The city and the middle class: two views

This week I read two very different views on rising inequality in successful global cities, from Ed Glaeser in the New York Daily News on New York City, and from Michael Goldfarb in the New York Times on London. The titles alone point up the contrast – Ed Glaeser’s piece is “A happy tale of two cities” while Michael Goldfarb‘s is “London’s Great Exodus.

Ed Glaeser picks up on Democrat Mayoral candidate Bill de Blasio’s pledge to make “the crisis of income inequality” a major theme of his campaign, and argues that the inequality in the city (which Glaeser acknowledges is extreme) is paradoxically a sign of its success. New York attracts both rich and poor, and for specific reasons – “if anyone should be cringing, it is our more ‘equal’ suburbs – which often zone out the disadvantaged…New York has been successful in attracting rich and poor alike, and that makes the city unequal.” Glaeser is far too subtle a thinker to be an advocate of ‘trickle down’; he is in favour of reducing poverty and inequality – but sees the locus for these processes and for the policies to tackle them as the national level. “Local inequality reflects the choice of where to live, made by rich and poor alike.” I think this is correct, and have written about it in the UK context:  see for example  my 2002 article ‘There goes the neighbourhood’  . 

Glaeser, above all, wants to promote opportunity and social mobility, and big successful cities provide the job niches and ethnic networks that help new immigrants become the new middle class. Successful cities have to retain their middle class, and so political candidates should be concerned about the ‘missing middle’ who will leave the city if a combination of high house prices, poor schools and rising taxes takes hold.

It is this missing – or rather fleeing – middle that Michael Goldfarb writes about. For Goldfarb – a writer rather than an economist –  the process whereby London property has become a “global reserve currency” is squeezing out professionals who leave for more affordable cities elsewhere. Over the last few years, money has poured in to London property as a safe asset – attractive both to the rising wealthy of the East and to anxious investors from the Eurozone. As a result, “the ordinary uses of the city have changed beyond recognition. London was never a cheap place to live, but now more expensive property means more expensive everything else: restaurants, cinemas, bars and theater tickets.”

How accurate is the picture painted by Goldfarb?  While some of the most desirable parts of the centre of London have clearly become un-affordable for all but the super-rich, describing London as a whole as ” a no-go area for increasing numbers of the middle class” is an exaggeration. London is growing at a rate of around 100,000 people every year – effectively a new London Borough every three years. This is the fastest rate of growth in Europe, and at the very least implies a city that is increasingly attractive to some groups. Goldfarb correctly identifies the low annual property taxes in the UK which look absurd at the top end of the scale – but a full account would also refer to Stamp Duty, a property transactions tax which has recently been raised for the most expensive properties.

As far as schools are concerned, yes new school-building is not keeping pace with the rate of population increase, which will create problems if not speedily tackled. But London schools are improving far faster than those anywhere else in the country – a key driver of middle class locational choice. Research by the FT earlier this year showed that “London schools have improved so rapidly over the past 10 years that even children in the city’s poorest neighbourhoods can expect to do better than the average pupil living outside the capital.” .

And yet…Goldfarb strikes a chord in me when he writes “A very organic sense of London pride has allowed this city to withstand substantial shocks…Now it is beginning to feel that the next phase of London’s history will be one of transience, with no allegiance to the city.”  I think  (and I hope) he is overly pessimistic in this assessment, but he is undoubtedly pointing out a very real danger.

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