Greg Clark is Financial Secretary to the Treasury and MP for Tunbridge Wells. Follow Greg on Twitter.
The Harvard economist Ricardo Hausmann has shown that most
of the differences in income and wealth creation between nations can be
attributed to how complex their economies are. Broadly speaking, poorer
countries make simple things that everyone else can make, while richer
countries make things that are complex that not everyone makes. According to one study, in the US, the average
employee works with 100 other people to do their job, while in India the
average employee works with four.
As Hausmann puts it: “for a complex society to exist, people
who know about design, marketing, finance, technology, operations and trade law
must be able to combine their knowledge to make products. Modern man is useless
as an individual: making a computer is a team sport.” Adam Smith, of course,
had the same insight two centuries earlier.
This is one of the reasons why, across the world, cities are
emerging as the places where economic growth is strongest. The purpose of cities – their raison d’etre –
is to bring people together to allow them to specialise in what they do best
and to collaborate with each other. One of the reasons why London has been so
successful is that you can find just about anything you want there – experts,
specialists, products, services, finance and labour.
Conversely, places that are not complex enough to support a
highly sophisticated economy are losing ground to places elsewhere in the world
that are. And the better connected successful places are with each other, the
stronger is the potential for economic growth.
Britain is unusual in having, outside London, a number of
great cities that are quite poorly connected with each other and, to varying
degrees, with the capital. Countries around the world are bringing their
principal cities together through fast, easy transport links. In Britain, there
is the potential for the cities of the North and Midlands to have transport
connections with each other that not only link our principal economic clusters,
but which can endow them with many of the benefits of a single city. With HS2,
it will take 38 minutes to travel from Birmingham to Sheffield, and 41 minutes
to Manchester. These are journey times
that are less than the time it can take to travel within and across London –
say from Enfield to Croydon, or from Ealing to Stratford.
HS2 offers the prospect of transforming the economic
geography of our country. It can make our cities as well-connected with each
other as is London itself. This opens
the prospect of businesses and people being able to be based in any one of them
without losing out on the inexhaustible range of connections, suppliers and
collaborators that has impelled our biggest city’s economic success.