“The state does not create wealth; the state destroys it. The state can give you nothing because it produces nothing, and when it attempts it, it does so poorly.” - Javier Milei. He is by no means the only person to think the state needs to get out of the way and let people get on with things.
Unless you have been hiding under a rock and promulgating ideological insanities, the above quote pretty much defines what is wrong with the UK at the moment. As someone said recently, Rachel Reeves – she of the somewhat dubious economic knowledge – stated that she inherited a £22 billion black hole (complete lies of course). She has managed to turn that into an £81 billion black hole while increasing taxes by over £150 billion. Don’t quote me on that figure – her ability to ignore the Laffer curve almost certainly means that won’t be the actual increased figure raised with the difference made up by borrowing. Oh, by the way, sometime in September this year the amount the UK owes will cross £3 trillion That’s a 3 with 12 zeros after it. Even if £1 was represented by one hundredth of a second it would take over 950 years to create that. To put that into perspective that’s £48,000 plus for every man woman and child in the UK.
The North is kind of in vogue at the moment and I am indebted to John Alty for an excellent article on Liverpool and its regeneration. As he rightly says Governments react to voter pressure with the “Something must be done” refrain which usually leads to a Czar being appointed. I am happy to be proved wrong but I cannot remember ANY of the multitude of Czars appointed in recent years ever actually achieving anything. Perhaps those making the appointments have forgotten what actually happed to the last proper Czar some 108 years ago. The result of all this expensive and pointless effort results in nothing changing.
What all politicians fail to realise is that the right redevelopment incentives have to be in place. Tidying up and prettifying an area is all very well but without things happening, it will atrophy and die.
John Alty is former Permanent Secretary of the Department for International Trade and a Visiting Professor in Practice at the London School of Economics my old Alma Mater. When he was in government, he hit the nail on the head. “What we need are good jobs, which means private sector investment in the area. So we need to focus on what will attract business in and encourage new businesses to invest.”
In the article he goes on to talk about his home town of Liverpool where arguably Labour policies ultimately destroyed a great city. I’m sure some of us remember Neil Kinnock railing against a Labour council using taxis to deliver redundancy notices. Those were the days of Derek Hatton, Toxteth riots and despair.
Unremarkably, Liverpool improved as the nation as a whole improved – politicians please remember that. As the tide rises all boats float. Correct national policies (read lower taxes, encouragement of growth, steady and controlled monetary expansion) have a wonderful effect on business people’s view of the future.
As a catalyst for change in Liverpool, he singles out the Swallow Hotel which opened in 1998. As ever, other local accommodation incumbents were horrified at more competition. But what happened was that the pretty rubbish offerings round about had to upgrade themselves to compete, which then attracted people to come and spend money. If you don’t find an area “gemutlich” you for sure won’t stay there and spend money – and spending money in an area is a sine qua non for growth and progress. Competition is a catalyst which injects enthusiasm and progress into any situation – particularly with the employees.
The regeneration of the Albert Docks was a milestone which gave some pride back to the City, long driven down by terrible local policies that kept looking backwards rather than forwards. That is one of the critical elements in any regeneration plan – there have to be people who turn to the future and away from the past and have some kind of vision for that future. Left to their own devices – and Mr. Market – people will create that future. Liverpool – along with many other places in the UK – had to reinvent itself as more of a leisure and services economy, which it has done.
Other things helped too. Being City of Culture in 2008 changed millions of people’s ideas about what Liverpool was. It had been a by-word for union militancy and intransigent Ludditeism . That year more than 15 million people visited and enjoyed a great event and a fabulous city. The same year Grosvenor Investments opened the massive Liverpool One shopping centre, raising almost £1 billion for a 42 acre regeneration project involving 40 new shops. Money came from outside and ended up in the city for the first time in several generations. As ever, great cities rely on their hinterlands to provide them both with products and with people as well.
As John Alty says, what had been a vicious downwards cycle started to turn into a virtuous, market driven, upwards cycle. Note the crucial word there – “market”. His conclusions are as clear as they are obvious. “The biggest impact on the local economy is likely to be the rate of growth nationally, driven by national policies which boost business confidence”. That’s the other critical bit, those people looking to invest, have to have confidence in the future and in their ability to deliver it. “Regeneration efforts need to be focussed on enabling the market to meet future demand, not trying to bring back past glories.”
So there you have it. A simple (but not easy) path back to the future. If only the economic illiterates running the country had stuck to their pre-election promises (ha!) of growth, of tearing up red tape, of simplifying planning laws and letting people have more of their own money, things would have been quite different. Sadly, until all politicians are forced to do an economics course and learn about the Laffer curve it won’t improve.
