The power of regions in a global economy
Martin Briggs
Chief Executive, East Midlands Regional Development Agency, England
Speech notes
Delighted to be here - to experience, albeit in a whistle-stop tour, all that is delightful about New Zealand: and to see the challenges you face, at first hand.
Reinforces what will be my key theme - that in an increasingly liberalised and integrated global economy, regions and localities - their special qualities, their natural resource, the skills of their people, are become more, not less important. Celebrating - and capitalising on the potential of each locality, each region will itself spur global success.
This should not surprise us - the foundation of market economics is the division of labour: but it should spur us to see globalisation as more opportunity than threat.
This piece of advice became a commonplace - almost cliché - in relation to the growth of MNCs, and their inward investment strategies in the 80s and 90s. They are now variously applied to environmental, labour market, "creative" industries, land use planning - just a sample of the 4.2 million Google hits that the phrases generates. But it captures well the challenge that we face as economic development agencies too. We have to combine an insight into the opportunities and challenges that globalisation brings, with an ability to understand and exploit the distinctive potential of our locality.
But we are Regional development agencies. What is a region? One obvious answer is that it is a line on a map. But though that's neat, it's also the least satisfying answer in terms of our economic development vision. What makes a region "tick" is its common threads - its distinctive topography and natural resource; the sense of identity if its people. These define not only a region, but its distinctiveness and potential too.
But as a definition a region is of course an abstraction: we may talk about its identity, or even its qualities, but to bring those to life the key component is the people, and their sense of a common vision and ambition. This is where the role of Regional Economic Strategies - by analogy our business plan (our game plan) come in. To achieve an objective you have to set an objective. But if the heart of a region is its people, that has to be a shared objective. But that cannot and must not be lowest common denominator - and to achieve that our challenges as economic development agencies is to combine both leadership, and buy in.
First, we have to ensure that all of our partners, and the people they represent, share a common understanding of the challenge. This is not a trivial task. In the East Midlands of England, a relatively prosperous economy in UK and European terms, it became apparent early in our work that many of our partners, and our media were (a) not much interested in economic theory. (b) Tended to see international trends (globalisation) as a threat rather than an opportunity (c) Disempowered, in the sense that "big scale" economic change is beyond our control. But that is to miss the disposal of (economic) power that markets deliver but a shared analysis is not enough. From that we have to develop a shared, clear-cut, and objectively testable ambition. And perhaps most of all, a shared commitment to doing all in our power to achieve that ambition.
Economics is often called "the dismal science". And certainly if our economic strategies concentrate on economic performance numbers alone, they will not achieve that resonance which creates the shared ownership that I have described as so vital. Many have argued - in the US, the UK, and elsewhere that economic progress is inimical to environmental and social goals. But our challenge is to embed an approach that holds together progress on all of these fronts. There is certainly much evidence - not least from the pre-1989 command economies of Eastern Europe that failure on all 3 fronts go together. I would not argue that economic success creates a certainty that environmental and social goals will be met - that us a question of political will, and priorities. But it does generate the resources to achieve positive environmental and social outcomes. Plenty of evidence that the wealthier societies become, the more committed they become to environmental goals evidence on social goals (disparities) (work life balance) is more equivocal (North America v European social model).
The trinity can also be described in a slightly different way-though corresponding to the economic, environmental distinction. PSA not the most memorable of acronyms, but does mimic the "Public Service Agreements" that stand at the heart of the relationship between Government and the regions of the UK.
"Productivity" is a crucial starting point. It's a word that has gone in and out of fashion (in the UK anyway). Productivity associations were all the rage in the 60s and 70s, but somehow the word got displaced from the lexicon, superseded by competitiveness, enterprise and innovation (all positive buzz words!). But at root the concept of productivity is simply the achievement of optimistic outcomes from the factor inputs involved. In this form, it ought to be a desirable end in and of itself. "Do your best" is not advice from which many dissent. It is of course important that the measurement of what is "best" captures the full impact (including externalities). Work by the UK Treasury in recent years has identified 5 (Olympic!) components of productivity. All are relevant to regional economy strategies as well as to National public policy: though all require different treatment by development agencies depending on the relative roles of public an private sectors; and variations in public authority "infrastructure".
Important at this point to make reference to a word that has achieved pre-eminence in recent years. A sense of "international competition" has been strongly enhanced by globalisation itself. That's the way it looks to businesses - why not to regional (or national) economies. The analogy is useful, to a degree. For the last 5 years in the UK's East Midlands we have been working towards to the goal "A top 20 region in Europe by 2010". In particular, that has enabled us to set a testable outcome which does "resonate" - the English Premier League (!), but also to specify a measurement that seeks to capture economic environmental and social outcomes - jobs, income, equality and environmental.
But we have to take care - economic impacts and dependencies are subtle, and some of the things we are most inclined to measure as achievements, - new jobs created, new business starts, are most likely to mislead (because of indirect impacts). If this is business planning, it is of a very subtle form. Secondly, and most important, we have seen in the last 200 years that economic advance is not a zero-sum goal. Marginal movements up and down league tables must not be misread to imply that the advance of China, or India, will be at the expense of developed economies. Individual businesses, or industrial sectors, may shift geographically, but all the evidence points to a convergence, not see-sawing.
Why is this the case. It is the miracle of markets - the division of labour. Increased specialisation drives the advance of technology, knowledge, and skill, key components of productivity. Enterprise investment, and innovation capture the degree to which we respond to, or rather get ahead of, the opportunities, and those challenges of change. At different stages of the industrial revolutions - difference factors have sometimes seemed of prime importance - access to raw material, access to markets. But I believe it is no exaggeration to say, in the ICT age, that the prime factor by far in securing competitive advantage is "knowledge" - the knowledge economy. During my working life globalisation has brought with it sophisticated financial and capital markets, and even more sophisticated distribution and logistics infrastructure, rendering much less significant old balance of trade - import/ export issues. We may have noticed less the changing balance between visible and invisible "created value". By weight, exports from the UK in 2000 were almost the same as in 1900. But their real value has increased ten-fold - embedded know how, technology, materials, designs, marketing, quality.
Globalisation does not mean homogeneity "Any colour you want, as long as it's black" (Henry Ford), is not a philosophy on which any market-driven business (or increasingly any public authority/ agency) could survive. In this context differentiation is also important to regional economies. Urban and rural areas face inter-connected but not identical challenges. Too much time is spent sometimes on the "problem" of urban or rural regeneration - whilst envying the opportunities that others have. But it is the distinctiveness of each area, the "USP", that will also create the competitive advantage. Equally there is no "ideal" scale or setting. Each of these can be used to advantage by a focus on the particular benefits and potential that any given setting may bring.
Much of the foregoing discussion could be read purely within the context to indicators of economic performance. But increasingly the challenge to regional development agencies is to establish and implement sustainable development. Indeed, in an increasingly sophisticated public dialogue it is simply not possible to achieve the buy-in that I have emphasised as crucial, without a serious emphasis on sustainability. Sustainability is understood in may different ways. at its crudest, sustainable development is simply that "built to last". But it has come to symbolise a much more fundamental challenge in encouraging economic development that takes full account of the depletion of natural resources: an environmental perspective that requires that we do not buy short term success at the expense of succeeding generations - in whom of course we all have a direct stake, and connection. But social sustainability has also become an increasingly important issue. Much research evidence suggests that economic growth in most developed economies over the last generation has been increased by increased disparities between rich and poor. Not inevitably, but often. Apart from issue of equity, this creates potentially serious quality of life issues, to which I will return.
Finally in the economic strategy triangle comes accountability. This is not an optional add-on. For business-led RDA boards in the UK (and their executives) it can sometimes seem an unwelcome distraction. Why do we have to draw so many people into consultation about Regional Economic Strategies? Why do we have to report formally to government, and then informally to so many parties within the region? But I hope it's clear from the approach I advocate that I believe accountability - in achieving wide ownership and commitment to both the vision, and the actions and attitude of mind required to make the difference - is a absolutely fundamental. Many businesses will say in caricature - "we create the wealth, leave us to get on with the job": many public agencies assume that economic growth is a given, and want to focus simply on how the resources thus generated will be deployed. Economic development agencies - RDAs - must hold these strands together. Businesses cannot succeed with an effective infrastructure - transport, yes, but education (skills), land-use planning, and health too. Public authorities must use the resources entrusted to then to advance, not retard, economic progress, to safeguard the future.
So to summarise - our goals need to be clear, and broadly owned, measurement of progress is not an irritating add-on, but fundamental to influencing our priorities, and the way we account to each other. Globalisation and liberalisation are not unwelcome forces to be resisted if at all possible, but trends which have, through market mechanisms, delivered previously unimagined prosperity to a large proportion of humanity in the last (half) century: with every prospect of working the same magic in the NICs. However, markets, though wonderfully efficient way of stimulating progress and growth, do not tell the whole story. Regional Economic Strategies must also grapple with the externalities - the environmental and social implications of growth, if they are to achieve the widespread ownership that is fundamental to their credibility.
Where will this dialogue take us next? Development agencies in England have been in place for 6 years. (30 in Scotland and Wales); and longer in many other developed economies. I believe the principles I've set out above do have widespread currency - but the debate is also moving in new directions. One of these is the issue of "embracing well-being: squaring growth and sustainability". A now quite extensive literature, particularly in the US, seeks to confront the fact that, even in the terms in which I've framed it, economic growth in developed economies has created a enigma. Objective improvements in levels of income and wealth have not been matched my improvement the more subjective measure of "experienced well-being". Though measurement of this is elusive, measured across economies and through time, this outcome is consistent, and has spawned a considerable literature.
Of course - this should come as not great surprise; it's now a discovery of the new millennium. More than a generation ago, Robert Kennedy captured well the gulf between "economic man", and our wider sense of value.
Measure of this disjunction have now become more widespread.
The New Economics Foundation in the UK has charted the divide that has been accentuated over the last generation. In brief, MDP (mirroring perceived well-being) has hardly improved over the last 30 years, whilst real GDP has grown by 75%.
MDP - Measure of Domestic Progress is not itself a subjective measure. Rather it adjusts GDP data for a number of costs, real or estimated, associated with the generation of economic output. Some of these- illustrated in the attached graph, do of course involve elements of judgement.
This debate is still in its comparatively early stages, and all the data I have seen relates to national economic experience. As regions however, I believe that this is a discussion we cannot avoid, and should welcome, given our commitment to sustainability. There is an opportunity here to lead the way in an important international debate. I have concentrated on the increasingly important role for regions and localities, in a global economy. Despite the pessimism sometimes expressed, there can be no doubt that the experience, over the last half century or more, of most of the developed and developing world has been of the power of a global economic system to deliver improvement in the life of millions.
Despite difficult transition and sometimes dislocation, regions, localities and individuals probably now have more power to shape their future than at any stage in history. In our own small but significant way, it is for Regional Development Agencies to ensure that the power and distinctiveness of regions is used to ensure "Opportunity for all, in a world of change".
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