Devolution of power won't save the West's stagnant economies

Manchester's real lesson

26 07 10 devolution wont save the Wests stagnant economies copy

The West's growth problem isn't a devolution problem. Handing power down to cities and regions has become the default prescription for stagnant growth, from Britain's mayoral experiment to decentralisation drives across Europe and America. But economist Joel Hoskins argues that Manchester's transformation, the model most often cited to justify this approach, was never really about who held the power. It took three decades, four governments, and a refusal to keep starting over. That kind of institutional discipline has vanished across Western democracies, and no amount of devolved authority can substitute for it.

 

Burnham is one of the few politicians with a proven record of creating genuine economic growth. However, the secret ingredients for that growth were political stability and a widespread willingness to deliver a plan. Both of those things are in desperately short supply everywhere you look today. Ask most people who follow economic policy and they will tell you, with conviction, that Manchester is a stand-out success story. The skyline has changed. The jobs numbers have changed. The mood has changed. For a country starved of good economic news, that story feels like a glass of cool water in the middle of the desert.

It is in large part because of that story that its former mayor is now sitting in Downing Street—many people are hoping that he can replicate the success across the UK. However, some key questions remain—how real is Manchester’s success? Why has it done so well?  And what does this tell us about the new Prime Minister’s chances of changing the growth story?

 

 

Has Manchester really grown?

On the official figures, Greater Manchester has posted the seventh highest productivity growth of 41 comparable UK regions since 2015, and the City of Manchester itself has overtaken every large UK city outside London and Edinburgh.

However, despite being frequently used to prove Manchester’s success, that statistic is seriously contested. One issue with the data is that there is a likely data error in Trafford’s legal and accounting sector, which has inflated the numbers for part of the city region. A second issue concerns suspicious revisions to hours worked, which conveniently flatter the North West while doing the opposite to London, which has raised further questions about whether the underlying data can be trusted at all. Finally, even researchers highly sympathetic to the Manchester story accept that they cannot yet explain why measured productivity has grown so much faster than wages or household income.

A second caveat concerns who benefits from this growth. Growth that pools in one part of a city while leaving everyone else behind does not provide a compelling model for the rest of the country to follow. The need for its benefits to spread widely is a reasonable concern, and one that is often levelled at growth-focused policymaking. However, median wage growth since 2015 has actually been strongest in outer boroughs like Oldham, Rochdale and Tameside, not in the city centre, and real household income has risen fastest in Manchester, Trafford and Tameside together, all comfortably ahead of the typical English local authority. That does not completely remove the inclusion question, but it does mean that the crude story of a shining centre extracting value from a neglected periphery is not supported by the data.

So—the headline statistic is shaky, and the inclusivity question is unresolved. However, if you zoom out, the overall picture is undeniably positive.

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