EconomicsEconomyHousingMicrofinancePoliticsRegional economiesUncategorized

Adam Smith’s invisible hand and visible hands in Birmingham

Birmingham has long been a city with some of the highest levels of deprivation in western Europe, living with fears for the future as the loss of big manufacturing becomes apparently permanent.

However, within living memory the city became the UK’s second city, and achieved an economic peak during the 1920s and 1930s – times that for Manchester and most American cities were very tough.

Neville Chamberlain and Stanley Baldwin were major reasons for Birmingham’s success. Theirs is a story that contradicts that of Michael Heseltine, who conjures up illusions about a ‘buccaneering’   entrepreneurial past. A story that underpinned his now clearly failed attempt to forge a common agenda between provincial English business (centered on Local Enterprise Partnerships) and the Downing St of today.

appeasementThe Appeasement of Adolf Hitler has cast a shadow over proper understanding of the era of Birmingham’s expansion. This appeasement occurred before the suburbs where most Birmingham people now live, had come to need their original paintwork renewing.

Local historians have been less effected by such political and  obsuring shadows. And one can find glimpses  in local history of  how Baldwin and Chamberlain and their people worked.

For much of the interwar period one or both of them were tenants in Downing Street. Either as Prime Minister or as Chancellor.

Business alliance

Both were elected from the West Midlands, but there was more to it than that. Kenrick coverTheir families had since 1887 both been in alliance with the Midland’s premier business family – the Kenricks.

As the First World War ended, Kenricks were at the heart of the trade ( the cartels) that supplied baths, cisterns and the metal components that would profit from any house building boom. The Baldwins were major shareholders in Kenricks since selling out their factories in Stourport-upon-Severn.

Neville Chamberlain’s mother was a Kenrick. And her early death meant that he spent most of his childhood at the Kenrick’s main family home – Berrow Court, at Edgbaston in Birmingham.

Berrow CourtAlthough Neville ran a firm of his own, that boasted of being an ‘Admiralty Supplier’ on its letterhead, around  1913 he brought in about a quarter of his income from a second job -chairing a Kenrick owned company.  This company,  called Elliots, made the copper for the plumbing and wiring that building now required, and was the base material for the bulk of Birmingham firms who were then geared towards home-making goods, rather than the automotive bits of  later decades. Indeed as the base for Ford in the UK,   Manchester could until 1929 better claim to be the UK Automotive city.

Homes for Heroes

That Neville Chamberlain would  be the most important figure behind the building of the interwar suburbs, should be seen against this industrial  background. For much of the interwar years he was acting for a cabinet led by Stanley Baldwin.Baldwin

Birmingham was first out of the stocks with building ‘homes fit for heros’ in 1919.  Manchester and Glasgow, Birmingham’s main rivals trailed. Shipbuilding and textiles did not sniff such profit in housing. Nor had either been prepared for a house building campaign.  Manchester did not have much room to expand, being hemmed in by industrial townships like Oldham and Salford in every direction except southwards into Cheshire. Manchester would not get round to buying up land until the end of the 1920s. Neville would be the minister who would assist the setting up of a Manchester Regional Plan in 1927, for the neighbouring councils to co-operate in Manchester’s overspill.

Building the suburbs

Birmingham had not needed any such help, when as a Ladywood councillor Neville had lead the lobbying for Birmingham to expand into the rural districts surrounding  it  in every direction except to the west – where the Black Country lay. This 1911 Birmingham boundary extension assumed future housing estates, the case for which he led the elaboration of – on the very eve of the 1914 war.

This experience in Birmingham gave him a status as a housing expert when he got to Parliament to represent Ladywood in 1918. Conservatives had tended to favour property tax incentives to encourage building, but Neville leaned towards government subsidy. It was no coincidence that subsidy for both private and council house building were introduced by Neville’s brother, when he was chancellor in 1919 (and his deputy was Stanley Baldwin). And this subsidy was rapidly taken up by Birmingham builders.

Manchester, however, was not yet going to be contributing to the profits of firms the likes of Kenricks.  Areas reliant upon textiles and other depressed industries could not afford building without even further subsidy. Led by Manchester, these councils sought an improved subsidy for building council houses in 1923. Baldwin was then chancellor, which ensured Neville ( as Health Minister) had a free enough hand to cut them a better deal. And on this basis, Manchester built out to the south into Wythenshaw.  Orders came Birmingham’s way – as a simple matter of trade association quota.

SmithWhile some might have been wittering on about the wonders worked by the ‘invisible hand’ of the free market, hands were visible reaching down to co-ordinate production, strategic subsidy and government policy – if one knew where to look. This would not be lost on the big banks – who were generous with overdrafts to the businesses so close to Downing St. There was also a Kenrick on the board of Lloyds Bank during those years. So credit got co-ordinated too.

Such strategic planning has more in common with the political economy of China in recent decades, then with the visions of Adam Smith and his invisible hand.  And it is worth bearing this in mind when one examines a further twist in this story.

Confronting the Brick interests

The interwar expansion of the English suburbs was based on bricks rather thanbrickwork any other building material.  And brick is so energy inefficient that it is now a major challenge for today’s suburban life. However, the brick economy was in the 1920s a major drag on the housing boom. Labour tended to blame profiteering on the part of brick manufacturers, while the conservatives tended to blame the bricklayer’s monopoly in the face of the laboriousness of  bricklaying.  But – whichever – this was hampering the flow of Birmingham’s supplies to a housing boom and the rewards.

However, in the late 1920s the brick industry came to have to accept less favourable terms.  It had been during a Labour interlude in office, that their housing minister, John Wheatley began a review of whether new building methods could speed up the delivery of cheap popular housing.  But when Neville got back into the ministerial driving seat he pushed this debate even further.

Houses built from bigger concrete ‘breeze blocks’ were encouraged. But even more radical options were ‘promoted’ by Neville.  He even fostered a scheme to use elements of the Glasgow shipbuilding industry to mass produce the panels for steel bungalows. Pushing such discussion so far, worked its effect on the brick interests, and delivered more profit thereafter for Birmingham than for Glasgow.

Drawing the right/wrong lessons

Since Chamberlain was displaced from power in 1940, the only city that Heseltine   has been able to tug so regularly upon the levers of power has been the ‘City of London’.  The lessons that can be drawn from the rise and fall of Birmingham are legion. However, our purpose here is to weigh up the agenda that Lord Heseltine has been pressing.

Heseltine began life as a ‘buy to let’  landlord who used his profits to become an advertiser/publisher. After going into politics he was a sort of Viceroy for Liverpool for Mrs Thatcher, whom he later sought to replace with himself. Liverpool did build its position on slavery and what went with it. Maybe that is where he gets his notion of a bucaneer capitalism.  But that label also fits himself. And fits him better than it does any inland city, and certainly better than Birmingham.

Birmingham’s experience would really highlight notions of planning, local committment, addressing social need ….

Andrew Lydon

An analysis of one of our rival cities can be found here