Causes Regional Economic Difference in Britain - Essay Example

What Causes Regional Economic Difference in Britain, Like the North-South Divide? In The Light Of That Analysis, Consider the Arguments as To WhetherGovernments Should Make an Effort to Lessen Such Differences What is the North-South Divide? In the 1980s, Britain was in its best times because they had witnessed national economic growth at rates that were higher than any other of the European nations. The nation had recuperated from the 1979-81 economic recession and it had risen to the fifth position among the oil producers in the world. Politically, the electoral was dominated by the Conservative Party and its leader was Margaret Thatcher. The period was very significant because the trends that were seen changed the normal local patterns of Britain. Of particular attention was the increasing difference between the North and the South; the North was severely impoverished and its political affiliation Labour party, and the South was affluent and its political affiliation, Conservative Party. The differences could have been caused by the policies of the Conservative government (Nelson Thornes Limited 2004, p1). Explaining the North-South Divide Regional differences occur as a result of the differences in the labour force participation, differences in the employment rates, differences in the skills composition and disparities in productivity. All these differences are related to each other but they have unique and separate causes (Rice and Venables 2004, p3). The South is richer than the North; the Great South East of UK which consists of the East of England, London, parts of South West and the South East regions. The other parts of UK are characterized by low levels of prosperity and these regions include the North East of England, Wales and the Northern Ireland (Adams, Robinson and Vigor 2003, pi). The levels of employments vary considerably between and within the regions. Full employment is found in the areas of the Greater South East. The lagging regions are characterized by low levels of employment rates. Major cities such as the London are also faced with low levels of employment (Adams, Robinson and Vigor 2003, pii). The major issue in these regions is the regional economic policy and the extent to which the differences in the employment rates indicate the supply and demand side problems. In other words, whether there is a significant difference in the employment opportunities or whether the unemployed individuals are capable of getting the existing jobs. The Government emphasizes on the latter argument and claims that the regions of high unemployment rates lie within areas with enough vacancies and that the individuals can travel easily (Adams, Robinson and Vigor 2003, pii). However, there are regions with levels of employment that lack the easy travelling distance of anywhere within the tight labour market. A good example is Hartlepool which borders Sunderland and Durham, and Middlesbrough and Stockton. Other examples include West Wales and the Valleys, Northern Ireland, and the industrial part of West Cumbria (Adams, Robinson and Vigor 2003, pii). Productivity Differences: Skill Levels and Economic Mass A major impact of the economic mass is the increase in returns which cause the productivity to rise in the regions that are close to the cities (Rice and Venables 2004, p5). There is a relation between productivity and the size of the city; (a) technological externalities – companies are able to learn efficiently when located near other companies doing related activities, (b) markets with deep labour work efficiently because they have low costs of search for the workers and the employers, and (d) easy access to the customers and the suppliers benefits the company with low cost of transport and trade. For example, the periphery and the core of South East indicate that productivity rise with the rise of the population and the effect of population declines significantly with proximity (Rice and Venables 2004, p7). Regional Policy The Conservatives’ regional policy witnessed the fall of the expenditure, the shift of aid from London to Brussels and selectivity increase. Three items will be taken into consideration to explain how the regional policy could not have instigated the divisions; the regional policy was a response to the poor performance. 1. Almost all of the money was flowing from the south to the north and this contributed to the regional economic differences. The revisions of 1993 did not solve anything because the southern regions were still eligible for aid. It is meaningless to credit the lesser growth in the light of an economic benefit, even if the benefit decreases (Casey 2002, p101). 2. Records indicate that there was little or no connection between the economic outcomes and the regional aid. Regional aid was meant to equalize unemployment. Regional employment differential was firm while the spending increased in the 1970s and widened considerably in the first Thatcher government. The expenditures continued rising and started declining in the late 1980s. In economic terms, the small amount involved was not sufficient to underline any economic trajectory (Casey 2002, p101). 3. Most of the areas (the midlands) that were in relative decline were not eligible for the aid at that period and thus could not have suffered the detrimental effects of the cuts in expenditure. To point out that regional differences are due to regional aid is to reverse cause and effect; the regional policy was a response to the poor performance and not the cause of the regional economic differences (Casey 2002, p101). The main aim of the regional policy was to enhance economic development in those areas that had low per capita incomes. It is argued that the regional policy is not the one causing regional economic disparity but the wider economic policy. The broader/wider economic policy has widened the division between the north and the south. The problems in the north are not caused by regional policies but the strong currency that prevents exports; it is a policy that results in the noninflationary growth and pushes up the interest. The division between north and south is attributed to the numerous attempts by the regional economic policies to assist the North and the macroeconomic policies aimed at strengthening the economy; the policies in turn have had regional differential implications (Pack 2002, p164). The regional policy started weakening after 1974 and it widened the gap of the regional economic disparities. When the Labour Party was in the government (between 1974 and 1979), the consequences of the weakening regional policy was done away with in Wales, Northern Ireland and Scotland by the immediate expansion of the public sector; the regions gained benefits that were not proportion. The urban regains of the West Midlands and the northern England benefited less from the public sector expansion; the regions were severely affected by the loss of jobs (Gudgin 1995, p19). The successive governments since the regional policy expenditure fall in the mid 1970s, the Labour and the Conservative have dismissed the North-South divide. Mrs. Thatcher termed the division as a media invention and that she had a few votes to lose in the northern region of the country; the region is dominated by the Labour Party. The notion that Britain had become divided into two major geographical regions was strongly disputed by the Thatcher governments. There were three denials mounted by the Thatcher governments: 1. If the South of UK was once leading in the UK’s growth in prosperity and employment specifically in the 1980s, then economic justice could have happened because in the previous periods, the North has dominated in richness; the argument is that, it was now the South’s turn. The argument was strongly disputed by the scholars of that period and it was regarded as erroneous (Baker and Billinge 2004, p19). 2. If the economic growth actually favoured the South, then this was attributed by the development of a novel enterprise society that was spearheaded by the South; this was the main policy goal of the Thatcher government, an argument in favour of the South. It was argued that similar prosperity would come to North as the novel enterprise distributed itself northwards (Baker and Billinge 2004, p19). 3. The intra-regional disparities (North-North and South-South) were more significant than the North-South gap; the view was echoed by Thatcher in her statement in 1987 (Baker and Billinge 2004, p19). Tony Blair has also tried to dismiss the division terming it as a basic notion that ignores the disparities within the regions (Bradbury 2008, p151). Majority of the Labour Party politicians do not dismiss the divisions on the fear that the London and southern regions will develop much faster than their northern counterparts because they are well equipped to make use of the move to an economy that is knowledge based (Bradbury 2008, p151). Regional Unemployment Rate Disparities in the UK Unemployment is an important indicator of regional disparities and a cause of the disparities. Local and regional disparities are highly related to other indices of social deficiency such as the quality of the jobs available, income, crime, ratio of the lone-parents families, housing conditions, and health conditions (Johnson and Floud 2004, p331). The jobless rates range from 6.1 percent in the South West and South East to 9.8 percent in the West Midlands and around 10.2 percent in the North East (Smith 2010, p1). Regional disparities were widened by the unemployment rate in the UK in the 1980s. The reverse happened in the late 1980s and went on into the late 1990s. The unemployment widened the gap between north and south during the recessions and then lessened at periods of boom (Armstrong and Taylor 2000, p186). The lessening of the north-south unemployment differences have indicated that there is no tendency to reduce within the affected areas despite their propensity to reduce between the regions (Armstrong and Taylor 2000, p187). Other than the differences in the unemployment rates, the average income earned in each family varies considerably; the average income per family in Southern England is five times higher than in the North England (Carvel 2010, p1). Market Forces and Regional Disparities: The Failure of Markets to Clear Frictions to free movement of labour and capital encourage regional economic disparities and if these fictions lack, the disparities are eliminated automatically by the responses in the factor market. Labour would shift from the low to high wage regions and the capital move in the different direction (Martin and Townroe 2002, p289). There are two major explanations why regional economic disparities cannot respond to the market forces. The first explanation is that neither capital nor labour perfectly movable. For example, low paid workers are very immobile because financial costs of migrating are high and within the unemployment regions, the living costs are very high. In most of the UK counties there is negative link between the unemployment rates and the house prices. The second explanation is that the regional wage structure is not sensitive to the unemployment disparities in the region (Martin and Townroe 2002, p289). Regional Spatial Strategy and the North-South Divide There is absence of the national spatial strategy and the national transport strategy except in Wales, Ireland and Scotland; the absence of these strategies is the source of the numerous regional planning problems. The challenge developing these strategies is aggravated by the change in the labour supply policy. There is tension between the maximization of the economic growth and the community welfare and the continued North-South divide (Dimitriou and Thompson 2007, p7). The Strategic Environmental Assessment that was carried out of the Eastern Region’s Spatial Strategy found that there was lack of sufficient concern by the North-South Divide Government and the move to increase development in the south-east (Environmental Audit Committee 2006, p120). This might have an impact on the economic disparities between the North and South regions. There are some sections of the North-South that have delayed or suspended the adoption of the Regional Spatial Strategy. The East of England Regional Assembly suspended its adoption of the Regional Spatial Strategy because the Government lacked commitment and failed to clarify the provisions of the infrastructure (Environmental Audit Committee 2006, p120). Although these efforts are meant to narrow the disparity gap between the North and the South, the gap will continue increasing if the government continues ignoring the efforts put by the nations of the North-South division. Consider the Arguments as To Whether Governments Should Make an Effort to Lessen Such Differences The differences in the economy of the UK regions are very clear and they show that the winners’ territory is emerging; some regions are keeping up and staying in touch with the pace while the others are still lagging behind. The pertinent issues need to be solved through a strong and radically restructured regional policy (Mawson 2002, p28). The government should make an effort to end or lessen the differences. The problem has persisted for quite a long time. The main problem has been different political ideologies and the formulation of policies that favour a section of the divide. It has been a trend that when a particular party takes over the leadership, there is a tendency that the region affiliated with the political party will benefit. This is evident from the leadership of Mrs. Thatcher to the leadership of Tony Blair. The governments have dismissed the notion that there is division within Britain with some terming the division as a media invention. Such a notion is detrimental and will stall the efforts of ending the economic differences. The government can end the negative notion because it is very evident that Britain is faced with regional economic differences; this can be ascertained by the levels of the employment and unemployment in the north and the south. This shows that there is a possibility of the government lessening the differences although much of the damage has been done. There is a clear indication that the disparities have also affected the method of endorsing very important strategies within the divisions. Some of the regions have suspended the endorsement of the Regional Spatial Strategy; the region is the East of England. The main reason of the suspension is the government’s failure to commit itself to the matter and clarify some of the issues within the strategy. This is a major setback for the nations that want to lessen the regional economic disparities. In such a case, the government is required to commit itself to the matter and find ways of ending the regional economic disparities. Although the whole process of ending the regional economic disparities may take a while, it is worth for the government taking the risk. This is because there regions within the north (the poorer region in Britain) that have resources that have not been exploited. By exploiting these resources, the government would have created jobs for the many of the people who are unemployed and boost the economy of that region. Policies formulated should coincide with the region’s capability and should not in any way favour one region. The government is capable of doing that because it is charged with the responsibility of making sure each region whether poor or rich is not economic deficient. References Adams, J., Robinson, P. & Vigor, A. (2003) A new regional policy for the UK. London: Institute for Public Policy Research. Baker, A. R. H. & Billinge, M. (2004) Geographies of England: The North-South divide, material and imagined. Cambridge, UK: Cambridge University Press. Bradbury, J. (2008) Devolution, regionalism and regional development: The UK experience. London, UK: Routledge. Carvel, J. (2010) North-south, east-west wealth divides in survey [Online], guardian.co.uk. Available from [Accessed on 28 March 2011]. Casey, T. (2002) The social context of economic change in Britain: Between policy and performance. Manchester, UK: Manchester University Press. Dimitriou, H. T. & Thompson, R. (2007) Strategic planning for regional development in the UK: A review of principles and practices. New York, NY: Taylor & Francis. Environmental Audit Committee. (2006) Sustainable housing: A follow-up report; fifth report of session 2005-06. UK: The Stationary Office. Gudgin, G. (1995) Regional problems and policy in the UK. Oxford Review of Economic Policy, 11(2), pp18-63. Johnson, P. A. & Floud, R. (2004) The Cambridge economic history of modern Britain. Cambridge, UK: Cambridge University Press. Martin, R. & Townroe, P. (2002) Regional development in the 1990s: The British Isles in transition. London, UK: Routledge. Mawson, J. (2002) England: The state of the regions. Bristol, UK: The Policy Press. Nelson Thornes Limited. (2004) The north-south divide in the United Kingdom [online], Nelson Thornes Limited. Available from [Accessed 28 March 2011]. Pack, J. R. (2002) Growth and convergence in metropolitan America. Washington, DC: Brookings Institution Press. Rice, P. & Venables, T. (2004) Productivity: Understanding regional differences. Centerpiece, pp2-32. Smith, D. (2010) A recovery for all regions? [Online], Barclays Corporate. Available from [Accessed 28 March 2011]. Read More