Economics

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Cities and Inequality

Jim Riley

29th June 2017

Perhaps George Osborne’s most abiding legacy from his time as Chancellor will be the creation of the concept of the Northern Powerhouse.  Certainly Manchester, its principal focus, is booming.

The landscape of the centre is being altered dramatically by skyscrapers.  Peel Holdings, the huge investment and property outfit, are planning to double the size of the development around Media City in the old docks, where the BBC was relocated.  The airport, already the third busiest in the UK, is expanding.

All in all, it seems a triumph for modern capitalism.  After decades of relative decline, a city is being transformed by private enterprise.  But what is really going on?

In a piece this month in the Massachusetts Institute of Technology’s publication Technology Review, urban guru Richard Florida has picked up on a startling new trend in the location of new technology companies in the US. 

In the 1980s, there were essentially no high tech companies in city locations.  Instead, we had Intel and Apple in Silicon Valley, Microsoft in the Seattle suburbs, the Route 128 beltway outside Boston, and the corporate campuses of North Carolina’s Research Triangle. 

Now, urban centres are rapidly becoming the places which attract technology companies. In 2016, the San Francisco metro area was top of the list for venture capital investment, attracting more than three times the amount of the iconic location of Silicon Valley.  Google has taken over the old Port Authority building in Manhattan.  Amazon’s headquarters are in downtown Seattle.

The impact of this new, high concentration of tech firms is to intensify geographic inequalities.  As Florida puts it: “Tech start-ups helped turn a handful of metro areas into megastars. Now, they’re tearing those cities apart”. 

A relatively small number of urban areas in America, and within them a small number of neighbourhoods, are capturing all the benefits.
The same sort of thing seems to be going on in Greater Manchester.  A few areas are soaring away and attracting wealth and talent.  In 1981, fewer than 600 people lived in what the Council describes as “the heart of Manchester”.  Now, over 50,000 do, almost all of them young graduates.

But the more traditional outlying boroughs of the city region, especially to the North and East, are struggling to capture any trickle down from this massive transformation.  Indeed, they are risk of losing out, as their young bright sparks are attracted by the life of the inner metropolis.

Richard Florida does not just identify the problem, he suggest some possible solutions.  One of which is a programme of building lots of good housing in the outlying areas, supplemented by a top class public transport service. This would keep house prices down, and attract some of the people stuck in rabbit warrens in the urban centres.

Manchester already has a modern tram service.  But the new Labour Mayor, Andy Burnham, is resolutely opposed to building on the green belt just to the north and east of the city.  Yet another example of the sanctimonious intentions of the Left serving to intensify, not reduce, inequality.

Jim Riley

Jim co-founded tutor2u alongside his twin brother Geoff! Jim is a well-known Business writer and presenter as well as being one of the UK's leading educational technology entrepreneurs.

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