Mishcon de Reya page structure
Site header
Main menu
Main content section

Now & Next: Can you make poor places richer? – in partnership with The Economist

Posted on 20 January 2023

The rising cost of living crisis is making the gap between the rich and poor all the more apparent. An increasingly stark divide can lead to further political and economic unrest. Can countries with unhealthy regional disparities fix them? 

Many across the rich world are feeling the pinch and it's hitting hardest in its poorest regions.

It's almost like we're not meant to have those opportunities.

In countries like Britain and America regional inequality is already ingrained.  Now rising prices are making it much worse.

Professor Mark Muro, Senior Fellow, Brookings Metro
In much of the world now divergence is a fundamental fact.

Although globalization benefited many in well-off countries large areas have been left in the lurch for decades.

Philip McCann, Professor of Urban and Regional Economics, Alliance Manchester Business School
Our political classes have no idea about the scale of the problem.

And it's not just those in declining places who stand to lose.

Andy Preston, Independent Mayor of Middlesbrough
It costs the country a fortune every single year.

Philip McCann, Professor of Urban and Regional Economics, Alliance Manchester Business School
People revolt in the Ballot Box and that starts to become extremely dangerous.

As the cost of living crisis bites how can left behind areas be made richer and just how big is the challenge?

Anand Menon, Professor of European Politics & Foreign Affairs, Kings College London
Putting in place the necessary investment is the work of decades.

How to make poor places richer

There is still a war on the streets and a war on the peace, every second we should think about it.


In Middlesbrough, the northeast of England local venue, Disgraceland is hosting a show by one of the region's up-and-coming musicians, Shaq. 

But this is about more than just music; Shaq is hoping to change perceptions of an area that has been culturally underrepresented for decades.

Make Some Noise if you're having a good.

I do this for myself but more than anything I'd love to, to change the perspective on, on the area.  Middlesbrough is a really important place because it represents working-class people.

Shaq's hometown is a reluctant poster child for regional inequality in Britain.  The northeast of England has some of the highest poverty rates in the country.

In my life I've seen a lot of Injustice.  Growing up here drugs and crime is prevalent.  You can get yourself in a lot of bother and you know there's people really struggling around here.

It used to be a very different picture.  In the late 19th and early 20th centuries Middlesbrough was a boom town for steel making and shipping but in the last few decades all that's changed and the steel works have been demolished.

All shut down.  It was once a booming steel town.

Anand Menon, Professor of European Politics & Foreign Affairs, Kings College London
The northeast of this country is certainly one of those regions that suffered very badly; a lot of heavy industry, shipping if you go up to Tyneside.  When those industries left those places were very badly hit and they never really recovered.

What I was told is you're not going to become wealthy in Middlesbrough unless you're a drug dealer or work offshore.

Middlesbrough is part of a regional inequality problem that is particularly extensive in Britain.  One often oversimplified as a north-south divide.

Philip McCann, Professor of Urban and Regional Economics, Alliance Manchester Business School
Half the country today in the UK is poorer than the poorest U.S states of Mississippi and West Virginia and has a quality of life which is about the same as Tennessee or Alabama.  At the same time half the country in the UK today has prosperity, standards of living which are about the same as Australia, Austria, Sweden, Canada.

This dark divide is bad news for the country's economy and politics and Britain is far from the only country suffering in the rich world where income gaps between wealthy and poor regions have been on the rise for years.

Philip McCann, Professor of Urban and Regional Economics, Alliance Manchester Business School
Countries which tend to be very centralised and top down in terms of governance what we see is that only certain parts of the country seem to really enjoy the benefits of prosperity and they tend to leave other parts of the country behind.

So how can countries with unhealthy regional divides fix them?  Well a good place to start is addressing the tendency towards over centralisation.  Britain's system of Government sees the capital give money to regional cities and tell them how to spend it.  This presumption that the Government knows best has seen London pull away from the regions, deepening the economic divide.

There’s all the anti-social behaviour with the kids…

Andy Preston, Independent Mayor of Middlesbrough
And they have control I think. 

Oh the kids are totally out of.

Andy Preston, Independent Mayor of Middlesbrough
No consequences.

One person who knows the impact of a London-centric approach better than most is Andy Preston.  His family has lived in the northeast for four generations and in 2019 he was elected Mayor of Middlesbrough.

Andy Preston, Independent Mayor of Middlesbrough
Back in 2002, the Government created a small number of, of City Mayors, Mayors that would sit above a town or city, a borough in other words.  The role of Mayor is really visible.  Now in politics visibility equals accountability and that's great for the residents, they hold you to account but it's only a step, we need to go much further.

To really make a difference Andy says local Mayors need more power to go with their profile.

Andy Preston, Independent Mayor of Middlesbrough
How can you have somebody sat down in Westminster deciding what bus route should come in. It's completely insane, it's undemocratic.  We have lots of restrictions; we need more autonomy, more devolution, more power.

And crucially more money.

Andy Preston, Independent Mayor of Middlesbrough
No there was a plan wasn’t there called the East Midlands Divide Plan so there was going to be a trade off on some land between the Councils but it didn’t happen.  No it definitely is not happening.  Power without money can't do much.  Listen we've got a crisis, we've got a crisis in suicide rates, we've got a crisis in addiction levels, we’ve got a crisis in crime.  Mayors and Councils need to be able to deal with this but so they need more power but they need a lot of new money.

The Central Government has announced a plan to move the Treasury from London to the nearby town of Darlington. But policies like this can seem like token gestures when making poor areas genuinely better off should arguably be everyone's concern.

Andy Preston, Independent Mayor of Middlesbrough
If you live in Surrey or Southampton or Stockport you care about Middlesbrough's crime rate and our underachievement at schools.  You care because it costs the country a fortune every single year.  The gap between rich and poor is of massive consequence to your wallet.

For countries trying to make poor regions wealthier giving these areas more executive powers and resources is a crucial first step but it isn't always a slam dunk.

Joel Budd, Social Policy Editor, The Economist
If a region is given more power and it has bad policies or policies that don't work it can go into a downward spiral even faster than it would otherwise.

Avoiding this Pitfall can be tricky but one European city offers a valuable lesson from a seismic moment in history.

The Breakthrough came last night as the first concrete block was removed by East German Workers.

In 1989 when the Berlin Wall came down Leipzig was a poor city part of communist East Germany.  Throughout the 90s it was blighted by rising unemployment and poor Public Services.

In Leipzig there are vacancies for more than 900 tram and bus drivers.

But now Leipzig has turned a corner and for those like Michael Weichert who remember the old days it's been a dramatic period of change.

Michael Weichert
Here was a betting shop for our racecourse in here and they made horse bets and now you can see what has changed in Leipzig in 30 years

Michael used to run a restaurant when the Wall came down.  He witnessed first-hand the transformation of the city's hospitality industry and its cultural re-awakening

The key to changing the city's fortunes has been sustained investment over time particularly in local infrastructure such as transport systems.

Michael Weichert
Now nine years after the opening of this transport system you can see that everywhere the S-Bahn from Leipzig goes, houses are being built there.  In this respect these infrastructure measures, among others were absolutely decisive for quality of life and population growth

Joel Budd, Social Policy Editor, The Economist
Germany took on regional development as a kind of national priority when the two halves of Germany were reunited.

Tina Beatty, Professor of Applied Economic Geography, Sheffield Hallam University
The unification of East and West Germany is a very good example of how you need to make serious scale and long-term investment decisions if you really are going to reduce inequalities between areas.

Germany has put around 2 trillion dollars into making reunification work and Leipzig has managed to slash its unemployment rate from over 20% to under 5% in two decades.

But while it and other East German cities might be on the up there's still a 26% wage gap between East and West Germany.  Not even Germany's economy could sustain the level of investment needed to revive every poor area of the country.

Joel Budd, Social Policy Editor, The Economist
Germany has decided that only large cities can be made economically dynamic.  In England it's been decided that even quite small towns can become sort of economic powerhouses.  I think Germany is probably more correct.

Deciding which areas to try to rejuvenate demands making tough and sometimes unpopular choices but if some areas are left to fail it's important people aren't too.

Joel Budd, Social Policy Editor, The Economist
Parts of countries do simply fail.  The important thing I think is that entire regions must not decline.  There's got to be areas within those regions which are economically dynamic where you know, people from a failing village or a failing small town can, can move to and become productive.

One way to increase productivity in declining regions is to rethink the approach to education.

The Pittsburgh Steelers came away with their seventh AFC Championship.

The Pittsburgh Steelers are famous for wins on the field and off the field the city has a game plan for success too.  Reinventing itself as Roboburgh by rewiring it’s universities for the future.

So basically the first thing is you can go back here this is called the circuit breaker.

At Carnegie Mellon University. Ava Miller belongs to Girls of Steel, a robotics training program.  It's part of a blueprint to make Pittsburgh a flourishing hub for this technology.

Ava Miller
If you're into robotics it's one of the things that can most help the world, it's something that anyone could benefit from.

In recent times Pittsburgh's universities have focused on specialising in robotics and AI with the aim of creating a pool of graduates like Ava skilled in these sectors.

Ava Miller
Pittsburgh is an exciting place to grow up.  A lot of my friends grandparents worked in the steel industry and it was a lot dirtier and it wasn't as innovative as it is now.

Pittsburgh steel capital of the world stands as a symbol of the power generated along the Monongahela.

Pittsburgh is another city which built its fortunes on the steel industry, only to see them reverse with the collapse of heavy industry in many parts of the rich world.

But today the growing pool of robotics graduates are helping Pittsburgh to create a new cluster economy.  With over 100 robotics companies the city is beginning to Boom again.   Over the last 30 years unemployment in Pittsburgh has fallen from 8% to under 5%.  The partnership between the cities universities and businesses now offers plentiful job opportunities to graduates giving them good reason to stay put.

Mark Thomas, Former President, Pittsburgh Regional Alliance
We produce more students than we actually have jobs for and so has created this ready-made work pool for
innovative companies to expand and create the ecosystem that we have.

But creating a pool of highly skilled graduates doesn't always mean they stay to benefit the area it can lead to a brain drain.

Joel Budd, Social Policy Editor, The Economist
If you make a local population more skilled there is of course a danger that many of them will leave to get the sorts of jobs they want in other areas.

One way to manage this risk of brain drain is to make an area attractive to large companies and employers as Pittsburgh has done for some of the world's biggest tech companies

Google it's an international brand that calls Pittsburgh home.

Apple has its eye on Pittsburgh.

Uber is totally pulling a kit from Knight Rider and introducing its self-driving cars to the streets of Pittsburgh.

Although the arrival of large prestige firms can price some residents out it's generally good news for struggling areas.

Professor Mark Muro, Senior Fellow, Brookings Metro
The incoming champion companies have the heft in in many cases to not only hire lots of local people but also to train them and to influence the rest of the regions labour market.

From re-skilling to power and resources there are various traditional ingredients for making deprived areas more appetizing and richer.  But with no reliable catch-all approach there's a growing hunger for new ideas.  So how about luring new residents not with a better job but a better life.

Even when I told people, we told them we're like, we're with Tulsa MP, would be like where?

Tulsa USA

Welcome to Tulsa Oklahoma now home to Jonathan and Haley who recently gave up the bright lights of Houston Texas to put down Roots here.

I honestly had never been to Oklahoma or even heard of Tulsa, maybe through Friends you know, there's an episode in Friends where Chandler has to go to Tulsa I think that's the extent of it.

Tulsa Oklahoma.

The Sooner State.

That's you know that was the reaction we get from it.

Yeah and then we just well you are just come visit us and see it, you have to come see it.

And the secret to getting Jonathan and Hayley to migrate, paying them.  The city is now rebranding itself as a honey pot for remote workers by offering them perks to move here.  A privately funded program called Tulsa Remote lures new residents with ten thousand dollars’ worth of housing, free workspaces and other incentives.  The idea is to attract people to the city like a hub attracts entrepreneurs.

Let's go directly to creators right and, and let's invite them to collaborate.

We are now seven years into that business and I am back home in Tulsa because I love Tulsa.

The hope is that the Tulsa remote program will help kick-start a bigger transformation.

You have a lot of folk that haven't come through Tulsa or they did just themselves have come here because they've started to hear you know, a buzz about something happening here.

It's a bold new idea for poor areas to make themselves richer and although the program only started in 2018 Tulsa Remote says it's delivering bang for buck.

Justin Harlan, Managing Director, Tulsa Remote
The Tulsa Remote program has made a huge impact on the Tulsa economy.  We know that for every dollar that we've spent on that ten thousand dollar incentive there has been a near 14 dollar return on investment to the city.

Other places have followed Tulsa's lead in trying to change their fortunes by enticing new inhabitants with cash incentives.  Over 80 cities in America now offer similar schemes.  But, while it all sounds promising, so far the share of America's population who have moved hasn't really changed since the pandemic.

Professor Mark Muro, Senior Fellow, Brookings Metro
My sense is that remote work though important is a secondary form of work and not a huge impact in most places.

Whatever the methods it's clear that reinvigorating long neglected regions is an enormous challenge for wealthy countries in the current economic climate.  What's less apparent is the political will to take on that challenge and some say that's a big mistake.

Anand Menon, Professor of European Politics & Foreign Affairs, Kings College London
For me the dangers inherent in allowing some places to fall behind isn't simply that it's morally wrong but it is also a waste of talent giving the same opportunities to people from around the country to achieve their full potential will be good for the national economy as a whole.

America and Britain have been all too aware of their regional inequality problems for a long time and they continue to suffer the damaging political consequences of not fixing them.  A backlash which may yet get worse.

Philip McCann, Professor of Urban and Regional Economics, Alliance Manchester Business School
When people start to sense that their pride in place is being undervalued they themselves will start to react against the institutional systems that we have.

Donald Trump
The forgotten men and women of the United States are forgotten no more.

Philip McCann, Professor of Urban and Regional Economics, Alliance Manchester Business School
And in a democracy that is potentially a very dangerous thing to face.

Andy Preston, Independent Mayor of Middlesbrough
We need to invest now in the things that will help bridge that gap between rich and poor because as that gets worse everybody pays.

Tom Standage

Hello I'm Tom Standage, Deputy Editor at The Economist.  If you'd like to learn more about this topic click on the link opposite and if you'd like to watch more of our Now & Next series click on the other link.  Thanks for watching and don't forget to subscribe.

How can we help you?

How can we help you?

Subscribe: I'd like to keep in touch

If your enquiry is urgent please call +44 20 3321 7000

I'm a client

I'm looking for advice

Something else