The Political Economy of Full Employment in Modern Britain

This paper examines the regional aspects of structural change and unemployment in the UK. Manufacturing decline has severely hit the industrial conurbations of the North. Although reflecting long-run trends, this decline has been exacerbated by poor macroeconomic management. New service jobs have been created but most of these are in the South. This growing North-South divide is reflected in a southward drift of population. The extent of the northern decline is masked by government expenditures that help to maintain employment in depressed areas. But this is only a temporary solution. As population drifts away from the depressed areas, public expenditures will eventually be cut, causing further loss of employment and population in these areas. Using a simple export base model, the paper quantifies the underlying decline of the northern economy. In relative terms, this decline has been almost as fast in the 1990s as in the previous decade of industrial crisis.