ECONOMIC DEVELOPMENT AND CRISIS

Economic Development and Crisis



Economic Development and Crisis

Introduction

Economic theories give us an insight about the economic mechanisms with which countries economically prosper. However, the extended economic recession we have been facing in the UK since the 2008 financial crisis, and the rising levels of unemployment here, have raised significant concern about what the government can and should be doing to help revitalize the economy (ONS 2009). Tracing the theoretical arguments of Adam Smith and Michael Porter regarding the drivers of economic development, this essay explores the economic states of North Eastern England and Scotland following the recession that spurred around 2008.

Discussion

Northeast of England and Scotland: Economic States and Government Response

Scotland and North of England holds the key to Britain's economic recovery. GDP per Capita in Northern England, Scotland, and UK as a whole can be illustrated by the geographic shares the economy. GDP per capita is a commonly used indicator for international comparisons of economic performance (Bernstein 2008). Regarding Scottish Gross Domestic Product (GDP), it is estimated that when compared against 34 OECD member countries, Scotland would be ranked 6th with regards to GDP per capita in 2010. This is shown below:

The Northern Economic Futures Commission's (NEFC) freshly published interim report attempts to set out exactly that. It makes the case for what the North has to offer and elaborates on why chronic underinvestment in it has not only been holding it back, but holding the UK back as a whole. The northern economy is over twice the size of Scotland's and if the North of England were a separate country it would be the eighth largest in the EU, ranking ahead of Sweden, Denmark and Belgium (Gulzar & Shafi 2011 558). Northern growth would be good for everyone. In fact, the UK economy would be £40billion better off if the difference in economic output between the north of England and the south could be halved. Recent OECD research also shows that broader-based economies have fared better during the recession, highlighting the resilience benefits of rebalancing the economy (McKibben 2007).

The interim report outlines the growing body of evidence that mid-sized cities offer the greatest potential for rapid growth. Moreover, measures of the proportion of adults involved in entrepreneurial activity and the proportion of adults expecting to start up a business in the next three years, suggest that the North is on course to overtake the Greater South East as the UK's centre for enterprise in the coming five years.

However, if the North is to fulfil its economic potential, there needs to be a level playing field in terms of public investment. For example, the transport investment appraisal process needs to be reformed to reduce its bias towards areas of high population density and high salaries, and also to take greater account of the long-term wider economic benefits. IPPR North research in December showed that the cost of additional transport infrastructure investment in London and the South East in the years to 2015 was £2,371 per person, compared ...