BY STEWART SLATER
Baffled by Brexit? Taken aback by Trump? Perplexed by Populism? You are not alone. Countless words have been spilled over recent years trying to make sense of the West’s ongoing political convulsions. If, however, a consensus is emerging over the concerns which have driven such eruptions, less attention is given to how we should solve them, or, indeed, if we should even try.
Broadly speaking, the recent electoral tremors have been based on an education split, graduates voting for the status quo, non-graduates seeking to overturn it. In Brexit, 29 of the 30 areas with the highest proportion of graduates voted Remain, while the cohort overall split 57%-43% compared to 48%-52% for the country as a whole. Hilary Clinton won graduates by 11% while losing non-graduates by 7%. By the 2020 election, the gap had widened to 14% and 15% respectively. In the recent French election, there was an almost linear relationship between education level and voting, with President Macron winning the run-off votes of 78% of higher degree-holders, 63% of degree-holders, 53% of those with a baccalaureate, but just 44% of those with no qualifications.
The commentator David Goodhart attempted to explain these data by introducing the notion of “Anywheres” and “Somewheres”. The former are those who do well at school, go to good universities before progressing to well-paying jobs in big cities or overseas. The latter, leaving school with few or no qualifications, find the university route blocked so are forced into low-paying jobs in their hometowns with little or no opportunity for progression. The modern globalised world works for “Anywheres”. It does not for “Somewheres”. To Goodhart, Brexit and the other political upheavals of recent years represent an attempted revolution by a group who finds itself in a world which no longer caters to its needs.
There is certainly something to this analysis. Gini coefficients (a measure of inequality) have grown over time in Western economies, albeit at different rates and to different extents (e.g.). Many of the stable, well-paid manufacturing jobs which supported working class families have been shipped off to lower cost producers overseas – before WWI, about 20% of all ships in the world were built on the River Clyde near Glasgow, now there are just two yards left, both of which produce exclusively for the Royal Navy.
However, the decline of Scottish shipbuilding was not an accident. In the recovery after WWII, it was out-competed by Japanese yards who were able to build higher quality ships more efficiently and cheaply before they in turn lost out to Korean shipbuilders. As such, it is an early example of the impact of globalisation on Western economies. Obviously, the shift to ships made in Asia was highly advantageous for shipowners, but it also brought benefits for everyone else, even those on Clydeside. More efficient vessels reduce transport costs, keeping prices low. Faster ships allow the transport of perishable foods from distant locations, increasing choice. Larger ships allow low-cost manufacturing hubs to sell untold quantities of affordable goods into developed markets. Western producers may have lost out, but consumers have gained with the result that, while inequality has increased, so have standards of living. Residents of Clydeside may no longer have the pride of being the world’s leading ship-builder, but in terms of material possessions and access to the benefits of modernity, they (as we all do) lead lives of luxury undreamt by their ancestors. Rather than seeing globalisation as a process of winners and losers, therefore, we should instead see it as a game in which everyone wins, but some win more than others.
This is not to present a Panglossian portrait of modern society. There are obviously areas in which it functions less than perfectly, but if the situation is more complex than we assume, then we should be careful about the solutions we propose. Those, for example, who are worried about deindustrialisation caused by the rise of overseas manufacturing, often argue for bringing it back – so called “reshoring”. There are signs that this process, driven not by social concerns, but by geopolitical developments and the post-pandemic desire for supply-chain security, has already started – 1mn jobs in America are thought to have been created by it since 2010 – but it will not be cost free. Manufacturing labour costs in Vietnam for example were less than $3 per hour in 2018, compared to around $27 in the U.S. It is hard to imagine that companies will not pass on any increase in expenses to consumers. We may well have ethical problems with offshore manufacturing, but we must also acknowledge that changing the system will likely raise prices, a cost which will fall on everyone, particularly “Somewheres” given their lower position in the income distribution.
Mindful of David Ricardo’s Law of Comparative Advantage which dictates that countries should focus on the areas in which they are most competitive, a better approach might be to seek re-industrialisation not by focusing the industries of the past, but on those of the future. Glasgow, for example, is Europe’s biggest producer of satellites and economic sense might be better served by concentrating on that sector rather than seeking to rebuild the shipyards of the Clyde.
However, the lower relative gains of “Somewheres” have not just been driven by the offshoring of heavy industry.
“Somewhere” jobs are highly vulnerable to competition in both the manufacturing and service sectors. In the former, as with the Clyde’s shipbuilders, this takes the form of competition in output – an overseas manufacturer who makes a better, cheaper product will gain market share – but in the latter, competition is more focussed on inputs, specifically labour costs. Having fewer educational requirements, the pool of applicants for positions is larger, limiting labour’s bargaining power, and this is exacerbated by high levels of global migration. Many “Anywhere” careers, by contrast, impose barriers to entry by mandating degrees for new applicants, reducing the number of potential new entrants to the labour market and some go further by requiring specific local qualifications. A Moroccan waiter could, for example, move to London and immediately find work in his trade, but a qualified lawyer following the same route would be unable to practise until they had passed the English bar exams.
But if increased competition from overseas has served to limit the gains of “Somewheres”, other aspects of globalisation have actively benefitted “Anywheres”. Consider the former barrister and Supreme Court Judge Lord Sumption who in 2012 earned £7.8mn for representing Roman Abramovich. Working in London, one of the world’s largest pools of capital, he was well placed to access money which flowed into the city from around the world – there were never many Russian billionaires in Bolton. He also, due to his years of practice, had a personal brand which marked him out as the lawyer all clients would wish to engage. “Somewhere” careers, by definition, take place away from the world’s megacities, limiting their ability to access much of the world’s wealth so that in rare cases where a personal brand can be developed, it cannot be monetised as effectively.
Even if “Anywheres” such as Lord Sumption have benefitted more than most from globalisation, they are not at the very top of the tree. In 2001, he described his earnings as “a puny £1.6mn”, drawing a contrast between his own earnings and those of leading figures in sport, entertainment and some areas of finance. For the true winners have been those whose careers have scalability – the ability to increase output without increasing input.
Take professional football players. Not classically “Anywhere” since they generally lack degrees, they nonetheless lead “Anywhere” lives, being highly skilled, highly mobile and very highly paid.
At the start of the 1901-1902 season, England’s Football Association imposed a wage cap on professional football players of £4 a week, double the average earnings of a skilled tradesman. In the current season, the average salary at the most parsimonious Premier League club, Brentford FC, is £640,000, or just over 17x the average income in the country.
In 1901, average attendance at a First Division match was just over 11,000, whereas last season, it was almost 40,000. More importantly, however, the development of television has allowed games to be broadcast around the world, reaching an estimated audience of over 3bn people for the 2018/19 season. Barring some developments in training and nutrition, however, the job of a footballer today is exactly the same as it was in 1901. The growth of the audience makes no difference to the job he performs on the pitch -he needs to do the same things whether watched by 10 people or 10 million- but since they all pay to watch, it substantially increases the pot of money available to pay him.
Not all of the more classically “Anywhere” careers also share this property – there is a hard limit to the number of courtrooms Lord Sumption could appear in at any one time – but some do. In finance, for example, it makes little difference on a day-to-day basis if a professional investor manages $10mn or $100mn but they receive a much bigger fee. An investment banker will do no more work in a $1bn take-over than a $100bn one, but will be rewarded more highly. Just as footballers have benefited from rising global audiences, so “Anywheres” in jobs with high scalability have been able to reap the greatest rewards from globalisation and the liberalisation of global capital.
“Somewhere” careers, by contrast, generally have low scalability, with input and output correlating closely – if a bricklayer is to lay more bricks, he needs to do more work, for example, and there is a limit above which he cannot go. In some areas, governments actively seek to limit scalability – many, although not all, countries, for instance, limit the number of children for whom a childminder can care.
However, these features are not a single-edged sword. Larger pools of labour keep prices low (particularly important for those on low wages who spend high proportions of their income on essential goods) and often fill gaps which existing, ageing populations either could not, or only with difficulty and extreme cost. 15% of the employees of Britain’s National Health Service, for example, are foreign-born as are 16% of the country’s care-workers. Replacing them would require hiring approximately 1.5% of the country’s workforce which is unlikely to be cost-free at a time when unemployment is 3.6%, inflation high and government finances tight. Efforts to improve “Somewheres’” scalability such as raising caps on childcare ratios may well allow them to increase their earnings while keeping costs low, but may also have a negative impact on quality.
If attempts to raise the earnings of “Somewheres” bring their own challenges, so too do efforts to restrict those of “Anywheres”. For they are mobile by definition and will move when they find conditions uncongenial. Hong Kong’s population has fallen by 110,000 (roughly 1.5%) in the first half of the year as many expatriates (10% of the total), frustrated by political developments and the government’s draconian reaction to the pandemic, have chosen to leave. High costs of living and high tax rates have led to California experiencing net emigration every year since 2015, leading the population to decline in 2021 as births could no longer compensate for the number of leavers.
But if discussion over the benefits “Somewheres” and “Anywheres” derive from globalisation should be more nuanced than it often is and display more awareness of potential costs that it usually does, so too should debates over the dominance of cities over towns and villages.
Sir Keir Starmer recently said, “Labour will create good quality jobs in towns and cities across Britain – so you don’t have to get out to get on.”, reflecting a key “Somewhere” concern. However, the “cluster effect” – concentrating industries in particular geographies such as Silicon Valley or the City of London makes them more productive – has been known in economics since the work of Alfred Marshall in the late nineteenth century. Attempts at geographical rebalancing need to find a way to compensate for the advantages in supplier location, access to skilled labour and shared knowledge which such agglomerations offer. Indeed, many of today’s “Left Behind” areas benefited at the time from being yesterday’s clusters. Detroit’s population grew from 285,000 at the turn of the century to 1.85mn in 1950, as it sucked in workers to turn itself into Motor City, before declining sales due to foreign competition reduced it to the current 640,000.
To illustrate the benefits of the model, consider a graduate who moves from Britain’s poorest region, Northern Ireland, to its richest, London – a cluster for finance, law, advertising etc.. Output there is 61% higher. This is well worth it for the graduate as earnings are also substantially higher (£30,256 vs. £17,331) but a Londoner also pays more tax (£18,431 vs. £8,746) – the UK’s tax system being quite progressive, with the top 10% of earners paying 61% of the tax despite only having 34% of the income. This money is then redistributed around the country – government spending per capita is £14,032 in Northern Ireland compared to £13,448 for the capital. While the “Anywhere” graduate might gain by moving through raising his earnings, the benefit from his increased productivity is also shared with the “Somewheres” he left behind. Attempts to rebalance by encouraging graduates to stay in their hometowns may reduce demand for public funds by cutting the need for welfare payments, but their proponents must also factor in the likely loss of revenues due to lower productivity such policies risk.
Where changes can be made at potentially lower cost is in areas such as politics, although, once more, the picture is complicated.
For if, as Goodhart suggests, the events of 2016 were revolts by “Somewheres”, we must acknowledge that they worked. Donald Trump did become American President and Britain did, after some wrangling, leave the European Union. The Conservative Party in the U.K. currently has a substantial majority because it ran in the last election on a platform explicitly tailored to “Somewhere” concerns, winning swathes of seats in the deindustrialised North. These events show that, however disenfranchised people may feel, “Somewheres” retain substantial influence over the system. .
While it has shown itself to be responsive, however, “Somewheres” are surely correct to argue that it is not representative. 34% of Britons are “working class” but only 7% of MPs are. There is no official among the top 450 in the E.U. who does not have a degree, and 80% of them have two or more. Little wonder that a Pew study of voters in 27 countries found 61% of respondents disagreed with the statement “Elected officials care about what ordinary people think”. While “Anywheres” may baulk at the costs of economic changes, they should be far keener on political measures. For in every country those who expressed this view were more likely to be “dissatisfied with democracy” and in most, large numbers of those holding that opinion had a favourable view of the populist parties whose policy prescriptions “Anywheres” find anathema. The only exceptions were the U.K. (where UKIP’s policy programme (Brexit) was enacted) and Greece (where the populist Syriza party held power). If “Anywheres” feel they benefit from the current system and wish to halt the rise of populism, they should be keen to ensure that politics is seen to be as representative as possible.
One method of doing so would be to take steps to increase the number of “Somewhere” politicians. The Labour Party adopted “All Women Shortlists” to improve female representation. It would be possible to do the same for non-graduates. Goodhart notes that “Somewheres” have “geographic identities”, derived from their hometowns in contrast to “Anywheres’” “achieved identities” based on their deeds. Devolving as many policy and spending decisions as possible from the centre to local areas would increase “Somewheres’” participation in the political process and give them more ownership over investment allocations, allowing money to be better directed to local concerns.
Society must also ensure that the system is fair and allows as many “Somewhere” children to become “Anywhere” adults as possible – the best cornflakes must be allowed to rise to the top of the packet as a former British Prime Minister put it. Entry to university should be based on academic merit, not legacy admissions or potentially spurious extra-curricular activities which favour “Anywheres”. In recent years, Oxford and Cambridge Universities have increased the proportion of students from state schools by about 10% through intensive outreach work. While there is more to be done (the figure is still about 20% lower than that for the population as a whole), the direction of travel is positive. “Anywheres” who object that this will directly harm their interests by reducing places for their own children – Eton College, the country’s grandest school, received fewer than half the Oxbridge places in 2022 that it did in 2014 – should remember that their defence of the current system is based on the idea that by promoting the most talented, everybody benefits.
Finally, “Anywheres”, today’s aristocrats, should rediscover the noblesse oblige of their predecessors. Since qualities such as intelligence and conscientiousness correlate with income and are substantially heritable, their pre-eminence in today’s society is every bit as much an accident of birth as was the status of the Dukes and Marquises of yesteryear. The person has not yet been born who chose his parents. Calling those who did not win the genetic lottery “deplorable”, arguing that we “should be careless of their opinions” or suggesting that they should just leave their hometowns does nothing to persuade and makes it harder to convince those whom it serves less well that the system, nonetheless, does work for them.
For if inequality has risen, so too have living standards for all. From the Scottish “Anywhere” who discovered penicillin in a London hospital, to the South African “Anywhere” who developed a global payment system, the modern world has been built by talented people leaving their hometowns and winning rewards by exploiting their gifts on a bigger stage. Whatever “Somewheres” might think, “Anywheres” are useful people to have around.
Stewart Slater works in Finance. He invites you to join him at his website.