Why Europe’s capital cities are pulling away from their countries – and what we can do about it

European productivity: blue is high, red is low. Image: CER.

Europe’s capital cities are much more productive than smaller cities and towns: the average metropolitan worker produces about 50 per cent more output than workers elsewhere. The divide between capitals and everywhere else is growing, too. Europe risks becoming as divided as the US, where the economic and cultural fault-lines between the coastal ‘elite’ and the Rust Belt were one reason why Donald Trump won the presidency. At the Centre for European Reform, we’ve put together a model which explains what is behind this divergence Europe. It also points to some possible solutions.

Reason number 1: Europe’s largest cities, like black holes, have a kind of gravitational mass. Some of you may remember the gravity equation from high school: take two objects, multiply their masses together, and divide that by the square of the distance between them. We did the same equation with all of Europe’s regions, and the bigger economic heft of most capital cities make workers there more productive.

We have good theories about why that’s the case: cities allow companies, especially those producing high-value services that don’t need large factories, and workers to cluster together. Companies get the benefit of a large pool of potential workers, and can select the most productive ones for jobs. They can also cut the costs of services and goods that they need, because there is plenty of nearby competition between other firms seeking to supply them. With so many companies to choose from, workers can more easily find one that fits their skills. Result: higher productivity.

What’s a bit more interesting, though, is that how densely populated a region is doesn’t matter very much, but being close to other successful regions really does. Rural Surrey isn’t just a commuter dormitory full of antique shops, but has lots of productive businesses. That’s because it is easy to get to London by train. Berlin is the only European capital that is less productive than the rest of the country. It is still overcoming the legacy of the Berlin Wall and communist rule in the East, but it is also a long way from the heartlands of the German economy in the West.

Reason number 2: Regions with big graduate populations are more productive. If the graduate share of, say, Rome’s population rose by 1 per cent, then our model predicts output per worker would rise by around 0.4 per cent. That link between higher education and productivity has been on the rise, too. Back in the year 2000, 1 per cent more graduates would have meant 0.2 per cent more productivity.

We can’t be sure if graduates are becoming more productive, or whether they have been moving to places that are already productive. But we have good reason to suspect it’s mostly because graduates have been increasingly moving to capital cities (and other productive places). The graduate population has risen faster in most European capital cities than in the rest of the country – bar Brussels, for some reason.


Reason number 3: The older the population, the less productive the region. That link has been growing over time, too. That’s probably because Europe is ageing so rapidly, and retired people buy a lot of consumer services, like day trips, shopping and social care, which tend to involve jobs with low productivity. And, because many young graduates move away – and often abroad, if they’re from Central and Eastern Europe – we’re seeing a slow process of geographic sorting, with younger, more highly educated people clustering together.

So what should we do about it? The solutions are fairly straightforward, but they require quite a lot of public investment. First, Europe needs to bring rich and poor places closer together, with better transport and communications links between successful cities and peripheral towns. This way, the economic reach of the successful cities is widened, with smaller towns offering cheaper office space and housing that’s within reach of the metropole.

Second, post-industrial conurbations – think of the Ruhr area and Northern England – have the potential to become highly productive hubs themselves. But in order to get there, governments need to invest in universities and research centres in places like Essen, Duisburg, Manchester and Leeds, which will help to draw in a highly educated workforce.

Third, all young people should have some tertiary education. The pan-European expansion of university education in the 1990s and 2000s raised labour productivity. It’s wrong to think that there’s no point educating everyone beyond a certain point: that argument was made in the 1800s against universal primary education and in the early 1900s about secondary. In a services-dominated economy, people need to be highly numerate and literate to get good jobs – and it may be worth reforming humanities degrees to give people who take them a head for numbers.

These policies will be familiar to CityMetric readers: they’ve been suggested many times before. But action’s now quite urgent, given sluggish growth outside the metropoles, as well as Europe’s increasingly nasty politics.

John Springford and Christian Odendahl are economists at the Centre for European Reform.

 
 
 
 

Mayor Marvin Rees' hope for Bristol: A more equitable city that can 'live with difference'

“I call on everyone to challenge racism and inequality in every corner of our city," Bristol Mayor Marvin Rees says. (Matt Cardy/Getty Images)

When the statue of 18th century slave trader Edward Colston was torn from its plinth and dumped in Bristol’s harbour during the city’s Black Lives Matter protests on 7 June, mayor Marvin Rees was thrust into the spotlight. 

Refraining from direct support of the statue’s removal, the city’s first black mayor shared a different perspective on what UK home secretary Priti Patel called “sheer vandalism”:

“It is important to listen to those who found the statue to represent an affront to humanity,” he said in a statement at the time. “I call on everyone to challenge racism and inequality in every corner of our city and wherever we see it.”

48 year-old Rees, who grew up in the city, has since expanded on his approach to the issue in an interview with CityMetric, saying “wherever you stand on that spectrum, the city needs to be a home for all of those people with all of those perspectives, even if you disagree with them.”

“We need to have the ability to live with difference, and that is the ethnic difference, racial difference, gender difference, but also different political perspectives,” he added. “I have been making that point repeatedly – and I hope that by making it, it becomes real.” 


What making that point means, in practice, for Rees is perhaps best illustrated by his approach to city governance.

Weeks after the toppling of Colston’s statue, a new installation was erected at the same spot featuring Jen Reid, a protester of Black Lives Matter. However, the installation was removed, as “it was the work and decision of a London-based artist, and it was not requested and permission was not given for it to be installed”, Rees said in a statement.

Bristol may appear a prosperous city, logging the highest employment rate among the UK’s “core cities” in the second quarter of 2019. But it is still home to many areas that suffer from social and economic problems: over 70,000 people, about 15 percent of Bristol’s population, live in what are considered the top 10 percent most disadvantaged areas in England. 

In an attempt to combat this inequality, Rees has been involved in a number of projects. He has established Bristol Works, where more than 3,000 young people from economically disadvantaged backgrounds are given work experience opportunities. And is now setting up a commission on social mobility. “Launching a Bristol commission on social mobility is not only about social justice; it [should not be] possible for a modern city to leave millions of pounds worth of talent on the shelf, just because the talent was born into poverty,” he says.

The mayor is also a strong supporter of the UN’s Sustainable Development Goals (SDGs), explaining that SDGs offer a way to talk about sustainability within a framework of many issues, ranging from climate change and biodiversity to women’s issues, domestic violence, poverty and hunger.

“What we want to achieve as a city cannot be done as a city working alone,” he insists. “We don’t want to benefit only people inside Bristol, we want to benefit the planet, and the SDGs offer a framework for a global conversation,” suggesting that a vehicle should be launched that allows cities to work together, ideally with organisations such as the UN, the World Bank and the International Monetary Fund involved. 

Greater collaboration between cities would be “beneficial in terms of economies of scale,” he argues, “as cities could get more competitive prices when buying materials for building houses or ordering buses, rather than each city acquiring a few of them at a higher price.”

In an attempt to focus on the long term, Rees launched One City Plan in January 2019, setting out a number of goals for Bristol to achieve by 2050.

Investing in green infrastructure to meet 2030 carbon emission targets spelled out in the SDGs is a key area here, with the mayor noting that transport, mass transit and energy are important sectors looking for further investment and government funding: “The sooner we meet our targets, the sooner we will benefit from them, and invest in sectors that will provide people with jobs.”

Jobs, especially following the outbreak of Covid-19, are of paramount importance to Rees. Bristol’s council wants to ensure that any government money given to the city will be quickly passed on to businesses to help prevent redundancies, he says, though given that mass job losses seem inevitable, reskilling options are also being looked into, such as through a zero-carbon smart energy project called City Leap.

Another important area for investment in Bristol is affordable housing, with 9,000 homes already built under Rees’s term of office. “People could build a base for life with affordable housing, [and this would mean] their mental health would be better because they have a safe place,” he explains. “Children in families that have a home that is affordable are more likely to able to eat and to heat, [and they are more likely to enjoy a] better education.”

Taken in the round, Rees’s agenda for Bristol is its own blueprint for shaping history. The Colston statue now lies in safe storage, with a local museum likely to play host to the controversial monument. But the Black Lives Matters protestors were fighting for a fairer, more equal future, and it is here where Rees is determined to deliver.

Sofia Karadima is a senior editor at NS Media Group.