Tag: agglomeration

…and then they all ran into the sea

Without new talent, cities will die

Paul Krugman, Nobel prize winning economist and long-time columnist for The New York Times, is also one of the fathers of New Economic Geography. NEG is described as ‘One Economic Theory to Explain Everything’ by a Bloomberg columnist in a handy explainer.

Anyway, I was reading a transcript of a conversation between Krugman and Masahisa Fujita (another parent of NEG) in the journal Papers in Regional Science. Just before the end there’s this helpful reminder of why protectionism and closed borders is so bad for cities:

…agglomeration of a large number of heterogeneous people (essentially, professional workers with heterogeneous skills/knowledge) in a city or industrial district can naturally be expected to contribute to the diffusion, generation/innovation, and accumulation of knowledge, and hence to economic growth. This would certainly be true in the short-run. But this is not assured in the long-run unless there is a sufficient infusion of new blood. (pp.161-162)

Economic growth relies upon new people who help to develop new ideas – clearly endangered by the likes of Brexit. On a lighter note, the transcript (recorded in Puerto Rico) ends as follows:

K: Of course, I agree with you. But, …
I: Hey Paul! Why are standing up? Where are you going?
K: Talking under the Caribbean sun for over two hours has literally fuelled my now burning desire to jump into that ocean.
F: Yeah, all I can think of now is to savour this Caribbean moment with a quick dip and a large beer under the cool shade.
K and F (in unison): Hasta la vista!
Sounds of two big splashes 
I: … Hey, Paul, Masa! Wait for me!
Another big splash is heard, followed by hearty laughter

Engines and Powerhouses evidence published

In what now seems like the distant past, before the Brexit vote and the change of government, the House of Commons launched an inquiry looking at the Northern Powerhouse and Midlands Engine and government policy towards regional growth. (You can read my thoughts on the Northern Powerhouse post-referendum here).

The written submissions to the inquiry have just been published. Of the 50 submissions, a quick count suggests that least a quarter are written by a university, a university group, or an institute based out of a university. Clearly universities are taking the regional growth agenda seriously.

Following the change of government, the committee will now look ‘more broadly at Industrial Strategy, rather than focussing on specific regional models’. Hopefully some of the good practice and lessons learned around forming strong regional links will be taken forward.

Work by Centre for Cities, looking at lessons learned from the Rhine-Ruhr (Germany) and Randstad (Netherlands) regions, found that these areas were successful not because of transport connections between their respective cities, but that ‘strong regional economies require strongly performing cities at their heart’, with a high concentration of knowledge-based businesses and highly skilled workers. This perhaps explains the high level of university engagement with regional policy in the UK.

The Rhine-Ruhr and Randstad regions were part of the inspiration for the Northern Powerhouse. Hopefully the importance of knowledge and skills as the basis for strong economies won’t be lost with a wider focus on Industrial Strategy rather than specific regional models.

I wrote Universities UK’s submission to the inquiry – read it here.

Photo: Kranhaus, Cologne on Flickr

Rebalancing: a case study of South Korea

Previous governments restricted the expansion of universities in Seoul. In the 2000s, a new government put universities in charge of regional growth

Discussions over ‘rebalancing’ the economy outside of London by strengthening other regions – explored in part one and part two of this miniseries – are not unique to the UK.1 South Korean academic Haknoh Kim writes that:

Balanced development is not a new policy goal in South Korea. Two basic facts – too heavy a concentration in the “Seoul capital region” and a very limited degree of political decentralization – have aggravated the disparities across regions in Korea for a long time… the Seoul capital region, only 11.8% of the South Korea’s total areas, accommodates 46% of the population, 57% of all manufacturing firms, about 70% of enrolled university students, 2/3 of financial activities.

In the mid-2000s the South Korean government prioritised decentralisation and balanced development as a national priority, but, unlike previous governments, saw this ‘as a means to strengthening the competitiveness of the country as a whole’.2 Yong-Sook Lee, an academic at Korea University, explains how balanced national development was encouraged through innovation:

…the PCBND [Presidential Committee on Balanced National Development] set up 14 regional innovation councils with 725 commissioners across the country… These councils were designed to encourage local initiatives in creating and implementing regional policy. To achieve self-sustaining endogenous development, the PCBND pursued a Nuri [New University for Regional Innovation] project that nurtures local talent by supporting local universities. In 2004, the government allocated a five year grant of 1.4 trillion won [about £900m at today’s rate] for cultivating local talent in promoting regional strategic industries. In 2006, a grant of 260 billion won [£170m] was awarded to 109 local universities in non-capital regions… Furthermore, the PCBND placed emphasis on reinforcing networks between local universities and local industries for the purpose of boosting R&D activities in non-capital regions.

Universities seem to play a particularly prominent role in South Korea. Kim expands on the New University for Regional Innovation concept:

NURI promotes “competition” within respective provincial regions by concentrating financial support on excellent projects selected in each region. It is worth noting that local universities form the project headquarters in NURI programs. They should include in their project teams other regional innovation actors such as other interlinked universities, research institutes, local authorities, business firms, or NGOs. This way, the principal universities serve to build and expand innovative networks between business, academia, public authorities, and other related actors.

Arguably, business is underrepresented. Here is the composition of the Daegu-Gyeongbuk Regional Innovation Council in 2006, where universities are nearly a quarter of members but business less than 10 percent:

Category Number of councillors
Local/regional authorities (including civil services) 23
Research institutes 7
Civil society (including NGOs) 19
Universities 24
Business 9
Press 6
Innovation supporting agencies 12
Total 100

Kim concludes that ‘the emergence of regions as an autonomous and important actor in the development of the country is quite a remarkable progress in Korean society’. However, ‘Korea is lagging behind in that it lacks “regional experimentalism” found in Europe’, mainly due to a lack of ‘sufficient autonomy and independent resources despite the participatory government’s emphasis on bottom-up approach’.

Whilst universities have been instrumental to South Korean attempts at rebalancing, genuine autonomy, devolved resources and partnership between important local actors are required for regions to be strengthened. It would be valuable to see progress in the ten years since the two academic articles referenced here.

This blog is in three parts. Previously we looked at the future of the Northern Powerhouse, and how universities can help realise the benefits of agglomeration.

Photo: Daegu, Korea on Flickr

  1. My interest in South Korea was piqued by a single reference in the excellent Nations and the Wealth of Cities publication by the two Greg Clarks: ‘the national government has employed a strategy to diversify economic activity from the dominant Seoul capital region by incentivising clusters and universities to scale up in the regional cities. The complementary economic roles of Busan’s seaport and Daegu’s manufacturing expertise have also been significantly supported’. ↩
  2. Previous administrations tried to rebalance the economy by many means, including applying brakes on Seoul’s development by restricting the expansion of universities, factories, shops and other development that might attract migrants. Did we see an echo of this in the UK, albeit under a different policy narrative, in 2015 with the proposed crackdown on satellite university campuses in London, ostensibly to stop exploitation by economic migrants? ↩

Four ways universities can ensure effective agglomeration

Councils and local authorities outside of the larger cities have less experience of devolution. Here’s how universities can help

Yesterday we explored a possible widening of devolution in England beyond the 10 deals in place. These deals cover 16.1 million people mostly in larger urban areas. The highest profile devolution has been within the so-called Northern Powerhouse, with Manchester as its unofficial capital. The relative leadership strength of Manchester and history of close cooperation between its constituent local authorities has allowed it to forge a path that others outside London will struggle to emulate.

The driving concept behind the Northern Powerhouse is agglomeration. Devolution without agglomeration is certainly possible, but the sum-greater-than-the-parts benefits that arise from close proximity of workers, firms and education bodies mean truly effective devolution must be underpinned by agglomeration. Think of it as Devolution + Agglomeration Economics = Growth and a Knowledge-Based Economy.

The two highest profile agglomeration projects in England – the Northern Powerhouse and the Midlands Engine – have 50 universities between them. Higher education, as a knowledge industry, contributes to the agglomeration economies that drive city growth. This is evident in London, with over 40 higher education institutions. Other areas in line for devolution deals will often have at least one university on their patch. Here are four ways universities can help.

  1. If devolved areas are to be functional economic actors, there will need to be effective coordination between the different towns, cities and local authorities within the area. Universities can help. They have long-standing networks between and within regions. Universities have a long history of supporting local areas with analysis of needs and assets, and providing of evidence and policy insight. This will continue with Science and Innovation Audits that will help to map local research, innovation and infrastructure strengths and uncover opportunities for businesses.

  2. Locally-built international links will be important. Universities can draw on their global alumni and international research networks. Universities attract overseas students but also foreign direct investment. When considering regional investment in the UK, the skills of the local workforce and transport infrastructure are the key factors that influence decisions.

  3. Agglomeration economics can be seen in practice within universities. Many university campuses are public spaces, providing community services and cultural events, and the line between the public realm and the university estate is softening. Universities are ideal hosts for the human face-to-face connections that spread new ideas and knowledge. They often house incubation centres for startups and social enterprises, work with SMEs, and generate cutting edge research.

  4. Universities can meet local skills needs. There is a strong correlation between cities with more skills and higher levels of human capital, and local employment growth.1 The majority of future growth and the rebalancing of the economy will rely on knowledge based industries which are dependent on high level skills.

Recognising that devolution is a journey rather than a destination, universities should provide a long-term vision and help local partners to overcome the challenges and recognise the opportunities that come with devolved powers.

This blog is in three parts. Previously we looked at the future of the Northern Powerhouse. Next we’ll look at an international example of agglomeration economics in action.

Photo: ‘Granary Wharf’ (Leeds) on Flickr

  1. Shapiro, J., Smart Cities: Quality of Life, Productivity, and the Growth Effects of Human Capital, NBER Working Paper No. 11615, p.2; Glaeser, E. and Resseger, M., The Complementarity between Cities and Skills, NBER Working Paper No. 15103, p.17 ↩

Is the Northern Powerhouse dead?

The name may have fallen victim to shifts in the political landscape but the idea is a sound one

The past few weeks have been full of speculation as to the future of the Northern Powerhouse, the plan to create strong links between urban areas in northern England. The Northern Powerhouse was a mainstay of the Cameron government, and closely linked to George Osborne.

The Northern Powerhouse concept is underpinned by agglomeration – the idea that the concentration of people, businesses and education establishments in close proximity leads to new knowledge, transfer of new ideas and greater productivity. It’s a really good idea. I talked about it (under the guise of proximity) here. There’s plenty of academic work on agglomeration economies and clustering effects, and it is the driving force behind many of the City Growth Commission’s final recommendations.

But is the Northern Powerhouse still alive?

On 27 July Northern Powerhouse minister Andrew Percy and Treasury commercial secretary Lord O’Neill reaffirmed the government’s commitment to building a Northern Powerhouse. (Lord O’Neill had previously threatened to quit if the Northern Powerhouse dies. A few weeks later he threatened to quit again, this time over the UK’s approach to China. He’s not having a good month.)

However, Theresa May hasn’t mentioned the words Northern Powerhouse since assuming office. Her Economy and Industrial Strategy Cabinet Committee met for the first time on 2 August 2016 – the press release doesn’t mention the Northern Powerhouse either, but quotes May: we ‘need a plan to drive growth up and down the country, from rural areas to our great cities’. Many commentators have picked up on this – perhaps previous plans were too Manchester-centric, or the government needs to appease voters in large swathes of the country that voted to leave the EU, or the plans were too closely associated with the former chancellor. A broader focus seems inevitable.

At the same time, Andy Burnham used his nomination as Labour candidate for Manchester mayor to campaign for the resurrection of the Northern Powerhouse – a curious case of a Labour politician pushing a Conservative policy.

However, as Alexandra Jones notes on the Centre for Cities blog, a likely outcome is that work on the Northern Powerhouse continues, but the name might be quietly dropped. We may well see a more diverse range of future devolution deals, including for the first time some in the south of England, and a softening of the requirement for elected mayors. It will be difficult to do, but encouraging effective agglomeration more widely is a good move.

This blog is in three parts. Tomorrow we’ll look at how universities can help realise the benefits of agglomeration. And next week we’ll look at an international example of agglomeration economics in action.

Photo: ‘Salford Quay Apartments’ on Flickr