The idea of ‘Levelling Up’ holds such strong purchase in the popular imagination that seldom is it explicitly defined. Participants in the national debate take for granted that their audience identifies with its ineluctable economic logic. The ‘Levelling Up’ White Paper marks a good attempt to understand the causes of regional disparities, and what ought to be done to close them. Any attempt to craft solutions to such enduring problems ought to grasp the historical roots of what has happened. Those roots run deep beneath the surface. Their complexity militates against shallow analysis or placebo solutions.
Britain’s contemporaneous debate has it that deindustrialisation is something that ‘commenced’ or ‘accelerated’ in the 1980s, mainly due to the actions of Margaret Thatcher. Just one direct quote from The Guardian will suffice:
“The story of the past 30 years has been the relentless hollowing-out of industrial Britain, the single biggest change to the British economy in the post-war era. It is a continuing saga that was still in its early stages when Margaret Thatcher sent in the cavalry to deal with the striking colliers.”
This caricature, clearly, serves a covert political purpose, but the currency of such views suggests that they are strongly held in the public consciousness. This means, therefore, that they must be engaged with. The problem of regional inequality in Britain is much older than many realise. Contrary to conventional wisdom, the decline of Britain’s manufacturing base can be traced back to when Britain was in its industrial and imperial splendour in the late nineteenth century.
British creations in both steam power and textile production had, by the late eighteenth century, created a paradigm of urban factory-based production. This success meant that by the 1850s, Britain had genuinely become ‘the workshop of the world’ and, by that time, British factories provided two-thirds of the world’s output of ‘new technology industries’.
Towards the end of the nineteenth century, however, Britain began to cede market share to both a unified Germany and a United States that was developing rapidly. This was largely due to their respective financial systems, most notably in Germany, where the banking system played an active role in developing, and working with, industry. Even so, Britain entered the Great War as a pre-eminent industrial power, to the extent that the staple industries of coal mining, textiles, iron, steel, and shipbuilding constituted almost three quarters of British exports, and employed one quarter of the working population. These industries were, of course, regionally concentrated. Coal mining, for example, was concentrated in South Wales and the north-east of England.
Britain in the interwar period was, however, a shadow of its former Victorian self. This was for a variety of reasons but principal amongst them was British industrial obsolescence compared with its competitors, an overvalued currency, declining levels of world trade due largely to reparations and growing industrial unrest at home, resulting infamously in the General Strike of 1926.
The 1930s are remembered as the ‘Devil’s Decade’, cultivated by images of the Jarrow Marches and George Orwell’s ‘The Road to Wigan Pier’. It is true that official unemployment between 1921 and 1938 never fell below one million people, nearly reaching three million people in the winter of 1932. However, this perspective is also liable to harden into caricature. There were severe regional disparities, what one might term ‘a north-south divide’, culminating in the Special Areas Acts. The Special Areas Acts, first of 1934 and then of 1937, were unique in that government adopted a dirigiste approach to alleviating unemployment in the industrial heartlands of South Wales, Tyneside, and Scotland. Such intervention was microeconomic in nature, but suggestive of government being used to prevent circumstances with macroeconomic implications.
The post-Second World War era, underpinned by its ‘Keynesian consensus’, enjoyed a track record of historically low unemployment, even if it was buffeted by bouts of inflation. The ‘stop-go’ era from 1945 until the 1970s was marked by difficult industrial relations and the rise of further international competitors, notably a revivified Western Germany and, latterly, Japan and China. By this time, the dollar had pushed sterling off its pre-eminent reserve currency status.
Of greater significance, though, was that the pattern of economic activity was dramatically changing: services, from the financial sort to leisure, came to dominate the share of the UK’s economic output. Trade and capital liberalisation, particularly from the 1980s onwards, in conjunction with the entry of the likes of China to the global trading system, meant that industry had a vast pool of labour to choose from. This resulted in the loss of British unionised jobs, and the increased sophistication of supply chains. Difficult industrial relations initially, and then the ease of shifting production elsewhere, has meant that Britain’s economy is now highly orientated towards services. Perhaps excessively so, in light of the COVID-19 pandemic.
It is manifest that if public policy is to be used to address regional inequality and the issues of poverty, under- and unemployment, or low educational attainment that flows from it, there must be an appreciation that such disparities have been much longer in gestation. They will require prolonged, sustained attention. Patterns of economic activity inevitably change over time. It will take a determined central government, together with agile local government, that will enable regions, once forgotten, to reinvent themselves.
My article on inflation, first published in Conservative Home: https://conservativehome.com/2022/06/30/aaron-jacob-the-challange-for-l…