Research based on England and France encourages policymakers to build upon local solutions to uplift deprived towns, write Prof Zografia Bika and Adi Gaskell.
When Boris Johnson made ‘levelling up’ a key part of his premiership, a large part of his vision centred around high-profile endeavours. Although HS2, the planned high-speed railway line, has hit the buffers, the £1.7 billion first round of the UK’s ‘Levelling Up’ funding largely consisted of the kind of ambitious infrastructure projects of which Johnson would surely approve. The £2.1 billion second round was announced recently and follows a similar pattern, consisting primarily of large-scale infrastructure projects rather than projects which are locally-derived and implemented.
Research from the London School of Economics suggests that physical infrastructure is generally not what is holding back ‘left behind’ regions of the UK. Instead, it identifies the scarcity of human and intangible capital as two more important factors in the different productivity levels seen across the country.
This reflects a challenge that would not surprise former World Bank economist William Easterly, who frequently bemoaned the way in which aid ‘solutions’ tend to be designed from afar. These solutions are parachuted in by people who, while well-meaning, are often lacking in any understanding of local conditions.
Oxford academic Paulo Savaget builds upon a long history of work in the aid community as he highlights the value of ‘piggybacking’ on local projects and infrastructure when you try to get things done. It echoes the ‘positive deviance’ approach popularised by Jerry and Monique Sternin, in which attempts are made to find locals who are already achieving the results you want, and then helping to spread their habits and behaviour across the community.
For Savaget, the best approach is to work with those who are already well-established members in their local community. Our research on how to help members of deprived communities in England and France re-enter the labor market via employment or entrepreneurship found that housing associations resemble these forms of stakeholders, as they are both permanent and well-resourced members of their respective communities.
Across four distinct approaches, the housing associations were able to provide valuable support to residents, even as the pandemic disrupted their ability to provide face-to-face services. This transformational role is one that they are increasingly willing and able to take on.
As Community Housing Cymru CEO Stuart Ropke argues, “Is it housing associations’ role just to be delivery agents for government, sticking to the knitting? Or is there no option but to step up as agents of recovery at the vanguard of the economic and social change?”.
Housing associations are a perfect example of what MIT’s David Autor refers to as labour market intermediaries, who “interpose themselves between workers and firms to facilitate, inform, or regulate how workers are matched to firms”. While this role was performed by housing associations in our research, it is a role that has also been played by community colleges, religious organisations, non-profits, and public agencies.
Local stakeholders could also be important in ensuring a more equitable spread of so-called ‘intangible capital’, which Imperial College London’s Jonathan Haskel and the Royal Statistical Society’s Stian Westlake believe is key to the modern economy.
Boosting intangible capital
“The economy is no longer the physical stuff, like parts and machinery, and is more about things that we can’t touch and feel, like research and development, brands, artistic originality”, Westlake and Haskel explain.
Their central argument of needing institutions designed specifically for the intangible economy could crash on the same rocks as Johnson’s grand projects, but they highlight that part of the regional productivity problem is less that new innovations don’t emerge from the regions, but that they aren’t adequately diffused to them.
To date, technological advancements have tended to widen, rather than narrow, regional inequalities, but Haskel and Westlake believe that things like mobility vouchers could be a low-cost way of redressing the balance. In the US, for instance, Choose Topeka offers up to $15,000 to people to rent or buy a home there. Similarly, Tulsa has attempted to attract remote workers by offering up to $10,000 towards a down payment on a new home in the city. Calabria, in Italy, has spent around €700,000 trying to entice people to the region.
While research from Princeton argues that this money should be focused on the best and brightest to create ‘cognitive hubs’, it could be just as powerful to use such funds to encourage people to return to their hometowns. The value of these returnees can help to overcome what researchers from the University of Sheffield regard as the creation of ‘subsistence entrepreneurship’, which is both highly localised and underproductive, and therefore has a limited impact on economic growth.
The importance of levelling up is such that social division and inequality were highlighted by the World Economic Forum in their annual Global Risks Report. This builds upon a clear desire from the European Commission to tackle the regional inequalities that are evident across Europe. Sadly, they have attempted to tackle that problem by focusing on centrally planned ‘smart specialisation’ to enhance innovation in less developed regions. Our research suggests that the reality is that the best outcomes will emerge when solutions are locally derived and implemented, even if they look less sophisticated on paper.
Zografia Bika is a Professor of Entrepreneurship at the Norwich Business School, University of East Anglia, United Kingdom
Adi Gaskell is a researcher on the future of work for the University of East Anglia and advises the European Institute of Innovation & Technology
Photograph by Breno Assis on Unsplash.
The views expressed in this post are those of the authors, and not of the UCL European Institute, nor of UCL.