These modern ghost towns show the danger of an undiversified economy

The Lower Ninth Ward of New Orleans in 2015, a decade after Hurricane Katrina. Image: Getty.

Do you remember the good old days before the ghost town?” asked The Specials in their classic 1981 hit. Released as riots swept the country, the song was describing the hollowing out of Britain’s cities, as – faced with urban decay, deindustrialisation, unemployment and violence – many of their residents just left.

In the bigger picture, the trend has long been in the other direction, and the tide of people moving from rural areas to the city seems pretty universal. Ten years ago, for the first time, half the world’s population was thought to live in a city. This is expected to hit two-thirds by 2050; it’s already at around 54 per cent.

Zoom in, though, and look more locally at individual cities especially in the post industrial world, the march of urbanisation seems a lot more fragile.

New Orleans

Unfortunately for the pride and wallets of most New Orleanians, their city is a textbook example of urban decline. When the oil industry, which had supported the city for so long, collapsed in the late 1970s, unemployment swelled and people began to leave.

Post-oil New Orleans failed to diversify its industries: the city fell back to tourism to provide economic support, but that didn’t quite cut it. Since then, poorer areas of the city have become synonymous with ongoing urban decay and depopulation, and between 1970 and 2000 the city’s residents moved out in their thousands, shrinking the population by 18 per cent.

The city’s economic problems were further compounded in 2005, with the tragedy of Hurricane Katrina. Flooding 80 per cent of the city, it displaced huge numbers of people, many of whom never returned.

Liverpool

The UK has seen its own share of urban decline. The great northern city of Liverpool has experienced some of the worst, with the population of the city proper shrinking by 18.8 percent in the four decades after 1971.

The docks in 1920. Image: Hulton Archive/Getty.

As in New Orleans, this decline was largely due to the disappearance of what brought people to the city in the first place:  jobs. Liverpool had boomed as the north’s great port, and well into the 20th century the city’s economy was centred around its docks.

But as containers replaced the labour intensive break bulk cargo, unemployment in many dock towns skyrocketed. To make matters worse, many of the industries that the docks had served moved abroad.

Why has the city struggled to move on? One explanation is outdated skills: an in depth knowledge of cargo ships isn’t really going to help you in a bank. At any rate, the lack of jobs has meant that people left – and large swathes of Liverpool were left vacant.

Kitakyushu

Kitakyushu, in western Japan, was once a thriving steel town. It was home of the Imperial Steel Works, whose grandiose name fitted its importance to the industrialising nation.

And the city’s industrial might didn’t go unnoticed abroad. During WWII, the atomic bomb that was dropped on Nagasaki was actually intended for Kitakyushu; it was only cloud cover over the latter that protected it.

At its peak the steel industry in Kitakyushu employed 50,000 people – but today, it provides jobs for as little as 4,200. As steel production moved to developing countries where overheads were cheaper, citizens were left without a jobs. Despite steady automotive and robotic industries, they couldn’t provide employment for the large number of workers who’d worked at the steel mill.

So, the now familiar story happened there, too: widespread unemployment, leading to depopulation and urban decline. Last month, Kitakyushu’s amusement park, Space World, closed – and nothing screams decay quite like abandoned space themed rides. 


These examples are in no way exhaustive; the list of depopulating ghost towns is long, and economics is often the cause. The common thread here is that all three were one-industry towns. New Orleans had oil, Liverpool the docks, and Kitakyushu steel. But the free-market stripped these cities of their main source of employment, leaving them hollowed out.

Blaming the markets, though, is liking blaming the wind if your house gets blown down: it may be to blame, but that doesn’t mean you can do literally nothing. These cities didn’t diversify when they had the chance – and when their industry left, they declined.

So to all you urban planners out there, if you value the longevity of your city, put on ‘Ghost Town’ by The Specials and get diversifying.

 
 
 
 

“Stop worrying about hairdressers”: The UK government has misdiagnosed its productivity problem

We’re going as fast as we can, here. Image: Getty.

Gonna level with you here, I have mixed feelings about this one. On the one hand, I’m a huge fan of schadenfreude, so learning that it the government has messed up in a previously unsuspected way gives me this sort of warm glow inside. On the other hand, the way it’s been screwing up is probably making the country poorer, and exacerbating the north south divide. So, mixed reviews really.

Here’s the story. This week the Centre for Cities (CfC) published a major report on Britain’s productivity problem. For the last 200 years, ever since the industrial revolution, this country has got steadily richer. Since the financial crash, though, that seems to have stopped.

The standard narrative on this has it that the problem lies in the ‘long tail’ of unproductive businesses – that is, those that produce less value per hour. Get those guys humming, the thinking goes, and the productivity problem is sorted.

But the CfC’s new report says that this is exactly wrong. The wrong tail: Why Britain’s ‘long tail’ is not the cause of its productivity problems (excellent pun, there) delves into the data on productivity in different types of businesses and different cities, to demonstrate two big points.

The first is that the long tail is the wrong place to look for productivity gains. Many low productivity businesses are low productivity for a reason:

The ability of manufacturing to automate certain processes, or the development of ever more sophisticated computer software in information and communications have greatly increased the output that a worker produces in these industries. But while a fitness instructor may use a smartphone today in place of a ghetto blaster in 1990, he or she can still only instruct one class at a time. And a waiter or waitress can only serve so many tables. Of course, improvements such as the introduction of handheld electronic devices allow orders to be sent to the kitchen more efficiently, will bring benefits, but this improvements won’t radically increase the output of the waiter.

I’d add to that: there is only so fast that people want to eat. There’s a physical limit on the number of diners any restaurant can actually feed.

At any rate, the result of this is that it’s stupid to expect local service businesses to make step changes in productivity. If we actually want to improve productivity we should focus on those which are exporting services to a bigger market.  There are fewer of these, but the potential gains are much bigger. Here’s a chart:

The y-axis reflects number of businesses at different productivities, shown on the x-axis. So bigger numbers on the left are bad; bigger numbers on the right are good. 

The question of which exporting businesses are struggling to expand productivity is what leads to the report’s second insight:

Specifically it is the underperformance of exporting businesses in cities outside of the Greater South East that causes not only divergences across the country in wages and standards of living, but also hampers national productivity. These cities in particular should be of greatest concern to policy makers attempting to improve UK productivity overall.

In other words, it turned out, again, to the north-south divide that did it. I’m shocked. Are you shocked? This is my shocked face.

The best way to demonstrate this shocking insight is with some more graphs. This first one shows the distribution of productivity in local services business in four different types of place: cities in the south east (GSE) in light green, cities in the rest of the country (RoGB) in dark green, non-urban areas in the south east in purple, non-urban areas everywhere else in turquoise.

The four lines are fairly consistent. The light green, representing south eastern cities has a lower peak on the left, meaning slightly fewer low productivity businesses, but is slightly higher on the right, meaning slightly more high productivity businesses. In other words, local services businesses in the south eastern cities are more productive than those elsewhere – but the gap is pretty narrow. 

Now check out the same graph for exporting businesses:

The differences are much more pronounced. Areas outside those south eastern cities have many more lower productivity businesses (the peaks on the left) and significantly fewer high productivity ones (the lower numbers on the right).

In fact, outside the south east, cities are actually less productive than non-urban areas. This is really not what you’d expect to see, and no a good sign for the health of the economy:

The report also uses a few specific examples to illustrate this point. Compare Reading, one of Britain’s richest medium sized cities, with Hull, one of its poorest:

Or, looking to bigger cities, here’s Bristol and Sheffield:

In both cases, the poorer northern cities are clearly lacking in high-value exporting businesses. This is a problem because these don’t just provide well-paying jobs now: they’re also the ones that have the potential to make productivity gains that can lead to even better jobs. The report concludes:

This is a major cause for concern for the national economy – the underperformance of these cities goes a long way to explain both why the rest of Britain lags behind the Greater South East and why it performs poorly on a

European level. To illustrate the impact, if all cities were as productive as those in the Greater South East, the British economy would be 15 per cent more productive and £225bn larger. This is equivalent to Britain being home to four extra city economies the size of Birmingham.

In other words, the lesson here is: stop worrying about the productivity of hairdressers. Start worrying about the productivity of Hull.


You can read the Centre for Cities’ full report here.

Jonn Elledge is the editor of CityMetric. He is on Twitter as @jonnelledge and on Facebook as JonnElledgeWrites

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