Welcome to REDI-Updates. REDI-Updates is a bi-annual publication which will get behind the data and translate it into understandable terms. WM REDI staff and guest contributors will discuss various topics, with this first publication focusing on how inclusive growth can be a tool to tackle regional imbalances across the UK. In this article, Dr Anastasios Kitsos takes a look at the relationship between Economic Resilience and Inclusive Growth.
Economic Resilience and Inclusive Growth
First things first, economic resilience and inclusive growth are too complex to be represented by a coin, hence the need for a dice to reflect their multifaceted nature.
The 2008 crisis has generated a new field in the study of cities and regions. The realisation that the financial crash has not just affected countries at different degrees but also had a significantly uneven footprint within countries, has drawn the attention of academics and policymakers to the notion of economic resilience. Economic resilience signifies the ability of a place to avoid or overcome a shock to which it is subjected (Kitsos and Bishop, 2018; Martin, 2012).
The chart below shows the different experiences several Local Authority Districts (LADs) in Great Britain had from 2004 to 2018. The blue bars compare the performance of a LAD in terms of its employment rate before the crisis to the worst years post-2008. Whilst some places such as Tamworth have lost more than 10 percentage points of their employment rate, others have not felt the brunt of the crisis.
More interestingly, the orange bars show the current employment performance of the same places compared to their pre-crisis one. What we see is that while some areas have outperformed their previous employment rates, others are still suffering from hysteretic effects. This is at a time the country is enjoying labour market conditions that are close to full employment.
It is evident that the growth period that followed the 2008 crisis has not benefited all places. This is likely to exacerbate interregional inequalities. In turn, increased inequalities between and within places could give rise to several social ills (criminality, etc.) and may hamper the future growth of localities (Glaeser, Resseger and Tobio, 2009). These understandings led to the notion of inclusive growth.
Inclusive growth is arguably a difficult concept to define and measure, although there are insightful attempts on both aspects (IGAU, 2017; Lee, 2019; Lee and Sissons, 2016; Sissons, Green and Broughton, 2018). It reflects the need to consider growth in terms of the distribution rather than just the generation of wealth. A useful definition is offered by the Organisation for Economic Cooperation and Development which sees inclusive growth as “… a new approach to economic growth that aims to improve living standards and share the benefits of increased prosperity more evenly across social groups…” (OECD, 2015, p.8).
From the above, it is evident that inclusivity and resilience are interacting fields that could lead to virtuous circles of prosperity or vicious cycles of inequality. However, whilst we have a wealth of evidence on what affects economic resilience, little is known on inclusive growth. More importantly, there is even less insight into the interrelationship between economic resilience and inclusivity.
Research on resilience has identified a multiverse of determining factors, ranging from skills and industrial structures to local entrepreneurship dynamics and infrastructure as well as finance (Kacher et al., 2018; Kitsos and Bishop, 2018; Kitsos, Carrascal-Incera and Ortega-Argilés, 2019; Kolko and Neumark, 2010; Lee, 2014; Martin and Sunley, 2015; Martin et al., 2016). These attributes can positively affect the capacity of a place to mitigate the negative impacts of a crisis. However, to date, no study explicitly addresses the inclusive growth-resilience nexus.
The expectation is that inclusivity may contribute to building resilient places. Places that are more inclusive will offer better opportunities to their populations during growth periods and build the agility characteristics, necessary to shield a place from a crisis. This relationship has largely escaped the public discourse on building resilient places at the national and international level with a notable exception in the West Midlands Local Industrial Strategy which explicitly links inclusivity to resilience.
Resilience and inclusivity are pertinent to both the health and economic aspects of the COVID-19 crisis. On the health front, evidence begins to emerge that socio-economic inequality across as well as within countries and cities may accelerate the spread of the virus. Characteristics associated with poverty such as overcrowding and poor health can increase transmission rates. On the economic aspect of the coronavirus crisis, evidence suggests that as with the 2008 crisis, the COVID-19 economic impact will be spatially uneven (Kitsos, 2020a). The factors affecting the final outcome are complex and interrelated (Kitsos, 2020b) but it is certain that some places will be hit harder and will have lower resilience performance.
At City-REDI /WM REDI, we are determined to deliver insights and evidence on a range of topics related to local socio-economic development. Inclusivity and resilience are among our core interests with current projects focussing on unpacking the complex relationships between economic resilience, inclusivity and their determinants and assisting with the response to the COVID-19 crisis.
References – Further reading
Kacher, N., Kitsos, A., Petach, L., Ortega-Argilés, R. & Weiler, S. (2018) ‘Entrepreneurship and Resilience: Implications for Regional Development in the US and UK’. North American Regional Science Association, 65th Annual Meeting. San Antonio, USA: 7-10 November 2018.
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