Just as there are differences in wealth between countries and continents, there are also uneven developments between different regions within countries. Deaton (2019) warned that significant inequalities in salary, health, and employment opportunities in the UK are threatening the British democracy. The world's two largest economies –the United States and China –also have conflicts of uneven regional development. The concept of uneven development was first proposed by Trotsky (1932) who believed that it would be the most common phenomenon in history. Smith (2006) pointed out that although the concept of uneven development was proposed at the beginning of the 20th century, no solution was found for the next half-century. To end this, Boris Johnson’s flagship election has pledged to “level up” the UK’s underperforming regions. Given that high-value economic sectors are concentrated in big cities such as London, can "leveling up" solve UK's uneven regional development? The answer is negative.
在意识到区域发展不平衡的严重性后，各国都相继出台了“拉平”政策。但是，这些政策一般都收效甚微。从原因上看，区域发展不平衡是地理、经济、社会、历史、政策等诸多因素相互作用的结果。资源配置的有效性会导致自然的不平衡，负面的外部条件也可能影响区域发展的平衡（Kline and Moretti，2014）。Williamson（1965）认为，政府政策是区域发展不平衡的动力之一，而市场经济并不强调发展不平衡的问题。Kaldor（1970）认为，区域发展不平衡是一种长期积累。他把不平衡发展与区域经济和出口等因素结合起来，解释了区域的整体发展。Shankar和Shah（2003）根据20世纪90年代末的数据对8个发达国家和18个发展中国家进行了比较，发现发展中国家的区域发展不平衡程度更高。各种因素的长期相互作用使得目前的 “拉平”措施无法对缓解这一问题产生重大影响。
After realizing the seriousness of uneven regional development, various countries have successively introduced “leveling up” policies. However, these policies generally have little effect. From the perspective of causes, uneven regional development results from the interaction of many factors such as geography, economy, society, history, and policies. The effectiveness of resource allocation will lead to natural imbalances, and negative externalities might also affect the balance of regional development (Kline and Moretti, 2014). Williamson (1965) believed that government policy is one of the driving forces of uneven regional development, while market economy does not emphasize the issue of uneven development. Kaldor (1970) argued that uneven regional development is a long-term accumulation. He combined uneven development with factors such as regional economy and exports to explain overall regional development. Shankar and Shah (2003) compared eight developed countries with 18 developing countries based on data from the late 1990s and found that the degree of uneven regional development in developing countries is higher. The long-term interaction of various factors makes the current "leveling up" measures unable to have a significant effect on mitigating the issue.
From the perspective of policy effects, "leveling up" measures might not even be necessary. Giles (2020) believes that the degree of inequality in some countries is essentially due to the division of urban areas. For example, when considering administrative boundaries, the UK ranks first among all countries in terms of inequality and the US ranks 14th. When using city boundaries, the UK ranked seventh in the degree of inequality, showing a significant drop, while the US ranked second. Holt and Lyne (2020) found that the degree of inequality in cities in the UK did not increase from 2010 to 2019. In their study, they argue that the high degree of inequality in some countries is due to the excessive performance of their leading cities. For examples, Germany and the UK have similar development levels in the underperforming regions, but London’s performance is much better than Munich. This also creates the illusion that the degree of inequality in the UK is higher than that in Germany. Thus, with respect to such an "abnormal" city, the "leveling up" measures lose their rationality.
In fact, the resolution of uneven regional development does not necessarily require targeted regional policies. Silveira-Neto and Azzoni (2011) analyzed the sources of uneven regional development in Brazil and concluded that labor productivity and the government's non-spatial policies can help reduction in regional inequality. Specific policies include changes to the minimum wage and income transfer plan. The core of alleviating uneven regional development might also lie in the “uneven” and not the “regional”. Policies that do not target regions but inequality, for example, creating more useful jobs by reforming structure, supporting small and medium-sized enterprises, etc., can effectively improve the employment scenario, thereby reducing the problem of income gap (Zhuang et al., 2014). The "leveling up" policy can reduce social inequality through projects such as improving the transportation and labor training. However, it cannot reduce the isolation effect of large cities. It needs to be supplemented by social policies, such as the construction of public housing, to address regional inequality (Gavrel et al., 2015).
When implementing the "leveling up" policy, most countries encounter two problems: First, the productivity efficiency is reduced. "Leveling up" might reduce the productivity of the developed regions or cities and further weaken the agglomeration effect of large cities. Graham and Gibbons’s research (2019) on 47 cities around the world shows that the urban population is directly proportional to urban productivity. If the productivity of big cities is not yet saturated, the labor mobility brought by the “leveling up” policy might lead to a productivity crisis in big cities. Second, a contradiction exists between the economy and society. Encouraging economic development in depressed areas and controlling growth in prosperous areas are both likely to contradict the distribution of social welfare. The industrialization of unemployed areas will be beneficial to the economy, but it can also cause social pressures such as traffic congestion, limited education, and medical facilities and cause pollution. The centrifugalization of prosperous regions has led to the inability to make full use of social capital, leading to, for example, the waste of school and hospital resources.
The successful gathering of high-value economic sectors in big cities is often not driven by the government. Krugman (1991) believes that contingency, path dependence, history, and special events play a decisive role in the formation of the economic structure. Once the early location advantages are formed, the agglomeration effect is achieved through extension to the upstream and downstream of the industry. This irrational economic distribution has a certain "locking in" effect under the effect of increasing returns to scale. Davis et al. (2002) examined the aftermath of the US bombing of Japanese cities and found that even after a huge impact (war), a city can usually not only restore its population and its share in the overall manufacturing industry but can also restore its previous specific industries. Therefore, in the real world, it is difficult for the government to pull the high-value economic sectors of big cities into poor or backward areas by adopting a "leveling up" policy.
Entrepreneurs are the protagonists of the market. To break the balance of high-value economic sectors in big cities, it is necessary to rely on entrepreneurship instead of the government’s “leveling up” and other industrial policies. Schumpeter (1934) argued that entrepreneurs are the force of disequilibrium and are also a crucial driving force for economic growth. Kirzner (1973) examined that the ability of entrepreneurs to exploit inherent opportunities can bring markets back to equilibrium. Through the process of entrepreneurial discovery, market participants deepen their understanding of each other and are the source of market equilibrium characteristics (Kirzner, 1997). Industrial policy refers to the selective intervention and discriminatory treatment of private production by the government for economic development or other purposes. However, there is an indisputable fact: government officials do not have the vigilance and judgment of entrepreneurs; even if they do, they do not have the incentives of entrepreneurs. Porter et al. (2000) used detailed information to prove that industrial policy has shown little effect on the 20 most successful industries in Japan. Instead, seven most failed industries are all seriously affected by industrial policies.
The landscape of unbalanced development caused by regional differences in the development of human civilization is one of the long-standing aspects of human history (Smith, 1990). Skinner (1986) analyzed China’s feudal history from a macroscopic perspective and argued that every economic zone in China has two major parts: core and peripheral. The core zone dominates the development of the peripheral area. If the unbalanced development in the pre-capitalist era is implicit and regional, then the unbalanced development in the capitalist era is increasingly prominent and global. "Leveling up" might yield short-term results, but in the long run, unfair development is the normal situation of human social development. Fujita et al. (1999) posited that the centripetal forces that promote the geographic concentration of industries primarily include market scale effects, ample labor markets, and pure external economies. The role of the government should be limited to providing essential services to society, including establishing a fair institutional environment, providing information on economic opportunities, strengthening education, and establishing a social security system. "Leveling up" policies prove it difficult to achieve the desired effect of policymakers but will breed rent-seeking behavior.
Nobel Ding is a senior at Stanford Online High School and Abbey College Cambridge.
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