Grand Issues in Political Economy

Rowthorn has never been afraid of tackling grand issues in political economy. For a conference in Japan in 2014, for example, he set out scenarios into the mid-twenty-first century in a paper entitled ‘The Emergence of China and India as Great Powers’. The paper is far-reaching in its scope. Rowthorn explores the long-term implications for international trade and investment, not least the relative importance of the rest of the EU to the UK, and goes on to consider the impact of China and India on the economies of sub-Saharan Africa. This is followed by a discussion of the changing balance of power in the world, including a discussion of the military balance.

The importance of institutional responses to the eventual outcome is emphasised, in particular those of the current imperial power, the USA. Intriguingly, Rowthorn sets his arguments in the context of Lenin’s classic work Imperialism, the Highest Stage of Capitalism. Lenin identified imperialism as a special stage of capitalism, with five key features. Rowthorn makes it clear that the world has not evolved exactly as Lenin expected, but some of his predictions have come true. Large swathes of the world economy are now dominated by giant global firms that compete fiercely with each other, and the export of capital, as distinguished from the export of commodities, has acquired exceptional importance. This sets the scene for a detailed discussion of whether the leading individual capitalist states support ‘their’ firms in the global struggle, or whether, as is fashionably thought, giant firms are losing their national identity. Citing sources such as the Harvard Business Review, Rowthorn comes down rather firmly on the side of Lenin on this point. Overall, the paper is one which most academic economists would never have even dreamed of writing.

Rowthorn has a long-standing interest in regional questions within developed economies, in particular, but not exclusively, the UK. A somewhat unusual paper, for Rowthorn, is one which he wrote with Andrew Glyn in 2006 on the convergence and stability of regional employment in the USA. Rowthorns applied analysis is usually based upon rather straightforward, classical econometrics, and it is his close understanding of the data and ability to form hypotheses which are the distinguishing and powerful features of his work. In the article with Glyn, the same very thorough appreciation of the data is present, and a substantial part is taken up with problems of measurement error in the data. The unusual aspect here is that Rowthorn uses modern developments in econometric time series analysis such as augmented Dickey-Fuller tests and split trends of the Perron type. Typically, the conclusions run contrary to conventional wisdom. Migration and other forces behind regional adjustment to shocks are now quite weak in the USA, and they cannot therefore explain the modern success of monetary union in that country.

The typical approach which Rowthorn has taken to regional economic issues is very much in the tradition of the Department of Applied Economics at Cambridge. A model is developed whose initial base is that of various identities in the national accounts. A thorough knowledge of national accounting principles can of itself generate powerful implications. Behavioural content is then added in the form of further aggregate equations, and the properties of the model are explored.

Rowthorns 2010 paper in Spatial Economic Analysis is a good illustration of his work in this area. The article is concerned with the geography of structural change in Great Britain since 1971. It divides the country into two broad areas: the ‘North’ comprising Northern England, the West Midlands, Wales, and Scotland, and the ‘South’ comprising the rest of mainland Britain. The particular application is to the economy of the UK, but this two-sector model of economic development has much more general applicability. The paper documents the uneven regional impact of industrial decline and the rise of the new service economy. Rowthorn constructs what he calls a ‘simple’ mathematical model to link together regional competitiveness, employment, fiscal transfers, population, and migration. True, the maths is simple, but the economic insights are powerful. Rowthorn shows the crucial importance of the ‘export base’. In the long run, the performance of a region depends upon the private sector, which in turn depends on the ability of this sector to produce tradable goods and services. The implications for policy makers are not particularly welcome. There are no quick fixes, because of the sheer scale of the imbalances which Rowthorn identifies, and the problem can only be partly mitigated by increased fiscal transfers between the North and the South. Drastic measures are needed. One set put forward by Rowthorn involves, somewhat paradoxically, boosting the successful South by massive investment in the transport infrastructure and ending zoning restrictions on housing and business development. This would permit migration on a sufficient scale from the North.