S3 Ep2: Regenerating the cities that were left behind

Episode Summary

Executive Summary: The episode examines why some European cities are falling behind and how regional inequality might be reduced. Tony Venables argues that weak cities often lose tradable, high-productivity sectors and replace them with lower-value non-tradable jobs, while Charles Goodhart says demographic, globalization, and technology shifts have deepened inequality but may now be easing. Both stress that solutions require long-term governance, stronger universities, and empowered city leadership rather than simple relocation or short-term regional subsidies.

Main Topics: Agglomeration and city divergence (Priority: 5/5): Venables explains that cities are not interchangeable: agglomeration benefits differ by sector, and tradable industries like finance or high-tech cluster strongly while non-tradables do not. Why left-behind cities struggle (Priority: 5/5): Cities that lose shipbuilding, textiles, or engineering often end up with lower-productivity service jobs rather than new high-value industries. Policy responses and governance (Priority: 5/5): The discussion focuses on making secondary cities better places to start and grow productive businesses, with stronger local governance and mayors seen as key. Universities as regional engines (Priority: 4/5): Goodhart argues that funding and support for universities in struggling metropolitan regions could help spawn science-based tradable industries. Demography, globalization, and labor power (Priority: 4/5): Goodhart links regional inequality to long-run demographic change and globalization, arguing these forces may weaken inequality over time as labor bargaining power rises. Politics, populism, and migration (Priority: 4/5): The speakers connect left-behind regions to populist politics, Brexit, Trump, and anti-immigration sentiment that has undermined traditional left-wing support. Limits of regional policy (Priority: 5/5): They caution that policies that simply move low-value jobs into poorer areas may preserve employment but not productivity or competitiveness.

Key Arguments: Regional inequality is driven in part by sectoral differences in agglomeration; some industries benefit from clustering much more than others. Cities that lose tradable sectors typically do not replace them with equally productive activities, but with lower-value non-tradable work. Because firms and workers benefit from existing agglomerations, it is hard to transplant productive industries to weaker regions. Effective regional revival depends less on redistribution and more on making cities attractive, investable, and governable places for new high-value activity. Local governance matters: empowered city leaders and devolution can create incentives to improve economic performance. Strengthening universities in lagging regions could help generate new science-based industries and tradable activity around them. Demographic aging, reduced globalization, and weaker immigration flows may gradually improve labor bargaining power and narrow inequality. Populist politics has been fueled by the economic and cultural effects of regional decline, especially around migration, and this has reshaped party systems across Europe and the US.

Data Points: CEPR research and policy network: launching later this year - The episode notes CEPR will launch a new network on regional inequality Tony Venables description: “godfather of agglomeration economics” - How Venables was introduced at the conference Charles Goodhart age: 83 years old - Goodhart was described as 83 during the discussion World War I impact: mid-1960s reference to decline after World War One - Goodhart argues the UK lost major tradable markets after World War One Time horizon for solutions: decades - Both speakers emphasize regional inequality will take decades to solve Policy network output: early policy papers, possibly an e-book - Venables describes plans for the CEPR network UK regional policy focus: secondary cities - Venables says policy should make secondary cities less unattractive for new high-value activity

Pivotal Quotes: "There is no magic bullet." — Tony Venables: On whether there is a simple policy fix for regional inequality "If I wanted to do territorial regeneration, is to shift funding and try and shift governmental support to the universities in the areas." — Charles Goodhart: On what policy intervention could help lagging regions "We want our cities to be able to produce goods and services that are internationally competitive, and rather few of them can." — Tony Venables: On the goal of regional policy beyond just reducing unemployment

Implications: Listeners should expect regional inequality to remain a long-term issue. The episode suggests that durable progress will depend on local governance, universities, and productivity-led development, not just subsidies or job relocation. Its political effects may continue to shape populism and migration debates.