Today: Around the world, some cities and regions are getting wealthier; others are increasingly left behind. Why? Sir Paul Collier on hyper-centralization and the economic origins of the populist blame game.

+ Is Russia’s wartime economy finally slowing down? What we’re tracking for this week’s member’s despatch. & New music from Gelli Haha x Sean Guerin …

‘Deplorable’

In Europe, meanwhile, regional inequality has been increasing since the 1980s, but far more so in some countries than in others. Britain, for example, is an extreme case. The South East is rapidly pulling ahead of the rest of the country, especially the North East, where the median household wealth is lower today than it was in 2006.

But while some places keep falling behind, others have caught up. Pittsburgh, Pennsylvania, lost huge parts of its heavy steel industry in the second half of the twentieth century. People started leaving, to the point that the city lost half its total population. For a while, it looked as though Pittsburgh would never recover, but today, it’s one of America’s most successful and innovative cities.

But in other places in the U.S., the U.K., and around the world, regional inequality is only becoming more pronounced. Between 2010 and 2020, the average wealth gap between people in England overall and the North almost doubled—and it keeps growing. Why are these places falling further behind?

Sir Paul Collier is a professor of economics and public policy in the Blavatnik School of Government at Oxford University, the Oxford academic director of the International Growth Centre of Oxford University and the London School of Economics and Political Science, and the author of Left Behind: A New Economics for Neglected Places.

Collier says it’s perfectly normal for economically neglected regions to recover, but where they’re not—where they’re falling further behind—it’s often because they’re in countries where the central government has overly concentrated its power. Policy makers in capitals often care little about their countries’ peripheral towns, cities, and regions; know about them even less; and even when they do, often end up paralyzed by bureaucratic infighting and inertia.

So why have some places managed to recover? We can find clues, Collier says, by looking to cases like the Basque region of Spain, which has gone from being one of Europe’s poorest and most violent regions to one of its most attractive. That recovery wasn’t powered by Spain’s leaders in Madrid but by Basques themselves. And giving locals the means to solve local problems hasn’t just worked in the Basque region but in place after place. Which raises the question of whether and how central governments will be willing to give local authorities real political power …

• “Places that used to be prosperous have typically fallen behind because their core industries have collapsed. It could be because technology has moved on. Or it could be because the central government made some misalignment of its exchange rate—as happened in Britain and to some extent in America in the early 1980s, when the appreciation of the pound and the dollar wiped out lots of export manufacturing industries—because it made their goods more expensive in foreign currencies. And once a local economy starts to spiral down, that spiral gathers momentum on its own—because contrary to what the economist Milton Friedman thought, once an economy begins collapsing, private investors move their capital out of the region, not into it.”
• “In the early 1980s, my hometown, Sheffield, collapsed, while everyone could see London still booming. … Then the blame game began. People started asking themselves, Who in Sheffield is to blame for us falling behind when London’s booming? Instead of people coming together to rebuild the local economy, they spend their time blaming each other. The business community blamed the local government. The trade unions blamed greedy businesses. And so on and so forth. Before long, Sheffield University, one of the world’s top 100 research universities, began distancing itself from the city. We recruit from the world, they said.”
• “England is extremely centralized. Power is concentrated in London. It’s easy for Londoners to be disdainful of left-behind places, just as it’s easy for people living in economically powerful American coastal cities—including Washington, D.C.—to say, These people in the Midwest voted for the wrong person, they’re deplorable. “Deplorable”—the very word tells you everything. They think these people are somehow weirdly inadequate—but if the disdainful were to have the kinds of life experience the “deplorables” have, they’d think just like them. Instead of recognizing the central government’s failures, they blame the people who’ve been failed most by them.”

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The Kremlin still found plenty of eager buyers for its oil and natural-gas exports, mostly in China and India, and its domestic war machine provided plenty of jobs and demand for goods and services.

But now, things seem to be changing. GDP growth for the first quarter of this year was only 1.4 percent. In June, President Vladimir Putin hosted the annual St. Petersburg International Economic Forum—a massive, spectacular show meant to attract new investment and display Russian strength. But no Western companies attended the event, and even Moscow’s allies mostly sent junior officials and businesspeople. At the forum, Economy Minister Maxim Reshetnikov said the country was on the brink of a recession.

Is it?

• U.S. and NATO allies have agreed to give Ukraine a massive new supply of military equipment, as U.S. President Donald Trump threatens Moscow with new sanctions.
• Israel has bombed Syrian tanks in Syria’s southwest, as some reports say more than 50 people died in sectarian clashes between the Druze minority, which Israel supports, and Sunni armed groups.
• France, Spain, Italy, Denmark, and Greece will pilot an age-verification app designed to protect children online from the potential adverse effects of social-media use.
• Vietnam has announced a plan to ban fossil-fuel motorcycles in central Hanoi starting in July 2026 to reduce air pollution and promote clean transportation.
• Wildfires continued to burn over 45,000 acres in Arizona, destroying a historic lodge on the Grand Canyon’s North Rim.

See you Thursday …

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