent twist in its fate. As historians of technology and industry, we find it helpful to step back from the breathless champions and critics of Silicon Valley and think about the long term. The rise and fall of another American economic powerhouse – Detroit – can help explain how regional reputations change over time.

The rise and fall of Detroit

The city of Detroit became a famous node of industrial capitalism thanks to the pioneers of the automotive age. Men such as Henry Ford, Horace and John Dodge, and William Durant cultivated Detroit’s image as a centre of technical novelty in the early 20th century.

The very name “Detroit” soon became a metonym for the industrial might of the American automotive industry and the source of American military power. General Motors president Charles E. Wilson’s remark that, “For years I thought what was good for our country was good for General Motors, and vice versa,” was an arrogant but accurate account of Detroit’s place at the heart of American prosperity and global leadership.

The public’s view changed after the 1950s. The auto industry’s leading firms slid into bloated bureaucratic rigidity and lost ground to foreign competitors. By the 1980s, Detroit was the image of blown-out, depopulated post-industrialism.

In retrospect – and perhaps as a cautionary tale for Silicon Valley – the moral decline of Detroit’s elite was evident long before its economic decline. Henry Ford became famous in the pre-war era for the cars and trucks that carried his name, but he was also an anti-Semite, proto-fascist and notorious enemy of organised labor. Detroit also was the source of defective and deadly products that Ralph Nader criticized in 1965 as “unsafe at any speed”. Residents of the region now bear the costs of its amoral industrial past, beset with high unemployment and poisonous drinking water.


A new chapter for Silicon Valley

If the story of Detroit can be simplified as industrial prowess and national prestige, followed by moral and economic decay, what does that say about Silicon Valley? The term “Silicon Valley” first appeared in print in the early 1970s and gained widespread use throughout the decade. It combined both place and activity. The Santa Clara Valley, a relatively small area south of the San Francisco Bay, home to San Jose and a few other small cities, was the base for a computing revolution based on silicon chips. Companies and workers flocked to the Bay Area, seeking a pleasant climate, beautiful surroundings and affordable land.

By the 1980s, venture capitalists and companies in the Valley had mastered the silicon arts and were getting filthy, stinking rich. This was when “Silicon Valley” became shorthand for an industrial cluster where universities, entrepreneurs and capital markets fuelled technology-based economic development. Journalists fawned over successful companies like Intel, Cisco and Google, and analysts filled shelves with books and reports about how other regions could become the “next Silicon Valley”.

Many concluded that its culture set it apart. Boosters and publications like Wired magazine celebrated the combination of the Bay Area hippie legacy with the libertarian individualism embodied by the late Grateful Dead lyricist John Perry Barlow. The libertarian myth masked some crucial elements of Silicon Valley’s success – especially public funds dispersed through the U.S. Defense Department and Stanford University.

The ConversationIn retrospect, perhaps that ever-expanding gap between Californian dreams and American realities led to the undoing of Silicon Valley. Its detachment from the lives and concerns of ordinary Americans can be seen today in the unhinged Twitter rants of automaker Elon Musk, the extreme politics of PayPal co-founder Peter Thiel, and the fatuous dreams of immortality of Google’s vitamin-popping director of engineering, Ray Kurzweil. Silicon Valley’s moral decline has never been clearer, and it now struggles to survive the toxic mess it has created.

Andrew L. Russell, Dean, College of Arts & Sciences; Professor of History, SUNY Polytechnic Institute and Lee Vinsel, Assistant Professor of Science and Technology Studies, Virginia Tech.

This article was originally published on The Conversation. Read the original article.