The ambitious answer to the governments ‘Levelling-Up’ initative
The UK currently possesses a gini coefficient of 34.3%; a score notably worse than countries like Canada, Australia, Japan and France. The north of England, illustrated by Figure 1, has a worse life expectancy, education quality, transport connections, less FDI, less government funding and more spirals of decline compared to its southern counterpart. There is absolutely no doubt that the UK is in need of an initiative to even out the distribution of income and wealth; and levelling up is exactly that. It promises to boost private sector growth, improve public services, restore local culture and pride and empower local communities. They plan to do this by improving six different factors; physical capital (infrastructure, machinery, housing), human capital (skills, health and experience of workforce), intangible capital (innovation, ideas and patents), financial capital (financial resources for private companies), social capital (strength of community and culture) and institutional capital (local leadership, capability and capacity). It is also worth noting there is little to no mobility to these factors; one cannot be left alone, they must all be addressed.
A number of policies and projects have come and gone to try and level the economic spread like the Northern Powerhouse — but what catches the eye in the proposal for Levelling Up is where it promises that the initiative cannot be a ‘string of shiny, but ultimately short-lived new policy initiatives’ and calls for a ‘root and branch reform’ to the problem. With that logic the most fitting idea possible is to open an SEZ (special economic zone) somewhere in North England; modelling places like Shenzhen and Hong Kong.
Deindustrialisation has left many towns and areas in the north — like Barrow in Furness — with a lack of identity, high rates of poverty and a dying workforce; whilst having untapped geographical advantages like bays and flat land. Creating what is essentially a more extreme enterprise zone by marking off an area in the north and marking little to no economic regulations (no corporation taxes, privatising services and possibly even a Georgist land value tax to ensure all land is used efficiently) will fulfil and magnify all the specified types of capital.
The proposed SEZ will almost definitely create physical capital. The south’s status as a HQ wonderland is dying with the advent of Brexit; Dyson has moved from London to Singapore, Panasonic from Berkshire to Amsterdam, along with numerous companies attempting to move like HSBC, Citi Bank and Unilever. Relaxed regulations in the north will mean companies will flock there and build towering skyscrapers and expansive campuses to call home within the area — it is hard to forgo the easy connection to Europe and North America. This will also mean employees arrive and so more housing, and more demand for better transport — which if the area is growing as it should, means better transport. Overall, better physical capital for the north is essentially guaranteed with the SEZ idea.
The SEZ idea also addresses the UK’s growing immigration problem –less of a problem with immigration, just the devastating lack of it. Brexit has meant huge deterrents to new immigrants and also the upheaval and exit of existing immigrants — a factor that can be blamed for the very recent petrol crisis. SEZ’s are all about opportunity; and opportunity means those willing to capitalise. We can see this in Boris Johnson’s British passport rule for long term Hong Kong residents to make it easier for them to achieve British citizenship — opening up opportunities for them here and so creating an influx in HK immigrants. We can see this in established patterns like Asian engineers or Filipino nurses and teachers. A SEZ is almost guaranteed in increasing levels of human capital in areas lacking it. Furthermore, it will also serve as a healing factor to the wound to Britain’s international reputation that is Brexit. SEZ’s are hubs and can become globally renowned overnight — and Britain can create a sustainable flow of global immigrants by earning that reputation as there would be incentive to work there. This has worked in areas in China and India hugely; to the extent that they face overpopulation.
Also, new immigration could theoretically mean newer residents outweigh locals which could then guarantee a cure to the housing crisis as NIMBYism would theoretically hold no weight with such little locals, developers will be incentivized to build homes because of huge tax-less profits and rent prices won’t be dangerously high; all without regulation.
A global hub of world-leading firms and world-leading labour in good living environments is completely synonymous with a rise of innovation and patents; guaranteeing again a rise in intangible capital. Local incomes will rise greatly to what they are now which will mean local happiness will rise using the heavily corroborated study of the Easterlin Paradox; and more happiness will mean more productivity and innovation. Big business will arrive with plans for new HQs, modern architecture and planning leading to more innovation and more and a chain effect will be created. As for whether this will be completely sustainable; I would like to remind the reader we live in an age of accountability, a world where anti fossil fuel global norms are rampant and used to hold firms accountable and guide them toward sustainable development in the area. I understand this would be a gamble but every firm and every government in the world has a plan to achieve full sustainability; it would be nonsensical to develop HQ’s and campuses and offices without having sustainability as a huge priority. Again this will guarantee innovation because of better living environment and intangible capital generation should theoretically be at all-time highs.
Furthermore, the arrival of firms simply means huge levels of financial capital in the area. There will be more offices, openings and jobs as mentioned which will mean financial assets will continue to swell as time goes on and the private sector will thrive. It is nigh on impossible to not see growth in financial capital if SEZ regulations are laid out precisely.
Now we approach two of the more intriguing factors that the creation of an SEZ could be criticized for diminishing. Social capital could be degraded due to foreign companies bringing in foreign ideals and huge influxes of immigrants clashing with local ideals — essentially diminishing the sense of community that the government desires alongside the economic growth they want in Northern England areas.
It is not wrong that cultures will mesh, blend and amalgamations will be created — but does this completely mean that strength of community will be hurt? For the answer you only need to travel to the areas that the SEZ is trying to even up against; areas like London and Birmingham where community and cultural diversity mesh (relatively) well creating diverse and colourful societies. People may have their qualms with cultural diffusion but it is a completely fair opportunity cost for a crippling spiral of decline. Furthermore, British colonialism takes a huge chunk of the blame for the globalized world — it is a dangerous hypocrisy to ‘protect local culture’ when the empire ravaged South Asia, Africa and Australia. It is completely beneficial to embrace a multi-cultural society and form a strong community from there.
Institutional capital consists of good local leadership, capability and capacity. The arrival of big business will mean these ideals will be harmed in the short run — meaning local capability may be harmed when big businesses will hold a lot of power. However, I have full confidence that overtime the area will develop a new identity — seen in other immigrant hubs like New York and San Francisco — and residents will develop a deep attachment to the area. In geographical terms, deep attachment to the area can be associated with relatively capable leadership which confirms my confidence in the SEZ ideal.
To conclude, the SEZ will increase every factor that is laid out in the plan the government has created to even out economies. As mentioned before, the document that lays out the plan for levelling up says that the initiative cannot be a ‘string of shiny, but ultimately short-lived new policy initiatives’ and calls for a ‘root and branch reform’ to the problem. The theoretical SEZ is the root and branch reform, and has the potential to change the landscape of Northern England completely.
