What is the relationship between global cities, poverty and inequality?

With reference to London, Manchester and Glasgow in the UK.

Introduction

Debates on poverty and inequality have been always heated and topical. In the aftermath of the global financial crisis and the dogma of austerity, poverty and inequality received a newfound attention from academic and policy circles alike. What is especially interesting, for the purposes of this essay, is to look at the bare version of austerity politics and how they have fed into existing socioeconomic privation and how they are aligned with more deep seated politics dating back to Thatcherite economics and Voodoo economics (Harvey, 2005).

This essay will look at the UK and specifically London, Manchester and Glasgow, and tease out themes around poverty and inequality and how they have been animated as a direct result of policy as well as decision-making at Westminster. By and large, poverty and inequality are multifaceted concepts and should not be seen as purely economic. They intersect with legacies and collective memories and the relationship between cities and inequality is therefore going to be dynamic and complicated.

This essay first turns to delineating what cities, poverty and inequality are taken to mean and locate this discussion within a larger theoretical current and critique. The argument that will be proposed is that poverty and inequality are, put simply, manifested in their fullest extent in global cities, as they are the immediate receptors of government policy and dialogue. Although regional cities and towns are also affected, the 'contagion' of policy is a lot weaker and their relationship obscure. To provide evidence for this argument, this essay will examine three different socioeconomic phenomena that have stark implications for poverty and inequality, namely neoliberal austerity politics, a protracted housing crisis, and finally, deindustrialization and a one-sided focus on the City. The essay concludes with a couple of policy recommendations as to how to curtail the rise of inequality in cities.

Why global cities?

As briefly mentioned in the introduction, this essay identifies and looks into global cities as opposed to a nation as a whole. This is because the latter is more abstract and generalized, and relies on more macroeconomic assumptions. In contrast, the former is the 'playground' of policy and dialogue, being their proximate receptor and their locus (Musterd and Ostendorf, 2013). That is to say, global cities, in a way, symbolize what policy underlies and is about. The direct consequences that accrue allow an observer to make more credible and robust points about its relationship to inequality and poverty (Sassen, 2011). For example, if this essay were to take up national inequality, measured by the Gini coefficient, the concepts would become harder to discern and the implications unclear. Much of the theoretical literature has homed in on the root causes of inequality and how this deleterious phenomenon has come about (see Atkinson, 2015). Although this essay will later touch on and attempt to trace why inequality exists and is magnified in cities, it is noteworthy that most of the research into inequality shies away from looking at the direct results it has on life in global cities. 

How do we explain poverty and inequality?

Next, this essay turns to defining poverty and inequality. There is a presumption in favour of conflating these two to purely economic phenomena to be addressed by economic solutions. However, as will be examined, the case study of Glasgow is a powerful rejoinder to this conflation. Namely, it is a city that has competitive economic infrastructure and results, and yet lags behind in other crucial holistic social measurements. More broadly, poverty and inequality, as stated are complex and multifaceted. That is why it is suggested that the Gini coefficient is a fundamentally limited and misguided measurement to marshal in this essay. Instead, what would be more relevant would be more relevant is to look at the likes of Amartya Sen (2005) and his work on human capabilities and how potential can be frustrated in myriad non-economic ways. For this reason, this essay cannot properly infer from London's high economic performance that it adequately caters to the problems of inequality and poverty. Put simply, that a global city grows does not mean that the least well off are benefiting as well. By taking this comprehensive approach, this essay will discuss how complex policy has complex consequences on people's lives and general levels of contentedness.

The trajectory of inequality

Inequality is, by no means, novel. This discussion is embedded in a global debate about what gives rise and momentum to inequality, especially following the global financial crisis of 2008. In the core of the Western world, inequality has run amok in the past few decades, despite the fact that they have rendered modest economic growth in general (Piketty, 2014). This puzzling reality has been the subject of a lot of academic debate and contributions; some scholars have suggested that inequality is not inevitable but, in fact, beneficial, as it makes people more driven and aspirational, and more likely to celebrate and mimic such role models as Mark Zuckerberg and Warren Buffet (Lippman et al., 2005). According to this line of arguing, inequality is seen to be a by-product of entrepreneurial ability and prowess.

However, it is unlikely that this line of thought captures the deep and perplexing character of inequality. To rebut the claim that inequality is a fair reflection of talent and ability, this essay makes a contention that it is rather the result of collective deliberate decision-making (Stieglitz, 2012). This becomes particularly evident in global cities where the contradictions therein highlight that it must be more than just a lack of talent or luck that is holding people back on such a large scale. London, for example, boasts the City which is undeniably the globe's foremost financial center and also the silicon roundabout, a very promising and booming hub of entrepreneurs. Yet, it also has areas like Peckham. Inquiring into the latter's residents' attitudes, it becomes plain that they feel disillusioned and failed by the capital of the United Kingdom (Glaeser et al., 2009). This area offers another side to London's 'success story', as it tends to be hosts of endemic crime, destitution, childhood obesity and other negative manifestations. Therefore, to say that inequality is down to the genes you are endowed and the aspirations you form is too simplistic a story for global cities.

Another instance in which it is seen that people are adversely affected by phenomena outside of their control is that of the prolonged housing crisis that London is witnessing (Harford, 2014). Due to unprecedented demand and people looking to move in, house prices have been on a perpetual rise. What has enabled this rise has been the power that landlords have in that they can charge disproportionate amounts to tenants but they can also fund their own mortgage by letting out properties (Harford, 2014). This translates very negatively for people from lower socioeconomic strata, as they lack comparable access to credit to begin with. That is why they turn to the state and council houses which cater to that. However, the latter have also been penetrated by private landlords leading to the perverse situation whereby council housing is owned privately and can also be overcharged. This is down to political choices regarding allowing the right to buy these kinds of properties, but also creating a generally more permissive framework to buy and let property. At the same time, those at the top end of the economic spectrum have benefitted from more generous inheritance and high property tax offering a glimpse into how glaring inequality can become in global cities. To contrast that, note that Berlin has recently introduced rent controls to avoid a similar scenario (Vasagar, 2015).

It is therefore clear that people living in London have vastly different and unequal access to the most important asset of their consumption lives, namely their house, which has bad implications for their psychological wellbeing and the extent to which they can provide for their families sustainably. Big cities cannot afford to have these kinds of contradictions run within them, whereby lower strata segregate from the mainstream in the own communities and refuse to engage with political-decision making and active citizenship (Wheeler, 2005). This, in turn, exacerbates the already unsteady relationship between cities and inequality, as these groups lose morale and incentive to engage with common goals and agendas.

Neoliberalism

The global financial crisis has made a case that the United Kingdom's government has heated and that is in favour of austerity politics. The government has engaged in discretionary benefit cuts and also has increased tuition for tertiary education, both of which disproportionally hurt the poor and therefore augment inequality. In seeing benefits reduced, a person in a big city faces profound adversity. Compounded by the housing crisis and general inflation, this person is likely to have his livelihood eroded. Their children will also have to take bloated student loans, and that is if they can afford to hold off working immediately after school. Recently, the UK government has engaged in a bait-and-switch policy whereby benefits to the poor were cut yet that was supposedly counteracted by the introduction of a 'living' wage (O'Connor and Gordon, 2015). Again, this example demonstrates that inequality is not an inevitable result of human nature and a random distribution of talent, but created and magnified by governments and collective communities that have bought into the austerity dogma. This has been criticised by high-profile academics such as Pikkety (2014), Stieglitz (2012), and Atkinson (2015).

The seeds of inequality were perhaps planted by Thatcherite economics and a legacy of tough-love when it comes to trade unions, workers, and the welfare state. Following Thatcher's election, the government introduced a series of neoliberal reforms that placed socioeconomically vulnerable people in an even more precarious situation, stripped of participation in unions, their jobs, if they worked for a factory that closed down, and livelihoods as regressive taxation took its toll (Harvey, 2005). One of the most important features that is relevant for the purposes of this essay is that of deindustrialization and how it has engendered a deep north-south divide in the UK that is persistent and difficult to address. Through a strong and remorseless focus on the service industry, which was hailed as forward-looking, efficient and innovative, the UK's industrial base concentrated in cities like Manchester and Glasgow (less so) took a back seat to the city of London (The Equity Trust, 2014). The latter has been consistently nurtured with state support and policy ever since at the expensive of other sectors, such as the manufacturing one which used to make up the backbone of the British economy. Instead, now it is, broadly speaking, lagging behind in terms of productivity as the latest findings of the CDI show (The Equity Trust, 2014).

annual pay by region

(source: The Equity Trust, 2014)

The graph above shows pay gaps between the rich and the poor in different regions in the UK. It is clear that the pay gap in London is the most glaring, although London is by far the highest growing city. This is because the service industry caters mainly to the wealthy and lacks the traditionally job-creating economic multipliers of the industrial and manufacturing sectors that have suffered.

Conclusion

In conclusion, this essay first took up the ambitious task of delineating what is meant by poverty and inequality, which are inherently complicated concepts. It has also attempted to come to grips with global cities and why they should be viewed as the main reference point in any policy discussion about poverty and inequality. The relationship that this essay identified is, by no accounts static. Rather, it evolves with time and changes in government and collective dialogue. This essay has also aimed to dispel associations between growth and inequality throughout by pointing at the example of London and Glasgow, both of which should alter the reader to the holistic and insidious ways in which inequality and poverty work. The roots of inequality and poverty have also been briefly explored, looking at how they are not novel but the result of long-lasting legacies and engrained ways of political thinking. It has finally turned to how important and telling the current context is in terms of how inequality sustaining policies have been legitimized under the guise of austerity and in the name of balanced budgets.

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