Today, I want to give a short virtual tour of the city in which I grew up, Stoke-on-Trent. Stoke-on-Trent grew up around the pottery industry. From Wikipedia:
Since the 17th century, the area has been almost exclusively known for its industrial-scale pottery manufacturing, with such world renowned names as Royal Doulton, Dudson Ltd, Spode (founded by Josiah Spode), Wedgwood (founded by Josiah Wedgwood) and Minton (founded by Thomas Minton) being born and based there. The presence locally of abundant supplies of coal and of suitable clay for earthenware production led to the early but at first limited development of the local pottery industry. The construction of the Trent and Mersey Canal enabled the import of china clay from Cornwall together with other materials and facilitated the production of creamware and bone china. Stoke-on-Trent is a world centre for fine ceramics – a skilled design trade established in the area since at least the 12th century. But in the late-1980s & 1990s Stoke-on-Trent was hit hard by the general decline in the British manufacturing sector. Numerous factories, steelworks, collieries, and potteries were closed. This resulted in a sharp rise in unemployment.
Of course, Stoke is by no means typical, but it does typify some problems that are found in many cities across the Western world: the loss of manufacturing jobs, and a subsequent decline into mass unemployment, drug abuse and social and economic degeneration. This is a tough cycle to break because there are no jobs for welfare recipients to take. So — without a serious regeneration budget — the state has little choice but to leave much of the city welfare-dependent and festering. What I really want to get across is the depth of the post-industrial decline and dereliction in such cities. When they lost their manufacturing sector to cheaper overseas competition, many of these cities lost their reason to exist. They just left an angry, workless and disaffected concentration of population tightly bundled together. Being deprived of capital and investment means that infrastructure, housing and social welfare grossly declined:
The City Centre
Boarded-Up Housing
Dereliction
Former Industrial Glory
Broken Wasteland
Panorama
azizonomics 
England IS the role model for amerika… stands to reason, they are in the same boat. So much for following the same ole illimunati, or if there are those who prefer, satanic game plan. Not only is the base of this poor earth cracking up, so is the outside.. I wonder how this is all gonna end… I hope soon… I, for one, am tired of evil having it’s way. Pathetic.
As long as people deny ignorance the future’s promising
If anything, I’d say a lot of this results from there being no game plan at all. These cities sprung up spontaneously around an industry (in this case, pottery), and now that that industry has been shipped overseas, a whole load of people are clustered together in one place, for no reason other than history.
Some readers may disagree with me, but I really think that government could have helped a great deal. Instead of spending money on needless wars in the middle east, it would have been better to inject the money into these formerly industrial cities to create both the skills and the infrastructure for the 21st Century. High-speed broadband, small and medium scale manufacturing and workshops, decentralised energy production, etc, things to build entrepreneurial culture and regenerate the region’s sense of self-worth and productivity.
America is going in the same direction, shipping off young productive people as soldiers to police the world, when they need to be at home in America building businesses and enterprise.
Maybe we will see a return to local production. Food as well as goods. The transition (via increased cost of global supply chains, reduction in consumer purchasing power & real wages) will be ugly though.
I would not consider moving back to the UK. Seeing the capability & motivation in workers in e.g. SE Asia (where I live), I cannot see anything but a flattening of global wages.
I think what is especially frightening for the UK is how unprepared it is to survive/prosper without cheap food, energy & goods from the outside.
You mention that post-industrial cities have lost their reason to exist. Is the same not mostly true of the UK as a whole? Beyond deregulated finance (and related services) what is there of value in the UK economy? What do expensive UK workers do that cannot be done better & more cheaply elsewhere?
If we assume there will be a debt-collapse & destruction of the illusion of prosperity (for the vast majority), what comes out the other side? I think it has to be be a relatively much poorer nation & populace, with attendant reduction in living standards (less ipads & less food).
None of this has to be the end of the world of course. Just the end of ‘life as we know it’. What do we ‘really’ need as humans? Food, shelter, clean water and love. What is the point of life? Something more (imho) than X-Factor and the latest phone.
None of this should be unobtainable. Perhaps the transition is just another, albeit painful, example of creative destruction.
Well, where I live now is a beautiful contrast to where I used to live before. I am surrounded by fields of sheep. There is a productive local economy based on the production of agricultural goods, as well as light and artisanal industry. Services’ role in the economy is lower, and closer to the proportion I believe is healthy. I think that probably 80% of the UK and the USA are like this, but probably only 20% of the population lives in these areas. Dealing with the contraction of the global trade web will be especially difficult for the cities, the areas that import the overwhelming majority of their energy and food.
As for your point about creative destruction, well, I agree absolutely. Nature is creative destruction, and humans as a species are a product of and an example of nature. The changing fabric of society is an example of creative destruction, and one that cannot be constrained, controlled or even directed by central planning.
That actually sounds like a pretty nice situation. I hope whatever transition problems occur with the cities don’t upset it too much.
Regarding creative destruction: Beyond the centraI planning point (that I agree with) I think there are factors which repress it (in individuals, societies, businesses, whatever). Change, the unknown, is feared and there is a sense of security in hanging on to the status quo however dysfunctional. Hence people stay in abusive relationships and populations put up with fucked-up political systems.
Ripping down the fixed ideas, fixed institutions and other security blankets (or allowing them to naturally fail) is a true liberation. All it takes is the courage to dive into the unknown.
You live in a region similar to mine, the only exception is I have the cold wet winter of England, but the dry hot dusty summer of Australia.
You are blessed!
What hot, dry dusty summer? Not this one! Sydney was warmer in August!!
People in the northern hemisphere will get very confused, Twodogs. August is a very hot month here.
Poor people in the City of Detroit in the U.S are doing urban farming, growing vegetables and food to feed themselves in their gardens and on rundown public lands.
Same thing happening in the industrialised nations all around the globe. Here in South Korea we industrialised in the 1970-80s yet we are already shipping off jobs to China and Southeast Asia. Now the once-centers of industries that are now considered cost-ineffective are filled with criminals, gangsters, hookers and foreign workers from South and Southeast Asia who have come for false Korean dreams. We know the consequences of deindustrialization, we just don’t know that it’s happening right now. The whole nation is drunk on the ever-soaring profits of Samsung and it’s brand new Galaxy Nexus advertisements.
Samsung is a much greater company than our juggernauts here in England, Mr. Mushroom. Samsung builds things as well as designing them, it controls its own supply chains, it creates huge amounts of infrastructure. While it might not be perfect, it is a damn lot better than having your economy dominated by Barclays, Royal Bank of Scotland and HSBC.
Well those conglomerates are constantly trying to force financial deregulation so that they can become financial juggernauts themselves. We used to have a strict separation between industrial and financial capital, which served greatly for the stability of the economy in such times of crises, but the current government is getting rid of the ban… I think this deindustrialisation process is at least for now the common mistake that all developed countries have made. Proves that people never learn from the history.
That is very worrying.
What the cities need is for individuals to be freed up to set up their own business and trade without too many regulations or licenses. Perhaps rent free, indoor stalls, allowing tax free sales of goods. This will re-generate the local economy and make the state less intrusive. See the work of Kevin Carson a mutualist, for better ideas:
http://en.wikipedia.org/wiki/Kevin_Carson
I agree with this.
The same is already starting to happen in China’s highly concentrated industrial factory based cities and towns. China’s grabbing as much of the world’s manufacture power as possible over-the-top-ambition will hit them hard when businesses are now moving out of China and with less demand around the world. Just think what are they going to do with all that thousands of factory cities and industrial capacities? There will be many Detroits all over China.
Some say China has a big enough market inside itself for all the over capacity. Well, not likely.
Obviously there will be fallout from the next transformation in Chinese society. I just think that with very high rates of savings, low rates of debt, massive hoards of FOREX, and control over many lucrative resources and trade routes China is uniquely placed to absorb these shocks far better than America.
Excess capacity is not a great economic problem; it’s loss of capacity which is the problem, both in Stoke-on-Trent, and in many cities across America and the EU.
I have written a few articles on this subject, if you haven’t already read them:
https://azizonomics.com/2011/10/02/the-only-chinese-hard-landing-will-be-on-americas-head/
https://azizonomics.com/2011/09/21/is-china-a-bubble/
A lady not far from my town is one of the last Wedgwood trained artisans still operating. She travelled to the UK and learnt the trade.
Maybe Australia could have comparitive advantage. Digging up clay and turning into fine bone china, is better value adding than shipping off iron ore.
But when I said to her how do you propose to cope with the couch genration eating from wrappers, she looked at me, twitched and had a gibberish melt down 🙂
I reread Mises’ paragraph on the benefits of Free trade. I don’t agree entirely with his theories, but I think the NeoCons have blindly adopted, because it opposed Communism.
I think Globalisation has lifted many areas out of poverty, but the benefits of a diverse economy is it reflects the diversity of its people.
You need simple repitive tasks for certain people, other jobs like ticket sales, suit the physically injured. When you automate (Robots,or outsource to China) or install ticket machines, these people have no other alternative.
Because we can’t measure non monetary benefits, the economics do not stack up. If we look at the costs of depression and welfare, these outsourced roles, do economically stack up.
@Bensengo: “Change, the unknown, is feared and there is a sense of security in hanging on to the status quo however dysfunctional. Hence people stay in abusive relationships and populations put up with fucked-up political systems.
Ripping down the fixed ideas, fixed institutions and other security blankets (or allowing them to naturally fail) is a true liberation. All it takes is the courage to dive into the unknown.”
Spot on. This is a great insight for me. Thanks for the thoughts.
Shit football team, too.
“Instead of spending money on needless wars in the middle east, it would have been better to inject the money into these formerly industrial cities to create both the skills and the infrastructure for the 21st Century.”
No, it would have been better to keep the money in the hands of the people of Stoke to invest and spend it as they please. When that happens, businesses prosper by giving people what they want. Industry continues to evolve to please consumers. People are free to pursue careers in any field they like or desire, and their choices aren’t skewed by government subsidies to favored industries and economic sectors. The firms and economic sectors that prosper are the ones that are productive, simply because unproductive firms cannot stay alive.
“Injecting money” into these cities means, effectively, taking money from people of the city and giving it to various businesses and economic sectors. This means businesses can acquire money from consumers without actually offering them something they want. For example: no longer do you have to fly American Airlines to pay for their continued miserable existence. http://www.theonion.com/articles/american-airlines-now-charging-fees-to-nonpassenge,2614/
This is not just bad because it is theft. The real problem is that it destroys the entire functioning of the profit/loss mechanism in a market economy. When businesses can earn money in ways other than getting consumers to willingly pay for things, they are wasting society’s resources (capital, land, and most importantly, labor) on things that do not improve the well-being of people. The result is a decline in production of (subjectively) valuable things, and the emergence of large amounts of businesses and people who are basically reliant on government misappropriation from the valuable production of others.
These ideas of supporting economic transformation might sound nice in theory, but in reality, they are just economic central planning. And it is precisely economic central planning that got places like Stoke and Detroit to where they are today.
When I use the word “inject the money” I am being intentionally ambiguous, because yes it could also mean giving the tax money back as well as spending it on projects in the city (so long as they are needed and wanted). One issue here is that the people of Stoke have very little money in the first place. I don’t know the figures but I would be surprised if Stoke (or similar cities, although Stoke and Hull are generally taken to be the two worst) contributes any net tax money at all.
If anyone is going to have any capital confiscated to be injected into Stoke it is the hyper-rehypothecating drunk gamblers in the City of London and Canary Wharf. They have already undermined their own businesses by taking British debt to 1000% of GDP, so when they inevitably collapse I have no problem whatever with sharing their wealth with the rest of Britain.
This is not central planning. I am nearly as opposed to that as you are. This is disaster relief.
It looks just like my town, Racine WI. I have suggested that the State of Wisconsin needs to take over large portions of the blight, brownfields and slums of SouthEast Wisconsin and make it a Special Economic Development Zone.
We have Lake Michigan, Oak Creek Power Plant, and many recreational opportunities in Northern Wisconsin.
What I envision is a World Class development in a mix of housing, manufacturing, retail, and infrastructure – as much green technology as possible, and no need for personal vehicles in this area.
It would be economic central planning, but in a world of 7 billion, it may be the reality of what is necessary.
Do we have 7 billion competing, or 7 billion cooperating – numbers are now too big to not re-think society and develop along the thoughts of Ant colonys.
My corner of the World, in pictures: http://www.flickr.com/photos/unisexcar/
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“so long as they are needed and wanted”
I would strongly encourage you to read up on subjective valuation. This is Menger’s biggest contribution to economics, and a founding central tenet of Austrian economics.
Value is not inherent or determined by various complicated financial models. It is subjective. It can only be subjective. What determines the value of something is how much normal individuals are willing to pay for it.
So what does it mean to say something is needed and wanted? If it really is needed and wanted by people, what’s stopping individuals from providing it for one another? What’s stopping normal people from investing in it and providing it to the citizens who need and want it? The fact that no one is queuing up to invest in something means that no one thinks there will be demand for it. Hence, the only real meaning of something being “needed and wanted” is something that people willingly and cooperatively provide for one another on a free market.
If it is not provided freely on the free market, that means that the amount of resources that need to be invested in it are subjectively valued higher than the output of this investment. This is why it can’t be done on a free market. There are people who can benefit from this project, though. So they would love it if the government took some of your money and spent it on something which they, with their inimitable wisdom and PhD’s, have decided is needed by you. They have to take your money and spend it on that project because you want it! This is the absurdity of it all.
If it’s needed and wanted, then if that term means anything, it means that it will be provided freely on a market. If it’s not provided on the market, then one can only conclude that it is not needed or wanted. These terms make no economic sense any other way.
They don’t have the money and resources to do so.
On this subject, I agree with Adam Smith:
Right now in Stoke, there are many, many things which could have real subjective utility to a lot of people and which are beyond the reach of individual enterprise. Now I do realise we have to be very careful of slipping into the habits central planning, but so long as there is proper accountability and checks and balances, and so long as the money is sustainably sourced (i.e. not from debt or money printing) I don’t have a problem with occasional redistribution, i.e. from corrupt arbitrageurs in London to building facilities for poor families in Stoke.
I realise doing this distorts the market mechanisms but I think what we have to realise is that in these cities the market has already been destroyed by years and years of failed social engineering that assumed that socialism was a sustainable political system. Perhaps social engineering that is genuinely trying to reduce socialism (“right wing social engineering”, as our beloved friend Newt Gingrich puts it) is not perfect, but it is better than the status quo of huge state dependency and stagnation.
This is, incidentally, why I think the term “market failure” is a scam. What it really means is: “You using your money the way you like is wrong, you bloody peasant. You fail to use your money correctly and good bureaucrats need to determine for you how to do that”. Now hand over the cash.
If you don’t have any money in the first place, and cannot find work because the job market has collapsed, then there is some market failure. I suppose you can feed yourself by planting tomatoes in your garden (maybe) or by foraging for nuts and berries in the woods (less likely) or (much more likely) dealing heroin or marijuana or robbing others, or by rioting and breaking into shops. But whatever the choice in this case there is definitely some market failure.
At the same time, I think the term “market failure” is very often used in that way by demagogues and bureaucrats and Paul Krugmans, and in that sense it is totally wrong and foolish.
In the case of Stoke what we see is both a kind of market failure, as well as a lot of “central planning failure”. I don’t really care how it gets fixed; to some extent the people must fix it for themselves, but in a financialist-socialist nation like Britain it is very hard to do anything without the government either hindering you or helping you.
Holy shit, dude.
You should see Asia. It is booming. Make some high quality and non-toxic products for us and we will buy them at a good price.
Just be better than the cheap competition.
The main problem we have is that wages cannot be lowered enough to compete with China, because state paid benefits will always be higher than any such wage. We have to win on quality, which means that there is still some industry, but it is small and artisanal, and not significant enough to employ many non-specialists. It is a slow process. Ultimately, cities either need to find a purpose, or they shall dissolve.